Management Discussion and Analysis
For
Golden Goliath Resources Ltd.
For the Quarter Ending May 31, 2016
General
The following management discussion and analysis has been prepared as of July 27, 2016. The selected financial information set out below and certain comments which follow are based on and derived from the management prepared condensed consolidated financial statements of Golden Goliath Resources Ltd. (the “Company” or “Golden Goliath”) for the third quarter ending May 31, 2016 and should be read in conjunction with them.
Golden Goliath is a Canadian listed public company with its shares traded on the TSX Venture Exchange under the symbol “GNG” as a Tier 2 company.
Golden Goliath is a junior exploration company with no revenues from mineral producing operations. The Company’s properties are all located in the State of Chihuahua, Mexico. Activities include acquiring mineral properties and conducting exploration programs. The mineral exploration business is risky and most exploration projects will not become mines. The Company may offer to a major mining company the opportunity to acquire an interest in a property in return for funding by the major mining company, of all or part of the exploration and development of the property. For the funding of property acquisitions and exploration that the Company conducts, the Company does not use long term debt. Rather, it depends on the issue of shares from the treasury to investors. Such stock issues in turn depend on numerous factors, important among which are a positive mineral exploration climate, positive stock market conditions, a company’s track record and the experience of management.
Overall Performance
During the quarter ending May 31, 2016 the Company conducted its 2016 exploration program on its San Timoteo property. The 2016 program involved using the Company’s Terraspec machine to analyze clay minerals from existing, property wide, drill core and other samples including samples from the area of the 500 level San Martin adit. The aim of this work was to allow the Company to build a 3D model of clay mineralogy to aid in the planning of future drill holes. Because different clay minerals form at different temperatures they can be used to differentiate different levels in the epithermal system that deposited the mineralization.
When the rising fluids get close enough to the surface that the confining pressure of the overlying rock is no longer sufficient to stop boiling, most of the precious metals are deposited and the “bonanza zone” of gold and silver mineralization occurs. A specific goal of the 2016 work program was to ensure that the Level 5 tunnel at San Martin (the lowest old working on the San Timoteo property), is above the paleo boiling level indicating greater potential at depth. The interpretation of the results confirmed the San Martin tunnel is above this level.
The field work portion of the 2016 program was completed during the third fiscal quarter, but the final report was not finished until the next quarter.
Results of Operation
For the quarter ended May 31, 2016, the Company incurred a comprehensive gain of $231,775 compared to comprehensive loss of $153,992 for the prior quarter and $135,178 for the quarter ended May 31, 2015. The significant differences between these periods include:
·
A gain on the sale of an interest in mineral properties of $311,430 in the past quarter compared to nil in prior quarters. The gain was a result of the cash payments received from the option of mineral properties to Fresnillo PLC.
·
Office and general expenses decreased to $21,710 in the past quarter compared to $46,362 in the prior quarter as the Company had added costs in the second quarter associated with closing the option agreement with Fresnillo PLC and commencing activities to conduct a small work program in the upcoming season.
·
The Company recorded a gain on foreign currency exchanges of $15,153 compared to a loss in the prior quarter of $2,277 and a loss in the prior year of $2,820 due to currency exchange rate fluctuations.
·
During the first quarter ended November 30, 2015, the Company realized a loss of $75,134 on marketable securities compared to nil in the other quarters under review due to a loss on the value of marketable securities the Company sold.
As ofMay 31, 2016, deferred mineral property exploration costs totalled $3,229,311 compared to $3,344,949 at August 31, 2015. The reduction in deferred property costs relate mainly to option payments received from Fresnillo and taxes paid by the Company then reimbursed by Fresnillo.
Summary of Quarterly Results
The following table sets forth selected quarterly financial information for each of the last eight (8) quarters prepared in accordance with IFRS.
Quarter Ending | Revenue | Comprehensive Loss (Gain) | Net Loss per Share (Gain) |
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May 31, 2106 February 29, 2016 November 30, 2015 August 31, 2015 May 31, 2015 | 311,440 Nil 8 Nil Nil | (231,775) 153,992 123,703 199,698 77,548 | (0.002) 0.01 0.00 0.01 0.00 |
February 28, 2015 | 3,390 | 135,178 | 0.00 |
November 30, 2014 | Nil | 165,109 | 0.00 |
August 31, 2014 | 4,982 | 3,028,817 | 0.03 |
May 31, 2014 | 1,996 | 152,431 | 0.00 |
NOTE:
The revenue relates to interest earned or option payments received consisting of cash and shares. There were no discontinued operations or extraordinary items on the Company’s financial statements during the above mentioned periods. The large increase in comprehensive loss in the quarter ended August 31, 2014 was a result of a property write downs of $2,883,086.
Liquidity and Capital Resources
The Company has financed its operations almost exclusively through the sale of its common shares to investors and will be required to continue to do so for the foreseeable future.
The Company had working capital (deficit) of ($245,776) at May 31, 2016 compared to ($146,484) at August 31, 2015. The Company’s cash position at May 31, 2016 was $130,913.
Capital Resources
Other than property taxes which are approximately $240,000 per year, the Company does not have any capital resource commitments. Apart from approximately $40,000 per year, the remaining taxes payable are required to be paid by Fresnillo pursuant to the option agreement.
Transactions with Related Parties
Key Management Compensation
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| NINE MONTHS ENDED | ||||
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| MAY 31 | ||||
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| 2016 | 2015 | |||
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| Golden Goliath Resources Ltd. |
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| Management fees | $ | 90,000 | $ | 90,000 | |
| Consulting fees |
| 54,000 |
| 88,000 | |
| Minera Delta S.A. de C.V. |
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| Wages and benefits |
| 18,000 |
| 38,655 | |
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| Total | $ | 162,000 | $ | 216,655 | |
Payments to key management personnel including the President, Chief Financial Officer, directors and companies directly controlled by key management personnel, and a former director, are directly related to their position in the organization.
Other Related Party Transactions
The Company entered into the following transactions and had the following balances payable with related parties. The transactions were recorded at the exchange amount agreed to by the related parties. Balances outstanding are non-interest bearing, unsecured and had no specific terms for collection or repayment.
a)
Due from related parties consists of $30,527 (August 31, 2015 - $30,572) due from companies controlled by common directors.
b)
Due to related parties consists of $348,657 (August 31, 2015 - $231,602) due to directors and company controlled by common director.
c)
During the nine month ended May 31, 2016 the Company paid $13,500 (in the year ended August 31, 2015 - $23,000) in respect of rent to a company with a common director.
Critical Accounting Estimates
Exploration and Evaluation Assets
Exploration and evaluation expenditures include the costs associated with exploration and evaluation activity. Exploration and evaluation expenditures are capitalized as incurred. Costs incurred before the Company has obtained the legal rights to explore an area are recognized in profit or loss.
Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, which management has determined to be indicated by a feasibility study, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets.
Recoverability of the carrying amount of any exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.
It is management’s judgment that none of the Company’s exploration and evaluation assets have reached the development stage and as a result are all considered to be exploration and evaluation assets.
Although the Company has taken steps to verify title to mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property may be subject to unregistered prior agreements and non-compliance with regulatory requirements. The Company is not aware of any disputed claims of title.
Changes in Accounting Policy
There were no changes in accounting policy in the past year.
Financial Instruments and Other Instruments
The Company has not entered into any specialized financial agreements to minimize its investment risk, currency risk or commodity risk. As of the date hereof, the Company’s investment in resource properties has full exposure to commodity risk, both upside and downside. As the metal prices move so too does the underlying value of the Company’s metal projects.
Outstanding Share Data
The authorized share capital consists of an unlimited number of common shares. As of May 31, 2016 and the date hereof, an aggregate of 106,660,889 common shares were issued and outstanding.
The Company has nil share purchase warrants outstanding as of May 31, 2016 and the date hereof.
As of May 31, 2016, the Company had nil incentive stock options outstanding.
Disclosure Controls and Procedures
Disclosure controls and procedures (“DC&P”) are intended to provide reasonable assurance that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified by securities regulations and that information required to be disclosed is accumulated and communicated to management. Internal controls over financial reporting (“ICFR”) are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with Canadian generally accepted accounting principles.
TSX Venture listed companies are not required to provide representations in the annual filings relating to the establishment and maintenance of DC&P and ICFR, as defined in Multinational Instrument 52-109. In particular, the CEO and CFO certifying officers do not make any representations relating to the establishment and maintenance of (a) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation, and (b) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in their certificates regarding the absence of misrepresentations and fair disclosure of financial information. Investors should be aware that inherent limitation on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in Multinational Instrument 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
Additional information relating to the Company can be found on SEDAR atwww.sedar.com and also on the Company’s website atwww.goldengoliath.com
