30 Dec 2011 10:28
FOR IMMEDIATE RELEASE: 30 December 2011:
CIC Mining Resources Ltd
("CIC Mining Resources", the "Company", or "CICR")
INTERIM FINANCIAL STATEMENTS
CICR is pleased to announce its third quarter report for the period ended 31 October 2011.
Financial highlights:
·; Revenue C$1,181k (2010: C$266k) for the nine months ended 31 Oct 2011
·; Net Profit of C$333k (2010: Loss of C$694k) for the nine months ended 31 Oct 2011
The Company has been working on a number of advisory mandates and the Company expects to see the final quarter positive.
Nature of Business
The Company is a consulting and advisory company, operating primarily in the mining and energy infrastructure sectors. The Company seeks to provide consulting and advisory services to entities operating at various stages of resource development, and the exclusive right to control the public listing process of any client company if the client company is an unlisted company.
Mining and energy infrastructure companies or projects will include those involved in the exploration for, and extraction of, base metals, precious metals, bulk commodities, thermal and metallurgical coals, industrial metals, hydrocarbons, renewables and new technologies, including single-asset as well as diversified natural resources companies.
The core services provided by CIC Mining Resources Ltd. are: the Advisory Service which provides a range of technical, project management, strategic and commercial services; the Strategic Investment Service which helps companies source investment from industry partners for which the Company will typically receive an equity interest; and Advice on Listings where the Company helps the client realize value by listing on a Stock Exchange.
FINANCIAL RESULTS
Summary of Quarterly Results
The following table sets out selected un-audited quarterly financial information of the Company and is derived from the un-audited quarterly financial statements prepared by management.
Oct 31, 2011 | July 31, 2011 | April 30, 2011 | Jan 31, 2011 | Oct 31, 2010 | July 31, 2010 | April 30, 2010 | Jan 31, 2010 | |
Revenues Net profit (loss) | 431,213 | 530,065 | 220,000 | 446,878 | - | - | - | - |
62,983 | 135,355 | 134,391 | (2,347,175) | (319,661) | (131,589) | (242,676) | (2,939,149) | |
Basic & diluted loss per share | 0.00 | (0.00) | (0.00) | (0.02) | 0.00 | (0.00) | (0.00) | (0.02) |
Variances in net income and loss by quarter in 2011 and 2010 reflect overall corporate activity and factors, which do not recur each quarter, such as the fluctuating of foreign exchange rate and revenues.
During the quarter ended October 31, 2011:
The net profit for the quarter was $62,983, versus a net loss of $(319,661) for the same quarter last year and for the three quarters was $333k, versus a net loss of $(694k) for the same period last year. The Company generated cash revenues in this quarter and confirms the Company's business model is producing initial positive results. This is expected to continue in the next quarter.
Changes in the quarter:
Amortization expense of $2,305 versus $2,809 in the same quarter last year remains relatively the same.
Management fee was Nil in this quarter versus $75,000 in the same quarter last year. In Q3 year ended January 31, 2012 management fees were halted pending new agreement with Stuart J Bromley.
Office and miscellaneousexpenses was $77,705 in this quarter versus $170,364 in the same quarter last year. Last year was an accounting adjustment and the Office and miscellaneous expenses remains at constant levels.
Professional fees were $120,320 in this quarter versus 183,870 in the same quarter last year. The Company has significant advisory services work in progress. Professional fees are expected to increase in 2012.
Rental was $105,813 in this quarter versus $44,900 in the same quarter last year. New office lease and construction costs are reflected in the increase.
Salaries were $31,646 in this quarter versus $69,951 in the same quarter last year. Contract staff contracts ended resulting overall salary costs.
Stock option compensation was Nil in this quarter versus Nil in the same quarter last year.
Travel & promotion, meal was $25,883 in this quarter versus 2,800 in the same quarter last year and remains relatively the same.
The Company's financial instruments as of October 31, 2011 consisted of cash, amounts receivable, accounts payable and accrual liabilities. As at October 31, 2011, the Company's cash totaled $29,106 compared to $2,421 as at October 31, 2010. The Company has a working capital deficiency of $2,638,698 as of October 31, 2011 compared to a working capital deficiency $1,635,731 as of October 31, 2010. As of October 31, 2011, the Company had 14,150,000 options exercisable, which if exercised, the Company's available cash would increase by $990,500.
SHARE DATA
CIC Mining Resources Ltd. authorized capital consists of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value. As at October 31, 2011, the Company has 152,451,777 common shares issued and outstanding, 14,150,000 stock options and 350,000 warrants outstanding.
The following is the summary of outstanding shares, stock options and warrants:
October 31, 2011 | October 31, 2010 | |
Common shares | 152,451,777 | 144,807,492 |
Warrants | 350,000 | 34,762,170 |
Options | 14,150,000 | 5,175,000 |
OTHER POSSIBLE IMPACTS
The Company is monitoring new regulations, policies and laws that change the way it operates commercially in China. In particular, the transfer of money from China to Canada is very difficult under the current Company organization.
The Company operates two companies in China:
a) China CIC Mining Resources Ltd. Beijing Company which is a foreign enterprise
b) Top Ten Mining Investment Limited, a domestic Chinese enterprise.
The Company has established its head office in China and in future intends to operate as a Chinese company that is listed on overseas stock exchange. Foreign enterprise restrictions will not apply.
Management's responsibility for financial reporting
The accompanying interim financial statements of The Company were prepared by management in accordance with International Financial Reporting Standards ("IFRS"). Management acknowledges responsibility for the preparation and presentation of the interim financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Company's circumstances. The significant accounting policies of the Company are summarized in Note 2 to the interim financial statements.
Management has established systems of internal control over the financial reporting process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced.
The Board of Directors is responsible for reviewing and approving the consolidated financial statements and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The majority members of the Audit Committee are not officers of the Company. The Audit Committee meets with management as well as with the independent auditors to review the internal controls over the financial reporting process, the consolidated financial statements and the auditors' report. The Audit Committee also reviews the Annual Report to ensure that the financial information reported therein is consistent with the information presented in the financial statements. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the consolidated financial statements for issuance to the shareholders.
Management recognizes its responsibility for conducting the Company's affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.
These interim statements will be available on the Company's website, www.cicresources.com, from today.
Stuart J. Bromley
Chairman
Hongguang Li
Director
December 30, 2011
OR FURTHER INFORMATION PLEASE CONTACT:
CIC Mining Resources Ltd | Stuart Bromley, CEO | +86 136 0113 1912 |
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| Northland Capital Partners Limited (Nominated Adviser) | Luke Cairns/Tim Metcalfe/Rod Venables | +44 (0) 20 7796 8800 | |||
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| GTH Communications (Public Relations) | Toby Hall/Suzanne Johnson Walsh | +44 (0) 20 3103 3903 | |||
CIC MINING RESOURCES LTD.
INTERIM CONSOLIDATED STATEMENTS OF BALANCE SHEETS
(In Canadian Dollars)
(Unaudited - Prepared by Management)
October 31, 2011 (Unaudited) | January 31,2011 (Audited) | ||||
ASSETS | |||||
Current Assets | |||||
Cash | $ | 29,106 | $ | 4,851 | |
Amounts receivable | 258,892 | 31,722 | |||
Marketable securities | 2,652 | 2,652 | |||
Prepaid expenses and deposits | 91,795 | 56,652 | |||
382,445 | 95,877 | ||||
Property and equipment | 2,343 | 9,246 | |||
$ | 384,788 | $ | 105,123 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Current Liabilities | |||||
Accounts payable and accrued liabilities | $ | 1,864,903 | $ | 2,077,707 | |
Income taxes payable | 98,440 | 98,440 | |||
Due to related parties | 1,057,800 | 907,800 | |||
3,021,143 | 3,083,947 | ||||
Shareholder's Equity (Note 7) | |||||
Share capital | 24,592,434 | 24,592,434 | |||
Contributed surplus | 4,646,153 | 4,646,153 | |||
29,238,587 | 29,238,587 | ||||
Deficit | ( 32,243,281) | (32,576,010) | |||
Accumulated other comprehensive income | 368,339 | 358,599 | |||
(31,874,942) | (32,217,411) | ||||
(2,636,355) | (2,978,824) | ||||
$ | 384,788 | $ | 105,123 | ||
Nature of Operations and Going Concern - Note 1 | |||||
Commitments - Note 8 | |||||
Contingencies - Note 9 | |||||
APPROVED ON BEHALF OF THE BOARD: | |||||
"Hongguang Li " | Director | ||||
"Stuart J. Bromley" | Director | ||||
See Accompanying Notes to the Interim Financial Statements |
CIC MINING RESOURCES LTD.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In Canadian Dollars)
(Unaudited - Prepared by Management)
Three months ended October 31 | Nine months ended October 31 | ||||
2011 | 2010 | 2011 | 2010 | ||
Revenue | 431,213 | 266,030 | 1,181,278 | 266,030 | |
General and administrative costs | |||||
Amortization | 2,305 | 2,809 | 6,916 | 7,411 | |
Bank charges and interest | 1,260 | 2,372 | 8,508 | 2,587 | |
Consulting fees | - | 25,000 | (23,293) | 28,000 | |
Filing fees and transfer agent | 3,298 | 8,665 | 15,650 | 11,665 | |
Director insurance | - | - | - | - | |
Management fees (Note 6) | - | 75,000 | 150,000 | 225,000 | |
Meals and entertainment | - | - | - | 2,626 | |
Office and administration | 77,705 | 170,364 | 222,772 | 191,157 | |
Professional fees | 120,320 | 183,870 | 60,715 | 183,870 | |
Rent | 105,813 | 44,900 | 273,918 | 120,317 | |
Salaries | 31,646 | 69,951 | 92,188 | 184,565 | |
Stock based compensation | - | - | - | - | |
Travel and promotion | 25,883 | 2,800 | 41,175 | 2,800 | |
Total general and administrative costs | 368,231 | 585,731 | 848,549 | 959,998 | |
Net Income (Loss) before other items | 62,983 | (319,701) | 332,729 | (693,968) | |
Other income (expense) | |||||
Gain (loss) on sale of marketable securities | |||||
Impairment of intangible assets | - | - | - | - | |
Impairment of resources properties | |||||
Interest Income | - | 40 | - | 41 | |
Net Income (Loss) before income taxes | 62,983 | (319,661) | 332,729 | (693,927) | |
Income tax | |||||
Net Income (loss) for the period | 62,983 | (319,661) | 332,729 | (693,927) | |
OCI-Foreign exchange | |||||
Other comprehensive income (loss) | 4,990 | (11,969) | (9,740) | 80,698 | |
Comprehensive income (loss) | 67,973 | (331,630) | 322,989 | (613,299) | |
Basic and fully diluted net income (loss) per share | 0.00 | 0.00 | 0.00 | 0.00 | |
Weighted average number of shares outstanding | 152,451,777 | 144,807,492 | 152,451,777 | 144,807,492 | |
See Accompanying Notes to the interim financial statements. |
CIC MINING RESOURCES LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Canadian Dollars)
(Unaudited - Prepared by Management)
Three months ended October 31 | Nine months ended October 31 | |||||||
2011 | 2010 | 2011 | 2010 | |||||
Operating Activities | ||||||||
Net Income (loss) | 62,983 | (319,661) | 332,729 | (693,927) | ||||
Items not effecting cash: | ||||||||
Amortization | 2,305 | 2,809 | 6,916 | 7,411 | ||||
Stock options issued to consultants | - | - | - | - | ||||
Stock based compensation | - | - | - | - | ||||
Write down of resource properties | - | - | - | - | ||||
65,288 | (316,852) | 339,645 | (686,516) | |||||
Changes in non-cash working capital items: | ||||||||
Amounts receivable | (124,553) | - | (227,170) | - | ||||
Prepaid expenses | - | (18,946) | (35,143) | 57,371 | ||||
Accounts payable and accrued liabilities | 77,505 | (309,881) | (212,804) | (137,240) | ||||
Cash used in operating activities | 18,240 | (645,679) | (135,472) | (766,385) | ||||
Financing Activities | ||||||||
Sale of marketable securities | - | - | - | - | ||||
Increase (decrease) due to related parties | - | 600,524 | 150,000 | 714,599 | ||||
Short term loans payable | - | - | - | - | ||||
Cash provided by financing activities | - | 600,524 | 150,000 | 714,599 | ||||
Investing Activity | ||||||||
Resource property expenditures | - | - | - | - | ||||
Intangible assets | - | - | - | - | ||||
Cash provided by investing activities | - | - | - | - | ||||
Effects of exchange rate change in cash | (4,992) | (12,473) | 9,727 | 8,927 | ||||
Increase (decrease) in cash and cash equivalents during the period | 13,248 | (57,628) | 24,255 | (42,859) | ||||
Cash and cash equivalents, beginning of the period | 15,858 | 60,049 | 4,851 | 45,280 | ||||
Cash and cash equivalents (overdraft) at end the period | 29,106 | 2,421 | 29,106 | 2,421 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | - | $ | - | $ | - | $ | - |
Income taxes | $ | - | $ | - | $ | - | $ | - |
CIC MINING RESOURCES LTD.
INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In Canadian Dollars)
(Unaudited - Prepared by Management)
Number of shares | Amount ($) | Contributed Surplus($) | AccumulatedDeficit($) | Accumulated Other Comprehensive Loss($) | |||
Balance, January 31, 2010 | 144,807,492 | 27,491,066 | 1,457,391 | (30,228,835) | 269,438 | ||
Balance, January 31, 2011 | 152,451,777 | 24,592,434 | 4,646,153 | (32,576,010) | 358,599 | ||
Issued for cash | |||||||
Pursuant of private placement | - | - | - | - | - | ||
Share subscription receivable | - | - | - | - | - | ||
Top up of January 31, 2010 private placement | - | - | - | - | - | ||
Cancellation of shares in escrow | - | - | - | - | - | ||
Stock based compensation | - | - | - | - | - | ||
Net loss for the year | - | - | - | 332,729 | - | ||
Foreign exchange translation | - | - | - | - | 9,740 | ||
Reversal of unrealized gain on securities disposal | - | - | - | - | - | ||
Unrealized gain on available for sale securities | - | - | - | - | - | ||
Balance, October 31, 2011 | 152,451,777 | 24,592,434 | 4,646,153 | (32,243,281) | 368,339 |
See Accompanying Notes to the Interim Financial Statements1. NATURE of operations AND GOING CONCERN
CIC Mining Resources Ltd. (the "Company") is a public company incorporated on June 20, 2003 under the Canada Business Corporations Act listed on the Canadian National Stock Exchange (CNSX) and is a consulting and advisory company, operating preliminary in the mining and energy infrastructure sectors. Its strategy is to assist in finding pre-IPO funding for its client companies and to assist them in identifying suitable potential investors and/or strategic partners for their projects. In November 2010, the Company's primary listing moved to the AIM market of the London Stock Exchange. The Company also trades on the Frankfurt Stock Exchange. The Company subsequently de-listed its shares from trading on the CNSX as of June 24, 2011.
These unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realized values may be substantially different from carrying values shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. These interim statements should be read together with the audited financial statements and the accompanying notes included in the Company's latest annual report. In the opinion of the Company, its unaudited interim consolidated financial statements contain all adjustments necessary in order to present a fair statement of the results of the interim presented.
At October 31, 2011, the Company has accumulated deficit of $32,243,281 since its inception, and working capital deficit excluding marketing securities of $2,638,698 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.
2. Significant Accounting Policies
Presentation and Consolidation
These consolidated financial statements have been presented in Canadian dollars and include the accounts of the Company and its wholly-owned subsidiaries, China CIC Mining Resources Limited Beijing Representative Office ("CICMR"), and Top Ten Mining Investment Limited ("Top Ten"). Prior to the January 31, 2008 fiscal year, these two subsidiaries were considered inactive and all transactions related to the Company's PRC operations were recorded directly by CIC Mining Resources Ltd. in its own accounts. Effective February 1, 2008 the Company used these subsidiaries to conduct the majority of its operations in PRC and they became active. Accordingly, the assets, obligations and operations of these subsidiaries were consolidated with those of the Company from that date forward. All significant inter-company transactions and balances have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and could impact future results of operations and cash flows.
Marketable Securities
Marketable securities include shares of a public company received as part of service revenue. These shares have been categorized as available for sale financial instruments and as such are carried at fair value. Adjustments to fair value are recorded in other comprehensive income unless there is a loss in value that is other than temporary, in which case the adjustment to fair value is included in income and not reversed for future fair value changes.
Foreign Currency Translation
The Company's functional currency is the Canadian dollar. The functional currency of the Company's wholly-owned subsidiaries, CICMR and Top Ten is the PRC Renminbi ("RMB"). On February 1, 2008 the Company changed its foreign currency translation policy from the temporal to the current rate translation method because the primary business focus of the company had changed and there were significant changes to the facts and circumstances primarily affecting the Company's foreign exchange exposure. Prior to February 1, 2008 the Company considered itself to be an exploration stage resource company focused on acquiring and exploring mineral properties in PRC, and was considered to be dependent on financing from outside PRC to sustain its exploration activities.
Effective February 1, 2008, the Company changed its primary focus to being a consultant and facilitator for the negotiation, development, promotion and financing of PRC resource projects in exchange for fees. As a result, the majority of the Company's activities are not only carried out in PRC but it also receives consideration from its PRC clients in the form of cash, equity participation, royalty participation, or other rights, and it is no longer dependent on its Canadian operation for financial backing. In addition, the majority of the Company's costs of operations are primarily local PRC costs and the majority of its consulting services are performed in PRC. Accordingly, management considers these PRC operations to be self-sustaining foreign operations and accordingly, the financial statements of CICMR and Top Ten are translated into Canadian dollars using the current rate method, as follows:
i) Assets and liabilities, at the rate of exchange in effect as at the balance sheet date;
ii) Revenues and expenses items (including amortization), at the rate of exchange in effect on the dates on which such items are recognized in income during the period.
Exchange gains and losses arising from the translation of the financial statements are recognized in a separate component of other comprehensive income.
Revenue Recognition
The Company earns its revenue by using its expertise to perform consulting, advisory, and facilitation services to development and exploration stage resource companies and projects in PRC. Consideration received by the Company may include cash, shares, securities or options of other companies, royalty participation or other rights, or options to acquire properties, rights or projects.
Service revenue is generally recognized when persuasive evidence of an arrangement exists, the value is fixed or determinable, performance has occurred and there is reasonable assurance of collection.
The Company's policy for recognizing revenues is as follows:
i) Cash consideration is recognized once the service has been performed, the consideration has been earned, the cash has either been received or there is reasonable assurance of prompt collection, any obligation to return or refund the consideration has lapsed or been waived, and a formal arrangement between the parties exists.
ii) Shares or options received as consideration are recognized when the services have been performed or the agreed effort has been expended, pursuant to a contract or agreement, the securities have been received by the Company, and the value of the securities received is measurable with reasonable accuracy.
iii) Royalty participation or other rights are recognized only once it is established that a royalty has been received or a right has been realized, generally when the right is sold or otherwise liquidated, a contract or arrangement exists, and the consideration received is measurable.
iv) Options to acquire properties or projects received as consideration are recognized once the option is sold or once the option has been exercised and the resulting assets obtained are liquidated or otherwise disposed.
Stock-based Compensation
The Company has a stock option plan, which is described in Note 7. The Company recognizes stock-based compensation expense in accordance with CICA Handbook Section 3870, "Stock-Based Compensation and Other Stock-Based Payments". When stock or stock options are issued to employees, compensation expense is recognized based on the fair value of the stock or stock options issued on the date of grant, over the vesting period of the stock or stock options. Stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable. The fair value of stock-based payments to non-employees is periodically re-measured until counterparty performance is complete, and any change therein is recognized over the period and in the same manner as if the Company had paid cash instead of paying with or using equity instruments. The cost of stock-based payments to non-employees that are fully vested and non-forfeitable at the grant date is measured and recognized at that date. On the exercise of stock options, share capital is credited for consideration received and for fair value amounts previously credited to contributed surplus.
Property and Equipment
Property and equipment are recorded at cost. Amortization is provided using the straight-line method to write off the cost over the estimated useful lives of the assets as follows:
Office, furniture and computer equipment 5 Years
The Company reviews the carrying values of its property and equipment for impairment whenever events or changes in circumstances indicate their carrying values may exceed their estimated net recoverable amounts determined by reference to estimated future operating results and undiscounted net cash flows. An impairment loss is recognized when the carrying value of those assets exceeds their fair value.
Comprehensive Income
This standard requires the presentation of a statement of comprehensive income and its components. Comprehensive income includes both net earnings and other comprehensive income. Other comprehensive income includes holding gains and losses on available for sale investments, gains and losses on certain derivative financial instruments and foreign currency gains and losses relating to self-sustaining foreign operations.
Future Income Taxes
Future income taxes are recorded using the asset and liability method whereby future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment or enactment occurs. To the extent that the Company does not consider it more likely than not that a future tax asset will be recovered, it provides a valuation allowance against the excess.
Basic and Diluted Loss Per Share
Basic loss per share is computed by dividing the loss for the year by the weighted average number of common shares outstanding during the year. Diluted loss per share reflects the potential dilution that could occur if potentially dilutive securities were exercised or converted to common shares. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method. Common equivalent shares consisting of shares issuable on the exercise of common share purchase options and warrants were not included in the computation of diluted loss per share because the effect was anti‑dilutive.
Recent Accounting Pronouncements
In October 2009, the Accounting Standards Board issued a third and final IFRS Omnibus Exposure Draft confirming that publicly accountable enterprises will be required to apply IFRS, in full and without modifications, for all financial periods beginning January 1, 2011. The Company's adoption of IFRS on February 1, 2011 requires the restatement, for comparative purposes, of amounts reported by the Company for the year ended January 31, 2011, including the opening balance sheet as at February 1, 2010.
3. CAPITAL MANAGEMENT
The Company's objectives for the management of capital are to safeguard the Company's ability to continue as a going concern including the preservation of capital and to achieve reasonable returns on invested cash after satisfying the objective of preserving capital.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. The Company considers its cash to be its manageable capital. The Company's policy is to maintain sufficient cash to cover operating costs over a reasonable future period. There are no external restrictions on management of capital.
4. financial instruments and CREDIT RISK
Fair Value of Financial Instruments
The Company's financial instruments consist of cash, marketable securities, amounts receivable, accounts payable, and amounts due to related parties. The carrying value of these instruments approximates their fair values due to the relatively short periods of maturity of these instruments.
Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and amounts receivable. To minimize its credit risk the Company deposits its cash in bank accounts with financial institutions. Transaction costs are expensed as incurred.
Financial assets past due
The Company reviews financial assets past due on an ongoing basis with the objective of identifying potential matters which could delay the collection of funds at an early stage. Once items are identified as being past due, contact is made with the respective company to determine the reason for the delay in payment and to establish an agreement to rectify the breach of contractual terms. At Oct 31, 2011, the Company had no provision for doubtful accounts.
Liquidity Risk
The Company does not have sufficient cash to meet its short-term general and administrative expenditures and its current liabilities. All of the Company's financial liabilities have contractual maturities of 30 days or are due on demand.
Market Risk
Market risk is the risk to the Company that the fair value or future cash flows of financial instruments will fluctuate due to changes in interest rates and foreign currency exchange rates. Market risk arises as a result of the Company generating revenues and incurring expenses in foreign currencies, holding cash and cash equivalents which earn interest, and having operations based in countries using currencies other than the Canadian dollar.
Interest Rate Risk
The Company does not currently have financial instruments that expose the Company to interest rate risk.
Foreign Exchange Risk
The Company's financial instruments are substantially all denominated in Chinese RMB and the Canadian dollar. Fluctuations in the exchange rates between the RMB and Canadian dollar could have a material effect on the Company's business and on the reported amounts of various financial instruments. The Company does not utilize any financial instruments or cash management policies to mitigate the risks arising from changes in foreign currency rates.
At October 31, 2011, approximately 57% of the Company's net liabilities are denominated in Chinese RMB and are exposed to foreign exchange risk.
5. PROPERTY AND EQUIPMENT
Office, Furniture & Equipment
2011 | 2010 | |||||||
| Cost | Accumulated amortization | Net Book Value | Net Book Value | ||||
Office, furniture & equipment | $ | 36,856 | $ | 34,513 | $ | 2,343 | $ | 11,562 |
6. Related Party Transactions
The Company incurred the following expenses with companies related by way of officers in common and with a company with whom a director is associated. These costs were measured at the amounts agreed upon by the parties.
Nine months ended October 31 | ||||
2011 | 2010 | |||
Management fees | 150,000 | 225,000 | ||
Professional fees - legal and interest | - | - | ||
$ | 150,000 | $ | 225,000 | |
These amounts are included in Due to related parties.
In Q3 year ended January 31, 2012 management fees were halted pending new agreement with Stuart J Bromley.
These entities are owed by the Company as follows:
October 31, 2011 | January 31, 2011 | |||
Due to related parties | 1,057,800 | 907,800 | ||
$ | 1,057,800 | $ | 907,800 |
These amounts are non-interest bearing, unsecured and have no fixed terms of repayment.
7. share capital
Authorized:
Unlimited common shares without par value.
Issued:
Number of shares | Amount | ||
Balance, January 31, 2010 | 144,807,492 | 27,491,067 | |
Balance, January 31, 2011 | 152,451,777 | 24,592,434 | |
Issued for cash | |||
Pursuant to private placement | - | - | |
Balance, October 31, 2011 | 152,451,777 | $ | 24,592,434 |
Escrow:
At October 31, 2011, no common shares were held in escrow (January 31, 2011: Nil).
Warrants:
The following is the summary of the changes in the Company's outstanding warrants at October 31, 2011 and January 31, 2011:
October 31, 2011 | January 31, 2011 | |||
Shares | Weighted Average Exercise Price |
Shares | Weighted Average Exercise Price | |
Balance of warrants at beginning of period | 35,112,170 | $0.15 | 50,382,170 | $0.18 |
Issued | - | - | 350,000 | 0.10 |
Exercised | - | - | (2,000,000) | 0.28 |
Expired | (34,762,170) | 0.15 | (13,620,000) | 0.25 |
Balance of warrants at end of period | 350,000 | $0.15 | 35,112,170 | $0.15 |
At October 31, 2011, the Company had 350,000 (January 31, 2011 - 35,112,170) warrants outstanding. Each warrant entitles the holder thereof the right to purchase one common share for each warrant held as follows:
Expiry date |
Exercise price | October 31, 2011 Number of Warrants | January 31, 2011 Number of Warrants |
February 4, 2010 | $0.28 | - | - |
February 4, 2010 | $0.25 | - | - |
July 13, 2011 | $0.15 | - | 34,762,170 |
July 14, 2012 | $0.10 | 350,000 | 350,000 |
350,000 | 35,112,170 |
Share Purchase Options
The Company has a stock option plan which authorizes the board of directors to grant incentive stock options to directors, officers and employees. The exercise price and vesting provisions of the options are determined by the board based on the market values of the shares using the closing price on the date prior to date of the grant. The continuity of options outstanding is as follows:
October 31, 2011 | January 31, 2011 | |||
Stock Options | Weighted Average Exercise Price |
Stock Options | Weighted Average Exercise Price | |
Balance, beginning of period | 5,175,000 | $0.32 | 5,175,000 | $0.32 |
Granted | 10,600,000 | 0.05 | 10,600,000 | 0.05 |
Expired | (1,625,000) | 0.75 | ||
Balance, end of period | 14,150,000 | $0.07 | 15,775,000 | $0.09 |
Exercisable, end of period | 14,150,000 | 15,775,000 |
On November 14, 2010, the Company changed the exercise price for 2,700,000 previously vested stock options. The exercise price for 1,000,000 stock options was changed to $0.05 from $0.75, 750,000 stock options was changed to $0.05 from $0.11, and 950,000 stock options was changed to $0.05 from $0.10.
On November 15, 2010, 9,900,000 stock options were granted to directors for their services to the Company and 700,000 stock options were granted to consultants for their legal and advisory services.
All of these stock options vested immediately, expire on November 15, 2013, and have an exercise price of $0.05 per share.
As at October 31, 2011, there were 14,150,000employee, director and consultant options outstanding. The weighted average remaining life for outstanding options is 1.81 years, and weighted average exercise price is $0.07.
Expiry date | Weighted average remaining life |
Exercise price | Options Outstanding | Options Exercisable |
May 23, 2012 | 0.81 | $0.68 | 100,000 | 100,000 |
October 17, 2012 | 1.22 | $0.10 | 1,600,000 | 1,600,000 |
September 24, 2012 | 1.15 | $0.10 | 150,000 | 150,000 |
February 7, 2013 | 1.53 | $0.10 | 1,700,000 | 1,700,000 |
November 15, 2013 | 2.30 | $0.05 | 10,600,000 | 10,600,000 |
1.81 | $0.07 | 14,150,000 | 14,150,000 |
As of December 31, 2011, the fair value of the options granted and the options repriced during the year was $285,130. The assumptions used in the Black-Scholes model and the resulting grant date fair value for the 10,600,000 options granted during the 2011 fiscal year are indicated below.
Risk-free interest rate | 1.75% |
Expected dividend yield | 0% |
Expected option life (years) | 3.00 |
Expected stock price volatility | 216% |
Issue date fair value per option | $0.025 |
As of December 31, 2011, the assumptions used in the Black-Scholes model and resulting grant date fair value for the 2,700,000 options repriced during the 2011 fiscal year are indicated below.
Risk-free interest rate | 1.56% |
Expected dividend yield | 0% |
Expected option life (years) | 1.21 |
Expected stock price volatility | 222% |
Issue date fair value per option | $0.02 |
8. Commitments
The Company entered into operating leases expiring in February 2014 for office premises and equipment located in China. Minimum annual lease payments required are approximately as follows:
Year Ending January 31, 2012 | $ 140,600 |
Year Ending January 31, 2013 | 140,600 |
Year Ending January 31, 2014 | 140,600 |
9. CONTINGENCIES
a) The Company and certain of its directors are defendants in an action in the Supreme Court of British Columbia commenced on June 26, 2005 whereby various parties have sought various damages from the Company and certain of its directors and a declaration that the Company has no interest in the properties known as the Golden Harvest property located in Li County, Long Nan District, Gansu Province, PRC, also known as the 25 Zone Lease and No. 5 Lease forming part of the Liba Project. The plaintiffs in this action also applied for leave to pursue a derivative action in the Supreme Court of British Columbia to cancel the 40,000,000 shares originally subject to the escrow agreement. The 40,000,000 escrow shares were cancelled before January 31, 2011.
The Company continues to incur costs to defend this action but is unable to predict its outcome.
All costs associated with defending this action are expensed as incurred and the Company has not recorded any accruals for damages after those direct costs incurred to date.
10. SUBSEQUENT EVENTS
a) On June 24, 2011, the Company de-listed from the Canadian National Stock Exchange (CNSX).
b) The Company in November 2011 sold shares held in CIC Precious Metals Group (HK) Limited (now Pubic Co.).
c) On December 20, 2011 the Company held its Annual General Meeting whereby all motions were passed.