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Consolidated Financial Statements for the years ended June 30, 2014 and 2013
DELRAND RESOURCES LIMITED
(formerly BRC DIAMONDCORE LTD.)
(Incorporated in Canada)
(Corporation number 627115-4)
Share code: DRN ISIN Number: CA2472671072
(“Delrand” or the "Company")
Delrand Resources Limited
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended June 30, 2014 and 2013
(Expressed in Canadian dollars)
Management’s Report
The consolidated financial statements, the notes thereto and other financial information contained in the
Management’s Discussion and Analysis have been prepared in accordance with International Financial Reporting
Standards and are the responsibility of the management of Delrand Resources Limited (the “Company”). The
financial information presented elsewhere in the Management’s Discussion and Analysis is consistent with the data
that is contained in the consolidated financial statements. The consolidated financial statements, where necessary,
include amounts which are based on the best estimates and judgments of management.
In order to discharge management’s responsibility for the integrity of the financial statements, the Company
maintains a system of internal controls. These controls are designed to provide reasonable assurance that the
Company’s assets are safeguarded, transactions are executed and recorded in accordance with management’s
authorization, proper records are maintained and relevant and reliable information is produced. These controls
include maintaining quality standards in hiring and training of employees, policies and procedures manuals, a
corporate code of conduct and ensuring that there is proper accountability for performance within appropriate and
well-defined areas of responsibility. The system of internal controls is further supported by a compliance function,
which is designed to ensure that management and the Company’s employees comply with securities legislation and
conflict of interest rules.
The Board of Directors is responsible for overseeing management’s performance of its responsibilities for financial
reporting and internal control. The Audit Committee, which is composed of non-executive directors, meets with
management as well as the external auditors, as and when appropriate, to ensure that management is properly
fulfilling its financial reporting responsibilities to the Board of Directors who approve the consolidated financial
statements.
The consolidated financial statements for the years ended June 30, 2014 and 2013 have been audited by Deloitte
LLP, Chartered Professional Accountants, Chartered Accountants and Licensed Public Accountants, in accordance
with Canadian generally accepted auditing standards.
(Signed) “Arnold Kondrat” (Signed) “Brian Scallan”
Arnold Kondrat, Chief Executive Officer Brian Scallan, Vice President, Finance
September 29, 2014
Page 2 of 29
Independent Auditor’s Report
To the Shareholders of Delrand Resources Limited
We have audited the accompanying consolidated financial statements of Delrand Resources Limited (the “Company”), which comprise the
consolidated statements of financial position as at June 30, 2014 and 2013 the consolidated statements of comprehensive loss, changes in
equity and cash flow for the years then ended and 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 audits. We conducted our audits 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 of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances. 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 in our audits 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 Delrand Resources
Limited as at June 30, 2014 and 2013 and its financial performance and its 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 1 – Corporate Information and Continuation of the Business in the consolidated
financial statements which indicates that the Company is in the exploration and evaluation stages of its mineral properties and the Company’s
ability to execute its work plan, meet its administrative overhead obligations, discharge its liabilities and fulfill its commitments as they come
due is dependent on its success in obtaining additional equity or debt financing and ultimately, on attaining future profitable operations.
These conditions, along with the fact that the Company does not currently have revenue-generating properties and has incurred a loss of
$3,487,552 for the year ended June 30, 2014 and the Company’s accumulated deficit was $123,542,174 indicate the existence of a material
uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.
/s/ Deloitte LLP
Chartered Professional Accountants, Chartered Accountants
Licensed Public Accountants
Toronto, Canada
September 29, 2014
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Delrand Resources Limited
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014
CONTENTS
Consolidated Statements of Financial Position.............................................................................5
Consolidated Statements of Comprehensive Loss.............................................................................6
Consolidated Statements of Changes in Equity..............................................................................7
Consolidated Statements of Cash Flow......................................................................................8
Notes to the Consolidated Financial Statements............................................................................9
1. Corporate Information and Continuation of the Business ................................................................9
2. Basis of Preparation ..................................................................................................9
3. Summary of Significant Accounting Policies .......................................................................... 10
4. Subsidiaries and Investment in Associate ............................................................................ 19
5. Exploration and Evaluation Assets ................................................................................... 20
6. Accounts Payable and Accrued Liabilities ............................................................................ 20
7. Related Party Transactions .......................................................................................... 21
8. Share Capital ....................................................................................................... 21
9. Share-Based Payments ................................................................................................ 23
10. Segmented Reporting ................................................................................................ 24
11. Financial Risk Management Objectives and Policies .................................................................. 24
12. Commitments and Contingencies....................................................................................... 27
13. Income Taxes ....................................................................................................... 28
14. Subsequent Event ................................................................................................... 29
Page 4 of 29
Delrand Resources Limited
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian dollars)
Notes June 30, 2014 June 30, 2013
$ $
Assets
Current Assets
Cash 31,559 101,713
Due from related parties 7 1,588 921
Prepaid expenses and other assets 5,523 24,858
Total Current Assets 38,670 127,492
Non-Current Assets
Exploration and evaluation 5 2,333,457 5,142,097
Total Non-Current Assets 2,333,457 5,142,097
Total Assets 2,372,127 5,269,589
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities 6 560,679 420,637
Income taxes payable 13 5,420 10,840
Due to related parties 7 60,212 125,982
Total Current Liabilities 626,311 557,459
Non-current
Income taxes payable 13 - 5,420
Total Liabilities 626,311 562,879
Shareholders' Equity
Share capital 8 117,128,346 116,601,688
Contributed surplus 8,159,644 8,159,644
Deficit (123,542,174) (120,054,622)
Total Shareholders' Equity 1,745,816 4,706,710
Total Liabilities and Shareholders' Equity 2,372,127 5,269,589
Common shares
Authorized (Note 8a) Unlimited Unlimited
Issued and outstanding 21,281,581 19,578,214
The accompanying notes are an integral part of these consolidated financial statements.
These consolidated financial statements were approved and authorized for issue by the Board of Directors on September 29, 2014.
Signed on behalf of the Board of Directors by:
/s/ Arnold Kondrat /s/ Brian Scallan
Arnold Kondrat Brian Scallan
Director Director
Page 5 of 29
Delrand Resources Limited
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in Canadian dollars)
Notes June 30, 2014 June 30, 2013
$ $
Expenses
Consulting and professional fees 163,656 178,764
General and administrative 204,055 102,049
Foreign exchange loss 4,287 2,963
Impairment of deferred exploration expenditures 5 3,115,554 -
Total expenses (3,487,552) (283,776)
Net loss and comprehensive loss (3,487,552) (283,776)
Basic and dilutes loss per share 8c (0.16) (0.01)
Adjustments for headline loss per share 8c 0.15 -
Headline loss per share 8c (0.01) (0.01)
Weighted average number of common shares outstanding 20,590,336 17,824,790
The accompanying notes are an integral part of these consolidated financial statements.
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Delrand Resources Limited
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in Canadian dollars except number of shares)
Share capital Total
Notes Number of shares Contributed Shareholders'
(Note 9) Amount surplus Deficit Equity
Balance at June 30, 2012 17,578,214 116,339,566 8,159,644 (119,770,846) 4,728,364
Net loss - - - (283,776) (283,776)
Share issuance (net of costs) 8 2,000,000 262,122 - - 262,122
Balance at June 30, 2013 19,578,214 $ 116,601,688 $ 8,159,644 $ (120,054,622) $ 4,706,710
Net loss - - - (3,487,552) (3,487,552)
Share issuance (net of costs) 8a 1,703,284 526,658 - - 526,658
Fractional shares due to consolidation 8a 83 - - - -
Balance at June 30, 2014 21,281,581 $ 117,128,346 $ 8,159,644 $ (123,542,174) $ 1,745,816
The accompanying notes are an integral part of these consolidated financial statements.
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Delrand Resources Limited
CONSOLIDATED STATEMENTS OF CASH FLOW
(Expressed in Canadian dollars)
Year ended Year ended
Notes June 30, 2014 June 30, 2013
$ $
Cash flows from operating activities
Net loss for the year (3,487,552) (283,776)
Adjustments to reconcile net loss to net cash used in operating activities
Impairment of deferred exploration expenditures 5 3,115,554 -
Changes in non-cash working capital
Prepaid expenses and other assets 19,335 29,614
Accounts payable and accrued liabilities 54,762 (85,862)
Taxes payable (10,840) (44)
Taxes paid - (16,452)
Net cash flows used in operating activities (308,741) (356,520)
Cash flows from investing activities
Expenditures on exploration and evaluation 5 (278,903) (381,065)
Funds received from Rio Tinto 4 57,269 265,579
Net cash used in investing activities (221,634) (115,486)
Cash flows from financing activities
Net proceeds from issuance of common shares 8a 116,158 262,122
Warrants exercised 8a 410,500 -
Due from related parties 7 (667) (12,247)
Due to related parties 7 (65,770) (116,811)
Net cash provided by financing activities 460,221 133,064
Net decrease in cash during the year (70,154) (338,942)
Cash, beginning of the year 101,713 440,655
Cash, end of the year 31,559 101,713
The accompanying notes are an integral part of these consolidated financial statements.
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Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
1. CORPORATE INFORMATION AND CONTINUATION OF THE BUSINESS
Corporate Information
The principal business of Delrand Resources Limited (the “Company”) is the acquisition and exploration of mineral properties
in the Democratic Republic of the Congo (“DRC”).
These consolidated financial statements as at June 30, 2014 and 2013 and for the years then ended include the accounts of
the Company and those of its wholly-owned subsidiary 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.
In May 2014, the Company consolidated its outstanding common shares on a three to one basis. Immediately prior to the
consolidation, the Company had 63,844,492 common shares outstanding (June 30, 2013: 58,734,643). Upon effecting the
consolidation, and as of June 30, 2014, the Company had 21,281,581 common shares outstanding (June 30, 2013:
19,578,214). All share numbers have been retroactively adjusted to reflect the share consolidation to provide more
comparable information.
Continuation of the business
The Company incurred a net loss of $3,487,552 for the year ended June 30, 2014 (year ended June 30, 2013: $283,776) and as
at June 30, 2014 had a working capital deficit of $587,641 and deficit of $123,542,174, (June 30, 2013: $429,967 and
$120,054,622 respectively). The Company does not currently have revenue-generating properties.
The Company’s ability to continue operations in the normal course of business is dependent on several factors, including its
ability to secure additional funding. Management is exploring all available options to secure additional funding, including
equity financing and strategic partnerships. In addition, the recoverability of the amount shown for exploration and
evaluation assets is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain
financing to continue to perform exploration activity or complete the development of the properties where necessary, or
alternatively, upon the Company’s ability to recover its incurred costs through a disposition of its interests, all of which are
uncertain.
In the event the Company is unable to identify recoverable resources, receive the necessary permitting, or arrange
appropriate financing, the carrying value of the Company’s assets could be subject to material adjustment. Furthermore,
these conditions may cast significant doubt upon the validity of the going concern assumption.
These consolidated financial statements do not include any additional adjustments to the recoverability and classification of
certain recorded asset amounts, classification of certain liabilities and changes to the statements of comprehensive loss that
might be necessary if the Company was unable to continue as a going concern.
2. BASIS OF PREPARATION
a) Statement of compliance
These consolidated financial statements as at and for the years ended June 30, 2014 and 2013 have been prepared in
accordance with International Financial Reporting Standards (“IFRS”).
The accompanying financial information as at and for the years ended June 30, 2014 and 2013 have been prepared in
accordance with the IFRS standards and IFRS Interpretation Committee (“IFRIC”) interpretations issued and effective at
June 30, 2014.
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Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
b) Basis of measurement
These consolidated financial statements have been prepared under the historical cost convention, except for certain
financial assets which are presented at fair value, as explained in the summary of significant accounting policies set out
in Note 3.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements, unless otherwise indicated. The accounting policies have been applied consistently by all group entities and for
all periods presented.
a) Basis of Consolidation
i. Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has power over an entity,
exposure or rights to variable returns from the Company’s involvement with the entity, and the ability to use its
power over the entity to affect the amount of the Company’s returns. The financial statements of subsidiaries are
included in the consolidated financial statements of the Company from the date that control commences until the
date that control ceases. Consolidation accounting is applied for all of the Company’s subsidiaries.
ii. Transactions eliminated on consolidation
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
iii. Associate
Where the Company has the power to significantly influence but not control the financial and operating policy
decisions of another entity, the investment is accounted for as an associate. Associates are initially recognized in the
consolidated statements of financial position at cost and adjusted thereafter for the post-acquisition changes in the
Company’s share of the net assets of the associate, under the equity method of accounting. The Company's share of
post-acquisition profits and losses is recognized in the consolidated statement of comprehensive loss, except that
losses in excess of the Company's investment in the associate are not recognized unless there is a legal or
constructive obligation to recognize such losses. If the associate subsequently reports profits, the Company’s share
of profits is recognized only after the Company’s share of the profits equals the share of losses not recognized.
Profits and losses arising on transactions between the Company and its associates are recognized only to the extent
of unrelated investor’s interests in the associate. The investor's share in the associate's profits and losses resulting
from these transactions is eliminated against the carrying value of the associate.
Any premium paid for an associate above the fair value of the Company's share of the identifiable assets, liabilities
and contingent liabilities acquired is capitalized and included in the carrying amount of the Company’s investment in
an associate. Where there is objective evidence that the investment in an associate has been impaired, the carrying
amount of the investment is tested for impairment in the same way as other non-financial assets.
b) Use of Estimates and Judgments
The preparation of these consolidated financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised and in any future periods affected. Critical judgments and
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Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
estimates in applying accounting policies that have the most significant effect on the amounts recognized in the
consolidated financial statements are as follows:
Estimates:
i) Provisions and contingencies
The amount recognized as a provision, including legal, contractual, constructive and other exposures or obligations, is
the best estimate of the consideration required to settle the related liability, including any related interest charges,
taking into account the risks and uncertainties surrounding the obligation. In addition, contingencies will only be
resolved when one or more future events occur or fail to occur. Therefore, assessment of contingencies inherently
involves the exercise of significant judgment and estimates of the outcome of future events. The Company assesses its
liabilities and contingencies based upon the best information available, relevant tax laws and other appropriate
requirements.
ii) Impairment
Assets, including exploration and evaluation, are reviewed for impairment whenever events or changes in circumstances
indicate that their carrying amounts may exceed their recoverable amounts.
iii) Share-based payment transactions
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions
requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the
grant. This estimate also requires determining the most appropriate inputs to the valuation model including the
expected life of the stock option, volatility, dividend yield, forfeiture rate and making assumptions about them. The
assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 9.
iv) Decommissioning and environmental provisions
The Company’s operations are subject to environmental regulations in the DRC. Upon any establishment of commercial
viability of a site, the Company will estimate the cost to restore the site following the completion of commercial
activities and depletion of reserves. These future obligations are estimated by taking into consideration closure plans,
known environmental impacts, and internal and external studies which estimate the activities and costs that will be
carried out to meet the decommissioning and environmental obligations. Amounts recorded for decommissioning and
environmental provisions are based on estimates of decommissioning and environmental costs which may not be incurred
for several years or decades. The decommissioning and environmental cost estimates could change due to amendments
in laws and regulations in the DRC. Additionally, actual estimated decommissioning and reclamation costs may differ
from those projected as a result of an increase over time of actual remediation costs, a change in the timing for
utilization of reserves and the potential for increasingly stringent environmental regulatory requirements. The Company
is currently in the exploration stage and as such, there are no decommissioning and environmental reclamation costs as
at June 30, 2014.
Judgments:
i) Exploration and evaluation expenditure
The application of the Company’s accounting policy for exploration and evaluation expenditure requires judgment in
determining whether it is likely that future economic benefits will flow to the Company, which may be based on
assumptions about future events or circumstances. Estimates and assumptions made may change if new information
becomes available. If, after the expenditure is capitalized, information becomes available suggesting that the recovery
of the expenditure is unlikely, the amount capitalized is written off in the statement of comprehensive loss during the
period the new information becomes available.
Page 11 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
ii) Income taxes
The Company is subject to income taxes in various jurisdictions and subject to various rates and rules of taxation.
Significant judgment is required in determining the provision for income taxes. There are many transactions and
calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain.
The Company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the
tax law. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such
differences will impact the current and deferred tax provisions in the period in which such determination is made.
In addition, the Company has not recognized deferred tax assets relating to tax losses carried forward. Future realization
of the tax losses depends on the ability of the entity to satisfy certain tests at the time the losses are recouped,
including current and future economic conditions, tax law, production rates and production costs.
iii) Functional and presentation currency
Judgment is required to determine the functional currency of each entity. These judgments are continuously evaluated
and are based on management’s experience and knowledge of the relevant facts and circumstances.
iv) Impairment
Judgment is involved in assessing whether there is any indication that an asset or cash generating unit may be impaired.
This assessment is made based on the analysis of, amongst other factors, changes in the market or business environment,
events that have transpired that have impacted the asset or cash generating unit, and information from internal
reporting. During the year ended June 30, 2014, there were indications that a particular project met the requirements for
impairment and as a result, an amount of $3,115,554 was recorded in the statement of comprehensive loss.
v) Going Concern
As described in the continuation of business note, management uses its judgment in determining whether the Company is
able to continue as a going concern. Refer to Note 1.
c) Foreign Currency Translation
Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars (“$”), which is the Company’s functional and
presentation currency.
Foreign currency transactions
The functional currency for each of the Company’s subsidiaries is the currency of the primary economic environment in
which the entity operates. Transactions entered into by the Company’s subsidiaries in a currency other than the currency
of the primary economic environment in which they operate (their "functional currency") are recorded at the rates
prevailing when the transactions occur except depreciation and amortization which are translated at the rates of
exchange applicable to the related assets, with any gains or losses recognized in the consolidated statements of
comprehensive loss. Foreign currency monetary assets and liabilities are translated at current rates of exchange with the
resulting gain or losses recognized in the consolidated statements of comprehensive loss. Exchange differences arising on
the retranslation of unsettled monetary assets and liabilities are recognized immediately in net loss. Non-monetary
assets and liabilities are translated using the historical exchange rates. Non-monetary assets and liabilities measured at
fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.
d) Cash
Cash includes cash on hand and deposits held with financial institutions.
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Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
e) Financial Assets
Financial assets are classified as either financial assets at fair value through profit or loss (“FVTPL”), loans and
receivables, held to maturity investments (“HTM”), or available for sale financial assets (“AFS”), as appropriate and,
except in very limited circumstances, the classification is not changed subsequent to initial recognition. The
classification is determined at initial recognition and depends on the nature and purpose of the financial asset. A
financial asset is derecognized when contractual rights to the asset’s cash flows expire or if substantially all the risks and
rewards of the asset are transferred.
i. Financial assets at FVTPL
Financial assets are classified as FVTPL when the financial asset is held for trading or it is designated upon initial
recognition as at FVTPL. A financial asset is classified as held for trading if (1) it has been acquired principally for
the purpose of selling or repurchasing in the near term; (2) it is part of an identified portfolio of financial
instruments that the Company manages and has an actual pattern of short term profit taking; or (3) it is a derivative
that is not designated and effective as a hedging instrument. Financial assets at FVTPL are carried in the
consolidated statement of financial position at fair value with changes in fair value recognized in net loss.
Transaction costs are expensed as incurred.
ii. Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an
active market are classified as loans and receivables. The Company has classified cash as loans and receivables.
Loans and receivables are initially recognized at fair value plus transaction costs that are directly attributable to
their acquisition or issue, and are subsequently carried at amortized cost less losses for impairment. The impairment
loss of receivables is based on a review of all outstanding amounts at period end. Bad debts are written off during
the period in which they are identified. Amortized cost is calculated taking into account any discount or premium on
acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and
losses are recognized in the statements of comprehensive loss when the loans and receivables are derecognized or
impaired, as well as through the amortization process.
iii. HTM investments
HTM financial instruments are initially measured at fair value. Subsequently, HTM financial assets are measured at
amortized cost using the effective interest rate method, less any impairment losses. The Company did not classify
any assets as HTM.
iv. AFS financial assets
Non-derivative financial assets not included in the above categories are classified as AFS financial assets. They are
carried at fair value with changes in fair value generally recognized in other comprehensive loss and accumulated in
the AFS reserve. Impairment losses are recognized in net loss. Purchases and sales of AFS financial assets are
recognized on settlement date with any change in fair value between trade date and settlement date being
recognized in the AFS reserve. On sale, the cumulative gain or loss recognized in other comprehensive loss is
reclassified from the AFS reserve to net loss. The Company has not designated any of its financial assets as AFS.
v. Impairment of financial assets
The Company assesses at each reporting date whether a financial asset or a group of financial assets is impaired. A
financial asset or group of financial assets is deemed to be impaired, if, and only if, there is objective evidence of
impairment as a result of one or more events that has occurred after the initial recognition of the asset and that
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Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that
can be reliably estimated.
For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the asset’s original effective
rate.
The carrying amount of all financial assets, excluding other receivables, is directly reduced by any impairment loss.
The carrying amount of other receivables is reduced through the use of an allowance account. Associated allowances
are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been
transferred to the Company. Subsequent recoveries of amounts previously written off are credited against the
allowance account. Changes in the carrying amount of the allowance account are recognized in net loss. A provision
for impairment is made in relation to other receivable, and an impairment loss is recognized in net loss when there
is objective evidence that the Company will not be able to collect all of the amounts due under the original terms.
The carrying amount of the receivable is reduced through use of an allowance account.
With the exception of AFS equity instruments, if in a subsequent period the amount of impairment loss decreases
and the decrease relates to an event occurring after the impairment was recognized, the previously recognized
impairment loss is reversed through net loss. On the date of impairment reversal, the carrying amount of the
financial asset cannot exceed its amortized cost had the impairment not been recognized. Reversal for AFS equity
instruments are recognized in other comprehensive loss.
vi. Effective interest method
The effective interest method calculates the amortized cost of a financial instrument asset or liability and allocates
interest income over the corresponding period. The effective interest rate is the rate that discounts estimated
future cash receipts over the expected life of the financial asset or liability, or where appropriate, a shorter period.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified
as FVTPL.
f) Financial Liabilities
Financial liabilities are classified as FVTPL, or other financial liabilities, as appropriate upon initial recognition. A
financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired.
i. Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly
attributable transaction costs. Subsequent to the initial recognition, other financial liabilities are measured at
amortized cost using the effective interest method. The Company’s other financial liabilities include accounts
payable and accrued liabilities and related party liability balances.
ii. Financial liabilities classified as FVTPL include financial liabilities held-for-trading and financial liabilities
designated upon initial recognition as FVTPL. Financial liabilities are classified as held-for-trading if they are
acquired for the purpose of selling in the near term. This category includes derivative financial instruments
(including separated embedded derivatives) held for trading unless they are designated as effective hedging
instruments. Gains or losses on liabilities held for trading are recognized in the consolidated statement of
comprehensive loss. The Company does not have any financial liabilities classified as FVTPL.
g) Loss Per Share
Basic loss per share is computed by dividing the net loss applicable by the weighted average number of common shares
outstanding during the reporting period. Diluted loss per share is computed by dividing the net loss by the sum of the
weighted average number of common shares issued and outstanding during the reporting period and all additional
common shares for the assumed exercise of stock options and warrants outstanding for the reporting period, if dilutive.
Page 14 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
The treasury stock method is used for the assumed proceeds upon the exercise of stock options and warrants that are
used to purchase common shares at the average market price during the reporting period. As the Company is incurring
losses, basic and diluted loss per share are the same because the exercise of outstanding stock options and share
purchase warrants in the diluted loss per share calculation is anti-dilutive.
Headline loss per share is an additional earnings number that is permitted by IAS 33, Earnings per share (“IAS 33”). The
starting point is earnings as determined in IAS 33, excluding “separately identifiable re-measurements” (as defined), net
of related tax (both current and deferred) and related non-controlling interest, other than re-measurements specifically
included in headline. A re-measurement is an amount recognized in profit or loss relating to any change (whether
realized or unrealized) in the carrying amount of an asset or liability that arose after the initial recognition of such asset
or liability.
h) Property, Plant and Equipment (“PPE”)
i. Recognition and measurement
Items of PPE are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets
includes the cost of materials, directed labor and any other cost directly attributable to bring the asset to the
location and condition necessary to be capable of operating in the manner intended by the Company. Assets in the
course of construction are capitalized in the capital construction in progress category and transferred to the
appropriate category of PPE upon completion. When components of an asset have different useful lives,
depreciation is calculated on each separate component.
ii. Subsequent costs
The cost of replacing part of an item of PPE is recognized in the carrying amount of the item if it is probable that
the future economic benefits embodied within the part will flow to the Company and its cost can be measured
reliably. The carrying amount of the replaced part is derecognized and included in net loss. If the carrying amount
of the replaced component is not known, it is estimated based on the cost of the new component less estimated
depreciation. The costs of the day?to?day servicing of property, plant and equipment are recognized in net loss as
incurred.
iii. Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are
assessed to determine whether a component has an estimated useful life that is different from that of the
remainder of that asset, in which case that component is depreciated separately. Depreciation is recognized in net
loss on a straight line basis over the estimated useful lives of each item or component of an item of PPE as follows:
- Furniture and office equipment two to seven years
- Vehicles four years
- Computer equipment three years
- Exploration and mining assets two to four years
Depreciation methods, useful lives and residual values are reviewed annually and adjusted, if appropriate.
Depreciation commences when an asset is available for use. Changes in estimates are accounted for prospectively.
iv. Gains and losses
Gains and losses on disposal of an item of PPE are determined by comparing the proceeds from disposal with the
carrying amount of the PPE, and are recognized net within other income in the consolidated statement of
comprehensive loss.
v. Repairs and maintenance
Page 15 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
Repairs and maintenance costs are charged to expense as incurred, except major inspections or overhauls that are
performed at regular intervals over the useful life of an asset are capitalized as part of PPE.
vi. De-recognition
An item of PPE is derecognized upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on de-recognition of the assets (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is included in net loss in the period the
item is derecognized.
i) Exploration and Evaluation Assets
All direct costs related to exploration and evaluation of mineral properties, net of incidental revenues, are capitalized
under exploration and evaluation assets. Exploration and evaluation expenditures include such costs as acquisition of
rights to explore; sampling, trenching and surveying costs; costs related to topography, geology, geochemistry and
geophysical studies; drilling costs and costs in relation to technical feasibility and commercial viability of extracting a
mineral resource.
A regular review of each property is undertaken to determine the appropriateness of continuing to carry forward costs in
relation to exploration and evaluation of mineral properties. Should the carrying value of the expenditure not yet
amortized exceed its estimated recoverable amount in any year, the excess is written off in the consolidated statement
of comprehensive loss.
The Company recognized impairment of exploration and evaluation assets during the year ended June 30, 2014 in
relation to the Tshikapa Project in the amount of $3,115,554 (year ended June 30, 2013 - $nil)
j) Impairment of Non-financial Assets
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying
amount of an exploration and evaluation asset may exceed its recoverable amount. Internal factors, such as budgets and
forecasts, as well as external factors, such as expected future prices, costs and other market factors are also monitored
to determine if indications of impairment exist. If any indication of impairment exists, an estimate of the asset’s
recoverable amount is calculated. The recoverable amount is determined as the higher of the fair value less costs to sell
for the asset and the asset’s value in use. This is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or the Company’s assets. If this is the case, the
individual assets are grouped together into cash generating units (“CGU”) for impairment purposes. Such CGUs represent
the lowest level for which there are separately identifiable cash inflows that are largely independent of the cash flows
from other assets.
If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is
charged to the consolidated statement of comprehensive loss so as to reduce the carrying amount to its recoverable
amount (i.e., the higher of fair value less cost to sell and value in use). Fair value less cost to sell is the amount
obtainable from the sale of an asset or CGU in an arm’s length transaction between knowledgeable, willing parties, less
the costs of disposal.
k) Income Taxes
Income tax expense consists of current and deferred tax expense. Income tax expense is recognized in profit and loss,
except to the extent that it relates to items recognized in other comprehensive loss or directly in equity. In this case,
the tax is also recognized in other comprehensive loss or directly in equity.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from, or paid, to the taxation authorities. The tax rates and tax laws used to compute current income tax
Page 16 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
assets and liabilities are measured at future anticipated tax rates, which have been enacted or substantively enacted at
the reporting date. Current tax assets and current tax liabilities are only offset if a legally enforceable right exists to set
off the amounts, and the Company intends to settle on a net basis, or to realize the asset and settle the liability
simultaneously.
Deferred taxes are recognized on all qualifying temporary differences at the reporting date between the tax basis of
assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are only recognized
to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future and
future taxable profit will be available against which the temporary difference can be utilized.
Deferred tax liabilities and assets are not recognized for temporary differences between the carrying amount and tax
bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax
assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority.
l) Share-Based Payments
Equity-settled share-based payments for directors, officers and employees are measured at fair value at the date of
grant and recorded as compensation expense in the consolidated statement of comprehensive loss. The fair value
determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period based on the Company’s estimate of shares that will eventually vest. The number of forfeitures likely to
occur is estimated on grant date. Any consideration paid by the optionee on exercise of equity-settled share-based
payments is credited to share capital. Shares are issued from treasury upon the exercise of equity-settled share-based
instruments.
Compensation expense on stock options granted to non-employees is measured at the earlier of the completion of
performance and the date the options are vested using the fair value method and is recorded as an expense in the same
period as if the Company had paid cash for the goods or services received.
When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the
fair value is measured by use of a Black-Scholes valuation model. The expected life used in the model is adjusted, based
on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
m) Provisions and Contingencies
Provisions are recognized when a legal or constructive obligation exists, as a result of past events, and it is probable that
an outflow of resources that can be reliably estimated will be required to settle the obligation. Where the effect is
material, the provision is discounted using an appropriate current market-based pre-tax discount rate. The increase in
the provision due to passage of time is recognized as interest expense.
When a contingency substantiated by confirming events, can be reliably measured and is likely to result in an economic
outflow, a liability is recognized as the best estimate required to settle the obligation. A contingent liability is disclosed
where the existence of an obligation will only be confirmed by future events, or where the amount of a present
obligation cannot be measured reliably. Contingent assets are only disclosed when the inflow of economic benefits is
probable. When the economic benefit becomes virtually certain, the asset is no longer contingent and is recognized in
the consolidated financial statements.
n) Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions. Parties are also
Page 17 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
considered to be related if they are subject to common control or common significant influence. Related parties may be
individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of
resources or obligations between related parties. Related party transactions that are in the normal course of business
and have commercial substance are measured at the exchange amount.
o) Newly Adopted Accounting Standards
The Company has applied the following new and revised IFRS in these consolidated financial statements:
- IAS 1, “Presentation of Financial Statements” (amendment);
- IAS 27, “Separate Financial Statements” (amendment);
- IAS 28, “Investments in Associates and Joint Ventures” (amendment);
- IAS 32, “Financial Instruments: Presentation” (amendment);
- IFRS 7, “Financial Instruments: Disclosure” (amendment);
- IFRS 10, “Consolidated Financial Statements” (new);
- IFRS 11, “Joint Arrangements” (new);
- IFRS 12, “Disclosure of Interests in Other Entities” (new); and
- IFRS 13, “Fair Value Measurement” (new).
The adoption of these new and revised standards and interpretations did not have a significant impact on the Company’s
consolidated financial statements.
p) Accounting Standards Issued But Not Yet Effective
The Company has reviewed recently issued 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
Page 18 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
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.
4. SUBSIDIARY 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 Interest Principal Activity
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, As at June 30,
2014 2013
Portion of ownership interest 0.00% 25.00%
Common shares held - 250
Total investment $ - $ -
On January 26, 2010, the Company entered into an agreement (the “Iron Ore Agreement”) with Rio Tinto Minerals
Development Limited ("Rio Tinto Minerals") for the exploration for iron ore in areas within the Orientale Province of the
DRC. 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.
During the year ended June 30, 2014, Rio Tinto Minerals withdrew from the iron ore project and, in connection with this
withdrawal, the Company surrendered all of its shares in DRC Orientale. As part of the arrangement with respect to Rio
Tinto's said withdrawal, the Company has maintained the iron ore rights in the exploration permits relating to the iron ore
project.
Page 19 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
5. EXPLORATION AND EVALUATION ASSETS
The following table summarizes the Company’s tangible exploration and evaluation expenditures with respect to its
properties in the DRC:
Tshikapa Northern DRC
Notes Project Project Total
Cost (a) (b)
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 at June 30, 2013 3,115,554 2,024,324 5,139,878
Additions - 306,914 306,914
Impairments (3,115,554) - (3,115,554)
Balance as at June 30, 2014 - 2,331,238 2,331,238
There is $2,219 of intangible exploration and evaluation expenditures as at June 30, 2014 (June 30, 2013: $2,219). There
have not been any additions or disposals to intangible assets since January 1, 2011.
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 had 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 had advised the Company of its wish to modify the option
agreement. As a result of not being able to resolve this situation with Acacia (i.e. Acacia’s wish to modify the
option agreement) over an extended period of time, the Company has recorded an impairment loss of $3,115,554
with respect to this project.
b. Northern DRC Project
The Company's northern DRC diamond project is located in Orientale Province of the DRC and consists of four
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 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 2 permits covering
an area of 173 km². The two additional exploration permits held by the Company’s DRC subsidiary cover an area of
92 km² (after its obligatory 50% reduction) directly north of the optioned ground.
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities are mainly comprised of amounts outstanding for purchases relating to exploration
activities and amounts payable for professional services. The credit period for purchases typically ranges from 30 to 90 days.
Page 20 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
7. RELATED PARTY TRANSACTIONS
a) Key Management Remuneration
The Company’s related parties include key management. Key management includes executive directors. The remuneration of
the key management of the Company as defined above, during the years ended June 30, 2014 and June 30, 2013 was as
follows:
Year ended Year ended
June 30, June 30,
2014 2013
Salaries $ 229,534 $ 267,444
$ 229,534 $ 267,444
b) Other Related Parties
As at June 30, 2014, an amount of $56,462 was owed to a director of the Company representing consulting fees (June 30,
2013: $117,107). For the year ended June 30, 2014, consulting fees of $100,000 were incurred to one director (June 30, 2013:
$100,000). These consulting fees related to management services in the normal course of operations.
During the year ended June 30, 2014, the Company incurred common expenses of $nil (year ended June 2013: $8,875) in the
DRC together with Loncor Resources Inc. (“Loncor”), a corporation with common directors. As at June 30, 2014, an amount
of $3,750 (June 30, 2013: $8,875) owing to Loncor was included in due to related parties in the consolidated statement of
financial position.
As at June 30, 2014, Banro Corporation (“Banro”) owed the Company an amount of $1,588 (June 30, 2013: $921 Banro owed
the Company). Banro owns 1,538,998 common shares of the Company, representing a 7.23% interest in the Company.
June 30, 2014 June 30, 2013
$ $
Due from related parties 1,588 921
Due to related party 60,212 125,982
All amounts due to/from 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.
8. SHARE CAPITAL
a) Authorized
The Company's authorized share capital consists of an unlimited number of common shares with no par value.
The holders of the common shares are entitled to receive notice of and to attend all meetings of the shareholders of the
Company and shall have one vote for each common share held at all meetings of the shareholders of the Company. The
holders of the common shares are entitled to (a) receive any dividends as and when declared by the board of directors,
out of the assets of the Company properly applicable to the payment of dividends, in such amount and in such form as
the board of directors may from time to time determine, and (b) receive the remaining property of the Company in the
event of any liquidation, dissolution or winding-up of the Company.
During the year ended June 30, 2014, 1,036,617 warrants were exercised at a price of $0.396 per share. This resulted in
the issuance of 1,036,617 common shares of the Company and gross proceeds to the Company of $410,500. 703,283 of
the shares were issued to a director of the Company (Arnold T. Kondrat). In April 2014, the Company closed a non-
Page 21 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
brokered private placement of 666,667 common shares of the Company at a price of $0.225 per share for gross proceeds
of $150,000. A director of the Company (Arnold T. Kondrat) was the purchaser of all of the shares.
During the year ended June 30, 2013, the Company issued 2,000,000 common shares in a private placement at a price of
$0.135 per share for gross proceeds of $270,000. 873,334 of these common shares were purchased by directors and
officers of the Company.
In May 2014, the Company consolidated its outstanding common shares on a three to one basis. Immediately prior to the
consolidation, the Company had 63,844,492 common shares outstanding (June 30, 2013: 58,734,643). Upon effecting the
consolidation, and as of June 30, 2014, the Company had 21,281,581 common shares outstanding (June 30, 2013:
19,578,214). All share, stock option and warrant numbers have been retroactively adjusted to reflect the share
consolidation to provide more comparable information.
Number of
shares Amount
Balance at June 30, 2012 17,578,214 $ 116,339,566
Shares issued for:
Cash 2,000,000 262,122
Balance at June 30, 2013 19,578,214 $ 116,601,688
Shares issued for:
Cash 666,667 116,158
Exercise of Warrants 1,036,617 410,500
Fractional shares due to consolidation 83 -
Balance at June 30, 2014 21,281,581 $ 117,128,346
b) Share purchase warrants
The Company’s outstanding warrants have been adjusted to reflect the three to one share consolidation that occurred in
May 2014 (see Note 8a). As at June 30, 2014, the Company had outstanding warrants to purchase nil (June 30, 2013:
3,989,899) common shares of the Company. During the year ended June 30, 2014, 1,286,615 warrants exercisable at a
price of $0.396 per share expired in November 2013 and 1,666,667 warrants exercisable at a price of $0.66 per share
expired in May 2014.
c) Loss per share and headline loss per share
Loss per share was calculated on the basis of the weighted average number of common shares outstanding for the year
ended June 30, 2014, amounting to 21,120,325 (year ended June 30, 2013: 17,824,790) common shares. Diluted loss per
share was calculated using the treasury stock method. Total stock options for the year ended June 30, 2014 of nil (year
ended June 30, 2013: 225,000) and warrants of nil (year ended June 30, 2013: 3,989,899) 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. There is an adjustment to reflect
the impairment of the deferred exploration expenditures; therefore, there is a difference between the basic and diluted
loss per share and the headline loss per share.
Page 22 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
Year ended Year ended
June 30, 2014 June 30, 2013
Loss for the period (3,487,552) (283,776)
Adjustments for headline loss 3,115,554 -
Headline loss for the period (371,998) (283,776)
Basic and diluted loss per share (0.16) (0.01)
Headline loss per share (0.01) (0.01)
9. SHARE-BASED PAYMENTS
In August 2011, the Company’s board of directors established a new stock option plan for the Company (the "New Plan").
In establishing the New Plan, the Board of Directors also provided that no additional stock options may be granted under
the Company’s other stock option plan (the "Old Plan") and terminated the Old Plan effective upon the exercise, expiry,
termination or cancellation of all of the currently outstanding stock options that were granted under the Old Plan.
Under the New Plan, non-transferable options to purchase common shares of the Company may be granted by the
Company’s Board of Directors to any director, officer, employee or consultant of the Company or any subsidiary of the
Company. The New Plan contains provisions providing that the term of an option may not be longer than ten years and
the exercise price of an option shall not be lower than the last closing price of the Company’s shares on the Toronto
Stock Exchange prior to the date the stock option is granted. Unless the Board of Directors makes a specific
determination otherwise, stock options granted under the New Plan and all rights to purchase Company shares pursuant
thereto shall expire and terminate immediately upon the optionee who holds such stock options ceasing to be at least
one of a director, officer or employee of or consultant to the Company or a subsidiary of the Company, as the case may
be. Stock options granted pursuant to the New Plan vest as follows: 75% of the stock options vest on the 12 month
anniversary of their grant date and the remaining 25% of such stock options vest on the 18 month anniversary of their
grant date. The total number of common shares of the Company issuable upon the exercise of all outstanding stock
options granted under the New Plan shall not at any time exceed 12% of the total number of outstanding common shares
of the Company, from time to time.
As at June 30, 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: $2.10) per share.
There are currently no stock options outstanding under the New Plan.
The following tables summarize information about stock options:
For the year ended June 30, 2014:
Weighted average
During the Year remaining Vested &
Exercise Price Range Opening Balance Granted Exercised Expired Forfeited Closing Balance contractual life Exercisable Unvested
($) (years)
2.10 - 7.51 675,000 - - (675,000) - - - - -
675,000 - - (675,000) - - - - -
Weighted Average
Exercise Price $ 2.10 $ - $ - $ - $ - $ - - $ - $ -
Page 23 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
For the year ended June 30, 2013:
Weighted average
During the Year remaining Vested &
Exercise Price Range Opening Balance Granted Exercised Expired Forfeited Closing Balance contractual life Exercisable Unvested
($) (years)
2.10 - 7.51 800,000 - - (125,000) - 675,000 1.16 675,000 -
7.52 - 16.00 90,000 - - (90,000) - - - - -
890,000 - - (215,000) - 675,000 - 675,000 -
Weighted Average
Exercise Price $ 3.51 $ - $ - $ - $ - $ 2.10 - $ 2.10 $ -
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.
10. SEGMENTED REPORTING
The Company has one operating segment: the acquisition, exploration and development of mineral properties located in the
DRC. The operations of the Company are located in two geographic locations, Canada and the DRC. Geographic segmentation
of non-current assets is as follows:
As at June 30, 2014
Exploration and Non-Current
evaluation Assets
DRC $2,333,457 $2,333,457
Canada - -
$2,333,457 $2,333,457
As at June 30, 2013
Exploration and Non-Current
evaluation Assets
DRC $5,142,097 $5,142,097
Canada - -
$5,142,097 $5,142,097
11. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
a) Fair value of financial assets and liabilities
The consolidated statements of financial position carrying amounts for cash, prepaid expenses and other assets, 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
Page 24 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
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 market prices (unadjusted) in active markets for
identical assets or liabilities;
- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs).
There were no transfers between Level 1 and 2 during the reporting periods. The fair values of financial assets and
liabilities carried at amortized cost are approximated by their carrying values.
b) Risk Management Policies
The Company is exposed to changes in commodity prices and foreign-exchange. The Company’s Board of Directors has
overall responsibility for the establishment and oversight of the Company’s risk management framework. Although the
Company has the ability to address its price-related exposures through the use of options, futures and forward contacts,
it does not generally enter into such arrangements.
c) Foreign Currency Risk
Foreign currency risk is the risk that a variation in exchange rates between the Canadian dollar and United States dollar
or other foreign currencies will affect the Company’s operations and financial results. A portion of the Company’s
transactions are denominated in United States dollars, Congolese francs and South African rand. The Company is also
exposed to the impact of currency fluctuations on its monetary assets and liabilities. The Company’s functional currency
is the Canadian dollar. The majority of major expenditures are transacted in US dollars. The Company maintains the
majority of its cash in Canadian dollars but it does hold balances in US dollars. Significant foreign exchange gains or
losses are reflected as a separate component of the consolidated statement of comprehensive loss. The Company does
not use derivative instruments to reduce its exposure to foreign currency risk.
The following table indicates the impact of foreign currency exchange risk on net working capital as at June 30, 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 June 30, 2014.
Page 25 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
U.S dollar South African rand
$ ZAR
Cash 15,391 13,404
Prepaids and other assets - 30,196
Accounts payable and accrued
liabilities (162,544) (250,507)
Total foreign currency financial
assets and liabilities (147,153) (206,907)
Foreign exchange rate at June 30,
2014 1.0670 0.1005
Total foreign currency financial
assets and liabilities in CDN $ (157,012) (20,794)
Impact of a 10% strengthening or
weakening of the CDN 4 on net loss (15,701) (2,079)
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 $560,679, amounts due from related parties of $1,588
and amounts due to related parties of $60,212 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 Business.
f) Mineral Property Risk
The Company’s operations in the DRC are exposed to various levels of political risk and uncertainties, including political
and economic instability, government regulations relating to exploration and mining, military repression and civil
disorder, all or any of which may have a material adverse impact on the Company’s activities or may result in
impairment in or loss of part or all of the Company's assets.
g) Market Risk
Market risk is the potential for financial loss from adverse changes in underlying market factors, including foreign-
exchange rates, commodity prices, interest rates and stock based compensation costs.
Page 26 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
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 common shares 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;
- 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 year ended June 30,
2014.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
12. COMMITMENTS AND CONTINGENCIES
The Company is committed to the payment of surface fees and taxes. As at June 30, 2014, these fees and taxes are
estimated to be $76,867 (US $72,000) compared to $67,315 (US $64,000) as at June 30, 2013.
Page 27 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
The surface fees and taxes are required to be paid annually under the DRC Mining Code in order to keep exploration permits
in good standing.
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 effect on its consolidated losses,
cash flow or financial position.
13. INCOME TAXES
The provision for income taxes is at an effective tax rate which differs from the basic corporate tax rate for the following
reasons:
Year ended June 30, Year ended June 30,
2014 2014
Canadian basic Federal and Provincial Income Tax Rates 26.5% 26.5%
Net loss before tax (3,487,552) (283,776)
Recovery of income tax based on statutory rates (924,201) (75,201)
Foreign rate differential (109,045) -
Unrecognized benefit of losses 1,033,246 75,201
Income tax expense - -
Income Tax Payable
The Company has income tax payable as a result of the Ontario harmonization as at June 30, 2014 and 2013.
As at June 30, 2014 As at June 30, 2013
Current income tax payable $ 5,420 $ 10,840
Non-current income tax payable - 5,420
$ 5,420 $ 16,260
Unrecognized Income Tax Assets
As at June 30, 2014, the Company has unrecognized temporary differences of approximately $119,298,858 (June 30, 2013:
$115,949,697)
The following information summarizes the main temporary differences for which no deferred tax asset has been recognized:
June 30, 2014 June 30, 2013
Deductible temporary differences 21,735,226 18,601,170
Tax losses 97,563,632 97,348,527
Total 119,298,858 115,949,697
Deferred tax assets have not been recognized in respect of these items because the Company does not have a history of
taxable earnings.
Page 28 of 29
Delrand Resources Limited
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Expressed in Canadian dollars)
The following table summarizes the Company’s net operating tax losses and deductible temporary differences not recognized
that can be applied against future taxable profit. The Company’s capital losses not recognized can be applied against future
capital gains.
Country Type Amount Expiry Date
Canada Net operating tax losses $5,003,187 2027 - 2034
Canada Capital losses $92,560,445 No expiry
Canada Deductible temporary differences $775,602 No expiry
DRC Deductible temporary differences $20,959,624 No expiry
14. SUBSEQUENT EVENTS
On July 23, 2014, the Company announced that it closed a non-brokered arm’s length private placement of 500,000 units of
the Company at a price of $0.50 per unit for proceeds to the Company of $250,000. Each such unit is comprised of one
common share of the Company and one-half of one warrant of the Company, with each full warrant entitling the holder to
purchase one common share of the Company at a price of $0.75 for a period of two years. The Company intends to use the
proceeds from this financing for general corporate purposes.
In a press release dated September 15, 2014, the Company announced it had entered into a share exchange agreement where
it has agreed to acquire all of the outstanding shares of VoiceTrust Holding Inc. (VoiceTrust), a privately-held global provider
of voice biometrics solutions based in Toronto, from VoiceTrust Holding B.V., an indirect subsidiary of Ramphastos
Participaties Coöperatief U.A.. The Company will acquire VoiceTrust for aggregate consideration of $27,000,000 to be paid by
the issuance of 36,000,000 common shares in the capital of the Company subject to adjustment in certain circumstances (the
Acquisition). Concurrently with the closing of the Acquisition, the Company proposes to complete a private placement of
common shares in the capital of the Company for net subscription proceeds of no less than $15,000,000.
30 September 2014
___________________________________________________________________________________________
Sponsors
Arcay Moela Sponsors Proprietary Limited
(t/a Arbor Capital Sponsors Proprietary Limited)
Page 29 of 29
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