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Interim condensed consolidated financial statements (unaudited) December 31 2014
Delrand Resources Limited
(Incorporated in Canada)
(Corporation number 627115-4)
Share code: DRN ISIN Number: CA2472672062
(“Delrand” or the "Company")
Delrand Resources Limited
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 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 six month periods ended December 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.
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
Notes to Interim Condensed Consolidated Financial Statements…………………………………………………………………............................………8
1. Corporate Information and Continuation of the Business ..........................................................8
2. Basis of Preparation ............................................................................................8
3. Exploration and Evaluation Assets ............................................................................. 10
4. Accounts Payable and Accrued Liabilities ...................................................................... 10
5. Related Party Transactions .................................................................................... 11
6. Share Capital ................................................................................................. 11
7. Share-Based Payments .......................................................................................... 13
8. Segmented Reporting ........................................................................................... 13
9. Financial Risk Management Objectives and Policies.............................................................. 14
10. Commitments and Contingencies................................................................................. 17
11. Subsequent Events ............................................................................................ 17
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian dollars) (unaudited)
December 31, June 30,
Notes
2014 2014
$ $
Assets
Current Assets
Cash 8,898 31,559
Due from related parties 5 - 1,588
Prepaid expenses and other assets 24,619 5,523
Total Current Assets 33,517 38,670
Non-Current Assets
Exploration and evaluation 3 1 2,333,457
Total Non-Current Assets 1 2,333,457
Total Assets 33,518 2,372,127
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities 4 1,806,401 560,679
Income taxes payable 5,420 5,420
Due to related parties 5 265,758 60,212
Total Current Liabilities 2,077,579 626,311
Non-current
Income taxes payable - -
Total Liabilities 2,077,579 626,311
Shareholders' Equity
Share capital 6 117,345,802 117,128,346
Contributed surplus 8,183,615 8,159,644
Deficit (127,573,478) (123,542,174)
Total Shareholders' Equity (2,044,061) 1,745,816
Total Liabilities and Shareholders' Equity 33,518 2,372,127
Common shares
Authorized (Note 6a) Unlimited Unlimited
Issued and outstanding 21,781,581 21,281,581
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Expressed in Canadian dollars) (unaudited)
Notes Three months ended Three months ended Six months ended Six months ended
December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013
$ $ $ $
Expenses
Consulting and professional fees 859,136 8,318 1,378,824 12,058
General and administrative 243,770 47,155 300,956 87,182
Impairment of deferred exploration expenditures 3 2,353,315 - 2,353,315 -
Foreign exchange loss/(gain) 1,569 310 (1,791) 2,324
Total expenses (3,457,790) (55,783) (4,031,304) (101,564)
Net loss and comprehensive loss (3,457,790) (55,783) (4,031,304) (101,564)
Basic and diluted loss per share 6c (0.16) (0.00) (0.19) (0.00)
Adjustments for headline loss per share 6c 0.11 (0.00) 0.11 (0.00)
Headline loss per share 6c (0.05) (0.00) (0.08) (0.00)
Weighted average number of common shares
outstanding 21,781,581 20,614,831 21,719,081 20,316,240
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in Canadian dollars) (unaudited)
Common shares Total
Contributed
Notes Number of shares Deficit Shareholders'
Amount Surplus
(Note 6) equity
Balance at June 30, 2013 19,578,214 116,601,688 8,159,644 (120,054,622) 4,706,710
Net loss for the period - - - (101,564) (101,564)
Warrants exercised 6b 1,036,617 410,500 - - 410,500
Balance at December 31, 2013 20,614,831 $ 117,012,188 $ 8,159,644 $ (120,156,186) $ 5,015,646
Net loss for the period - - - (3,385,988) (3,385,988)
Share issuance (net of costs) 6a 666,667 116,158 - - 116,158
Fractional shares due to consolidation 83 - - - -
Balance at June 30, 2014 21,281,581 $ 117,128,346 $ 8,159,644 $ (123,542,174) $ 1,745,816
Net loss for the period - - - (4,031,304) (4,031,304)
Issuance of units (net of costs) 6a 500,000 217,456 23,971 - 241,427
Balance at December 31, 2014 21,781,581 $ 117,345,802 $ 8,183,615 $ (127,573,478) $ (2,044,061)
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Expressed in Canadian dollars) (unaudited)
Three months ended Three months ended Six months ended Six months ended
December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013
Notes $ $ $ $
Cash flows from operating activities
Net loss for the period (3,457,790) (55,783) (4,031304) (101,564)
Adjustments to reconcile net loss to net
cash used in operating activities
Impairment of deferred exploration expenditures 3 2,353,315 - 2,353,315 -
Changes in non-cash working capital
Prepaid expenses and other assets (17,111) (12,124) (19,096) (14,106)
Accounts payable and accrued liabilities 842,138 29,842 1,245,722 (13,024)
Taxes payable - (10,840) - (10,840)
Net cash used in operating activities (279,448) (48,905) (451,363) (139,534)
Cash flows from investing activities
Expenditures on exploration and evaluation 3 (15,491) (148,479) (19,859) (208,399)
Funds received from Rio Tinto - 26,739 - 57,270
Net cash used in investing activities (15,491) (121,740) (19,859) (151,129)
Cash flows from financing activities
Net proceeds from issuance of shares 6 - - 217,456 -
Warrants issued - - 23,971 410,500
Due from related parties 1,812 24,585 1,588 506
Due to related parties 5 228,035 (1,093) 205,546 (122,246)
Net cash provided by financing activities 229,847 23,492 448,561 288,760
Net decrease in cash during the period (65,092) (147,153) (22,661) (1,903)
Cash, beginning of the period 73,990 246,963 31,559 101,713
Cash, end of the period 8,898 99,810 8,898 99,810
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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 six month periods ended December
31, 2014 include the accounts of the Company and 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.
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 $3,457,790 and $4,031,304 during the respective three and six month periods ended December 31, 2014
and, as of that date, the Company's deficit was $127,573,478. 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 six month periods ended
December 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, 2014, 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
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.
IFRS 15, Revenue from Contracts with Customers (“IFRS 15”) was issued by the IASB on May 28, 2014 and will replace IAS
18 Revenue and IAS 11 Construction Contracts. IFRS 15 provides a more detailed framework for the timing of revenue
recognition and increased requirements for disclosure of revenue. IFRS 15 uses a control-based approach to recognize
revenue which is a change from the risk and reward approach under the current standard. The mandatory effective date
is for annual periods beginning on or after January 1, 2017. The Company is evaluating the impact of this standard.
An amendment to IAS 1, Presentation of Financial Statements (“IAS 1”) was issued by the IASB in December 2014. The
amendment clarifies principles for the presentation and materiality consideration for the financial statements and notes
to improve understandability and comparability. The amendment to IAS 1 is effective for annual periods beginning on or
after January 1, 2016. The Company is evaluating the impact of this standard on its consolidated financial statements.
An amendment to IAS 16, Property, Plant and Equipment (“IAS 16”) was issued by the IASB in May 2014. The amendment
prohibits the use of a revenue-based depreciation method for property, plant and equipment as it is not reflective of the
economic benefits of using the asset. It clarifies that the depreciation method applied should reflect the expected
pattern of consumption of the future economic benefits of the asset. The amendment to IAS 16 is effective for annual
periods beginning on or after January 1, 2016. The Company does not expect the standard to have a material impact on
its consolidated financial statements.
An amendment to IAS 38 Intangible Assets (“IAS 38”) was issued by the IASB in May 2014. The amendment prohibits the
use of a revenue-based depreciation method for intangible assets. Exceptions are allowed where the asset is expressed
as a measure of revenue or revenue and consumption of economic benefits for the asset are highly correlated. The
amendment to IAS 38 is effective for annual periods beginning on or after January 1, 2016. The Company is evaluating
the impact of this standard but does not expect the standard to have a material impact on its consolidated financial
statements.
Amendments IFRS 10 Consolidated Financial Statements (“IFRS 10”), IFRS 12 Disclosure of Interests in Other Entities
(“IFRS 12”), and IAS 28 Investments in Associates and Joint Ventures (“IAS 28”) were published by the IASB in December
2014. The amendments define the application of the consolidation exception for investment entities. They are effective
for annual periods beginning on or after January 1, 2016. The Company is evaluating the impact of this standard but does
not expect the standard to have a material impact on its consolidated financial statements.
3. EXPLORATION AND EVALUATION ASSETS
The following table summarizes the Company's tangible exploration and evaluation expenditures with respect to its
properties in the DRC:
Tshikapa Northern DRC
Notes Total
Project Project
Cost (a) (b)
Balance as at June 30, 2013 3,115,554 2,024,324 5,139,878
Additions - 306,914 306,914
Impairment (3,115,554) - (3,115,554)
Balance as at June 30, 2014 - 2,331,238 2,331,238
Additions - 19,859 19,859
Impairment - (2,351,097) (2,351,097)
Balance as at December 31, 2014 - - -
There is $1 of intangible exploration and evaluation expenditures as at December 31, 2014 (June 30, 2014: $2,219). There
have not been any additions or disposals to intangible assets since January 1, 2010. During the year ended December 31,
2014, an impairment loss of $2,218 on the intangible exploration and evaluation expenditures was recognized in the
statement of comprehensive loss.
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. 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, during the year ended June 30, 2014, the Company recorded an
impairment loss of $3,115,554 with respect to this project.
b. Northern DRC Project
The northern DRC diamond project is located in Orientale Province of the DRC and had consisted of four exploration
permits, two of which were 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 wished 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 was made to reduce these permits to the current total of 2 permits covering an area of 173
km². The two additional exploration permits which had been held by the Company's DRC subsidiary cover an area of
92 km² (after the obligatory 50% reduction) directly north of the optioned ground. These two permits have now been
relinquished based on exploration results. During the three months ended December 31, 2014, the Company
recorded an impairment loss of $2,353,315 with respect to the northern DRC project.
4. 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.
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 six month
periods ended December 31, 2014 and the three and six month periods ended December 31, 2013 was as follows:
Three months ended Three months ended Six months ended Six months ended
December 31, December 31, December 31, December 31,
2014 2013 2014 2013
Salaries $ 25,000 $ 68,431 $ 60,000 $ 110,559
$ 25,000 $ 68,431 $ 60,000 $ 110,559
b) Other Related Parties
As at December 31, 2014, an amount of $183,447 (June 30, 2014 - $56,462) was owing to two directors of the Company
representing consulting fees.
As at December 31, 2014, an amount of $79,490 was owed to Banro Corporation (“Banro”) related to common expenses (June
30, 2014 - $1,588 was owed by Banro). Banro owns 1,538,998 common shares of the Company, representing a 7.07% interest
in the Company.
During the three and six month periods ended December 31, 2014, the Company incurred common expenses of $98 and
$1,179 (three and six month periods ended December 31, 2013 - $nil) in the DRC together with Loncor Resources Inc.
(“Loncor”), a corporation with common directors. As at December 31, 2014, an amount of $2,821 (June 30, 2014 - $3,750)
owing to Loncor was included in due to related parties in the consolidated statement of financial position.
December 31, 2014 June 30, 2014
$ $
Due from related parties - 1,588
Due to related parties 265,758 60,212
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.
In July 2014, the Company closed a non-brokered arm's length private placement for the issuance of 500,000 units of the
Company at a price of $0.50 per unit for gross proceeds to the Company of $250,000. Each such unit was 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.
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-
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.
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. Upon effecting the consolidation, and as of
June 30, 2014, the Company had 21,281,581 common shares outstanding. All share, stock option and warrant numbers
have been adjusted to reflect the share consolidation to provide more comparable information.
Number of
shares Amount
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
Shares issued for:
Cash 500,000 217,456
Balance at December 31, 2014 21,781,581 $ 117,345,802
b) Share purchase warrants
In July 2014, the Company issued 250,000 warrants, with each such warrant entitling the holder to purchase one common
share of the Company at a price of $0.75 until July 2016. As at December 30, 2014, all 250,000 warrants were
outstanding.
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
Loss per share was calculated on the basis of the weighted average number of common shares outstanding for the three
and six month periods ended December 31, 2014, amounting to 21,781,581 and 21,719,081 respectively (three and six
month periods ended December 31, 2013: 20,614,831 and 20,316,240) common shares. Diluted loss per share was
calculated using the treasury stock method. For the three and six month periods ended December 31, 2014, total stock
options of nil (three and six month periods ended December 31, 2013: nil) and warrants of 250,000 (three and six month
periods ended December 31, 2013: 1,666,667) 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 to be excluded from the Company?s
headline loss per share are impairment of property, plant, and equipment and losses on disposal of assets.
Three months ended Three months ended Six months ended Six months ended
December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013
Loss for the period (3,457,790) (55,783) (4,031,304) (101,564)
Adjustments for headline loss 2,353,315 - 2,353,315 -
Headline loss for the period (1,104,475) (55,783) (1,677,989) (101,564)
Basic and diluted loss per share (0.16) (0.00) (0.19) (0.00)
Headline loss per share (0.05) (0.00) (0.08) (0.00)
7. SHARE-BASED PAYMENTS
The Company has a stock option plan (the “Plan”), pursuant to which 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 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. The total number
of common shares of the Company issuable upon the exercise of all outstanding stock options granted under the 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 December 31, 2014, the Company had no stock options outstanding.
The following tables summarize information regarding outstanding stock options for the six month period ended
December 31, 2013:
During the Year Weighted average
Exercise Price Range remaining Vested &
Opening Balance Closing Balance Unvested
($) Granted Exercised Expired Forfeited contractual life Exercisable
(years)
2.10 - 7.51 675,000 - - (675,000) - - - - -
675,000 - - (675,000) - - - - -
Weighted Average
Exercise Price $ 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.
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:
As at December 31, 2014
Exploration and Total Non-
evaluation current Assets
DRC $1 $1
Canada - -
$1 $1
As at June 30, 2014
Exploration and Total Non-
evaluation current Assets
DRC $2,333,457 $2,333,457
Canada - -
$2,333,457 $2,333,457
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).
There were no transfers between Level 1 and Level 2 during the six month periods ended December 31, 2014 and 2013.
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 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 December 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 December 31, 2014.
U.S dollar South African rand
$ ZAR
Cash (491) 11,483
Prepaid and other assets 30,196
Accounts payable and accrued liabilities (159,645) (529,403)
Total foreign currency financial assets and liabilities (160,136) (487,724)
Foreign exchange rate at December 31, 2014 1.1601 0.1005
Total foreign currency financial assets and liabilities in CDN $ (185,774) (49,016)
Impact of a 10% strengthening or weakening of the CDN $ on net loss (18,577) (4,902)
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 $1,806,401 and amounts due to related parties of
$265,758 are due within one year and represent all significant contractual commitments, obligations, and interest and
principal repayments on financial liabilities. Please refer to Note 1, Continuation of the Business.
f) Mineral Property Risk
The Company's activities 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 activities 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;
- 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 six month period ended
December, 2014.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
As at As at
December 31, June 30,
2014 2014
Cash $ 8,898 $ 31,559
Share Capital $ 17,345,802 $ 117,128,346
Deficit $127,573,478) $ 123,542,174)
Contributed Surplus $ 8,183,615 $ 8,159,644
10. COMMITMENTS AND CONTINGENCIES
The Company is committed to the payment of surface fees and taxes. As at December 31, 2014, these fees and taxes are
estimated to be $nil (US $nil) compared to $76,867 (US $72,000) as at June 30, 2014.
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 adverse effect on its consolidated
losses, cash flow or financial position.
11. SUBSEQUENT EVENTS
In a press release dated September 15, 2014, the Company announced it had entered into a share exchange agreement where
it had 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 said agreement provided that the Company would acquire VoiceTrust for aggregate
consideration of $27,000,000 to be paid by the issuance of up to 36,565,839 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 proposed to complete a private placement by the issuance of up to 22,660,000 common shares of the Company. It
was a condition of closing the Acquisition that the Company dispose of its existing exploration assets to an arm's length party.
At the annual and special meeting of shareholders of the Company held on December 8, 2014, shareholders authorized the
Acquisition and concurrent private placement, a change in the Company?s name to VoiceTrust Biometrics Inc., the disposal of
the Company's wholly-owned subsidiary Delrand Resources Congo SPRL, and a reduction in the Company's stated capital by
$123,542,174.
On February 12, 2015, the Company issued a press release announcing that by mutual agreement The Company and
VoiceTrust Holding B.V. have elected not to proceed with the Acquisition. Accordingly, they have terminated the share
exchange agreement dated September 15, 2014. The proposed disposal of Delrand Resources Congo SPRL is not proceeding as
a result of the termination of the said agreement. The Company will continue to explore opportunities in the resources and
other fields.
16 February 20154
Sponsor
Arbor Capital Sponsors Proprietary Limited
Date: 16/02/2015 04:59:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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