Q2
- 2002
CONSOLIDATED BALANCE SHEETS
As at June 30th (in thousands of dollars)
|
June 30,
2002
(unaudited)
$ |
Dec. 31,
2001
|
ASSETS |
Current |
|
|
Cash |
5
|
114
|
Accounts receivable |
5
|
134 |
Prepaid expenses |
5
|
20 |
Total current
assets |
15
|
268
|
|
|
|
Cash for Exploration Expenditures |
-
|
116
|
Exploration and Development Projects
(note 2) |
17,425 |
17,260 |
Other Assets |
150
|
156 |
|
$
17,590 |
$17,800
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY |
Current |
|
|
Accounts payable and
accrued liabilities |
$ 463
|
288 |
Mortgage
Payable (note 5) |
500
|
500
|
|
963 |
778 |
Convertible notes (note 3) |
200
|
- |
|
1,163 |
788 |
SHAREHOLDERS'
EQUITY |
Share capital |
54,050
|
53,853
|
Special
Warrants |
-
|
197 |
Contributed
surplus |
759
|
759 |
Deficit |
(38,382) |
(37,797) |
Net shareholders' equity |
16,427
|
17,012 |
|
$
17,590 |
$17,800
|
GOING CONCERN (NOTE 1b)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited in thousands of dollars)
|
2002 |
2001 |
2002 |
2001 |
|
3 mo ended |
6 mo ended |
|
June 30 |
June 30 |
Cash from (used by) |
|
|
|
|
|
Operating activities |
Net loss for the
period |
$ (471) |
$ (452) |
$
(585) |
$
(589) |
Item not affecting
cash |
- |
- |
-
|
- |
Depreciation |
3 |
5 |
(6) |
10 |
Write-down E&D projects |
300 |
- |
300 |
- |
|
168 |
(447) |
(279) |
(579) |
Changes in non-cash
working capital |
8 |
177 |
37 |
175 |
Cash used by
operating activities |
(160) |
(270) |
(242) |
(404) |
|
|
|
|
|
Financing activities |
Convertible notes |
200 |
- |
200 |
- |
Exercise of share options |
- |
100 |
- |
100 |
Cash provided by financing activities |
200 |
100 |
200 |
100 |
|
|
|
|
|
Investing activities |
Cash for exploration expenditure |
- |
- |
116 |
- |
Additions to
E&D projects |
(55) |
(252) |
(183) |
(994) |
Equipment purchases |
-
|
(2) |
- |
(2) |
Cash used by
investing activities |
(55) |
(254) |
(67) |
(996) |
|
|
|
|
|
Net decrease
in cash this period |
(15) |
(424) |
(109) |
(1,300)
|
|
|
|
|
|
Cash beginning of
period |
20
|
843 |
114
|
1,719 |
Cash end of period |
$ 5 |
$
419
|
$ 5 |
$
419 |
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(unaudited in thousands of dollars, except per share amounts)
|
2002 |
2001 |
2002 |
2001 |
|
Three
mo ended June 30 |
Six
mo ended June 30 |
Revenue |
Interest income |
$ - |
$
5 |
$ 3 |
$ 23 |
|
|
|
|
|
Costs
and Expenses |
General and administrative |
168 |
452 |
282 |
602 |
Depreciation |
3
|
5 |
6 |
10 |
Write-down
of E&D Projects |
300
|
- |
300 |
- |
|
471 |
457 |
588 |
612 |
|
|
|
|
|
Net loss for
period |
471 |
452 |
585 |
589 |
Deficit, beginning of period |
37,911
|
33,845
|
37,797 |
33,708
|
Deficit, end of period |
$
38,382 |
34,297 |
38,382 |
$ 34,297 |
|
|
|
|
|
Loss per share -
basic and fully diluted |
$ 0.009 |
$0.009 |
$0.011 |
$ 0.011 |
|
|
|
|
|
Average outstanding
common shares |
54,266,740 |
51,707,252 |
54,266,740 |
51,643,186 |
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
June 30, 2002
(unaudited)
1. General
(a) The
consolidated interim financial statements of the Company are prepared by management using
accounting principles generally accepted in Canada for interim financial statements and
reflect the accounting principles set out in the notes to the Company's consolidated
financial statements as of December 31, 2001, appearing in the Company's 2001 Annual
Report. These interim financial statements should be read in conjunction with those annual
financial statements and the notes thereto.
The results of operations and cash flows for the
current periods are not
necessarily indicative of the results to be expected for the full year.
(b) Going Concern
These
consolidated financial statements have been prepared using accounting
principles applicable to a going concern entity, which assume that the
entity will continue operating in the future and be able to realize its
assets and discharge its liabilities in the normal course of its
business. The Company's exploration and development projects are in
their early stages and, consequently, the Company, having no operating
revenues to sustain its activities, has been wholly dependent on equity
financings and the optioning of resource properties for its funds.
Several
adverse conditions cast substantial doubt on the validity of the
Company’s application of the going concern principle. The conditions
include ongoing losses and property write-downs, working capital
deficiencies and insufficient cash reserves to meet the Company’s
minimum commitments. Therefore, the Company’s ability to continue its
operations, its planned development activities, and maintain its
interest in its projects, is dependent upon the satisfactory completion
of a financing or optioning or sale of property interests to provide the
required funds. Should the company not be able to obtain the necessary
financing and should the Company not be able to continue as a going
concern, then adjustments would be required with respect to the carrying
value of the Company’s assets and liabilities, reported net loss, and
the balance sheet classifications used.
2. Exploration and Development Projects
Project |
June
30, 2002 |
Dec. 31, 2001 |
|
(in
thousands) |
Rainy River |
$ 11,684 |
$ 11,429 |
Lac Rocher |
4,068 |
4,066 |
Mel Properties |
1,443 |
1,265 |
Stong
Lake/Moak |
- |
300 |
Other |
230 |
200 |
|
$ 17,425 |
$
17,260 |
3.
Convertible Notes
During
the period $200,000 of convertible notes were issued
which are secured by a pledge of the Minago property leases. The notes bear
interest at 9% per year, payable annually and mature July 9, 2007.
The notes may be converted into common shares of the Company based on
$0.19 per share.
4.
Share Capital
At
August 20, 2002, the issued and outstanding common shares of the
Company totalled 54,266,740 and on a fully diluted basis there would
be 59,216,724 common shares outstanding.
4.
Subsequent Event
Subsequent to
the end of the period, the mortgage loan of $500,000 was repaid by the issuance of
2,500,000 common shares of the Company.
On August 27, 2002,
Mr. Frank Crothers, the Company's largest shareholder, was granted and
exercised stock options to purchase 600,000 shares at $0.185 to
provide funding for the preliminary exploration program at Prairie
Lake and other corporate expenses.
MANAGEMENT DISCUSSION AND ANALYSIS
Six Months Ended June 30, 2002
This MD&A reflects the period ended June 30, 2002
and should be read in conjunction with the MD&A included in the 2001
Annual Report.
RESULTS OF OPERATIONS
During
the three months and the six months ended June 30, 2002, the Company
incurred losses of $471,000 and $585,000, respectively, compared to
losses of $452,000 and $589,000 in the corresponding periods of 2001.
In addition, interest income on excess cash balances continued to
decline. The current year losses included a $300,000 write-down of the
Strong Lake/Moak project. General and administrative expenses have been
significantly
lower due to
reduced
activity.
Expenditures on exploration projects for the three months and the six
months ended June 30, 2002 were $55,000 and $183,000, respectively,
compared to expenditures of $252,000 and $994,000 in the corresponding
periods of 2001. The significant reduction in project expenditures in
2002 is principally due to the Company’s limited cash resources and
adverse market conditions, which are not conducive to equity
financings. In view of these conditions, the Company is currently
evaluating its financing alternatives and reviewing the priorities of
the various projects.
LIQUIDITY AND CAPITAL RESOURCES
Having no producing properties, the Company has financed its
activities through sales of its equity securities. As at December 31,
2001, cash balances of $114,000 were available to finance the
Company's activities. In the first six months of 2002, operating
activities used $242,000 and $67,000 was spent on exploration projects
offset by the result of a cash balance of $5,000 at June 30, 2002;
Issue of convertible notes during the second quarter resulted
in proceeds of $200,000
secured by a pledge of the Minago property leases. Subsequent to the end of the period, the
$500,000 mortgage loan, originally repayable in November 2002, was
repaid by the issuance of 2,500,000 common shares of the Company.
OUTLOOK
Following
is a brief summary of exploration, development and available resources:
PRAIRIE LAKE
TANTALUM -
exploration work starting in September 2002:
An exploration program seeking high grade tantalum has been launched
on our Prairie Lake property, located north of Lake Superior, about 30
miles NW of Marathon, Ontario. This work is based on research studies
conducted by Prof. D.W. Watkinson of Carleton University (see Press
Release dated May 28th for details). The result of the
Carleton studies proved to be quite remarkable. Dr. Watkinson
identified rock types from the SW quadrant of the Complex grading 8 to
10 wt% Ta2O5 in pyrochlore. The host rock may
carry up to 10% pyrochlore. Favourable results from this work can be
expected to lead to a major extension of the program to evaluate the
economic potential of the entire complex, which measures about 1,250
acres.
The Prairie Lake complex hosts significant metals (tantalum, niobium,
uranium) and by-product industrial minerals wollastonite, apatite and
high-grade calcium carbonate.
Necessary equipment is being assembled and field crews will be
on the ground immediately following the Labour Day
holiday.
MEL
PROJECT - with INCO at Thompson, Manitoba:
Since last reporting on the Mel claim group, interpretation of the
winter 2002 geophysical results were received and are very promising.
Both INCO
and Nuinsco have proposed drilling a number of strong
conductors located along the Thompson nickel belt just north of INCO's
mining and smelting complex. An extensive diamond drill program is
planned for the winter months of 2002-2003.
RAINY RIVER - Drill
Program on hold:
Continuation of testing high-priority MT geophysical anomalies within
altered volcanics along the Rainy River greenstone belt has been
deferred. Several
conductive zones have been delineated along the Pinewood River and a
deep anomaly lies adjacent to the nickel-enriched base-metal #34 Zone.
Further diamond drill testing will get underway as soon as funding has
been arranged.
EXPLORATION
FUNDING:
On August 27, 2002, Mr. Frank Crothers,
the Company's largest shareholder, was granted and exercised stock
options to purchase 600,000 shares at $0.185 to provide funding for the
preliminary exploration program at Prairie Lake and other corporate
expenses.
August 28, 2002
|