ENP Newswire -
Release date- 28052014 - The following management discussion and analysis of financial position and results of operations of
In this discussion, unless the context otherwise dictates, a reference to the business and operations of the Company includes the business and operations of the Company's wholly owned Mexican subsidiary, Exploracion Auramex S. A. de C. V. ('Auramex Mexico'). Additional information relating to the Company is available on SEDAR at www.sedar.com.
Management is responsible for the preparation and integrity of the financial statements, including the maintenance of appropriate information systems, procedures and internal controls and to ensure that information used internally or disclosed externally, including the financial statements and MD&A, is complete and reliable.
Forward Looking Statements
All statements in this discussion, other than statements of historical facts, that address future exploration drilling, exploration activities, anticipated metal production, internal rate of return, estimated ore grades, commencement of production estimates and projected exploration and capital expenditures (including costs and other estimates upon which such projections are based) and events or developments that the Company expects, are forward looking statements.
Although the Company believes the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include metal prices, exploration success, continued availability of capital and financing, as well as general economic, market or business conditions. Accordingly, readers should not place undue reliance on forward-looking statements.
Description of the Business
The Company is engaged in the business of acquiring interests in mineral properties with exploration potential and exploring those properties to determine if they may host economic deposits of minerals. If the Company determines that a property likely does not host an economic deposit, or if maintaining a property becomes uneconomic for any other reason, it abandons the property and writes off the capitalized acquisition and deferred exploration and development costs associated with the property.
As existing properties are abandoned, the Company seeks out new properties for acquisition that it considers may have the potential to host the economic mineral deposit or deposits that will result in its evolution into a producing, revenue generating entity. The exploration of mineral properties and subsequent development involves a high degree of risk and few properties that are explored are ultimately developed into producing properties.
As the Company does not have a producing mineral property, it has no source of cash other than debt financing and equity financing from the sale of its common shares and share purchase warrants. The cash raised in this manner is used to cover ongoing administrative expenses and to fund exploration activities on its mineral exploration properties. The amount of money available for exploration is directly related to the amount that the Company is able to raise from these sources, after administrative expenses have been paid.
The Company is continually engaged in the process of raising money and allocating the proceeds between its current administrative needs and desired exploration activities. As funds become depleted, new financing is sought and the process is repeated. The determination as to which properties to explore, what programs to undertake and how much money to spend in each instance is made on an ongoing basis by the Company's management, in consultation with its Board of Directors and professional advisors.
As a result of the foregoing, the true measure of the Company's performance for any given period lies in the amount of money it was able to raise, the amount of exploration it was able to undertake and the results of those exploration efforts.
Results of Operations
The Company is engaged in the business of acquiring and exploring mineral exploration properties in the hope of discovering economic deposits of minerals that can eventually be placed into production. The Company has yet to identify and develop an economic mineral deposit, and accordingly has no sales or other significant revenue and no profit.
During 2013, the Company cancelled the Brandywine Mining Lease in the Vancouver Mining Division. The Company held an additional property, La Perla II,
A description of each project is as follows:
The Company's Magenta property is located near
For this reason, Auramex reduced the Magenta concession from 4,686 hectares to less than 1,000 hectares to obtain a lower rate. Title to the reduced area of 998 hectares, which includes the most prospective areas, was issued
With respect to the El Fierro concession, Auramex Mexico entered into an option agreement with
Azteca automatically converts to a 2% NSR in the event that its interest under the joint venture is diluted to 10% or less. Formal resolution of the joint venture and dilution to a 2% NSR has been delayed due to changes in management and corporate affairs of Azteca.
During November and December of 2012, two diamond core holes were drilled. One tested an IP anomaly 150 metres west of the
The second hole was collared on the eastern edge of the El Fierro concession and tested a geophysical anomaly identified in a 1996 Aerodat survey. Thirty seven samples were marked for assay which has not yet been done. Core from the two holes is stored in
Under various agreements between 2005 and 2009, the Company has acquired a 100% interest in the
The program was completed on
Exploration on the three claim blocks to date is summarized as follows:
Although the drilling did not encounter any ore grade mineralization, the area still has good exploration potential as the area with alteration and mineralization is quite extensive and only a small portion was drill tested.
The VTEM-M airborne survey of 744.3 line kilometres on the eastern section of the property (
A VTEM-M airborne survey conducted by
An exploration program in 2011 located a gold occurrence, identified for future reference as the Gamebreaker, in the southern part of the property. The Company has received a drill permit, valid to
Tide North - The VTEM survey outlined a conductor of approximately 1,000 metres length in the area where previously reported gold values were obtained in 2006 and 2007 from rocks at surface and stream sediment samples. Interpretation was provided by Mira Geoscience on a 900 x 300 metre anomaly identified by this survey. The Company has received a drill permit, valid to
Our consultants are continually adding to a comprehensive model that includes information from various sources, notable geology, topographic features, historical third party data, satellite imagery, stream sediment assays, etc, which will be used to better pinpoint locations for future drilling.
The Brandywine property consisted of a 45 hectare mining lease, and 1,440 hectares in mineral tenures located in the Vancouver Mining Division,
This should result in the refund of the reclamation deposits of
The fourth quarter loss in 2013 is higher than the first three quarters as it includes a mineral property write-down, a deferred tax expense in
The third quarter loss in 2012 includes mineral property write-offs of
The Company's primary source of cash is equity financing from the sale of the Company's common shares and share purchase warrants on a private placement basis. Additional cash is generated when convertible securities, such as previously issued share purchase warrants and stock options, are exercised.
The Company has two primary requirements for working capital: administrative costs and exploration expense.
During the three months ended
During the three months ended
Each share purchase warrant entitles the holder to purchase one additional common share for a period of five years, at a price of
The Company's ability to obtain sufficient funding for the medium to long terms will be dependent on the availability of equity and debt financing in the future, which the Company cannot predict. The availability of such funding will be dependent on a number of factors beyond the Company's control, including commodity prices, stock market performance and any number of other economic conditions. Accordingly, the ability of the Company to continue as a going concern cannot be assured.
Transactions with Related Parties
The Company was party to the following transactions with related parties during the three months ended
In this regard Ms. Whitby submitted reimbursement claims in the amount of
The Company's primary supplier of legal services is Venex Law, which is a sole proprietorship of
The Company considers all of the foregoing transactions and the amounts related thereto to be reasonable and representative of normal commercial transactions.
Adoption of Accounting Standards and Pronouncements under IFRS
Future accounting changes
Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC that are mandatory for accounting periods beginning on or after
IAS 32, Financial Statements Presentation has been amended to provide clarification on the application of offsetting rules. These amendments are effective for annual periods beginning on or after
The fair value of the Company's receivables, reclamation deposits, accounts payable and accrued liabilities and shareholder loans approximate carrying value which is the amount recorded on the consolidated statement of financial position. The Company's other financial instrument, cash, under the fair value hierarchy is based on level one quoted prices in active markets for identical assets and liabilities.
The Company's risk exposures and the impact on the Company's financial instruments are summarized below:
The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company's credit risk is primarily attributable to cash and cash equivalents. Cash is held with highly rated financial institutions and management believes the risk of loss to be remote.
The Company has no significant concentration of credit risk arising from operations. Most receivables consist of input tax credits receivable from the Government of
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.
Interest rate risk
The Company has cash balances and no interest-bearing debt. The Company's current policy is to invest excess cash in investment-grade short-term deposit certificates issued by its banking institutions. The Company periodically monitors the investments it makes and is satisfied with the credit ratings of its banks. As of
Foreign currency risk
The Company is exposed to foreign currency risk or fluctuations related to cash, receivables and taxes recoverable, and accounts payable and accrued liabilities that are denominated in US Dollars and Mexican Pesos.
The Company has cash, receivables and taxes recoverable and accounts payable and accrued liabilities that are denominated in US Dollars and Mexican Pesos. A 10% fluctuation in the US Dollar and Mexican Peso against the Canadian Dollar would affect net income for the year by approximately
The Company is exposed to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Company's earnings due to movements in individual equity prices or general movements in the level of the stock market. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company closely monitors commodity, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company.
Disclosure of Outstanding Share Data
At the Company's Annual and Special General Meeting held
At the same meeting, the shareholders approved the re-pricing of stock options outstanding after the consolidation, to a price consistent with the post-consolidation market price for the Company's shares. Pursuant to that approval the outstanding stock options have been re-priced and are now exercisable at
The Company has the following securities outstanding at
16,332,483 common shares.
Incentive stock options for the purchase of 825,000 common shares at an exercise price of
7,673,334 share purchase warrants.
Each of 6,733,334 share purchase warrants entitles the holder to purchase one common share until
Each of 940,000 share purchase warrants entitles the holder to purchase one common share until
The Company has no off-balance sheet arrangements.
While the Company is in discussions regarding property acquisitions and disposals on an ongoing basis, the Company has no proposed material asset or business acquisition or disposition that the Company's Board of Directors has decided to proceed with, or that the Company's senior management has decided to proceed with in the belief that confirmation by the Board is probable.
Tel: (604) 924-9376
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