SAMPLE PRECIOUS & OTHER METALS EXPLORATION CORPORATION
ILLUSTRATIVE IFRS FINANCIAL STATEMENTS
For the year-ended December 31, 2012
SAMPLE PRECIOUS & OTHER METALS EXPLORATION
FINANCIAL STATEMENTS
For the year-ended December 31, 2012
The purpose of this publication is to assist precious and other
metals exploration companies in preparing their first annual
International Financial Reporting Standards (IFRS) financial
statements for the year ended December 31, 2012.
• All investments are classified as available-for-sale.
Financial Statement Preparation Assumptions:
convertible debt.
The illustrative financial statements are based on the following
assumptions:
• No new standards or amendments to standards have been early adopted.
• The Company has an accounting policy of capitalizing exploration • All property, plant and equipment is accounted for using the cost model.
• The Company has no complex financing arrangements such as • The going concern disclosures are considered appropriate for this company, which we assume has sufficient cash resources to meet its obligations for a minimum of twelve months from the end of the reporting period. The appropriate disclosure may be different based on facts and circumstances of each individual company.
and evaluation expenditures in accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources.
For more information, please contact:
National Leader
Michael Madsen
604 443 4732
mmadsen@bdo.ca
BC Leader
Bryndon Kydd
604 443 4713
bkydd@bdo.ca
Western Leader
Lorraine Walker
403 213 2592
lwalker@bdo.ca
Eastern Leader
Tammy Thompson
416 369 3116
tthompson@bdo.ca
The publication is based on standards and interpretations that have been issued by the International Accounting Standards Board (IASB) by December 31, 2012. The sample financial
statements should not be used as a substitute for referring to standards and interpretations themselves.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover
specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO
Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees agents and affiliates do not accept or assume any
liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international
BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
Precious & Other Metals Exploration
For the year-ended December 31, 2012
CONTENTS
STATEMENT OF FINANCIAL POSITION .................................................................................................3
STATEMENT OF COMPREHENSIVE LOSS ...............................................................................................4
STATEMENT OF CHANGES IN EQUITY .................................................................................................5
STATEMENT OF CASH FLOWS ........................................................................................................6
1. Corporate Information .......................................................................................................7
2. Basis of Preparation ..........................................................................................................7
3. Summary of Significant Accounting Policies .............................................................................8
4. Critical Accounting Judgments and Estimates ....................................................................... 16
5. Cash and Cash Equivalents ................................................................................................ 17
6. Available-For-Sale Investment ........................................................................................... 17
7. Reclamation Deposits ...................................................................................................... 17
8. Exploration and Evaluation Assets ....................................................................................... 18
9. Property, Plant and Equipment .......................................................................................... 19
10. Other Liabilities ............................................................................................................ 20
11. Provisions .................................................................................................................... 21
12. Share Capital and Reserves ............................................................................................... 21
13. Share-Based Payments ..................................................................................................... 24
14. Nature of Expenses ......................................................................................................... 25
15. Income Taxes ................................................................................................................ 25
16. Financial Instruments and Risk Management .......................................................................... 27
17. Capital Management ....................................................................................................... 30
18. Related Party Transactions ............................................................................................... 30
19. Segmental Reporting ....................................................................................................... 30
20. Loss Per Share ............................................................................................................... 31
21. Events After the Reporting Date ......................................................................................... 31
Precious & Other Metals Exploration
STATEMENT OF FINANCIAL POSITION
Expressed in Canadian Dollars
December 31, 2012
References: IAS 1.10(a), IAS 1.38, IAS 1.54, IAS 1.60, IAS 1.66, IAS 1.69, IAS 1.78, IAS 1.113, IFRS 6.23
Reference:
IAS 1.54 –
IAS 1.80A
2012
$’000
2011
$’000
$ xxx
$ xxx
xxx
xxx
Assets
Current assets
Cash and cash equivalents (Note 5)
Prepaid expenses and deposits
Available-for-sale investment (Note 6)
Total current assets
xxx
xxx
$ xxx
$ xxx
$ xxx
$ xxx
Non-current assets
Reclamation deposits (Note 7)
IFRS 6.23(c)
Exploration and evaluation assets (Note 8)
xxx
xxx
Property, plant and equipment (Note 9)
xxx
xxx
Total non-current assets
$ xxx
$ xxx
Total assets
$ xxx
$ xxx
Trade and other payables
$ xxx
$ xxx
Other liabilities (Note 10)
xxx
-
$ xxx
$ xxx
$ xxx
$ xxx
$ xxx
$ xxx
$ xxx
$ xxx
xxx
xxx
(xxx)
(xxx)
(xxx)
(xxx)
Total shareholders' equity
$ xxx
$ xxx
Total liabilities and shareholders’ equity
$ xxx
$ xxx
IAS 1.54
Liabilities and shareholders' equity
IAS 1.69
Current liabilities
Total current liabilities
Non-current liabilities
Provisions (Note 11)
Total liabilities
IAS 1.54
IAS 1.55
IAS 1.78
Shareholders' equity
Share capital (Note 12)
Contributed surplus (Note 12)
Accumulated other comprehensive loss/income
Accumulated deficit
Signed on behalf of the Board of Directors by:
_____________________
_____________________
The accompanying notes form an integral part of these financial statements
PAGE 3 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
STATEMENT OF COMPREHENSIVE LOSS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
References: IAS 1.10(b), IAS 1.81, IAS 1.82, IAS 1.85, IAS 1.87, IAS 1.97, IAS 1.99, IAS 1.104
Reference:
IAS 1.82
2012
$’000
2011
$’000
$ xxx
$ xxx
Depreciation (Note 9)
xxx
xxx
Employee costs
xxx
xxx
Finance expense
xxx
xxx
Other expenses (Note 14)
xxx
xxx
xxx
xxx
(xxx)
(xxx)
xxx
xxx
$ (xxx)
$ (xxx)
Interest and other income (Note 10)
IAS 1.99
Total expenses
Loss before income tax
IAS 12.77
Income tax expense (Note 15)
Loss after income tax
Other comprehensive income
IFRS 7.20
Fair value gain on available-for-sale investment
xxx
xxx
IAS 1.90
Income tax relating to fair value gain on available-for-sale investment
(xxx)
(xxx)
Total other comprehensive income, net of tax
$ xxx
$ xxx
$ (xxx)
$ (xxx)
$ (x.xx)
$ (x.xx)
Total comprehensive loss for the year
IAS 33.66
Loss per common share, basic and diluted (Note 20)
The accompanying notes form an integral part of these financial statements
PAGE 4 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
STATEMENT OF CHANGES IN EQUITY
Expressed in Canadian Dollars
For the year-ended December 31, 2012
References: IAS 1.10(c), IAS 1.79, IAS 1.106
Share
capital
$’000
Contributed
surplus
$’000
Accumulated
other
comprehensive
loss
$’000
$ xxx
$ xxx
$ (xxx)
Reference:
Deficit
$’000
Total
$’000
$ (xxx)
$ xxx
(xxx)
(xxx)
IAS 1.106
IFRS 7.20
Balance at January 1, 2011
Loss for the year
Available-for-sale investment
(net of tax)
Share capital issued (Note 12)
xxx
xxx
Stock options issued
Options exercised
Share issue costs
xxx
xxx
xxx
xxx
(xxx)
xxx
xxx
xxx
xxx
(xxx)
xxx
(xxx)
xxx
(xxx)
Warrants issued
Warrants exercised
xxx
IAS 1.106
Balance at December 31, 2011
$ xxx
$ xxx
$ (xxx)
$ (xxx)
$ xxx
IAS 1.106
Balance at January 1, 2012
$ xxx
$ xxx
$ (xxx)
$ (xxx)
$ xxx
(xxx)
(xxx)
Loss for the year
Available-for-sale investment
(net of tax)
Share capital issued (Note 12)
xxx
xxx
Stock options issued
Options exercised
Share issue costs
IAS 1.106
Balance at December 31, 2012
xxx
xxx
xxx
xxx
(xxx)
xxx
xxx
xxx
xxx
(xxx)
xxx
(xxx)
xxx
(xxx)
$ xxx
$ xxx
Warrants issued
Warrants exercised
xxx
$ (xxx)
$ (xxx)
$ xxx
The accompanying notes form an integral part of these financial statements
PAGE 5 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
STATEMENT OF CASH FLOWS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
References: IAS 1.10(d), IAS 7.10, IAS 7.17, IAS 7.18, IAS 7.20, IAS 7.21, IAS 7.31, IAS 7.35, IAS 7.43, IAS 7.45
Reference:
IAS 7.18-IAS
7.21
2012
$’000
2011
$’000
$ (xxx)
$ (xxx)
Depreciation (Note 9)
xxx
xxx
Interest income
xxx
xxx
Finance expense
xxx
xxx
Income tax expense
xxx
xxx
Other receivables
xxx
xxx
Prepaid expenses
xxx
xxx
Trade and other payables
xxx
xxx
Other liabilities
xxx
xxx
Provisions
xxx
xxx
Cash generated from operations
xxx
xxx
Income tax paid
xxx
xxx
$ xxx
$ xxx
Acquisition of property, plant and equipment
(xxx)
(xxx)
Investment in exploration and evaluation assets
(xxx)
(xxx)
Change in reclamation deposits
xxx
xxx
Interest received
xxx
xxx
$ (xxx)
$ (xxx)
xxx
xxx
(xxx)
(xxx)
xxx
xxx
(xxx)
(xxx)
Total cash inflows from financing activities
$ xxx
$ xxx
Total increase in cash during the year
$ xxx
$ xxx
Cash and cash equivalents at beginning of year
$ xxx
$ xxx
Cash and cash equivalents at end of year
$ xxx
$ xxx
Cash flows from operating activities
Loss for the year
Adjustments to reconcile loss to net cash used in operating
activities:
Changes in non-cash working capital balances:
IAS 7.35
IAS 7.10
Total cash inflows from operating activities
Cash flows from investing activities
IAS 7.31
IAS 7.10
Total cash (outflows) from investing activities
IAS 7.17
Cash flows from financing activities
Proceeds from share issuance
Costs of issue of shares
Proceeds from exercise of stock options
IAS 7.31
IAS 7.10
IAS 7.45
Interest paid
The accompanying notes form an integral part of these financial statements
PAGE 6 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
1. CORPORATE INFORMATION
IAS
IAS
IAS
IAS
Precious & Other Metals Exploration‘s business activity is the exploration and evaluation of mineral properties
in Canada. Precious & Other Metals Exploration (the ―Company‖) was incorporated under the Canada Business
Corporations Act on Month DD, YYYY, and has continued as a company under the Business Corporations Act of
British Columbia. The Company is listed on the TSX Venture Exchange, having the symbol xxx-V, as a Tier 2
mining issuer and is in the process of exploring its mineral properties.
1.10(e)
1.51
1.113
1.138
The address of the Company's corporate office and principal place of business is 123 Any Street, Vancouver,
British Columbia, Canada.
IAS 1.112(a)
2. BASIS OF PREPARATION
a)
Statement of Compliance
IAS 1.16
These financial statements of the Company have been prepared in accordance with International Financial
Reporting Standards (―IFRS‖) as issued by the International Accounting Standards Board (―IASB‖).
IAS 10.17
The financial statements were authorized for issue by the Board of Directors on Month DD, 2013.
b)
Basis of Measurement
IAS 1.117
The financial statements have been prepared on a historical cost basis, as modified by the revaluation of
available-for-sale financial assets.
IAS
IAS
IAS
IAS
IAS
The financial statements are presented in Canadian dollars (―CDN‖), which is also the Company‘s functional
currency, and all values are rounded to the nearest thousand (CDN $‘000), unless otherwise indicated.
1.51
21.8
21.53
1.122
1.125
The preparation of financial statements in compliance with IFRS requires management to make certain
critical accounting estimates. It also requires management to exercise judgment in applying the Company‘s
accounting policies. The areas involving a higher degree of judgment of complexity, or areas where
assumptions and estimates are significant to the financial statements are disclosed in Note 4.
c)
IAS 1.25
Going Concern of Operations
The Company has not generated revenue from operations. The Company incurred a net loss of $xxx during the
year-ended December 31, 2012 and, as of that date the Company‘s accumulated deficit was $xxx. However,
the Company has sufficient cash resources to meet its obligations for at least twelve months from the end of
the reporting year. As the Company is in the exploration stage, the recoverability of the costs incurred to
date on exploration properties is dependent upon the existence of economically recoverable reserves, the
ability of the Company to obtain the necessary financing to complete the exploration and development of its
properties and upon future profitable production or proceeds from the disposition of the properties and
deferred exploration expenditures. The Company will periodically have to raise funds to continue operations
and, although it has been successful in doing so in the past, there is no assurance it will be able to do so in
the future.
PAGE 7 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
IAS 1.10(e)
The accounting policies set out below have been applied consistently to all years presented in these financial
statements, unless otherwise indicated.
a)
Foreign Currency Transactions
Foreign currency accounts are translated into Canadian dollars as follows:
IAS
IAS
IAS
IAS
IAS
21.21
21.23
21.28
21.30
21.32
At the transaction date, each asset, liability, revenue and expense denominated in a foreign currency is
translated into Canadian dollars by the use of the exchange rate in effect at that date. At the year-end date,
unsettled monetary assets and liabilities are translated into Canadian dollars by using the exchange rate in
effect at the year-end date and the related translation differences are recognized in net income. Exchange
gains and losses arising on the retranslation of monetary available-for-sale financial assets are treated as a
separate component of the change in fair value and recognized in net income. Exchange gains and losses on
non-monetary available-for-sale financial assets form part of the overall gain or loss recognized in respect of
that financial instrument.
Non-monetary assets and liabilities that are measured at historical cost are translated into Canadian dollars
by using the exchange rate in effect at the date of the initial transaction and are not subsequently restated.
Non-monetary assets and liabilities that are measured at fair value or a revalued amount are translated into
Canadian dollars by using the exchange rate in effect at the date the value is determined and the related
translation differences are recognized in net income or other comprehensive loss consistent with where the
gain or loss on the underlying non-monetary asset or liability has been recognized.
b)
Cash and Cash Equivalents
IFRS 7.B5(f)
IAS 39.58
Cash and cash equivalents includes cash on hand, demand deposits with financial institutions and other shortterm, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and subject to an insignificant risk of change in value. For cash flow statement
presentation purposes, cash and cash equivalents includes bank overdrafts.
IAS 17.7
IAS 17.19
c)
Leased Assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been
transferred to the Company (a "finance lease"), the asset is treated as if it had been purchased outright. The
amount initially recognized as an asset is the lower of the fair value of the leased property and the present
value of the minimum lease payments payable over the term of the lease. The corresponding lease
commitment is shown as a liability. Lease payments are analyzed between capital and interest. The interest
element is charged to the statement of comprehensive loss over the period of the lease and is calculated so
that it represents a constant proportion of the lease liability. The capital element reduces the balance owed
to the lessor.
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Company
(an "operating lease"), the total rentals payable under the lease are charged to the statement of
comprehensive loss on a straight-line basis over the lease term. The aggregate benefit of lease incentives is
recognized as a reduction of the rental expense over the lease term on a straight-line basis.
PAGE 8 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
d)
Mineral Exploration and Evaluation Expenditures
Pre-exploration Costs
Pre-exploration costs are expensed in the year in which they are incurred.
IFRS 6.23
IFRS 6.24
Exploration and Evaluation Expenditures
Once the legal right to explore a property has been acquired, costs directly related to exploration and
evaluation expenditures (―E&E‖) are recognized and capitalized, in addition to the acquisition costs. These
direct expenditures include such costs as materials used, surveying costs, drilling costs, payments made to
contractors and depreciation on plant and equipment during the exploration phase. Costs not directly
attributable to exploration and evaluation activities, including general administrative overhead costs, are
expensed in the year in which they occur.
The Company may occasionally enter into farm-out arrangements, whereby the Company will transfer part of
a mineral interest, as consideration, for an agreement by the transfee to meet certain exploration and
evaluation expenditures which would have otherwise been undertaken by the Company. The Company does
not record any expenditures made by the farmee on its behalf. Any cash consideration received from the
agreement is credited against the costs previously capitalized to the mineral interest given up by the
Company, with any excess cash accounted for as a gain on disposal.
When a project is deemed to no longer have commercially viable prospects to the Company, exploration and
evaluation expenditures in respect of that project are deemed to be impaired. As a result, those exploration
and evaluation expenditure costs, in excess of estimated recoveries, are written off to the statement of
comprehensive loss/income.
The Company assesses exploration and evaluation assets for impairment when facts and circumstances
suggest that the carrying amount of an asset may exceed its recoverable amount. The recoverable amount is
the higher of the asset‘s fair value less costs to sell and value in use.
IFRS 6.10
Once the technical feasibility and commercial viability of extracting the mineral resource has been
determined, the property is considered to be a mine under development and is classified as ‗mines under
construction‘. Exploration and evaluation assets are also tested for impairment before the assets are
transferred to development properties.
As the Company currently has no operational income, any incidental revenues earned in connection with
exploration activities are applied as a reduction to capitalized exploration costs.
Mineral exploration and evaluation expenditures are classified as intangible assets.
e) Reclamation Deposits
Cash which is subject to contractual restrictions on use is classified separately as reclamation deposits.
Reclamation deposits are classified as loans and receivables.
PAGE 9 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
f)
Property, Plant and Equipment
Recognition and Measurement
IAS 16.6
IAS 16.73
IAS 16.16
IAS 16.30
On initial recognition, property, plant and equipment are valued at cost, being the purchase price and
directly attributable cost of acquisition or construction required to bring the asset to the location and
condition necessary to be capable of operating in the manner intended by the Company, including
appropriate borrowing costs and the estimated present value of any future unavoidable costs of dismantling
and removing items. The corresponding liability is recognized within provisions.
Property, plant and equipment is subsequently measured at cost less accumulated depreciation, less any
accumulated impairment losses, with the exception of land which is not depreciated.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.
Subsequent Costs
The cost of replacing part of an item of property, plant and equipment is recognized in the
of the item if it is probable that the future economic benefits embodied within the part
Company and its cost can be measured reliably. The carrying amount of the replaced part
The costs of the day-to-day servicing of property, plant and equipment are recognized in
incurred.
carrying amount
will flow to the
is derecognized.
profit or loss as
Major Maintenance and Repairs
Subsequent costs are included in the asset‘s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged
to profit or loss during the financial year in which they are incurred.
Gains and Losses
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount, and are recognized net within other income in profit or
loss.
IAS 16.73
Depreciation
Depreciation is recognized in profit or loss and is provided on a straight-line basis over the estimated useful
life of the assets as follows:
Furniture and Fixtures
Office Equipment
Vehicles
Field Equipment
IAS 16.51
Straight line over x Years
Straight line over x Years
Straight line over x Years
Straight line over x Years
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted
if appropriate.
PAGE 10 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
g)
Impairment of Non-Financial Assets
IAS 36.12
Impairment tests on intangible assets with indefinite useful economic lives are undertaken annually at the
financial year-end. Other non-financial assets, including exploration and evaluation assets are subject to
impairment tests whenever events or changes in circumstances indicate that their carrying amount may not
be recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the higher of
value in use and fair value less costs to sell, the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is
carried out on the asset's cash-generating unit, which is the lowest group of assets in which the asset belongs
for which there are separately identifiable cash inflows that are largely independent of the cash inflows from
other assets. The Company has one cash-generating unit for which impairment testing is performed.
An impairment loss is charged to profit or loss, except to the extent they reverse gains previously recognized
in accumulated other comprehensive loss/income.
IAS 39.9
h)
Financial Instruments
Financial Assets
Financial assets are classified into one of the following categories based on the purpose for which the asset
was acquired. All transactions related to financial instruments are recorded on a trade date basis. The
Company's accounting policy for each category is as follows:
IFRS 7.21
IAS 39.43
IAS 39.46
Loans and Receivables
IFRS 7.21B5
IAS 39.43
IAS 39.44
IAS 39.45
IAS 39.46
Available-For-Sale Investments
These assets are non-derivative financial assets resulting from the delivery of cash or other assets by a lender
to a borrower in return for a promise to repay on a specified date or dates, or on demand. They are initially
recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue and
subsequently carried at amortized cost, using the effective interest rate method, less any impairment losses.
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 profit or loss when the loans and receivables are derecognized or impaired, as well as through the
amortization process.
Non-derivative financial assets that do not meet the definition of loans and receivables are classified as
available-for-sale and comprise principally the Company's strategic investments in entities not qualifying as
subsidiaries or associates. Available-for-sale investments are carried at fair value with changes in fair value
recognized in other comprehensive loss/income. Where there is a significant or prolonged decline in the fair
value of an available-for-sale financial asset (which constitutes objective evidence of impairment), the full
amount of the impairment, including any amount previously recognized in other comprehensive loss/income,
is recognized in profit or loss. If there is no quoted market price in an active market and fair value cannot be
readily determined, available-for-sale investments are carried at cost.
On sale or impairment, the cumulative amount recognized in other comprehensive loss/income is reclassified
from accumulated other comprehensive loss/income to profit or loss.
IFRS 7 B5
IAS 39.58
Impairment on Financial Assets
At each reporting date the Company assesses whether there is any objective evidence that 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 event has an impact on the estimated future cash flows of
the financial asset or the group of financial assets.
PAGE 11 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
h)
Financial instruments (continued)
IFRS 7.21
Financial Liabilities
Financial liabilities are classified as other financial liabilities, based on the purpose for which the liability was
incurred, and comprise of trade payables and accrued liabilities. These liabilities are initially recognized at
fair value net of any transaction costs directly attributable to the issuance of the instrument and
subsequently carried at amortized cost using the effective interest rate method. This ensures that any
interest expense over the period to repayment is at a constant rate on the balance of the liability carried in
the statement of financial position. Interest expense in this context includes initial transaction costs and
premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
Trade and other payables represent liabilities for goods and services provided to the Company prior to the
end of the year which are unpaid.
IAS 37.10
i)
Provisions
Rehabilitation Provision
The Company is subject to various government laws and regulations relating to environmental disturbances
caused by exploration and evaluation activities. The Company records the present value of the estimated
costs of legal and constructive obligations required to restore the exploration sites in the year in which the
obligation is incurred. The nature of the rehabilitation activities include restoration, reclamation and revegetation of the affected exploration sites.
The rehabilitation provision generally arises when the environmental disturbance is subject to government
laws and regulations. When the liability is recognized, the present value of the estimated costs is capitalized
by increasing the carrying amount of the related exploration properties. Over time, the discounted liability is
increased for the changes in present value based on current market discount rates and liability specific risks.
Additional environment disturbances or changes in rehabilitation costs will be recognized as additions to the
corresponding assets and rehabilitation liability in the year in which they occur.
IAS 37.10
Other Provisions
Provisions are recognized for liabilities of uncertain timing or amount that have arisen as a result of past
transactions, including legal or constructive obligations. The provision is measured at the best estimate of
the expenditure required to settle the obligation at the reporting date.
j)
Income Taxes
IAS 1.32
IAS 12.34
IAS 12.58
Income tax expense comprises of current and deferred tax. Current tax and deferred tax are recognized in
net income except to the extent that it relates to a business combination or items recognized directly in
equity or in other comprehensive loss/income.
IAS 12.12
IAS 12.46
Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income
or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current
income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by
the year-end date.
IAS 12.15
IAS 12.24
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs
from its tax base, except for taxable temporary differences arising on the initial recognition of goodwill and
temporary differences arising on the initial recognition of an asset or liability in a transaction which is not a
business combination and at the time of the transaction affects neither accounting nor taxable profit or loss.
IAS 12.24
IAS 12.34
IAS 12.37
Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is
restricted to those instances where it is probable that future taxable profit will be available against which
the deferred tax asset can be utilized. At the end of each reporting year the Company reassesses
unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset to
the extent that it has become probable that future taxable profit will allow the deferred tax asset to be
recovered.
PAGE 12 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
k)
Government Grants
IAS 20.39
From time to time the Company receives government incentive programs such as investment tax credits.
Government incentives are accrued when there is reasonable assurance of realization and reflected as a
reduction of the related asset or expense. In the event the investment tax credits received are less than the
amount claimed, the difference will be reflected in profit or loss in the year in which it is determined.
IFRS 7.76
l)
Share Capital
Equity instruments are contracts that give a residual interest in the net assets of the Company. Financial
instruments issued by the Company are classified as equity only to the extent that they do not meet the
definition of a financial liability or financial asset. The Company‘s common shares, preferred shares, share
warrants and flow-through shares are classified as equity instruments.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
m) Flow-through Shares
The Company will from time to time, issue flow-through common shares to finance a significant portion of its
exploration program. Pursuant to the terms of the flow-through share agreements, these shares transfer the
tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the
flow-through share into i) a flow-through share premium, equal to the estimated premium, if any, investors
pay for the flow-through feature, which is recognized as a liability, and ii) share capital. Upon expenditures
being incurred, the Company derecognizes the liability and recognizes a deferred tax liability for the amount
of tax reduction renounced to the shareholders. The premium is recognized as other income and the related
deferred tax is recognized as a tax provision.
Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian
resource property exploration expenditures within a two-year period. The portion of the proceeds received
but not yet expended at the end of the Company‘s reporting year is disclosed separately as flow-through
share proceeds in Note 10.
The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the Lookback Rule, in accordance with Government of Canada flow-through regulations. When applicable, this tax is
accrued as a financial expense until paid.
IAS 33.70
n)
Earnings / Loss Per Share
Basic earnings/loss per share is computed by dividing the net income or loss applicable to common shares of
the Company by the weighted average number of common shares outstanding for the relevant year.
Diluted earnings/loss per common share is computed by dividing the net income or loss applicable to common
shares by the sum of the weighted average number of common shares issued and outstanding and all
additional common shares that would have been outstanding, if potentially dilutive instruments were
converted.
PAGE 13 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
o)
Share-based Payments
IFRS 2.12
IFRS 2.46
Where equity-settled share options are awarded to employees, the fair value of the options at the date of
grant is charged to the statement of comprehensive loss/income over the vesting period. Performance vesting
conditions are taken into account by adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the
number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored
into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is
made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjusted
for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the
options, measured immediately before and after the modification, is also charged to the statement of
comprehensive loss/income over the remaining vesting period.
IFRS 2.13
Where equity instruments are granted to employees, they are recorded at the fair value of the equity
instrument granted at the grant date. The grant date fair value is recognized in comprehensive loss/income
over the vesting period, described as the period during which all the vesting conditions are to be satisfied.
Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or
services received in the statement of comprehensive loss/income. Options or warrants granted related to the
issuance of shares are recorded as a reduction of share capital.
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 valuation model.
IAS 1.79(b)
All equity-settled share-based payments are reflected in contributed surplus, until exercised. Upon exercise,
shares are issued from treasury and the amount reflected in contributed surplus is credited to share capital,
adjusted for any consideration paid.
Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting
conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of
vesting and recognizes the amount that otherwise would have been recognized for services received over the
remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as
the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity
instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.
IAS 1.31,
IAS 8.30,
IAS 8.31
p)
Standards, Amendments and Interpretations Not Yet Effective1
Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are mandatory
for accounting years beginning after January 1, 2012 or later years.
i)
New standards, interpretations and amendments effective from 1 January 2012
None of the new standards, interpretations and amendments, effective for the first time from January 1,
2012 have had a material effect on the financial statements.
1
―Standards, Amendments and Interpretations Not Yet Effective‖ section may need further updating prior to
financial statement release.
PAGE 14 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
p) Standards, Amendments and Interpretations Not Yet Effective2 (continued)
Reference:
ii)
New standards, interpretations and amendments not yet effective
The following new standards, interpretations and amendments, which have not been applied in these
financial statements, will or may have an effect on the Company‘s future financial statements:

IFRS 9 Financial Instruments
IFRS 9 Financial Instruments is part of the IASB's wider project to replace IAS 39 Financial
Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement
model and establishes two primary measurement categories for financial assets: amortized cost and
fair value. The basis of classification depends on the entity's business model and the contractual cash
flow characteristics of the financial asset. The standard is effective for annual periods beginning on
or after January 1, 2015. The Company is in the process of evaluating the impact of the new
standard on the accounting for the available-for-sale investment.

IFRS 10 Consolidated Financial Statements
IFRS 10 builds on existing principles by identifying the concept of control as the determining factor
in whether an entity should be included within the consolidated financial statements of the parent
company. The standard provides additional guidance to assist in the determination of control where
this is difficult to assess. The Company is yet to assess the full impact of IFRS 10 and will adopt the
standard for the accounting period beginning on January 1, 2013.

IFRS 11 Joint Arrangements
IFRS 11 describes the accounting for arrangements in which there is joint control; proportionate
consolidation is not permitted for joint ventures (as newly defined). IFRS 11 replaces IAS 31 Interests
in Joint Ventures and SIC 13 Jointly Controlled Entities — Non-Monetary Contributions by Venturers.
The Company is yet to assess the full impact of IFRS 11 and will adopt the standard for the
accounting period beginning on January 1, 2013.

IFRS 12 Disclosures of Interests in Other Entities
IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including
joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The
Company is yet to assess the full impact of IFRS 12 and will adopt the standard for the accounting
period beginning on January 1, 2013.

IFRS 13 Fair Value Measurement
IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair
value and a single source of fair value measurement and disclosure requirements for use across
IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how
it should be applied where its use is already required or permitted by other standards within IFRSs.
The Company is yet to assess the full impact of IFRS 13 and will adopt the standard for the
accounting period beginning on January 1, 2013.

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
In IFRIC 20, the IFRS Interpretations Committee sets out principles for the recognition of production
stripping costs in the balance sheet. The interpretation recognizes that some production stripping in
surface mining activity will benefit production in future periods and sets out criteria for capitalizing
such costs. While the Company is not yet in the production phase, the Company is currently
assessing the future impact of this interpretation.
2
―Standards, Amendments and Interpretations Not Yet Effective‖ section may need further updating prior to
financial statement release.
PAGE 15 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
p) Standards, Amendments and Interpretations Not Yet Effective (continued)

IAS 1 Presentation of Financial Statements
IAS 1 was amended to change the grouping of items presented in OCI. Items that would be
reclassified to profit or loss at a future point in time will be presented separately from items that
will never be reclassified. The amendments do not change the nature of the items that are currently
recognized in OCI, nor do they impact the determination of whether items in OCI are reclassified
through profit or loss in future periods. The Company is yet to assess the full impact of this
amendment to IAS 1 and will adopt the standard for the annual period beginning on January 1, 2013.
None of the other new standards, interpretations and amendments, which are effective for periods beginning
after January 1, 2013 and which have not been adopted early, are expected to have a material effect on the
Company‘s future financial statements.
4. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES
IAS
IAS
IAS
IAS
1.122
1.125
1.129
1.130
3
The Company makes estimates and assumptions about the future that affect the reported amounts of assets
and liabilities. Estimates and judgments are continually evaluated based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates and assumptions.
Judgments
Information about critical judgments in applying accounting policies that have the most significant risk of
causing material adjustment to the carrying amounts of assets and liabilities recognized in the financial
statements within the next financial year are discussed below:
i)
Title to Mineral Property Interests
Although the Company has taken steps to verify title to mineral properties in which it has an interest, these
procedures do not guarantee the Company‘s title. Such properties may be subject to prior agreements or
transfers and title may be affected by undetected defects.
ii)
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.
If, after exploration and evaluation expenditure is capitalized, information becomes available suggesting
that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount the
Company carries out an impairment test at the cash generating unit or group of cash generating units level
in the year the new information becomes available. The Company has determined that there are currently
no indicators of impairment.
iii) Income Taxes
The Company has not recognized a deferred tax asset as management believe it is not probable that taxable
profit will be available against which a deductible temporary differences can be utilized.
3
―Critical Accounting Judgments and Estimates‖ section needs to be updated based on an entity‘s own facts and
circumstances to reflect the accounting judgments and estimates that have the most significant risk of causing
material adjustment to the carrying amounts of that entity‘s assets and liabilities prior to financial statement
release.
PAGE 16 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
4. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES (CONTINUED) 4
IAS 8.36
Estimates
The effect of a change in an accounting estimate is recognized prospectively by including it in
comprehensive income in the year of the change, if the change affects that year only, or in the year of the
change and future years, if the change affects both.
The estimates and assumptions that have a significant risk of causing material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
i)
Rehabilitation Provisions
Rehabilitation provisions have been created based on the Company‘s internal estimates. Assumptions, based
on the current economic environment, have been made which management believes are a reasonable basis
upon which to estimate the future liability. These estimates take into account any material changes to the
assumptions that occur when reviewed regularly by management. Estimates are reviewed annually and are
based on current regulatory requirements. Significant changes in estimates of contamination, restoration
standards and techniques will result in changes to provisions from year to year. Actual rehabilitation costs
will ultimately depend on future market prices for the rehabilitation costs which will reflect the market
condition at the time of the rehabilitation costs are actually incurred. The final cost of the currently
recognized rehabilitation provisions may be higher or lower than currently provided for.
The discount rate currently applied in the calculation of the net present value of the provision is x.x% (2011:
x.x%).
5. CASH AND CASH EQUIVALENTS
Cash at banks and on hand earn interest at floating rates based on daily bank deposit rates.
6. AVAILABLE-FOR-SALE INVESTMENT
Available-for-sale investment consists of an investment in common shares of XYZ Mine Company Limited, and
therefore has no fixed maturity date or coupon rate. The fair value of the listed available-for-sale
investment has been determined directly by reference to published price quotations in an active market.
IFRS 7.7
7. RECLAMATION DEPOSITS
The Company is required to make reclamation deposits in respect of its expected rehabilitation obligations.
The reclamation deposits represent collateral for possible reclamation activities necessary on mineral
properties in connection with the permits required for exploration activities by the Company. The
reclamation deposits are held in certificates of deposits with a maturity date of 20YY and an interest rate of
x.xx% (2011 – maturity date of 20YY and interest rate of x.xx%).
4
―Critical Accounting Judgments and Estimates‖ section needs to be updated based on an entity‘s own facts and
circumstances to reflect the accounting judgments and estimates that have the most significant risk of causing
material adjustment to the carrying amounts of that entity‘s assets and liabilities prior to financial statement
release.
PAGE 17 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
8.
EXPLORATION AND EVALUATION ASSETS
Property xxx
$’000
Property yyy
$’000
Total
$ ‘000
$ xxx
$ xxx
$ xxx
Exploration costs
xxx
xxx
xxx
Acquisition of property xxx
xxx
xxx
xxx
(xxx)
(xxx)
(xxx)
IFRS 6.23
IFRS 6.24
IFRS 6.25
Balance at January 1, 2011
Farm-out of interest in property xxx
Write-off of unsuccessful exploration expenditure
-
(xxx)
(xxx)
$ xxx
$ xxx
$ xxx
Exploration costs
xxx
xxx
xxx
Acquisition of property xxx
xxx
xxx
xxx
(xxx)
-
(xxx)
-
(xxx)
(xxx)
$ xxx
$ xxx
$ xxx
Balance at December 31, 2011
Proceeds from farm-out of interest in property xxx
Write-off of unsuccessful exploration expenditure
Balance at December 31, 2012
Property xxx is 100% owned and is located in north-western Québec. Property yyy is 100% owned and is
located in Northern Ontario.
The Company entered into a farm-out agreement with ABC Limited to share costs and risks associated with
exploration activities on Property xxx. The cash received has been credited against costs previously
capitalized for the whole interest. No gain on disposal was recognized.
The impairment assessment of exploration and evaluation assets did not result in amounts being written off
of the Company‘s properties.
PAGE 18 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
9. PROPERTY, PLANT AND EQUIPMENT
IAS 16.73
Office
equipment
Vehicles
Field
equipment
Total
$’000
$’000
$’000
$’000
Cost
IAS 16.73d
IAS 16.73e
IAS 16.73d
IAS 16.73e
IAS 16.73d
$ xxx
$ xxx
$ xxx
$ xxx
Additions
xxx
xxx
xxx
xxx
Disposals
(xxx)
(xxx)
(xxx)
(xxx)
$ xxx
$ xxx
$ xxx
$ xxx
Additions
xxx
xxx
xxx
xxx
Disposals
(xxx)
(xxx)
(xxx)
(xxx)
$ xxx
$ xxx
$ xxx
$ xxx
$ xxx
$ xxx
$ xxx
$ xxx
Balance at January 1, 2011
Balance at December 31, 2011
Balance at December 31, 2012
Depreciation and impairment
IAS 16.73d
Balance at January 1, 2011
IAS 16.73e
Depreciation for the year
xxx
xxx
xxx
xxx
Disposals
xxx
xxx
xxx
xxx
Impairment loss
xxx
xxx
xxx
xxx
$ xxx
$ xxx
$ xxx
$ xxx
Depreciation for the year
xxx
xxx
xxx
xxx
Disposals
xxx
xxx
xxx
xxx
Impairment loss
xxx
xxx
xxx
xxx
$ xxx
$ xxx
$ xxx
$ xxx
At January 1, 2011
$ xxx
$ xxx
$ xxx
$ xxx
At December 31, 2011
$ xxx
$ xxx
$ xxx
$ xxx
At December 31, 2012
$ xxx
$ xxx
$ xxx
$ xxx
IAS 16.73d
IAS 16.73e
IAS 16.73d
Balance at December 31, 2011
Balance at December 31, 2012
Carrying amounts
IAS 1.78a
PAGE 19 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
10. OTHER LIABILITIES
Other liabilities include the liability portion of the flow-through shares issued. The following is a continuity
schedule of the liability portion of the flow-through shares issuances.
IFRS 7.7
Flow-through Shares
Balance at January 1, 2011
Liability incurred on flow-through shares issued
Settlement of flow-through share liability on
incurring expenditures
Balance at December 31, 2011
Issued on Month
DD,2011
$’000
Issued on Month
DD,2012
$’000
Total
$’000
$-
$-
$-
xxx
-
xxx
(xxx)
-
(xxx)
$-
$-
$-
Liability incurred on flow-through shares issued
-
xxx
xxx
Settlement of flow-through share liability on
incurring expenditures
-
(xxx)
(xxx)
$-
$ xxx
$ xxx
Balance at December 31, 2012
On Month DD, 2011, the Company completed a brokered private placement, consisting of the issue and sale
of xxx flow‐through units at a price of $x.xx per flow‐through unit and xxx common share units at a price of
$x.xx per unit, for aggregate gross proceeds of $xxx. Each flow-through unit consisted of one flow‐through
common share and one‐half of one common share purchase warrant.
As at December 2011, the Company had fulfilled its commitment to incur exploration expenditures in
relation to this flow-through share financing.
On Month DD, 2012, the Company completed a brokered private placement, consisting of the issue and sale
of xxx flow‐through units at a price of $x.xx per flow‐through unit and xxx common share units at a price of
$x.xx per unit, for aggregate gross proceeds of $xxx. Each flow-through unit consisted of one flow‐through
common share and one‐half of one common share purchase warrant; each common share unit consisted of
one common share and one‐half of one common share purchase warrant.
As at December 2012, the Company had not fulfilled its commitment to incur exploration expenditures in
relation to this flow-through share financing.
PAGE 20 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
11. PROVISIONS
Rehabilitation
$’000
Other
$’000
Total
$’000
Balance at January 1, 2011
$ xxx
$ xxx
$ xxx
Change in liability estimate
xxx
xxx
xxx
IAS 37.84
IAS 37.88
Accretion of interest
Balance at December 31, 2011
Change in liability estimate
Accretion of interest
Balance at December 31, 2012
xxx
xxx
xxx
$ xxx
$ xxx
$ xxx
xxx
xxx
xxx
xxx
xxx
xxx
$ xxx
$ xxx
$ xxx
Rehabilitation Provision
Precious & Other Metals Exploration makes full provision for the future cost of site rehabilitation on a
discounted basis at the time exploration and evaluation activities take place. The rehabilitation provision
represents the present value of rehabilitation costs relating to exploration and evaluation activities that
have occurred to date. The rehabilitation expenditure is expected to be incurred in various stages up to
20YY.
12. SHARE CAPITAL AND RESERVES
IAS 1.79
IAS 1.134
a)
Common Shares
The Company is authorized to issue an unlimited number of common shares, issuable in series.
The holders of common shares are entitled to receive dividends which are declared from time to time, and
are entitled to one vote per share at meetings of the Company. All shares are ranked equally with regards to
the Company's residual assets.
The following is a summary of changes in common share capital from January 1, 2011 to December 31, 2012:
Number of
Shares
Balance at January 1, 2011
IAS 1.79(a)
Issue Price
xxx
Amount
$’000's
$ xxx
Shares issued via private placement
xxx
$ x.xx
xxx
Flow-through share issuance
xxx
$ x.xx
xxx
Issue of shares on exercise of warrants
xxx
$ x.xx
xxx
Issue of shares on exercise of options
xxx
$ x.xx
xxx
Less share issue costs
Balance at December 31, 2011
(xxx)
xxx
$ xxx
Shares issued via private placement
xxx
$ x.xx
xxx
Flow-through share issuance
xxx
$ x.xx
xxx
Issue of shares on exercise of warrants
xxx
$ x.xx
xxx
Issue of shares on exercise of options
xxx
$ x.xx
xxx
Less share issue costs
Balance at December 31, 2012
PAGE 21 OF 31
(xxx)
xxx
$ xxx
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
12. SHARE CAPITAL AND RESERVES (CONTINUED)
IAS 1.79(a)
b)
Preferred Shares
The Company is authorized to issue an unlimited number of preference shares, issuable in series.
The preferred shares may be issued in one or more series and the directors are authorized to fix the number
of shares in each series and to determine the designation, rights, privileges, restrictions and conditions
attached to the shares of each series. No preferred shares have been issued since the Company‘s inception.
c)
Contributed Surplus
Warrants
Stock Options (Note 13)
Contributed Surplus
IAS 1.79
IAS 1.134
d)
2012
$’000
2011
$’000
$ xxx
$ xxx
xxx
xxx
$ xxx
$ xxx
Share Purchase Warrants
The following is a summary of changes in warrants from January 1, 2011 to December 31, 2012:
Number of
Warrants
Amount
$’000's
xxx
$ xxx
Balance at January 1, 2011
Issue of warrants
Exercised warrants
Balance December 31, 2011
Issue of warrants
xxx
xxx
(xxx)
(xxx)
xxx
$ xxx
xxx
xxx
(xxx)
(xxx)
xxx
$ xxx
Number of warrants
Exercise price
Expiry
xxx
$ x.xx
MM/DD/ 20YY
xxx
$ x.xx
MM/DD/ 20YY
xxx
$ x.xx
MM/DD/ 20YY
Exercised warrants
Balance as at December 31, 2012
As at December 31, 2012, the Company had outstanding warrants as follows:
On Month DD, 2012, the Company completed a brokered private placement, consisting of the issue and sale
of xxx flow‐through units at a price of $x.xx per flow‐through unit and xxx common share units at a price of
$x.xx per unit, for aggregate gross proceeds of $xxx. Each flow-through unit consisted of one flow‐through
common share and one‐half of one common share purchase warrant; each common share unit consisted of
one common share and one-half of one common share purchase warrant. Each whole common share purchase
warrant entitles the holder to purchase one additional common share of the Company at a price of $x.xx per
share for a period of xx months after the closing of the offering. The Company paid commission of $xxx and
issued xxx broker compensation warrants exercisable at $x.xx per share expiring Month DD, 20YY valued at
$xxx. Share issuance costs related to the placement totaled $xxx.
PAGE 22 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
12. SHARE CAPITAL AND RESERVES (CONTINUED)
d) Share Purchase Warrants (Continued)
On Month DD, 2011, the Company completed a brokered private placement, consisting of the issue and sale
of xxx flow‐through units at a price of $x.xx per flow‐through unit and xxx common share units at a price of
$x.xx per unit, for aggregate gross proceeds of $xxx. Each flow-through unit consisted of one flow‐through
common share and one‐half of one common share purchase warrant; each common share unit consisted of
one common share and one-half of one common share purchase warrant. Each whole common share purchase
warrant entitles the holder to purchase one additional common share of the Company at a price of $x.xx per
share for a period of xx months after the closing of the offering. The Company paid commission of $xxx and
issued xxx broker compensation warrants exercisable at $x.xx per share expiring Month DD, 20YY valued at
$xxx. Share issuance costs related to the placement totaled $xxx.
e)
Nature and Purpose of Equity and Reserves
The reserves recorded in equity on the Company‘s Statement of Financial Position include ‗Contributed
Surplus‘, ‗Accumulated Other Comprehensive Loss/Income‘ and ‗Accumulated Deficit‘.
‗Contributed Surplus‘ is used to recognize the value of stock option grants and share purchase warrants prior
to exercise.
‗Accumulated Other Comprehensive Loss/Income‘ includes an available-for-sale reserve. This reserve is used
to recognize fair value changes on available-for-sale investments.
‗Accumulated Deficit‘ is used to record the Company‘s change in deficit from earnings from year to year.
PAGE 23 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
13. SHARE-BASED PAYMENTS
IFRS 2.45
a)
IFRS 2.44
The Company has an incentive Stock Option Plan (―the Plan‖) under which non-transferable options to
purchase common shares of the Company may be granted to directors, officers, employees or service
providers of the Company. The terms of the Plan provide that the Directors have the right to grant options to
acquire common shares of the Company at not less than the closing market price of the shares on the day
preceding the grant at terms of up to four years. No amounts are paid or payable by the recipient on receipt
of the option, and the options granted are not dependent on any performance-based criteria. In accordance
with the Plan, 25% of the options vest immediately, with a further 25% vesting in each of the subsequent
three years on the anniversary of the initial grant date.
IFRS 2.45
The following is a summary of changes in options from January 1, 2011 to December 31, 2012:
Option Plan Details
Grant Date
Expiry Date
During the Year
Exercise
Price
Opening
Balance
Granted
Exercised
Forfeited
Closing
Balance
Vested and
Exercisable
Unvested
MM/DD/YY
MM/DD/YY
$ x.xx
xxx
xxx
(xxx)
(xxx)
xxx
xxx
xxx
MM/DD/YY
MM/DD/YY
$ x.xx
xxx
xxx
(xxx)
(xxx)
xxx
xxx
xxx
MM/DD/YY
MM/DD/YY
$ x.xx
xxx
xxx
(xxx)
(xxx)
xxx
xxx
xxx
MM/DD/YY
MM/DD/YY
$ x.xx
xx
xxx
(xxx)
(xxx)
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
$ x.xx
$ x.xx
$ x.xx
$ x.xx
$ x.xx
$ x.xx
$ x.xx
Weighted Average Exercise Price
b)
Fair Value of Options Issued During the Year
The weighted average fair value at grant date of options granted during the year ended December 31, 2012
was $x.xx per option (2011: $x.xx per option).
IFRS 2.44
Options Issued to Employees
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.
Options Issued to Non-Employees
IFRS 2.44
IFRS 2.45(d)
Options issued to non-employees, are measured based on the fair value of the goods or services received, at
the date of receiving those goods or services. If the fair value of the goods or services received cannot be
estimated reliably, the options are measured by determining the fair value of the options granted, using a
valuation model.
The model inputs for options granted during the year ended December 31, 2012 included:
Grant Date
MM/DD/YY
Expiry Date
MM/DD/YY
Share Price at
Grant Date
$ x.xx
Exercise
Price
$ x.xx
Risk-Free Interest
Rate
x.xx% -x.xx%
Expected Life
xx-xx-months
Volatility Factor
x.xx% -x.xx%
Dividend Yield
-%
MM/DD/YY
MM/DD/YY
$ x.xx
$ x.xx
x.xx% -x.xx%
xx-xx-months
x.xx% -x.xx%
-%
MM/DD/YY
MM/DD/YY
$ x.xx
$ x.xx
x.xx% -x.xx%
xx-xx-months
x.xx% -x.xx%
-%
MM/DD/YY
MM/DD/YY
$ x.xx
$ x.xx
x.xx% -x.xx%
xx-xx-months
x.xx% -x.xx%
-%
PAGE 24 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
13. SHARE BASED PAYMENTS (CONTINUED)
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.
IFRS 2.45(c)
IFRS 2.51(a)
The weighted average share price at the date of exercise of options during the year ended December 31,
2012 was $x.xx per share (2011: $x.xx per share).
c)
Expenses Arising from Share-based Payment Transactions
Total expenses arising from share-based payment transactions recognized during the year as part of
employee benefit expense were $xxx (2011: $xxx).
d)
IFRS 6.23
IAS 1.99
Amounts Capitalized Arising from Share-based Payment Transactions
Total expenses arising from share-based payment transactions that were capitalized during the year as part
of exploration and evaluation activities were $xxx (2011: $xxx).
14. NATURE OF EXPENSES
2012
2011
$’000
$’000
$ xxx
$ xxx
Transportation expenses
xxx
xxx
Advertising expenses
xxx
xxx
$ xxx
$ xxx
Other expenses include:
General and administrative expenses
IAS 12.80
15. INCOME TAXES
2012
2011
$’000
$’000
Loss before income taxes
$ (xxx)
$ (xxx)
Tax recovery based on the statutory rate of xx% (2011:xx%)
$ (xxx)
$ (xxx)
Change in tax rates
xxx
xxx
Non-deductible expenses
xxx
xxx
Unrecognized non-capital loss carry-forwards
xxx
xxx
$ xxx
$ xxx
Total income tax expense (recovery)
IAS 12.80(d)
Changes to the federal and provincial tax rates were announced in 2012 and 2011 which resulted in an
adjustment to the opening carrying value of temporary differences.
PAGE 25 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
15. INCOME TAXES (CONTINUED)
Deferred Tax Assets and Liabilities
IAS 12.81
The nature and tax effect of the temporary differences giving rise to the deferred tax assets and liabilities at
December 31, 2012 and 2011 are summarized as follows:
$’000
Recognized
in net
income
$ xxx
$ xxx
January 1, 2012
Property, plant and equipment
Recognized
directly in
equity
Recognized in
accumulated other
comprehensive
income
December 31,
2012
$’000
$ xxx
Share issue costs
xxx
Non-capital losses carried forward
xxx
xxx
xxx
Capital losses carried forward
xxx
xxx
xxx
$ xxx
$ xxx
$ xxx
$ xxx
Offset against deferred tax liabilities
(xxx)
(xxx)
(xxx)
(xxx)
Unrecognized deferred tax asset
(xxx)
(xxx)
(xxx)
(xxx)
$-
$ xxx
$-
$ (xxx)
$ (xxx)
Deferred tax assets
Exploration and evaluation
Available-for-sale investment
xxx
xxx
$-
$xxx
$ (xxx)
(xxx)
(xxx)
(xxx)
Offset against deferred tax assets
xxx
xxx
Deferred tax liabilities
$-
$-
$-
$ (xxx)
$(xxx)
Net deferred tax balance
$-
$ xxx
$-
$ (xxx)
$-
Property, plant and equipment
January 1, 2011
$’000
Recognize in
net income
$ xxx
$ xxx
xxx
Recognize
directly in
equity
Recognized in
accumulated other
comprehensive
income
December 31, 2011
$’000
$ xxx
Share issue costs
xxx
Non-capital losses carried forward
xxx
xxx
xxx
Capital losses carried forward
xxx
xxx
xxx
$ xxx
$ xxx
$ xxx
$ xxx
Offset against deferred tax liabilities
(xxx)
(xxx)
(xxx)
(xxx)
Unrecognized deferred tax asset
(xxx)
(xxx)
(xxx)
(xxx)
$-
$ xxx
$-
$ (xxx)
$ (xxx)
Deferred tax assets
Exploration and evaluation
xxx
xxx
$-
$ xxx
$ (xxx)
Available-for-sale investment
(xxx)
(xxx)
Offset against deferred tax assets
xxx
xxx
Deferred tax liabilities
$-
$-
$-
$ (xxx)
$ (xxx)
Net deferred tax balance
$-
$ xxx
$-
$ (xxx)
$-
PAGE 26 OF 31
xxx
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
15. INCOME TAXES (CONTINUED)
As at December 31, 2012, the Company has estimated capital losses for Canadian tax purposes of $xxx (2011:
$xxx). These losses do not expire and may be utilized to reduce future capital gains, if any.
IAS 12.81
IAS 12.81(e)
As at December 31, 2012, the Company has estimated non-capital losses for Canadian income tax purposes
that may be carried forward to reduce taxable income derived in future years. A summary of these tax losses
is provided below.
Tax Losses
IAS 12.81
IAS 12.81
These tax losses will expire as follows:
Year of Expiry
Taxable Losses
20YY
$ xxx
20YY
xxx
20YY
xxx
Total
$ xxx
The potential benefits of these carry-forward non-capital losses, capital losses and deductible temporary
differences has not been recognized in these financial statements as it is not considered probable that
sufficient future taxable profit will allow the deferred tax asset to be recovered.
16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The company is exposed through its operations to the following financial risks:



Market Risk
Credit Risk
Liquidity Risk
In common with all other businesses, the company is exposed to risks that arise from its use of financial
instruments. This note describes the Company‘s objectives, policies and processes for managing those risks
and the methods used to measure them. Further quantitative information in respect of these risks is
presented throughout these financial statements.
There have been no substantive changes in the Company‘s exposure to financial instrument risks, its
objectives, polices and processes for managing those risks or the methods used to measure them from
previous years unless otherwise stated in the note.
IFRS 7.33
General Objectives, Policies and Processes:
The Board of Directors has overall responsibility for the determination of the Company‘s risk management
objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority
for designing and operating processes that ensure the effective implementation of the objectives and
policies to the Company‘s finance function. The Board of Directors receive monthly reports from the
Company‘s Financial Controller through which it reviews the effectiveness of the processes put in place and
the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly
affecting the Company‘s competitiveness and flexibility. Further details regarding these policies are set out
below.
PAGE 27 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
IFRS
7.40(a)
16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
a)
Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because
of changes in market prices. Market prices are comprised of four types of risk: foreign currency risk, interest
rate risk, commodity price risk and equity price risk.
Foreign Currency Risk:
Foreign currency risk is the risk that a variation in exchange rates between the Canadian dollar and US dollar
or other foreign currencies will affect the Company‘s operations and financial results. The company does not
have significant exposure to foreign exchange rate fluctuation.
Interest Rate Risk:
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest
rates. The Company does not have any borrowings. Interest rate risk is limited to potential decreases on
the interest rate offered on cash and cash equivalents held with chartered Canadian financial institutions.
The Company considers this risk to be immaterial.
Equity Price Risk:
Equity risk is the uncertainty associated with the valuation of assets arising from changes in equity markets.
The Company is exposed to this risk through its equity holdings. The available-for-sale investment in the
common shares of XYZ Mine Company is monitored by Management with decisions on sale taken at Board
level. A 10% decrease in the fair value of XYZ Mine Company would result in a $x decrease in equity.
b) Credit Risk
IFRS 7.36
Credit risk is the risk of financial loss to the Company if a customer or a counterparty to a financial
instrument fails to meet its contractual obligations. Financial instruments which are potentially subject to
credit risk for the Company consist primarily of cash and cash equivalents. Cash and cash equivalents are
maintained with financial institutions of reputable credit and may be redeemed upon demand.
The carrying amount of financial assets represent the maximum credit exposure. The Company has gross
credit exposure at December 31, 2012 and December 31, 2011 relating to cash and cash equivalents of $xx
and $xx respectively. All cash and cash equivalents are held at BCD Bank which has a rating of XXX. The
Company has performed a sensitivity analysis on changes in the credit risk associated with BCD Bank and
considers this risk to be minimal for all cash and cash equivalent assets based on changes that are reasonably
possible at the reporting date.
PAGE 28 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
c)
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‘s policy is to ensure that it will always have sufficient cash to allow it to meet its
liabilities when they become due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Company‘s reputation. 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.
Typically, the Company ensures that it has sufficient cash on demand to meet expected operational
expenses for a period of xx days. To achieve this objective, the Company prepares annual capital
expenditure budgets, which are regularly monitored and updated as considered necessary. Further, the
Company utilizes authorizations for expenditures on exploration projects to further manage expenditure.
The Company monitors its risk of shortage of funds by monitoring the maturity dates of existing trade and
other accounts payable.
IFRS 7.39(a)
The following table sets out the contractual maturities (representing undiscounted contractual cash flows)
of financial liabilities:
Up to 3
months
Total
Trade payables and other liabilities
December 31, 2012
$xxx
December 31, 2011
$xxx
Between 3
and 12 months
Between 1
and 2 years
Between 2
and 5 years
Over 5
years
$xxx
$xxx
$xxx
$xxx
$xxx
$xxx
$xxx
$xxx
$xxx
$xxx
IFRS 7.25
Determination of Fair Value:
IFRS 7.26
Fair values have been determined for measurement and/or disclosure purposes based on the following
methods. When applicable, further information about the assumptions made in determining fair values is
disclosed in the notes specific to that asset or liability.
The Statement of Financial Position carrying amounts for cash and cash equivalents and trade and other
payables 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:
IFRS 7.27B
Financial instruments that are measured subsequent to initial recognition at fair value are grouped in 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; and
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 marker data (unobservable inputs).
The available-for-sale investment is based on quoted prices and is therefore considered to be Level 1.
PAGE 29 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
IAS 1.124A
IAS
1.124B(a)
17. CAPITAL MANAGEMENT
The company monitors its cash, common shares, warrants and stock options as capital. The Company‘s
objectives when maintaining capital are to maintain sufficient capital base in order to meet its short-term
obligations and at the same time preserve investor‘s confidence required to sustain future development and
production of the business.
The company is not exposed to any externally imposed capital requirements.
18. RELATED PARTY TRANSACTIONS
IAS 24.18
The following is a summary of the Company‘s related party transactions during the year:
a)
Legal Fees
Legal fees of $xxx (2011: $xxx), incurred in connection with the Company‘s financings as well as general
corporate matters, were paid to a law firm of which one partner is a Director of the Company. At December
31, 2012, $xxx (2011: $xxx) owing to this legal firm was included in accounts payable.
b)
Rental Payments
Rental payments of $xxx (2011: $xxx) were paid to Office Company, which is controlled by a Director of the
Company. At December 31, 2012, $xxx (2011: $xxx) owing was included in accounts payable.
c)
IAS 24.17
Key Management Compensation
Key management personnel are persons responsible for planning, directing and controlling the activities of an
entity, and include executive and non-executive directors. Key management personnel compensation
comprised:
Short term employee benefits and director fees
Share-based payments
2012
$’000
2011
$’000
$ xxx
$ xxx
xxx
xxx
$ xxx
$ xxx
d) Loans to Key Management Personnel
No loans were made to Directors or any other key management personnel, including personally related
entities during the reporting year (2011: Nil).
19. SEGMENTAL REPORTING
IFRS 8.20
The Company is organized into business units based on mineral properties and has one reportable operating
segment, being that of acquisition and exploration and evaluation activities.
PAGE 30 OF 31
BDO CANADA LLP
Precious & Other Metals Exploration
NOTES TO THE FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the year-ended December 31, 2012
Reference:
20. LOSS PER SHARE
Basic loss per share amounts are calculated by dividing the net profit for the year by the weighted average
number of ordinary shares outstanding during the year.
Loss attributable to ordinary shareholders
Weighted average number of common shares
Basic and diluted loss per share
IAS 33.70
Weighted Average Number of Common Shares:
2012
$’000
2011
$’000
$xxx
$xxx
xxx
xxx
$x.xx
$x.xx
000’s
000’s
Issued common shares at January 1
xxx
xxx
Effect of shares issued
xxx
xxx
Effect of stock options exercised
xxx
xxx
Effect of stock options on issue
xxx
xxx
Effect of share warrants on issue
xxx
xxx
Weighted average number of common shares (basic and diluted)
at December 31
xxx
xxx
The basic and diluted loss per share are the same as there are no instruments that have a dilutive effect on
earnings.
The brokered private placement which occurred on February DD, 2013 (see Note 21) consists of one flowthrough share and one non-transferrable share purchase warrants exercisable at a price of $x.xx for each
warrant. This transaction, which occurred between the reporting date and the date of completion of these
financial statements, has an impact on the number of ordinary and potential ordinary shares.
21. EVENTS AFTER THE REPORTING DATE
IAS 10.21
Private Placement Financing
On February DD, 2013, the Company obtained a brokered private placement for total proceeds of $xxx
consisting of xxx flow-through units at a price of $x.xx. Each flow-through unit consisted of one flow-through
share and one non-transferrable share purchase warrant exercisable at a price of $x.xx for each warrant.
PAGE 31 OF 31
BDO CANADA LLP
For more information, please contact:
National Leader
Michael Madsen
604 443 4732
mmadsen@bdo.ca
BC Leader
Bryndon Kydd
604 443 4713
bkydd@bdo.ca
Western Leader
Lorraine Walker
403 213 2592
lwalker@bdo.ca
Eastern Leader
Tammy Thompson
416 369 3116
tthompson@bdo.ca
This publication has been carefully prepared, but it has been written in general
terms and should be seen as broad guidance only. The publication cannot be relied
upon to cover specific situations and you should not act, or refrain from acting, upon
the information contained therein without obtaining specific professional advice.
Please contact BDO Canada LLP to discuss these matters in the context of your
particular circumstances. BDO Canada LLP, its partners, employees and agents do
not accept or assume any liability or duty of care for any loss arising from any action
taken or not taken by anyone in reliance on the information in this publication or for
any decision based on it.
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO
International Limited, a UK company limited by guarantee, and forms part of the
international BDO network of independent member firms. BDO is the brand name for
the BDO network and for each of the BDO Member Firms.