Unaudited Interim Financial Statements
Cumberland Resources Ltd.
March 31, 2005
Cumberland Resources Ltd.
BALANCE SHEETS
(Unaudited)
(Canadian dollars)
March 31 2005 | December 31 2004 | |
$ | $ | |
ASSETS | ||
Current | ||
Cash and cash equivalents[note 2] | 10,606,869 | 10,063,509 |
Short term investments[note 2] | 25,995,463 | 27,062,928 |
Accrued interest receivable | 52,882 | 216,499 |
Accounts receivable | 98,280 | 109,317 |
Due from joint venturer | 4,108 | 65,899 |
Prepaid expenses and other assets | 920,390 | 384,541 |
Total current assets | 37,677,992 | 37,902,693 |
Mineral property interests | 8,246,083 | 8,246,083 |
Capital assets, net[note 3] | 4,647,111 | 4,676,302 |
Reclamation deposit[note 7(b)] | 605,000 | 605,000 |
Investments in public companies[note 8] | 37,905 | 89,205 |
51,214,091 | 51,519,283 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
Current | ||
Accounts payable and accrued liabilities | 664,283 | 532,949 |
Current portion of capital leases | 362,592 | 358,578 |
Total current liabilities | 1,026,875 | 891,527 |
Accrued site closure costs[note 4] | 453,327 | 443,759 |
Capital leases | 107,182 | 197,088 |
Commitments and contingencies [note 7] | ||
Shareholders’ equity | ||
Share capital[note 6[a]] | 112,404,856 | 112,404,856 |
Contributed surplus[note 6[b]] | 3,406,227 | 3,313,940 |
Deficit | (66,184,376) | (65,731,887) |
Total shareholders’ equity | 49,626,707 | 49,986,909 |
51,214,091 | 51,519,283 |
See accompanying notes to financial statements
Cumberland Resources Ltd.
STATEMENTS OF LOSS AND DEFICIT
(Unaudited)
(Canadian dollars)
For the three month periods ended March 31,
2005 | 2004 | |
$ | $ | |
REVENUE | ||
Option receipts | 500,000 | 500,000 |
Interest revenue | 216,810 | 296,387 |
Gain on sale of investments in public companies[note 8] | 643,649 | 811,567 |
1,360,459 | 1,607,954 | |
EXPENSES | ||
Exploration and development costs[note 5] | 1,103,617 | 2,039,047 |
Employee compensation | 171,265 | 180,133 |
Stock-based compensation[note 6[b]] | 92,287 | 224,690 |
Public and investor relations | 71,474 | 56,415 |
Office and miscellaneous | 104,320 | 131,332 |
Legal, audit and accounting | 51,985 | 84,050 |
Other fees and taxes | 60,513 | 121,504 |
Insurance | 119,107 | 102,152 |
Depreciation and amortization | 13,460 | 13,371 |
Accrued site closure costs – accretion expense | 9,568 | 7,006 |
Interest expense on capital leases | 15,352 | 21,544 |
1,812,948 | 2,981,244 | |
Net loss for the period | 452,489 | 1,373,290 |
Deficit, beginning of period | 65,731,887 | 55,205,622 |
Deficit, end of period | 66,184,376 | 56,578,912 |
Basic and Diluted loss per share | $0.01 | $0.03 |
Weighted average number of share outstanding | 54,973,941 | 54,351,610 |
See accompanying notes to financial statements
Cumberland Resources Ltd.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Canadian dollars)
For the three month periods ended March 31,
2005 | 2004 | |
$ | $ | |
OPERATING ACTIVITES | ||
Net loss for the period | (452,489) | (1,373,290) |
Add (deduct) items not affecting cash: | ||
Depreciation and amortization | 13,460 | 13,371 |
Accrued site closure costs – accretion expense | 9,568 | 7,006 |
Exploration related amortization | 29,831 | 46,927 |
Gain on sale of investment in public companies | (643,649) | (811,567) |
Stock-based compensation | 92,287 | 224,690 |
Net changes in non-cash working capital items: | ||
Accrued interest receivable | 163,617 | 33,436 |
Accounts receivable | 11,037 | 39,948 |
Due from joint venturer | 61,791 | 5,994 |
Prepaid expenses | (535,849) | (405,716) |
Accounts payable and accrued liabilities | 131,334 | 468,233 |
Cash used in operating activities | (1,119,062) | (1,750,968) |
FINANCING ACTIVITIES | ||
Issuance of common shares | - | 583,058 |
Repayment of capital lease obligation | (85,892) | (79,698) |
Cash provided by (used in) financing activities | (85,892) | 503,360 |
INVESTING ACTIVITIES | ||
Purchase of capital assets | (14,100) | (443,236) |
Short term investments | 1,067,465 | 3,139,890 |
Proceeds on sale of investment in public companies | 694,949 | 907,567 |
Cash provided by investing activities | 1,748,314 | 3,604,221 |
Increase in cash and cash equivalents during the period | 543,360 | 2,356,613 |
Cash and cash equivalents, beginning of period | 10,063,509 | 24,270,017 |
Cash and cash equivalents, end of period | 10,606,869 | 26,626,630 |
Supplemental information: | ||
Interest paid | 15,352 | 21,544 |
See accompanying notes to financial statements
Cumberland Resources Ltd.
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Canadian dollars)
March 31, 2005
1. BASIS OF PRESENTATION
The accompanying interim financial statements of Cumberland Resources Ltd. (the “Company”) have been prepared in accordance with Canadian generally accepted accounting principles for interim financial statements and accordingly do not include all disclosures required for annual financial statements.
These interim financial statements follow the same significant accounting policies and methods of application as the Company’s annual financial statements for the year ended December 31, 2004 (the “Annual Financial Statements”). The interim financial statements should be read in conjunction with the Annual Financial Statements.
In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for these interim periods are not necessarily indicative of the result that may be expected for the full fiscal year ending December 31, 2005. The majority of exploration costs are incurred in the second and third quarters of the fiscal year due to the seasonal weather conditions in Nunavut Territory. Option receipts are received from the operator of the Meliadine West joint venture in the first quarter.
2. CASH AND CASH EQUIVALENTS AND SHORT TERM INVESTMENTS
Cash and cash equivalents include cash and highly liquid Canadian dollar denominated investments in investment grade debt and banker's acceptances, with terms to maturity of 90 days or less when acquired. The counter-parties are financial institutions. At March 31, 2005, these instruments were yielding a weighted average interest rate of 2.3% per annum (at December 31, 2004 – 2.4% per annum).
Short-term investments comprise highly liquid Canadian dollar denominated investments in investment grade debt and banker's acceptances with maturities to March 7, 2006. The counter-parties include the Canadian government and financial institutions. At March 31, 2005, these instruments were yielding a weighted average interest rate of 2.5% per annum (at December 31, 2004 – 2.2% per annum).
The fair market value of the cash equivalents and short-term investments approximates their carrying values at March 31, 2005.
2
Cumberland Resources Ltd.
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Canadian dollars)
March 31, 2005
3. CAPITAL ASSETS
Capital assets are comprised as follows:
Cost | Accumulated amortization | Net book value Mar 31, 2005 | Net book value Dec 31, 2004 | |
$ | $ | $ | $ | |
Exploration equipment | 1,408,823 | 894,716 | 514,107 | 543,938 |
Computer equipment | 261,878 | 155,932 | 105,946 | 119,083 |
Office equipment | 120,790 | 115,871 | 4,919 | 5,242 |
Construction in progress | 4,022,139 | - | 4,022,139 | 4,008,039 |
5,813,630 | 1,166,519 | 4,647,111 | 4,676,302 |
4. ACCRUED SITE CLOSURE COSTS
Accrued site closure costs relate to the Company’s legal obligation to remove exploration equipment and other assets from its mineral property sites in Nunavut and to perform other site reclamation work. Although the ultimate amount of future site restoration costs to be incurred for existing exploration interests is uncertain, the Company has estimated the fair value of this liability to be $453,327 at March 31, 2005 (December 31, 2004 - $443,759) based on the expected payments of $1,081,404 to be made primarily in 2017, discounted at interest rates of 8.5% or 10.0% per annum.
The liability for accrued site closure costs is comprised as follows:
$ | |
Accrued site closure costs, December 31, 2004 | 443,759 |
Additional liabilities incurred during the period | - |
Accrued site closure costs – accretion expense | 9,568 |
Accrued site closure costs, March 31, 2005 | 453,327 |
3
Cumberland Resources Ltd.
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Canadian dollars)
March 31, 2005
5. EXPLORATION AND DEVELOPMENT COSTS
The following is a summary of exploration and development costs incurred by the Company related to its mineral property interests in Meadowbank and Meliadine East, for the three month periods ended March 31:
2005 | 2004 | ||
$ | $ | ||
Meadowbank (100% interest): | |||
Drilling | - | 56,169 | |
Transportation and freight | 96,057 | 217,357 | |
Contracts and personnel | 147,883 | 247,877 | |
Supplies and equipment | 87.793 | 191,732 | |
Other exploration costs | 76,029 | 123,596 | |
Environmental and permitting costs | 379,426 | 660,324 | |
Feasibility and engineering | 285,260 | 538,080 | |
| 1,072,448 | 2,035,135 | |
Meliadine East (50% interest): | |||
Exploration costs | 22,487 | 7,824 | |
Recoveries from joint venture partner | (4,108) | (3,912) | |
18,379 | 3,912 | ||
Other projects | 12,790 | - | |
Total exploration and development costs | 1,103,617 | 2,039,047 | |
4
Cumberland Resources Ltd.
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Canadian dollars)
March 31, 2005
6. SHARE CAPITAL
[a]
Common shares
As at March 31, 2005 and December 31, 2004, the Company has an unlimited number of authorized common shares with no par value.
As at March 31, 2005 and December 31, 2004, the Company has 54,973,941 common shares issued and outstanding.
[b]
Stock options
At March 31, 2005 there are options outstanding under the Company’s Incentive Share Option Plan of 1995 (as amended) to issue 3,268,628 common shares of the Company. The exercise price of these options ranges from $0.80 to $4.85 and their expiry dates range from December 17, 2004 to May 13, 2013. At March 31, 2005, 4,958,894 common shares were reserved for issuance pursuant to the incentive share option plan.
The following table summarizes information about the share options outstanding and exercisable at March 31, 2005:
Outstanding | Exercisable | |||||
Range $ | Total # of shares | Weighted average exercise price | Weighted average contract life remaining | Total # of shares | Weighted average exercise price | |
0.80 - 1.85 | 262,500 | 1.24 | 1.65 | 225,000 | 1.14 | |
2.00 - 2.65 | 2,638,628 | 2.16 | 3.63 | 2,308,628 | 2.16 | |
3.56 - 4.85 | 367,500 | 4.78 | 3.64 | 367,500 | 4.78 | |
3,268,628 | 2.38 | 3.47 | 2,901,128 | 2.41 | ||
There were no options granted or exercised in the three month period ended March 31, 2005. The Company recognized total stock compensation expense of $92,287 for the three month period ended March 31, 2005 (three months ended March 31, 2004 - $224,690) in accordance with the fair value based method of accounting for stock compensation, with the offsetting credit recorded as an increase in contributed surplus.
5
Cumberland Resources Ltd.
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Canadian dollars)
March 31, 2005
7. COMMITMENTS AND CONTINGENCIES
[a]
The Company has a contingent loan balance which totals $15,512,549 as at March 31, 2005 [December 31, 2004 - $15,121,045]. This loan will be repaid only if commercial production at Meliadine West is achieved and will be paid only out of production cash flow (as defined in the joint venture agreement).
[b]
The Company has a $605,000 deposit at a financial institution that is serving as collateral for a letter of credit. The letter of credit has been pledged in favour of the Kivalliq Inuit Association (“KIA”) under the term of a commercial lease agreement with the KIA, dated November 30, 2004. The deposit is bearing interest at market rates. The deposit will be returned when the Company has satisfied its legal obligations with respect to site reclamation at the Meadowbank mineral property in Nunavut (see Note 4).
[c]
The Company has committed to use certain third party mobile equipment between 2005 and 2007. Whereas the ultimate commitment amount will depend on usage, the maximum commitment amount is approximately $4 million.
[d]
The Company has employment agreements in place with various key employees which establish compensatory terms, including annual salary, employee benefit entitlements and termination benefits. Three of these agreements also provide for the payment of specific bonus amounts should certain financial and operating milestones with respect to the Meadowbank Project be attained in the future. As of March 31, 2005, the estimated contingent payment with respect to such bonuses is approximately $1.2 million, none of which has been accrued.
[e]
The Company is committed to future minimum annual rent payments under operating lease agreements over the next three years as follows:
$ | ||
2005 (remainder) | 163,553 | |
2006 | 190,000 | |
2007 | 159,000 |
6
Cumberland Resources Ltd.
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
(Canadian dollars)
March 31, 2005
8. GAIN ON SALE OF INVESTMENTS IN PUBLIC COMPANIES
During the three month period ended March 31, 2005 the Company sold 855,000 shares (three months ended March 31, 2004 – 1,600,000 shares) of Eurozinc Mining Corporation (“Eurozinc”) for net proceeds of $694,949 (three months ended March 31, 2004 - $907,567), resulting in a gain of $643,649 (three months ended March 31, 2004 - $811,567).
The market value of the Company’s Eurozinc shares based on the quoted share trading price at March 31, 2005 is $562,500 (625,000 shares at $0.90 per share). This amount may not be reflective of what the Company would realize on liquidation of its investment.
9. SUBSEQUENT EVENT
Subsequent to March 31, 2005, the Company has sold an additional 150,000 shares of Eurozinc Mining for net proceeds of approximately $0.1 million, resulting in a gain of approximately $0.1 million.
