Minco Gold Corporation
(An exploration stage enterprise)
Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016 and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
(1)
NOTICE TO READER
Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of condensed consolidated interim financial statements; they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying unaudited condensed consolidated interim financial statements of Minco Gold Corporation have been prepared by, and are the responsibility of, the Company's management. The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting.
Minco Gold Corporation's independent auditor has not performed a review of these condensed consolidated interim financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of condensed consolidated interim financial statements by an entity's auditor.
Dr. Ken Cai | Larry Tsang, CPA, CA |
President and CEO | Interim Chief Financial Officer |
| Vancouver, Canada | |
| November 14, 2016 | |
(2)
Index
| Page | ||
| Condensed Consolidated Interim Financial Statements | 4 - 8 | |
Condensed Consolidated Interim Statements of Financial Position | 4 | |
Condensed Consolidated Interim Statements of Income (Loss) | 5 | |
Condensed Consolidated Interim Statements of Comprehensive Income (Loss) | 6 | |
Condensed Consolidated Interim Statements of Changes in Equity | 7 | |
Condensed Consolidated Interim Statements of Cash Flow | 8 | |
| Notes to Condensed Consolidated Interim Financial Statements | 9 - 18 | |
| 1 | General information and liquidity risk | 9 |
| 2 | Basis of preparation | 9 |
| 3 | Amendment | 10 |
| 4 | Cash and cash equivalents | 11 |
| 5 | Short-term investment | 11 |
| 6 | Mineral interests | 11 |
| 7 | Equity investment in Minco Silver Corporation | 12 |
| 8 | Receivable from a legal settlement | 14 |
| 9 | Non-controlling interest | 15 |
| 10 | Share capital | 15 |
| 11 | Related party transactions | 16 |
| 12 | Financial instruments | 17 |
(3)
Minco Gold Corporation
(An exploration stage enterprise)
Condensed Consolidated Interim Statements of Financial Position
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
| September 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Assets | $ | $ | ||||||
| Current assets | ||||||||
| Cash and cash equivalents (note 4) | 4,936,467 | 5,593,669 | ||||||
| Short-term investment (note 5) | 3,618,341 | 4,048,341 | ||||||
| Receivables | 64,914 | 11,122 | ||||||
| Due from related parties (note 11) | 551,280 | 12,387 | ||||||
| Prepaid expenses and deposits | 73,035 | 162,970 | ||||||
| 9,244,037 | 9,828,489 | |||||||
| Long-term deposit | 51,277 | 51,277 | ||||||
| Property, plant and equipment | 7,938 | 10,428 | ||||||
Equity investment in Minco Silver (note 7) | 4,872,756 | 6,631,094 | ||||||
| Total Assets | 14,176,008 | 16,521,288 | ||||||
| Liabilities | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | 124,378 | 389,522 | ||||||
| Due to related party (note 11) | 328,453 | 177,330 | ||||||
| 452,831 | 566,852 | |||||||
| Equity | ||||||||
| Equity attributable to owners of the parent | ||||||||
| Share capital (note 10(a)) | 41,976,886 | 41,911,823 | ||||||
| Contributed surplus | 9,310,734 | 9,247,685 | ||||||
| Accumulated other comprehensive income | 1,544,463 | 2,763,940 | ||||||
| Deficits | (39,108,906 | ) | (37,969,012 | ) | ||||
| Total equity | 13,723,177 | 15,954,436 | ||||||
| Total liabilities and equity | 14,176,008 | 16,521,288 | ||||||
Approved by the Board of Directors
(signed) Malcolm Clay Director | (signed) Robert Callander Director |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
(4)
Minco Gold Corporation
(An exploration stage enterprise)
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2016 | 2015 Amended- Note 3 | 2016 | 2015 Amended- Note 3 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
Exploration costs (note 6) | 49,788 | 124,814 | 169,556 | 598,653 | ||||||||||||
| Administrative expenses | ||||||||||||||||
| Accounting and audit | 31,108 | 49,341 | 67,223 | 116,758 | ||||||||||||
| Amortization | 464 | 3,870 | 2,489 | 33,768 | ||||||||||||
| Consulting | 21,103 | 17,487 | 37,629 | 44,087 | ||||||||||||
| Directors' fees | 11,000 | 18,000 | 38,638 | 47,124 | ||||||||||||
| Investor relations | 457 | 13,116 | 11,413 | 36,598 | ||||||||||||
| Legal and regulatory | 32,862 | 29,436 | 106,873 | 158,601 | ||||||||||||
| Office and miscellaneous | 57,210 | 71,820 | 182,688 | 322,930 | ||||||||||||
| Property investigation | 45,396 | 22,081 | 111,846 | 50,567 | ||||||||||||
| Salaries and benefits | 27,400 | 53,544 | 90,818 | 322,426 | ||||||||||||
| Share-based compensation (note 10(b)) | 22,471 | 13,349 | 89,325 | 37,891 | ||||||||||||
| Travel and transportation | 5,710 | 18,754 | 14,740 | 73,935 | ||||||||||||
| 255,181 | 310,798 | 753,682 | 1,244,685 | |||||||||||||
| Operating loss | (304,969 | ) | (435,612 | ) | (923,238 | ) | 1,843,338 | ) | ||||||||
Finance income | 15,465 | 19,790 | 48,087 | 38,042 | ||||||||||||
| Foreign exchange gain (loss) | 72,739 | 47,068 | (253,539 | ) | 29,924 | |||||||||||
| Gain on sale of Minco Resources (note 1,3) | - | 15,129,170 | - | 15,129,170 | ||||||||||||
| Gain on legal settlement (note 8) | 38,657 | - | 527,657 | 51,745 | ||||||||||||
| Recovery (impairment) of equity investment in Minco Silver (note 7,3) | - | 966,009 | - | (2,205,638 | ) | |||||||||||
| Share of gain (loss) from equity investment in Minco Silver (note 7) | (8,707 | ) | 326,989 | (444,383 | ) | 1,285,567 | ||||||||||
| Dilution loss (note 7) | (27,353 | ) | - | (94,478 | ) | - | ||||||||||
| Net income (loss) for the period | (214,168 | ) | 16,053,414 | (1,139,894 | ) | 12,485,472 | ||||||||||
| Net income (loss) attributable to: | ||||||||||||||||
| Shareholders of the Company | (214,168 | ) | 16,057,986 | (1,139,894 | ) | 12,526,258 | ||||||||||
| Non-controlling interest | - | (4,572 | ) | - | (40,786 | ) | ||||||||||
| (214,168 | ) | 16,053,414 | (1,139,894 | ) | 12,485,472 | |||||||||||
| Income (loss) per share - Basic and diluted | (0.00 | ) | 0.32 | (0.02 | ) | 0.25 | ||||||||||
| Weighted average number of common shares outstanding- Basic and diluted | 50,732,729 | 50,017,670 | 50,672,089 | 50,371,850 | ||||||||||||
(5)
Minco Gold Corporation
(An exploration stage enterprise)
Consolidated Statements of Changes in Equity
For the three and nine months ended September 30, 2016 and 2015
(in Canadian dollars)
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
Net income (loss) for the period | (214,168 | ) | 16,053,414 | (1,139,894 | ) | 12,485,472 | ||||||||||
Other comprehensive income (loss) | ||||||||||||||||
Items that may be reclassified subsequently to profit or loss: | ||||||||||||||||
| Realized gain upon disposition of Minco Resources | - | (479,324 | ) | - | (479,324 | ) | ||||||||||
| Share of other comprehensive income (loss) of an equity investee (note 7) | 149,744 | 464,239 | (1,219,477 | ) | 1,687,308 | |||||||||||
| Cumulated translation adjustment from NCI | - | 11,060 | - | 37,223 | ||||||||||||
Gain on translation from the functional to the presentation currency | - | 19,465 | - | 101,238 | ||||||||||||
| Total comprehensive income (loss) for the period | (64,424 | ) | 16,068,854 | (2,359,371 | ) | 13,831,917 | ||||||||||
Comprehensive income (loss) attributable to: | ||||||||||||||||
| Shareholders of the Company | (64,424 | ) | 16,062,365 | (2,359,371 | ) | 13,835,480 | ||||||||||
| Non-controlling interest | - | 6,489 | - | (3,563 | ) | |||||||||||
| (64,424 | ) | 16,068,854 | (2,359,371 | ) | 13,831,917 | |||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
(6)
Minco Gold Corporation
(An exploration stage enterprise)
Condensed Consolidated Interim Statements of Changes in Equity
For the nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
| Attributable to equity owner of the Company | ||||||||||||||||||||||||||||||||
Number of shares | Share capital | Contributed surplus | Accumulated other comprehensive income | Deficits | Subtotal | Non-controlling interest | Total equity | |||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Balance - January 1, 2015 | 50,514,881 | 41,882,757 | 9,179,213 | 1,183,086 | (52,330,354 | ) | (85,298 | ) | 4,988,512 | 4,903,214 | ||||||||||||||||||||||
| Net income (loss) for the period | - | - | - | - | 12,526,258 | 12,526,258 | (40,786 | ) | 12,485,472 | |||||||||||||||||||||||
| Other comprehensive income | - | - | - | 1,309,222 | - | 1,309,222 | 37,223 | 1,346,445 | ||||||||||||||||||||||||
| Sale of Minco Resources | - | - | - | - | - | - | (4,984,949 | ) | (4,984,949 | ) | ||||||||||||||||||||||
| Proceeds on issuance of shares from exercise of options | 46,500 | 29,066 | (11,776 | ) | - | - | 17,290 | - | 17,290 | |||||||||||||||||||||||
| Share-based compensation | - | - | 37,891 | - | - | 37,891 | - | 37,891 | ||||||||||||||||||||||||
| Balance – September 30, 2015 | 50,561,381 | 41,911,823 | 9,205,328 | 2,492,308 | (39,804,096 | ) | 13,805,363 | - | 13,805,363 | |||||||||||||||||||||||
Balance - January 1, 2016 | 50,581,381 | 41,911,823 | 9,247,685 | 2,763,940 | (37,969,012 | ) | 15,954,436 | - | 15,954,436 | |||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (1,139,894 | ) | (1,139,894 | ) | - | (1,139,894 | ) | |||||||||||||||||||||
| Other comprehensive loss | - | - | - | (1,219,477 | ) | - | (1,219,477 | ) | - | (1,219,477 | ) | |||||||||||||||||||||
| Proceeds on issuance of shares from exercise of options | 152,000 | 65,063 | (26,276 | ) | - | - | 38,787 | - | 38,787 | |||||||||||||||||||||||
| Share-based compensation | - | - | 89,325 | - | - | 89,325 | - | 89,325 | ||||||||||||||||||||||||
| Balance – September 30, 2016 | 50,733,381 | 41,976,886 | 9,310,734 | 1,544,463 | (39,108,906 | ) | 13,723,177 | - | 13,723,177 | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
(7)
Minco Gold Corporation
(An exploration stage enterprise)
Condensed Consolidated Interim Statements of Cash Flow
For the nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
| Nine months ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Amended- Note 3 | ||||||||
| $ | $ | |||||||
Operating activities | ||||||||
| Net income (loss) for the period (1,139,894) | 12,485,472 | |||||||
| Adjustments for: | ||||||||
| Amortization | 2,489 | 33,768 | ||||||
| Share of loss (gain) on equity investment in Minco Silver | 444,383 | (1,285,567 | ) | |||||
| Impairment of equity investment in Minco Silver (note 3) | - | 2,205,638 | ||||||
| Dilution loss (note 7) | 94,478 | - | ||||||
| Foreign exchange loss (gain) | 253,539 | (38,803 | ) | |||||
| Gain on sale of Minco Resources (note 1,3) | - | (15,129,170 | ) | |||||
| Gain on legal settlement (note 8) | - | (51,745 | ) | |||||
| Share-based compensation (note 10 (b)) | 89,325 | 37,891 | ||||||
| Changes in items of working capital: | ||||||||
| Receivables | (53,792 | ) | (22,814 | ) | ||||
| Due from/to related parties | (387,769 | ) | 365,997 | |||||
| Prepaid expenses and deposits | 89,935 | (44,604 | ) | |||||
| Accounts payable and accrued liabilities | (265,144 | ) | (192,346 | ) | ||||
| Net cash used in operating activities | (872,450 | ) | (1,636,283 | ) | ||||
| Investing activities | ||||||||
| Net cash outflow from sale of Minco Resources and its subsidiaries | - | (1,452,910 | ) | |||||
| Proceeds from legal settlement | - | 98,940 | ||||||
| Property, plant and equipment | - | 15,231 | ||||||
| Net redemption of short-term investments | 430,000 | 6,210,982 | ||||||
| Net cash generated from investing activities | 430,000 | 4,872,243 | ||||||
| Financing activities | ||||||||
| Proceeds from stock option exercises | 38,787 | 17,290 | ||||||
| Net cash generated from financing activities | 38,787 | 17,290 | ||||||
| Effect of exchange rate changes on cash | (253,539 | ) | 208,184 | |||||
| (Decrease) increase in cash and cash equivalents | (657,202 | ) | 3,461,434 | |||||
Cash and cash equivalents- Beginning of period | 5,593,669 | 2,117,038 | ||||||
Cash and cash equivalents- End of period | 4,936,467 | 5,578,472 | ||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
(8)
Minco Gold Corporation
(An exploration stage enterprise)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
1. | General information and disposition of assets |
Minco Gold Corporation ("Minco Gold" or the "Company") was incorporated in 1982 under the laws of British Columbia, Canada as Cap Rock Energy Ltd. The Company changed its name to Minco Gold in 2007. The registered office of the Company is 2772 – 1055 West Georgia Street, British Columbia, Canada. The Company has listed its common shares on the Toronto Stock Exchange ("TSX") under the symbol "MMM", and the NYSE MKT under the symbol "MGH".
As at September 30, 2016, Minco Gold owned an 18.27% (December 31, 2015 – 18.45%) equity interest in Minco Silver Corporation ("Minco Silver"), a TSX listed company.
On May 22, 2015, the Company entered into the share purchase agreement ("SPA") with Minco Silver and Minco Silver's wholly-owned subsidiary, Minco Investment Holding HK Ltd. ("Minco Investment"). Pursuant to the SPA, the Company disposed most of its mineral interests through the sale of all of the issued and outstanding shares of its wholly-owned subsidiary, Minco Resources Limited ("Minco Resources"), which held interests in Minco Mining (China) Corporation ("Minco China") to Minco Investment. Minco China consolidated certain subsidiaries including Yuanling Minco Mining Ltd. ("Yuanling Minco"), Tibet Minco Mining Co. Ltd. ("Tibet Minco"), Huaihua Tiancheng Mining Ltd. ("Huanihua Tiancheng"), and a 51% interest in Guangdong Mingzhong Mining Co. Ltd. ("Mingzhong"), which owned the Changkeng Gold Project until July 31, 2015 when the SPA was completed
Three assets were retained by the Company including the contingent receivable from a legal settlement with 208 Team (note 8) and the Gold Bull Mountain and Longnan exploration permits (note 6) (collectively the "Retained Assets").
As the Company ceased to have operating subsidiaries in China after the completion of the SPA, the Company has entered into a trust agreement with Minco Silver and Minco China where Minco China holds the above Retained Assets in trust for Minco Gold.
The Company is an exploration stage enterprise engaged in exploration and evaluation of gold-dominant mineral properties and projects and is currently reviewing new mineral properties of merit.
2. | Basis of preparation |
The Company did not have subsidiaries during the three and nine months ended September 30, 2016. The comparative figures presented in these condensed consolidated financial statements to account for the three and nine months ended September 30, 2015 include the accounts of the following former subsidiaries to the date of disposition, July 31, 2015 (note 1):
| Name | Principal activities (ownership interest) | Country of Incorporation | ||
| Minco China | Exploring and evaluating mineral properties | (100%) | China | |
| Yuanling Minco | Exploring and evaluating mineral properties | (100%) | China | |
| Tibet Minco | Exploring and evaluating mineral properties | (100%) | China | |
| Huaihua Tiancheng | Exploring and evaluating mineral properties | (100%) | China | |
| Minco Resources | Holding company | (100%) | Hong Kong | |
| Mingzhong | Exploring and evaluating mineral properties | (51%) | China | |
(9)
Minco Gold Corporation
(An exploration stage enterprise)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
| 2. | Basis of preparation (continued) |
Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.
These condensed consolidated interim financial statements have been prepared in compliance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") applicable to the preparation of interim financial statements including IAS 34, Interim Financial Reporting. The condensed consolidated interim financial statements should be read in conjunction with the Company's annual financial statements for the year ended December 31, 2015, which have been prepared in accordance with IFRS as issued by the IASB.
The accounting policies applied in these condensed consolidated interim financial statements are consistent with those applied in the preparation of the consolidated annual financial statements for the year ended December 31, 2015.
These condensed consolidated interim financial statements were approved by the board of directors for issue on November 14, 2016.
3. Amendment
In preparing the 2015 annual financial statements, the Company revised the amount of the gain on sale of Minco Resources and impairment of equity investment in Minco Silver originally recorded in the consolidated interim statements of income (loss) and consolidated interim statements of cash flow for the three and nine months ended September 30, 2015. The changes had no impact on the income and the cash used in the operating activities for the three and nine months ended September 30, 2015. Details are as follows:
(10)
Minco Gold Corporation
(An exploration stage enterprise)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
3. Amendment
| Consolidated interim statement of income | Previously | |||||||||||
| Three months ended September 30, 2015 | reported | Adjustment | Amended | |||||||||
| $ | $ | $ | ||||||||||
| Gain on sale of Minco Resources | 18,536,407 | (3,407,237 | ) | 15,129,170 | ||||||||
| Recovery (impairment) of equity investment in Minco Silver | (2,441,228 | ) | 3,407,237 | 966,009 | ||||||||
| Income for the period | 16,053,414 | - | 16,053,414 | |||||||||
| Consolidated interim statement of income | Previously | |||||||||||
| Nine months ended September 30, 2015 | reported | Adjustment | Amended | |||||||||
| $ | $ | $ | ||||||||||
| Gain on sale of Minco Resources | 18,536,407 | (3,407,237 | ) | 15,129,170 | ||||||||
| Impairment of equity investment in Minco Silver | (5,612,875 | ) | 3,407,237 | (2,205,638 | ) | |||||||
| Income for the period | 12,485,472 | - | 12,485,472 | |||||||||
| Consolidated interim statement of cash flow | Previously | |||||||||||
| Nine months ended September 30, 2015 | reported | Adjustment | Amended | |||||||||
| Operating activities: | $ | $ | $ | |||||||||
| Gain on sale of Minco Resources | (18,536,407 | ) | 3,407,237 | (15,129,170 | ) | |||||||
| Impairment of equity investment in Minco Silver | 5,612,875 | (3,407,237 | ) | 2,205,638 | ||||||||
| Net cash used in operating activities | (1,636,283 | ) | - | (1,636,283 | ) | |||||||
| Increase in cash and cash equivalent | 3,461,434 | - | 3,461,434 | |||||||||
4. Cash and cash equivalents
Cash and cash equivalents comprise cash at banks and on hand and guaranteed investment certificates with initial maturities of less than three months. The company did not hold any cash equivalents as at September 30, 2016 and December 31, 2015. As at September 30, 2016, the cash balance included USD $3,697,606 ($4,860,021 equivalent) comparing to USD $4,007,446 ($5,557,926 equivalent) held on December 31, 2015.
5. Short-term investment
As at September 30, 2016, short-term investment consisted of a cashable guaranteed investment ("GIC") of $3,618,341 (December 31, 2015 - $4,048,341) that earns an interest of $1.4% per annum and has a maturity on December 28, 2016.
6. Mineral interests
As at September 30, 2016, the Company had the following mineral interests that are part of the Retained Assets. The Company is actively seeking buyers for these mineral interests.
a) Gansu – Longnan Property
After the completion of the SPA on July 31, 2015, Minco China held nine exploration permits in the trust for the Company in the Longnan region in the south of Gansu Province in China. The Longnan region is within the southwest Qinling gold field. The Longnan region consists of three projects including Yejiaba – four exploration permits; Yangshan – four exploration permits;
(11)
Minco Gold Corporation
(An exploration stage enterprise)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
6. Mineral interests (continued)
Xicheng East – one exploration permit, according to their geographic distribution, type and potential of mineralization.
On December 13, 2013, Minco China entered into an agreement with Gansu Yuandong Investment Co., Ltd ("YDIC") in which the Company agreed to sell two exploration permits in the Xicheng East and Yejiaba area to YDIC for RMB 0.8 million ($170,973). The process of transferring the titles to the two permits to YDIC was pending approval by Gansu province and the proceeds were not received as September 30, 2016.
On December 26, 2014, Minco China entered into an agreement with Beijing Runlong Investment Limited Company ("Beijing Runlong") in which the Company agreed to sell four exploration permits in the Yangshan area to Beijing Runlong for total cash proceeds of RMB 3,200,000 ($604,618).
As the proceeds were not received as at September 30, 2016, the Company considers Beijing Runlong is in default of the agreement. As a result, the titles of these four permits are still kept by the Company.
b) Hunan - Gold Bull Mountain
Minco China through its subsidiary Yuanling Minco holds the Gold Bull Mountain exploration permit in trust for the Company. This exploration permit expires on June 28, 2017.
| c) | Exploration Costs |
The following is a summary of exploration costs, net of recoveries, broken down by project:
| Three months ended | Nine months ended | Cumulative to | ||||||||||||||||||
| September 30, | September 30, | September 30, | ||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | 2016 | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Currently active properties: | ||||||||||||||||||||
| - Gansu Longnan | 44,152 | 48,531 | 152,722 | 418,258 | 12,550,433 | |||||||||||||||
| - Guangdong Changkeng | - | 7,047 | - | 87,986 | 8,285,703 | |||||||||||||||
| - Hunan Gold Bull Mountain | 5,636 | 69,236 | 16,834 | 92,303 | 2,333,445 | |||||||||||||||
| - Guangdong Sihui | - | - | - | 106 | 6,099 | |||||||||||||||
| Total | 49,788 | 124,814 | 169,556 | 598,653 | 23,175,680 | |||||||||||||||
(i) Changkeng Property was sold to Minco Silver on July 31, 2015 | ||||||||||||||||||||
(12)
Minco Gold Corporation
(An exploration stage enterprise)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
7. Equity investment in Minco Silver Corporation
As at September 30, 2016, the Company owned 11,000,000 common shares of Minco Silver which represented 18.27% ownership of Minco Silver (December 31, 2015 – 11,000,000 share or 18.45%).
As at September 30, 2016, management evaluated its equity investment in Minco Silver and concluded that indicators of impairment or reversal were not identified as Minco Silver did not have significant changes during the nine months ended September 30, 2016. As a result, no impairment or impairment reversal is required.
| 2016 | 2015 | |||||||
| $ | $ | |||||||
| As at January 1, Equity investment in Minco Silver | 6,631,094 | 6,820,000 | ||||||
| Dilution loss (i) | (94,478 | ) | - | |||||
| Share of income (loss) of Minco Silver | (444,383 | ) | 1,259,391 | |||||
Share of other comprehensive income (loss) of Minco Silver (ii) | (1,219,477 | ) | 1,958,940 | |||||
| Unrealized gain on disposition of Minco Resources | - | (3,407,237 | ) | |||||
Equity investment in Minco Silver as at September 30, 2016 and December 31, 2015 | 4,872,756 | 6,631,094 | ||||||
(i) The Company's interest in Minco Silver was diluted to 18.27% on September 30, 2016 from 18.45% on December 31, 2015, which resulted in the recognition of a dilution loss of $94,478.
(ii) Represents the exchange differences on translation from functional to presentation currency of Minco Silver's subsidiaries.
The following is a summary of Minco Silver's statements of position and reconciliation to carrying amounts as at September 30, 2016 and December 31, 2015:
| September 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| $ | $ | |||||||
Cash and cash equivalents | 21,038,670 | 26,202,564 | ||||||
Other current assets | 31,227,779 | 33,039,404 | ||||||
Mineral interests | 59,732,492 | 63,676,055 | ||||||
Property, plant and equipment | 336,296 | 434,999 | ||||||
Current liabilities | 439,018 | 638,550 | ||||||
Total equity | 112,748,772 | 122,714,472 | ||||||
(13)
Minco Gold Corporation
(An exploration stage enterprise)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
7. Equity investment in Minco Silver Corporation (continued)
| September 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
Minco Gold's share in percentage | 18.27 | % | 18.45 | % | ||||
Minco Gold's share of net assets of Minco Silver | $ | 20,599,201 | $ | 22,640,820 | ||||
| Differences between Minco Gold's share of net asset and carrying value of the equity investment | (15,726,445 | ) | (16,009,726 | ) | ||||
Carrying value of investment in Minco Silver | $ | 4,872,756 | $ | 6,631,094 | ||||
Fair market value of investment in Minco Silver (based on the quoted market price of Minco Silver's shares as at September 30, 2016) | $ | 15,400,000 | $ | 4,620,000 | ||||
The following is a summary of Minco Silver's statements of comprehensive income for the three and nine months ended September 30, 2016 and 2015:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
Operating income (loss) | (102,824 | ) | 1,668,640 | (2,995,597 | ) | 1,803,881 | ||||||||||
| Net income (loss) attributed to | ||||||||||||||||
| shareholders of Minco Silver | (50,138 | ) | 1,793,178 | (2,420,605 | ) | 6,989,651 | ||||||||||
| Non-controlling interest | (52,686 | ) | (20,561 | ) | (134,759 | ) | (20,561 | ) | ||||||||
| Comprehensive income (loss) attributed to: | ||||||||||||||||
| Shareholders of Minco Silver | 757,010 | 4,309,830 | (9,063,236 | ) | 16,136,587 | |||||||||||
| Non-controlling interest | 70,727 | 83,651 | (1,160,142 | ) | 83,651 | |||||||||||
| Comprehensive income (loss) for the period | 827,737 | 4,393,481 | (10,223,378 | ) | 16,220,238 | |||||||||||
8. Receivable from a legal settlement
On December 16, 2010, Minco China entered into an agreement with the 208 Team, a subsidiary of China National Nuclear Corporation, to acquire a 51% equity interest in the Tugurige Gold Project located in Inner Mongolia, China (the "Agreement"). The 208 Team did not comply with certain of its obligations under the Agreement, including its obligation to set up a new entity (the "JV Co") and the transfer of its 100% interest in the Tugurige Gold Project to the JV Co. As a result, Minco China commenced legal action in China seeking compensation.
On March 25, 2013, Minco China settled its claim against the 208 Team relating to the Agreement for an amount of RMB 14 million ($2.4 million). Minco China received RMB 5 million ($801,395) during 2013 and recognized a receivable of RMB 4 million ($699,688) as at December 31, 2013. The Company received RMB 4 million ($720,095) in January 2014.
(14)
Minco Gold Corporation
(An exploration stage enterprise)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
8. Receivable from a legal settlement (continued)
On May 6, 2015, Minco China reached an agreement to settle its claim against the 208 Team for an amount of RMB 5.5 million ($1,138,472). The payments were to be received in following manner:
| i) | On the signing date of the agreement- RMB 500,000 ($98,538) (received by Minco China on May 7, 2015) |
| ii) | On or before June 17, 2015- RMB 2,000,000 ($394,151) |
| iii) | On or before August 7, 2015- RMB 3,000,000 ($591,226) |
Upon the completion of the SPA on July 31, 2015, the Company continued to hold the interest of the outstanding receivable (RMB 5,000,000) through a trust agreement with Minco China.
As at December 31, 2015, the remaining RMB 5 million balance receivable under the legal settlement was not settled and therefore, was not been recognized as an asset due to the uncertainty of collectability.
The Company, through Minco China, engaged a Chinese law firm to recommence a lawsuit against 208 Team to recover the remaining RMB 5 million unpaid balance on a contingent fee basis whereby the Company will pay the Chinese law firm 50% of the net amount recovered. On May 27, 2016, the Company obtained a judgment from the Highest Court of the People of Republic of China to order the 208 team to repay the Company the RMB 5,000,000, which was received, by the Minco China on the Company's behalf, on July 27, 2016 (Note 9).
As a result, the Company recognized a gain of $527,657 for the nine months ended September 30, 2016, which was the settlement payment received net of the related legal expenditures.
9. Non-controlling interest
Below is summarized financial information (before inter-company elimination) of Mingzhong, a 51% owned subsidiary formerly owned by the Company until July 31, 2015.
| For the period ended | September 30, | September 30, | ||||||
| 2016 | 2015 | |||||||
| $ | $ | |||||||
| Net loss | - | (101,050 | ) | |||||
| Other comprehensive income | - | 75,966 | ||||||
| Total comprehensive income (loss) | - | (25,084 | ) | |||||
| Loss allocated to NCI | - | (40,786 | ) | |||||
(15)
Minco Gold Corporation
(An exploration stage enterprise)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
9. Non-controlling interest (continued)
| For the period ended | September 30, 2016 | September 30, 2015 | ||||||
| $ | $ | |||||||
| Cash flows from operating activities | - | 87,500 | ||||||
| Cash flows from financing activities | - | 7,500 | ||||||
| Effect of exchange rate changes on cash | - | 33,700 | ||||||
10. Share capital
| a. | Common shares |
Authorized: 100,000,000 common shares without par value
Issued and outstanding: 50,733,381
| b. | Stock options |
Minco Gold may grant options to its directors, officers, employees and consultants under its stock option plan (the “Stock Option Plan”). The Company’s board of directors grants such options for periods of up to five years, with vesting periods determined at its sole discretion and at prices equal to or greater than the closing market price on the day preceding the date the options are granted. These options are equity-settled.
During the nine months ended September 30, 2016, the Company did not grant any stock options.
The maximum number of common shares reserved for issuance under the Stock Option Plan is 15% of the issued and outstanding common shares of the Company.
The Company uses the Black-Scholes option pricing model to determine the fair value of the options. Minco Gold recorded $22,471 and $89,325 in share-based compensation expense for the three and nine months ended September 30, 2016 (September 30, 2015 - $13,349 and $37,891).
A summary of the options outstanding is as follows:
| Number outstanding | Weighted average exercise price | |||||||
| $ | ||||||||
| January 1, 2015 | 6,460,501 | 0.79 | ||||||
| Granted | 1,190,000 | 0.24 | ||||||
| Exercised | (66,500 | ) | 0.26 | |||||
| Forfeited | (927,500 | ) | 0.55 | |||||
| Expired | (66,667 | ) | 0.93 | |||||
| Balance, December 31, 2015 | 6,589,834 | 0.72 | ||||||
| Exercised | (152,000 | ) | 0.26 | |||||
| Forfeited | (30,000 | ) | 0.46 | |||||
| Expired | (1,122,500 | ) | 2.17 | |||||
| Balance, September 30, 2016 | 5,285,334 | 0.43 | ||||||
(16)
Minco Gold Corporation
(An exploration stage enterprise)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
10. Share capital (continued)
The weighted average share price on the date of exercise for options exercised during nine months ended September 30, 2016 was $0.38 (2015 - $0.30). As at September 30, 2016, there was $14,752 (2015- $129,825) of unrecognized compensation cost relating to unvested stock options.
| Options outstanding | Options exercisable | |||||||||||||||||||||
Range of exercise prices | Number outstanding | Weighted average remaining contractual life (years) | Weighted average exercise price | Number exercisable | Weighted average exercise price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
0.18 – 0.24 | 1,003,334 | 3.96 | 0.24 | 631,665 | 0.24 | |||||||||||||||||
0.25 – 0.42 | 907,000 | 2.30 | 0.26 | 907,000 | 0.26 | |||||||||||||||||
0.43 – 0.54 | 2,115,000 | 1.24 | 0.46 | 2,115,000 | 0.46 | |||||||||||||||||
0.55 – 0.67 | 1,260,000 | 0.49 | 0.67 | 1,260,000 | 0.67 | |||||||||||||||||
5,285,334 | 1.76 | 0.43 | 4,913,665 | 0.45 | ||||||||||||||||||
11. Related party transactions
Shared office expenses
Minco Silver and Minco Gold shared offices and certain administrative expenses in Beijing up to July 31, 2015. Minco Silver, Minco Base Metals Corporation ("MBM"), and Minco Gold share offices and certain administrative expenses in Vancouver. MBM is a company over which the Company's CEO has significant influence.
Due to and due from related parties
a) As at September 30, 2016, the Company had $328,453 due to Minco Silver (December 31, 2015 – $177,330) which included the unpaid shared office expenses, and the expenditures Minco Silver had paid on behalf of the Company in connection with the Company's Retained Assets in China. The Company also had $534,081 due from Minco Silver (December 31, 2015 - $Nil), which represents the net amount Minco China received from 208 team lawsuit on behalf of the Company. As at September 30, 2016, the Company had a net receivable from Minco Silver in the amount of $205,628.
b) As at September 30, 2016, the Company had $17,199 due from MBM (December 31, 2015 $12,387), in relation to shared office expenses.
The amounts due to related parties are unsecured, non-interest bearing and payable on demand.
(17)
Minco Gold Corporation
(An exploration stage enterprise)
Notes to the Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30, 2016, and 2015
(Unaudited, expressed in Canadian dollars, unless otherwise stated)
(18)