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PLAN OF ARRANGEMENT INVOLVING INTERNATIONAL TOWER HILL MINES LTD.,
ITS SHAREHOLDERS AND CORVUS GOLD INC.
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Suite 1920 1188 West Georgia St. Vancouver, BC Canada V6E 4A2 | TEL 604.683.6332 FAX 604.408.7499 www.ithmines.com TSX: ITH | NYSE-A: THM |
Chairman of the Board of Directors
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1. | to consider and, if appropriate, to pass a special resolution (the “Arrangement Resolution”), the full text of which is attached as Schedule “A” to the accompanying Information Circular, approving an arrangement (the “Arrangement”) under Section 288 of theBusiness Corporations Act (British Columbia) (the “BCBCA”) among the Company, the Shareholders and Corvus Gold Inc. (“Corvus”), which will involve, among other things, a reorganization of the business and capital of the Company, the distribution of common shares of Corvus to Shareholders, and an exchange of securities of the Company; | |
2. | to consider and, if thought fit, to approve and ratify a stock option plan for Corvus; and | |
3. | to transact such further or other business, including without limitation such amendments or variations to any of the foregoing resolutions, as may properly come before the Meeting and any postponement or adjournment thereof. |
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Chairman of the Board of Directors
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Year ended December 31 | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Noon rate at end of period | US$0.9555 | US$0.8166 | US$1.0120 | |||||||||
Average noon rate during period | US$0.8760 | US$0.9371 | US$0.9310 | |||||||||
High for period | US$0.9484 | US$1.0009 | US$1.0339 | |||||||||
Low for period | US$0.7908 | US$0.8100 | US$0.8504 |
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(a) | the Spin-Off Alaska Properties, which includes the West Pogo Project, Chisna Project, Terra Project, and LMS Project, each of which is located in Alaska and is subject to a farm-out option to a third party; | ||
(b) | certain underlying agreements through which the Spin-Off Alaska Properties are held; | ||
(c) | data related to the Spin-Off Alaska Properties; | ||
(d) | the Royalty; and | ||
(e) | certain service agreements, physical assets and permits related to the Spin-Off Alaska Properties. |
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(a) | the Arrangement is expected to improve the market’s identification and valuation of the Company’s mineral properties, particularly, those other than the Livengood Project; | ||
(b) | the Arrangement is expected to enhance the ability of each of the Company and Corvus to pursue its independent corporate objectives and strategies, with a view to maximizing shareholder value. In particular, the Arrangement will allow Corvus to focus on the continued exploration of the North Bullfrog Project; | ||
(c) | the separation of the Company’s mineral properties into two separate companies dedicated to the pursuit of their respective businesses will provide Shareholders with additional investment flexibility, as they will hold a direct interest in two companies, each of which is focused on different objectives; | ||
(d) | the procedures by which the Arrangement is to be approved, including the requirement for approval of the Arrangement by the Court after a hearing at which fairness to the Company’s securityholders will be considered; and | ||
(e) | the availability of rights of dissent to Shareholders with respect to the Arrangement. |
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Pro-Forma as at | ||||||||
The Company | Corvus | |||||||
February 28, 2010 | May 31, 2010 | |||||||
Current Assets | $ | 17,110,132 | $ | 3,300,055 | ||||
Property, plant and equipment | $ | 83,466 | — | |||||
Mineral Properties | $ | 36,438,605 | $ | 12,597,678 | ||||
Liabilities | $ | 1,562,078 | $ | 24,737 | ||||
Shareholders’ Equity | $ | 52,070,125 | $ | 15,872,996 |
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(a) | a chair, vice-chair or president, | |
(b) | a vice-president in charge of a principal business unit, division or function including, sales, finance or production, or | |
(c) | performing a policy-making function in respect of the Company or Corvus, as the context requires. |
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(a) | each CEO; | |
(b) | each CFO; | |
(c) | each of the three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and CFO, at the end of the most recently completed financial year and whose total compensation was, individually, more than $150,000 for that financial year; and | |
(d) | each individual who would be an NEO under paragraph (c) but for the fact that the individual was neither an executive officer of the company, nor acting in a similar capacity, at the end of that financial year. |
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(a) | be voted or withheld from voting in accordance with the instructions of the person appointing the proxyholder on any ballot that may be taken; and |
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(b) | where a choice with respect to any matter to be acted upon has been specified in the Proxy, be voted in accordance with the specification made in such Proxy. |
Authorized Capital: | 500,000,000 Common Shares without par value | |
Issued and Outstanding: | 66,909,534(1) Common Shares without par value |
(1) | As at July 9, 2010 |
Percentage of Issued and | ||||||||
Name of Shareholder | Number of Shares | Outstanding | ||||||
Tocqueville Asset Management, L.P.(1) | 8,011,662 | 11.97 | % | |||||
AngloGold Ashanti (U.S.A.) Exploration Inc.(2) | 8,397,753 | 12.55 | % |
(1) | The foregoing common shares are held by various accounts and funds managed by Tocqueville Asset Management, LP (“TAM”). TAM has control, but not ownership, of such common shares. This information is based upon an Early Warning Report dated June 14, 2010 and filed on SEDAR by TAM. No further alternative monthly reports have been filed since that date. | |
(2) | AngloGold Ashanti (U.S.A.) Exploration Inc. is an indirect wholly owned subsidiary of AngloGold Ashanti Limited, a South African public company whose securities are listed on the New York, Johannesburg, Ghanaian, London and Australian Stock Exchanges as well as the Paris and Brussels bourses. |
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(a) | Annual Information Form of the Company for the financial year ended May 31, 2009, dated as of August 25, 2009, other than; |
(i) | the Management Information Circular dated September 16, 2008 in respect of the 2008 Annual General Meeting (“Information Circular”); and | ||
(ii) | Technical report dated July 31, 2009 entitled “July 2009 Summary Report on the Livengood Project, Tolovana District, Alaska” by Paul Klipfel, Ph.D., CPG#10821, Tracy Barnes, P.E. and William Pennstrom Jr. M.A. | ||
which are incorporated by reference in the Annual Information Form. | |||
(b) | audited consolidated annual financial statements (including notes thereto) of the Company, consisting of consolidated balance sheets of the Company as at May 31, 2009 and May 31, 2008, and the related consolidated statements of operations and comprehensive loss and deficit and cash flows for each of the years in the three year period ended May 31, 2009, together with the report of the auditors dated August 6, 2009 on the consolidated financial statements as at May 31, 2009 and for the year then ended; | ||
(c) | Management Discussion and Analysis for the financial year ended May 31, 2009; | ||
(d) | unaudited consolidated interim financial statements (including notes thereto) of the Company consisting of consolidated balance sheets as at February 28, 2010, consolidated statements of operations, comprehensive loss and deficit and cash flows for the three and nine month periods ending February 28, 2010; | ||
(e) | Management Discussion and Analysis for the nine months ended February 28, 2010; | ||
(f) | Information Circular of the Company dated September 15, 2009 for the annual general meeting of Shareholders held on October 15, 2009; and | ||
(g) | the Technical Reports. |
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(a) | the Spin-Off Alaska Properties, which includes the West Pogo Project, Chisna Project, Terra Project, and LMS Project, each of which is located in Alaska and is subject to a farm-out option to a third party; | ||
(b) | certain underlying agreements through which the Spin-Off Alaska Properties are held; | ||
(c) | data related to the Spin-Off Alaska Properties; | ||
(d) | the Royalty; and | ||
(e) | certain service agreements, physical assets and permits related to the Spin-Off Alaska Properties. |
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(a) | the Arrangement is expected to improve the market’s identification and valuation of the Company’s mineral properties, particularly those other than the Livengood Project; | ||
(b) | the Arrangement is expected to enhance the ability of each of the Company and Corvus to pursue its independent corporate objectives and strategies, with a view to maximizing shareholder value. In particular, the Arrangement will allow Corvus to focus on the continued exploration of the North Bullfrog Project; | ||
(c) | the separation of the Company’s mineral properties into two separate companies dedicated to the pursuit of their respective businesses will provide Shareholders with additional investment flexibility, as they will hold a direct interest in two companies, each of which is focused on different objectives; | ||
(d) | the procedures by which the Arrangement is to be approved, including the requirement for approval of the Arrangement by the Court after a hearing at which fairness to the Company’s securityholders will be considered; and | ||
(e) | the availability of rights of dissent to Shareholders with respect to the Arrangement. |
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(a) | the Common Shares held by Dissenting Shareholders together with any and all Rights attached to such Common Shares shall be deemed to have been transferred by the holder thereof, without any further act or formality on its part, free and clear of all liens, claims and encumbrances, to the Company and the Dissenting Shareholders shall cease to have any rights as shareholders of the Company other than the right to be paid the fair value of their Common Shares in accordance with Article 4 of the Plan of Arrangement; | ||
(b) | the notice of articles and articles of the Company shall be amended to: |
(i) | change the designation of the existing “common shares” (being the Common Shares) to “class A shares” (being the Class A Shares); | ||
(ii) | create a new class of shares designated as “common shares” (being the New Common Shares), with an authorized capital of 500,000,000 New Common Shares; and | ||
(iii) | consequential on the creation of the New Common Shares, attach the special rights set out in Appendix 2 of the Plan of Arrangement to the Class A Shares; |
(c) | the Company’s central securities register for the “common shares” (being the Common Shares) shall be deemed to be the central securities register for the renamed and redesignated “class A shares” (being the Class A Shares); | ||
(d) | Corvus will issue and be deemed to issue Corvus Common Shares to the Company pursuant to the Corvus Subscription Agreement for the issue price of CAD 14.8 million (the “Cash”) and the number of Corvus Common Shares to be issued in consideration of the Cash shall be such that the total number of issued and outstanding Corvus Common Shares is equal to the number of issued and outstanding Common Shares immediately prior to the Effective Time multiplied by one-half; | ||
(e) | Corvus will pay and be deemed to pay to Raven Gold CAD 8.5 million as the issue price for one additional treasury share of Raven Gold pursuant to the Raven Gold Subscription Agreement; | ||
(f) | the “Closing” under the Alaska Purchase Agreement for the sale by Talon Alaska of the Spin-Off Alaska Assets to Raven Gold will occur and be deemed to occur; | ||
(g) | the capital of the Company in respect of the Class A Shares will be reduced and deemed to be reduced pursuant to Section 74 of the BCBCA by an amount equal to the fair market value of the Corvus Common Shares and the Company will transfer and be deemed to have transferred all Corvus Common Shares held by it to the Shareholders (other than Dissenting Shareholders) on the basis of one-half of one Corvus Common Share for each Common Share held by each Shareholder at the Effective Time, and the transfer of the Corvus Common Shares to the Shareholders (other than Dissenting Shareholders) will be deemed to be full payment of such reduction of capital, and for greater certainty, subject to Section 4.5 of the Plan of Arrangement, the Company shall be |
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deemed not to be the holder of any Corvus Common Shares and any Corvus Common Shares held by the Company shall be cancelled and the appropriate entry shall be made in Corvus’s central securities registry (“Step (g)”); |
(h) | each recipient of Corvus Common Shares transferred shall be deemed to be the holder of the number of Corvus Common Shares issued to such holder; the name of such holder shall be added to the central securities register of Corvus as the holder of the number of the Corvus Common Shares so issued to such holder; | ||
(i) | each Class A Share issued and outstanding at the Effective Time (other than shares held by Dissenting Shareholders) will be deemed to be exchanged (without any action on the part of the holder of the Class A Shares) for one New Common Share, and no other consideration will be received or receivable therefor by any holder of the Class A Shares; | ||
(j) | each Shareholder shall be deemed to cease to be the holder of the Class A Shares together with any and all Rights attached to such Class A Shares so exchanged, shall cease to have any rights with respect to such Class A Shares and shall be deemed to be the holder of the number of New Common Shares issued to such Shareholder; the name of such Shareholder shall be removed from the central securities register for Class A Shares in respect of the Class A Shares so exchanged and shall be added to the central securities register of the New Common Shares so issued to such Shareholder, and each holder of the Class A Shares shall be deemed to have executed and delivered all consents, releases, assignments and waivers, statutory or otherwise, required to exchange such shares as described above; | ||
(k) | the Class A Shares and any and all Rights attached to such Class A Shares shall be deemed to have been cancelled and the appropriate entry shall be made in the Company’s central securities registry; | ||
(l) | for greater certainty, the aggregate capital of the New Common Shares for the purposes of the Act will equal the capital of the Class A Shares immediately before the exchange, after deducting the reduction in capital pursuant to Step (g) above; | ||
(m) | for greater certainty, in accordance with the terms of the Options and the consents to be signed by each Optionholder, each Option will entitle the Optionholder thereof to receive (and such holder shall be deemed to accept), upon the exercise thereof, in lieu of the number of Common Shares otherwise issuable upon the exercise thereof, the same number of New Common Shares; | ||
(n) | in accordance with the terms of the Warrants, each Warrant will entitle the holder thereof to receive (and such holder shall be deemed to accept), upon the exercise thereof, in lieu of the number of Common Shares otherwise issuable upon the exercise thereof, the number of New Common Shares and Corvus Common Shares which such holder would have been entitled to receive as a result of the Arrangement if, immediately prior to the Effective Time, such holder had been the registered holder of the number of Common Shares to which such holder was theretofore entitled upon such exercise; | ||
(o) | the Company will transfer and be deemed to transfer all of the shares of Talon Nevada to Corvus and in consideration Corvus will pay and be deemed to pay to the Company $3 million pursuant to the Talon Nevada Purchase Agreement and the balance of the Cash, being the $3.3 million Working Capital Amount, will remain the property of Corvus; and | ||
(p) | the Company’s notice of articles and articles shall be amended to cancel the class of shares designated as “Class A Shares”, none of which will be issued and outstanding at such time in accordance with the Plan of Arrangement. |
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(a) | each of the representations and warranties of Talon Alaska contained in the Alaska Purchase Agreement or in any documents delivered in order to carry out the transactions contemplated thereby shall be true and accurate on the date of the Alaska Purchase Agreement and at the Effective Time; | ||
(b) | Talon Alaska shall have complied with all covenants and agreements therein agreed to be performed or caused to be performed by it at or prior to the Effective Time; | ||
(c) | from the date of the Alaska Purchase Agreement until the Effective Time there shall not have occurred any changes in the status of the Spin-Off Alaska Assets, howsoever arising, except as to such changes which have occurred in the ordinary course of the business of Talon Alaska or changes which, individually or in the aggregate, have not affected the Spin-Off Alaska Assets or the transactions contemplated herein in any material adverse respect; | ||
(d) | no order, decision or ruling of any governmental authority having jurisdiction shall have been made, and no action or proceeding shall be pending or threatened which, in the opinion of counsel to Raven Gold, is likely to result in an order, decision or ruling to disallow, enjoin, prohibit or impose any limitations or conditions on the purchase and sale of the Spin-Off Alaska Assets or the right of Raven Gold to own a 100% interest in the Spin-Off Alaska Assets; | ||
(e) | Talon Alaska shall have received all third party consents or approvals required to proceed with the transactions contemplated under the Alaska Purchase Agreement or required to transfer any permits with respect to the Spin-Off Alaska Assets to Raven Gold, and Talon Alaska shall have received the waiver by AngloGold of its pre-emptive rights, pursuant to the AngloGold Agreement, to acquire the Chisna Project (AngloGold waiver received July 8, 2010); and | ||
(f) | at or prior to Effective Time, Talon Alaska shall have delivered all data in respect of the Spin-Off Alaska Assets in its possession or control (including, where applicable, all originals of documents) to Raven Gold, without retaining any copies thereof. |
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(a) | the representations and warranties of Raven Gold contained in the Alaska Purchase Agreement or in any documents delivered in order to carry out the transactions contemplated thereby will be true and accurate on the date of the Alaska Purchase Agreement and at the Effective Time; | ||
(b) | Raven Gold shall have complied with all covenants and agreements therein agreed to be performed or caused to be performed by it at or prior to the Effective Time; and | ||
(c) | no order, decision or ruling of any governmental authority having jurisdiction shall have been made, and no action or proceeding shall be pending or threatened which, in the opinion of counsel to Talon Alaska, is likely to result in an order, decision or ruling, to disallow, enjoin or prohibit the purchase and sale of the Spin-Off Alaska Assets as contemplated thereby. |
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(a) | the Interim Order and the Final Order shall have been obtained in form and substance satisfactory to the Company and Corvus; | ||
(b) | the Arrangement, with or without amendment, shall have been approved at the Meeting in accordance with the Interim Order and by the requisite majority of the votes cast by the Shareholders thereon at the Meeting; | ||
(c) | the TSX shall have received notice of the Arrangement in accordance with their rules and policies, and shall have no objection to the Arrangement as of the Effective Date and, if required, the TSX shall have conditionally approved the listing of the New Common Shares to be issued pursuant to the Arrangement (including the New Common Shares which as a result of the Arrangement are issuable on the exercise of the Options and Warrants), subject to the usual requirements of the TSX; | ||
(d) | the TSX, or such other recognized stock exchange acceptable to Corvus, shall have conditionally approved the listing of the Corvus Common Shares issuable under the Arrangement (including the Corvus Common Shares which as a result of the Arrangement are issuable on the exercise of the Warrants), subject to compliance with the requirements of the TSX or such other stock exchange; | ||
(e) | the conditions precedent, other than any conditions related to the completion of the transactions contemplated under the Arrangement Agreement, contained in the Alaska Purchase Agreement, Talon Nevada Purchase Agreement, Corvus Subscription Agreement and Raven Gold Subscription Agreement shall have been satisfied or waived; | ||
(f) | there shall not be in force any order or decree restraining or enjoining the consummation of the transactions contemplated by the Arrangement; | ||
(g) | all material regulatory requirements shall have been complied with and all governmental, court, regulatory, third person and other approvals, consents, expiry of waiting periods, waivers, permits, exemptions, orders and agreements and all amendments and modifications to, and terminations of, agreements, indentures and arrangements considered by the Company to be necessary or desirable for the completion of the transactions provided for in the Arrangement to become effective and for the transfer of the Transferred Assets to Corvus, shall have been obtained or received on terms that are satisfactory to the Company and Corvus; | ||
(h) | none of the consents, orders, regulations or approvals contemplated herein shall contain conditions or require undertakings or security deemed unsatisfactory or unacceptable by the Company or Corvus, acting reasonably; | ||
(i) | Dissent Rights shall not have been exercised prior to the Effective Date by holders of 3% or more of the Common Shares; and | ||
(j) | the Arrangement Agreement shall not have otherwise been terminated. |
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(a) | the Arrangement must be approved by the Shareholders in the manner set forth in the Interim Order and the BCBCA; | ||
(b) | if the Arrangement is approved by the Shareholders in the manner set forth in the Interim Order, the BCBCA, and assuming all conditions precedent to the Arrangement, as set forth in the Arrangement Agreement, are satisfied or waived by the appropriate party, a hearing before the Court must be held to obtain the Final Order approving the Arrangement; and | ||
(c) | if the Final Order is granted by the Court, such documents, records and information, including a copy of the entered Final Order must be filed with the Registrar as are required under the BCBCA in order for the Registrar to give effect to the Arrangement. |
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(a) | determine the fair value that the Dissent Shares had immediately before the passing of the Arrangement Resolution, excluding any appreciation or depreciation in anticipation of the Arrangement unless such exclusion would be inequitable, or order that such fair value be established by arbitration or by reference to the Registrar or a referee of the Court; | ||
(b) | join in the application each other Dissenting Shareholder who has not reached an agreement with the Company as to the amount to be paid for the Dissent Shares; or | ||
(c) | make consequential orders and give directions it considers appropriate. |
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(a) | the “market price” of the Corvus Common Shares on the TSX on the trading day immediately preceding the day on which the Corvus Option is granted (calculated in accordance with the TSX Company Manual); and | ||
(b) | the closing price of the Corvus Common Shares on the TSX on the trading day immediately preceding the day on which the Corvus Option is granted (provided that if there are no trades on such day then the last closing price within the preceding ten trading days will be used, and if there are no trades within such ten-day period, then the simple average of the closing bid and ask prices on the trading day immediately preceding the day of grant will be used) last daily market price per Corvus Common Share on the TSX on the trading day immediately preceding the grant date. |
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(a) | ensure that the Corvus Options granted thereunder will comply with any provisions respecting stock options in tax and other laws in force in any country or jurisdiction of which a participant to whom a Corvus Option has been granted may from time to time be resident or a citizen; | ||
(b) | make amendments of an administrative nature; | ||
(c) | change vesting provisions of a Corvus Option or the Corvus Option Plan; | ||
(d) | change termination provisions of a Corvus Option provided that the expiry date does not extend beyond the original expiry date; | ||
(e) | reduce the exercise price of a Corvus Option for a participant who is not an insider; | ||
(f) | make any amendments required to comply with applicable laws or TSX requirements; and | ||
(g) | make any other amendments that are accepted for filing by the TSX. |
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1. | the 2010 incentive stock option plan (“Plan”) of Corvus be and is hereby approved, ratified and confirmed; | |
2. | Corvus be and is hereby authorized to grant stock options pursuant to the terms and conditions of the Plan equal in number up to an aggregate fixed percentage of 10% of the issued capital of the Company at the time of grant of any stock option from time to time, and all unallocated stock options issuable pursuant to the Plan be and are hereby specifically authorized and approved until August 12, 2013; and | |
3. | the Plan shall require re-approval by the shareholders on or before August 12, 2013 in order to remain effective past that date.” |
(a) | Paul Klipfel PhD., Tim Carew P.Geo and William Pennstrom, Jr. M.A., authors of the Livengood Technical Report; | ||
(b) | Paul Klipfel PhD and Gary Giroux, M.Sc. P. Eng., authors of the Terra and LMS Technical Reports; | ||
(c) | Roger Steininger PhD and Gary Giroux, M.Sc. P. Eng., authors of the North Bullfrog Technical Report; | ||
(d) | Christopher N.A. Taylor, P.Geo., author of the Chisna Technical Report; | ||
(e) | Jeffrey A. Pontius, a qualified person as defined by NI 43-101, supervised the preparation of the scientific and technical information on the Livengood Project that formed the basis of some of the |
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disclosure in the Management Discussion and Analysis dated August 20, 2009 and April 12, 2010; and |
(f) | Paul Klipfel PhD., a qualified person as defined in NI 43-101, supervised the preparation of the technical exploration information with respect to the Livengood Project that formed the basis of some of the disclosure in the Management Discussion and Analysis dated August 20, 2009. |
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Chairman of the Board of Directors
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Vancouver, Canada | “MacKay LLP” | |
July 9, 2010 | Chartered Accountants |
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1. | the plan of arrangement under Section 288 of theBusiness Corporations Act(British Columbia) set forth in the plan of arrangement (the “Plan of Arrangement”) attached as Schedule “A” to the arrangement agreement (the “Arrangement Agreement”) that is attached as Schedule “B” to the information circular (the “Information Circular”) of the Company dated July 9, 2010 accompanying the notice of meeting (as the Plan of Arrangement may be or may have been modified or amended) and all of the transactions and the reduction of capital contemplated therein, is hereby authorized, approved and adopted; | |
2. | the Arrangement Agreement and all the transactions contemplated therein and the actions of the directors of the Company in approving the Arrangement Agreement and the actions of the officers of the Company in executing and delivering the Arrangement Agreement and any amendments thereto are hereby ratified confirmed and approved; | |
3. | notwithstanding that this resolution has been duly passed by the shareholders of the Company or received the final approval of the Supreme Court of British Columbia, (the “Court”) without further notice to, or resolution of, the shareholders, approval is hereby given to the board of directors of the Company to (a) amend the Plan of Arrangement or the Arrangement Agreement, to the extent permitted by the Arrangement Agreement and the Plan of Arrangement, in any manner not inconsistent with an applicable order of the Court, and (b) subject to the terms of the Arrangement Agreement to determine not to proceed with the Plan of Arrangement and to revoke this resolution at any time prior to the Effective Time (as defined in the Arrangement Agreement); and | |
4. | any one director or officer of the Company be and is hereby authorized, for and on behalf of the Company, to execute and deliver any documents, agreements and instruments and to perform all such other acts and things as in such person’s opinion may be necessary or desirable to implement this special resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of any such documents, agreements or instruments and the doing of any such act or thing. |
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A. | Corvus is a wholly-owned subsidiary of the Company. | |
B. | The Company wishes to carry out a reorganization of the Company’s business and a reorganization of the capital of the Company, all pursuant to the Plan of Arrangement (as hereinafter defined) and on the terms and conditions set out in this Agreement. | |
C. | In contemplation of the reorganization of the Company’s business, the Company and Corvus have entered into the Talon Nevada Purchase Agreement and intend to enter into the Corvus Subscription Agreement and Raven Gold Subscription Agreement (each as hereinafter defined) and Raven Gold and Talon Alaska (each as hereinafter defined) have entered into the Alaska Purchase Agreement (as hereinafter defined), whereby, among other things, Corvus will acquire the Transferred Assets (as hereinafter defined), directly or indirectly. | |
D. | In contemplation of the reorganization of the capital of the Company, the Company will amend its authorized share structure to create the New Common Shares (as hereinafter defined) and will redesignate the existing common shares as described in the Plan of Arrangement. | |
E. | To complete the reorganization of the capital of the Company and the reorganization of the Company’s business, the Company will distribute the Corvus Common Shares to the shareholders of the Company by way of a reduction of the Company’s capital and the shareholders of the Company will exchange their existing common shares for New Common Shares, all pursuant to the Plan of Arrangement with the result that the shareholders of the Company (other than dissenting shareholders) will become shareholders of Corvus and have the same percentage shareholding in each of the Company and Corvus at the Effective Time of the Arrangement (as hereinafter defined) and Corvus will own the Transferred Assets, directly or indirectly, which will include the Spin-Off Alaska Assets, Talon Nevada and the North Bullfrog Project. | |
F. | The Company proposes to have the Shareholders consider the Arrangement on the terms set forth in the Plan of Arrangement. |
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INTERPRETATION
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Schedule “A” — Plan of Arrangement |
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THE ARRANGEMENT
2.4.1 | As soon as is reasonably practicable after the date of execution of this Agreement, the Company shall: |
(a) | file, proceed with and diligently prosecute an application to the Court for the Interim Order, providing for, among other things, the calling and holding of the Meeting for the purpose of considering and, if deemed advisable, approving the Arrangement; and | ||
(b) | subject to obtaining the approvals as contemplated by the Interim Order (including the approval of the Special Resolution by the Shareholders) and as may be directed by the Court in the Interim Order, file, proceed with and diligently prosecute an application for the Final Order which application shall be in form and substance satisfactory to the parties hereto. |
2.4.2 | The notice to the Court and related materials for the applications referred to in this section shall be in a form satisfactory to the Company and Corvus prior to filing, and in the case of the application to the Court for the Interim Order, shall inform the Court that, based on the Court’s determination of the fairness of the Plan of Arrangement, the Company will rely on section 3(a)(10) of the 1933 Act for an exemption from the 1933 Act registration requirements with respect to the securities to be issued under the Plan of Arrangement. In order to ensure the availability of such exemption, the Parties agree that the Arrangement will be carried out on the following basis: |
(a) | the Arrangement will be subject to the approval of the Court; | ||
(b) | the Court will be required to satisfy itself as to the fairness of the Arrangement to the Securityholders subject to the Arrangement; | ||
(c) | the Final Order will expressly state that the Arrangement is approved by the Court as being fair to the Securityholders to whom securities will be issued; | ||
(d) | the Company will ensure that each Securityholder will be given adequate and timely notice advising them of their right to attend the hearing of the Court to give approval of the Arrangement and providing them with sufficient information necessary for them to exercise that right; |
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(e) | the Securityholders will be advised that the securities issued in the Arrangement have not been registered under the 1933 Act and will be issued by the Company and Corvus in reliance on the exemption from the registration requirements of the 1933 Act provided by section 3(a)(10) of the 1933 Act and may be subject to restrictions on resale under the securities laws of the United States, including, as applicable, Rule 144 under the 1933 Act with respect to affiliates of the Company and Corvus after the Effective Time or within 90 days prior to the Effective Time; | ||
(f) | the Interim Order will specify that each Securityholder will have the right to appear before the Court at the hearing of the Court to give approval of the Arrangement so long as such Securityholder files and delivers an appearance within a reasonable time; and | ||
(g) | the Final Order shall include a statement substantially to the following effect: |
“This Order will serve as a basis of a claim to an exemption, pursuant to section 3(a)(10) of the United States Securities Act of 1933, as amended, from the registration requirements otherwise imposed by that act, regarding the distribution of securities of the Company and Corvus, pursuant to or in connection with the Plan of Arrangement.” |
(a) | Corvus acknowledges and agrees that, pursuant to the Arrangement, from and after the Effective Time it shall be obligated to issue Corvus Common Shares to Warrantholders, as the case may be, upon the exercise of Warrants. | ||
(b) | After the Effective Time, on exercise of a Warrant, the Company shall deliver to Corvus an exercise notice (an “Exercise Notice”) which sets out the number of Warrants being exercised and the name and registration particulars for the Warrantholder that is exercising Warrants and will pay to Corvus a portion of the exercise price in respect of each Warrant (other than a Warrant that would result in the issuance of a fractional Corvus Share) equal to the exercise price of the Warrant immediately prior to the Effective Time multiplied by the fraction A/B where: |
(i) | “A” is the volume weighted average trading price of the Corvus Common Shares for the five trading days preceding the Adjustment Measurement Date; and | ||
(ii) | “B” is the volume weighted average trading price of the Corvus Common Shares plus the volume weighted average trading price of the New Common Shares for the five trading days preceding the Adjustment Measurement Date, |
any or such other price as the TSX, or other applicable stock exchange, may require (the “Corvus Exercise Price”). | |||
(c) | As soon as reasonably possible after receipt of a completed Exercise Notice and the Corvus Exercise Price, Corvus shall issue and deliver, or cause to be issued or delivered to the Company, Corvus Common Share certificates registered as directed in the Exercise Notice representing the number of Corvus Common Shares to which the Warrantholder is entitled under the Plan of Arrangement. |
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(d) | Upon the reasonable request by Corvus, the Company shall provide to Corvus an up to date list of the outstanding Warrants for which Corvus Common Shares are issuable hereunder. |
(a) | The Company acknowledges and agrees that, from time to time after the Effective Date, Corvus, or a subsidiary of Corvus, may be required to deliver New Common Shares to the lessors under that certain Mining Lease and Option to Purchase dated effective December 1, 2007 made and entered into by and among the Brian L. Greenspun Family Limited Partnership, the Daniel A. Greenspun and Robin S. Greenspun Family Limited Partnership, the Susan Greenspun-Fine Family Limited Partnership and the Jane Greenspun Gale Family Limited Partnership, as lessors, Talon Nevada, as lessee, and the Company (the “Mayflower Lease”). | ||
(b) | The Company agrees that it shall issue and deliver New Common Shares, registered and delivered as directed by Corvus or a subsidiary of Corvus, as soon as reasonably possible after receipt from Corvus or a subsidiary of Corvus of written notice providing the number of New Corvus Shares to be issued and the registration particulars for such shares together with the purchase price per New Common Share equal to the volume weighted average trading price of the New Common Shares for the five trading dates preceding the date on which the notice and purchase price were delivered to the Company, or such other price as the TSX, or other applicable stock exchange may require. | ||
(c) | Any New Common Shares which may be issued by the Company pursuant to this subsection 2.7, shall be subject to adjustment in accordance with the terms of the Mayflower Lease, and the Company shall not effect any transaction that would result in the succession of the Company unless prior to, or simultaneously with the consummation thereof, the entity succeeding the Company agrees in writing to be bound by and will comply with this subsection 2.7. |
CONDITIONS
(a) | the Interim Order and the Final Order shall have been obtained in form and substance satisfactory to the Company and Corvus; | ||
(b) | the Arrangement, with or without amendment, shall have been approved at the Meeting in accordance with the Interim Order and by the requisite majority of the votes cast by the Shareholders thereon at the Meeting; |
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(c) | the TSX shall have received notice of the Arrangement in accordance with their rules and policies, and shall have no objection to the Arrangement as of the Effective Date and, if required, the TSX shall have conditionally approved the listing of the New Common Shares to be issued pursuant to the Arrangement (including the New Common Shares which as a result of the Arrangement are issuable on the exercise of the Options and Warrants), subject to the usual requirements of the TSX; | ||
(d) | the TSX, or such other recognized stock exchange acceptable to Corvus, shall have conditionally approved the listing of the Corvus Common Shares issuable under the Arrangement (including the Corvus Common Shares which as a result of the Arrangement are issuable on the exercise of the Warrants), subject to compliance with the requirements of the TSX or such other stock exchange; | ||
(e) | the conditions precedent, other than any conditions related to the completion of the transactions contemplated under this Agreement, contained in the Alaska Purchase Agreement, Talon Nevada Purchase Agreement, Corvus Subscription Agreement and Raven Gold Subscription Agreement shall have been satisfied or waived; | ||
(f) | there shall not be in force any order or decree restraining or enjoining the consummation of the transactions contemplated by this Agreement; | ||
(g) | all material regulatory requirements shall have been complied with and all governmental, court, regulatory, third person and other approvals, consents, expiry of waiting periods, waivers, permits, exemptions, orders and agreements and all amendments and modifications to, and terminations of, agreements, indentures and arrangements considered by the Company to be necessary or desirable for the completion of the transactions provided for in this Agreement and the Arrangement to become effective and for the transfer of the Transferred Assets to Corvus, shall have been obtained or received on terms that are satisfactory to the Company and Corvus; | ||
(h) | none of the consents, orders, regulations or approvals contemplated herein shall contain conditions or require undertakings or security deemed unsatisfactory or unacceptable by the Company or Corvus, acting reasonably; | ||
(i) | dissent rights shall not have been exercised prior to the Effective Date by holders of 3% or more of the Common Shares; and | ||
(j) | this Agreement shall not have been terminated under Article 4. |
AMENDMENT AND TERMINATION
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GENERAL
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INTERNATIONAL TOWER HILL MINES LTD. | ||||
Per: | (signed) Lawrence Talbot | |||
Authorized Signatory |
CORVUS GOLD INC. | ||||
Per: | (signed) Lawrence Talbot | |||
Authorized Signatory | ||||
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JULY 8, 2010 BETWEEN INTERNATIONAL TOWER HILL MINES LTD.
AND CORVUS GOLD INC.
OF THEBUSINESS CORPORATIONS ACT(BRITISH COLUMBIA)
INTERPRETATION
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GOVERNING AGREEMENT
ARRANGEMENT
(a) | the Common Shares held by Dissenting Shareholders together with any and all Rights attached to such Common Shares shall be deemed to have been transferred by the holder thereof, without any further act or formality on its part, free and clear of all liens, claims and encumbrances, to the Company and the Dissenting Shareholders shall cease to have any rights as shareholders of the Company other than the right to be paid the fair value of their Common Shares in accordance with article 4 of this Plan of Arrangement; | ||
(b) | the notice of articles and articles of the Company shall be amended to: |
(i) | change the designation of the existing “common shares” (being the Common Shares) to “class A shares” (being the Class A Shares); |
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(ii) | create a new class of shares designated as “common shares” (being the New Common Shares), with an authorized capital of 500,000,000 New Common Shares; and | ||
(iii) | consequential on the creation of the New Common Shares, attach the special rights set out in Appendix 2 to the Class A Shares; |
(c) | the Company’s central securities register for the “common shares” (being the Common Shares) shall be deemed to be the central securities register for the renamed and redesignated “class A shares” (being the Class A Shares)(“Step (c)”); | ||
(d) | Corvus will issue and be deemed to issue Corvus Common Shares to the Company pursuant to the Corvus Subscription Agreement for the issue price of CAD 14.8 million (the “Cash”) and the number of Corvus Common Shares to be issued in consideration of the Cash shall be such that the total number of issued and outstanding Corvus Shares is equal to the number of issued and outstanding Common Shares immediately prior to the Effective Time multiplied by one-half(“Step (d)”); | ||
(e) | Corvus will pay and be deemed to pay to Raven Gold CAD 8.5 million as the issue price for one additional treasury share of Raven Gold pursuant to the Raven Subscription Agreement(“Step (e)”); | ||
(f) | the “Closing” under the Alaska Purchase Agreement for the sale by Talon Alaska of the Spin-Off Alaska Assets to Raven Gold will occur and be deemed to occur(“Step (f)”); | ||
(g) | the capital of the Company in respect of the Class A Shares will be reduced and deemed to be reduced pursuant to section 74 of the Act by an amount equal to the fair market value of the Corvus Common Shares and the Company will transfer and be deemed to have transferred all Corvus Common Shares held by it to the Shareholders (other than dissenting Shareholders) on the basis of one-half of one Corvus Common Share for each Common Share held by each Shareholder at the Effective Time, and the transfer of the Corvus Common Shares to the Shareholders (other than dissenting Shareholders) will be deemed to be full payment of such reduction of capital, and for greater certainty, subject to section 4.5, the Company shall be deemed not to be the holder of any Corvus Common Shares and any Corvus Common Shares held by the Company shall be cancelled and the appropriate entry shall be made in Corvus’s central securities registry(“Step (g)”); | ||
(h) | each recipient of Corvus Common Shares transferred shall be deemed to be the holder of the number of Corvus Common Shares issued to such holder; the name of such holder shall be added to the central securities register of Corvus as the holder of the number of the Corvus Common Shares so issued to such holder; | ||
(i) | each Class A Share issued and outstanding at the Effective Time (other than shares held by Dissenting Shareholders) will be deemed to be exchanged (without any action on the part of the holder of the Class A Shares) for one New Common Share, and no other consideration will be received or receivable therefor by any holder of the Class A Shares; | ||
(j) | each Shareholder shall be deemed to cease to be the holder of the Class A Shares together with any and all Rights attached to such Class A Shares so exchanged, shall cease to have any rights with respect to such Class A Shares and shall be deemed to be the holder of the number of New Common Shares issued to such Shareholder; the name of such Shareholder shall be removed from the central securities register for Class A Shares in respect of the Class A Shares so exchanged and shall be added to the central securities register of the New Common Shares so issued to such Shareholder, and each holder of the Class A Shares shall be deemed to have executed and delivered all consents, releases, assignments and waivers, statutory or otherwise, required to exchange such shares as described above; |
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(k) | the Class A Shares and any and all Rights attached to such Class A Shares shall be deemed to have been cancelled and the appropriate entry shall be made in the Company’s central securities registry; | ||
(l) | for greater certainty, the aggregate capital of the New Common Shares for the purposes of the Act will equal the capital of the Class A Shares immediately before the exchange, after deducting the reduction in capital pursuant to Step (g) above; | ||
(m) | for greater certainty, in accordance with the terms of the Options and the consents signed by each Optionholder, each Option will entitle the Optionholder thereof to receive (and such holder shall be deemed to accept), upon the exercise thereof, in lieu of the number of Common Shares otherwise issuable upon the exercise thereof, the same number of New Common Shares; | ||
(n) | in accordance with the terms of the Warrants, each Warrant will entitle the holder thereof to receive (and such holder shall be deemed to accept), upon the exercise thereof, in lieu of the number of Common Shares otherwise issuable upon the exercise thereof, the number of New Common Shares and Corvus Common Shares which such holder would have been entitled to receive as a result of the Arrangement if, immediately prior to the Effective Time, such holder had been the registered holder of the number of Common Shares to which such holder was theretofore entitled upon such exercise(“Step (n)”); | ||
(o) | the Company will transfer and be deemed to transfer all of the shares of Talon Nevada to Corvus and in consideration Corvus will pay and be deemed to pay to the Company CAD 3 million pursuant to the Talon Nevada Purchase Agreement and the balance of the Cash, being the CAD 3.3 million Working Capital Amount, will remain the property of Corvus(“Step (o)”); and | ||
(p) | the Company’s notice of articles and articles shall be amended to cancel the class of shares designated as “Class A Shares”, none of which will be issued and outstanding at such time in accordance with the Plan of Arrangement(“Step (p)”). |
(a) | On or as soon as practicable after the Effective Date, the Company and Corvus shall deliver or arrange to be delivered to the Depositary certificates representing the New Common Shares and the Corvus Common Shares respectively required to be issued to the Shareholders in accordance with the provisions of section 3.1 hereof, which certificates shall be held by the Depositary as agent and nominee for the Shareholders for delivery to the Shareholders in accordance with the provisions of Article 5 hereof. | ||
(b) | Subject to the provisions of Article 5 hereof, the Shareholders shall be entitled to receive the certificates representing the New Common Shares and the Corvus Common Shares to which they are entitled pursuant to section 3.1 hereof. |
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RIGHTS OF DISSENT
(a) | Holders of Common Shares may exercise rights of dissent in connection with the Arrangement with respect to their Common Shares pursuant to and in the manner set forth in Part 8 — Division 2 of the Act as modified by the Interim Order and this section 4.1 (the “Dissent Rights”), provided that, notwithstanding subsection 242 of the Act, the written objection contemplated by subsection 242(2) of the Act must be received by the Company not later than 4:00 p.m. (Vancouver time) on the date which is two Business Days immediately preceding the Meeting. | ||
(b) | Holders of Common Shares who duly exercise Dissent Rights and who are ultimately entitled to be paid fair value for their Common Shares shall be deemed to have irrevocably transferred their Common Shares to the Company immediately prior to the Effective Time, without any further authorization, act or formality and free and clear of all liens, charges, claims and encumbrances and thereupon such Common Shares will be, and will be deemed to be, cancelled and the former holders of such Common Shares shall cease to have any rights as former holders of Common Shares other than their right to be paid fair value for their Common Shares. | ||
(c) | Shareholders who exercise, or purport to exercise, Dissent Rights, and who are ultimately determined not to be entitled, for any reason, to be paid fair value for their Common Shares, shall be deemed to have participated in the Arrangement on the same basis as any non-Dissenting Shareholder as at and from the Effective Time and shall receive, and be entitled to receive, only the consideration for each Common Share on the basis set forth in Article 3. |
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CERTIFICATES AND DOCUMENTATION
(a) | Upon surrender to the Depositary for cancellation of a certificate which immediately prior to the Effective Time represented one or more outstanding Common Shares which were exchanged for New Common Shares in accordance with section 3.1 hereof, together with such other documents and instruments as would have been required to effect the transfer of the Common Shares formerly represented by such certificate under the Act and the articles of the Company and such additional documents and instruments as the Depositary may reasonably require, the holder of such surrendered certificate shall be entitled to receive in exchange therefor, and the Depositary shall deliver to such holder following the Effective Time, a certificate representing the New Common Shares and a certificate representing the Corvus Common Shares which such holder is entitled to receive in accordance with section 3.3 hereof. | ||
(b) | After the Effective Time and until surrendered for cancellation as contemplated by paragraph 6.1(a) hereof, each certificate which immediately prior to the Effective Time represented one or more Common Shares shall be deemed at all times to represent only the right to receive in exchange therefor a certificate representing the New Common Shares and a certificate representing the Corvus Common Shares which the holder of such certificate is entitled to receive in accordance with paragraph 5.1 (a) hereof. |
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AMENDMENT
(a) | The Company reserves the right to amend, vary and/or supplement this Plan of Arrangement at any time from time to time, whether before or after the Interim Order or the Final Order, provided that any amendment, variation, or supplement must be contained in a written document which is filed with the Court and, if made following the Meeting, approved by the Court and communicated to any Persons if and in the manner required by the Court; | ||
(b) | any amendment, variation or supplement to this Plan of Arrangement may be proposed by the Company at any time prior to or at the Meeting without any other prior notice or communication and, if so proposed and accepted by the Persons voting at the Meeting, will become part of this Plan of Arrangement for all purposes; |
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(c) | any amendment, variation or supplement to this Plan of Arrangement which is approved or directed by the Court following the Meeting will be effective only if it is consented to by the Company and Corvus; | ||
(d) | any amendment, variation or supplement to this Plan of Arrangement may be made following the Effective Time on the Effective Date unilaterally by the Company, provided that it concerns a matter which, in the reasonable opinion of Company, is of an administrative nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the financial or economic interests of any holder of shares of the Company or Corvus; and | ||
(e) | this Plan of Arrangement may be withdrawn by the Company prior to the Effective Time. |
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Vancouver Registry
S.B.C.2002, c. 57,AS AMENDED
TOWER HILL MINES LTD, CORVUS GOLD INC. AND THE SHAREHOLDERS OF
INTERNATIONAL TOWER HILL MINES LTD.
) | FRIDAY, THE 9TH DAY OF | |||||
) | ||||||
) | JULY, 2010 | |||||
) | ||||||
MASTER DONALDSON | ) | |||||
) | ||||||
) | ||||||
) | ||||||
) |
MEETING
1. | The Petitioner, International Tower Hill Mines Ltd. (“ITH”), be permitted to convene, hold and conduct a Special Meeting (the “Meeting”) of the registered holders (the “Shareholders”) of common shares of the Petitioner (the “Common Shares”) tointer alia: |
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(a) | consider and, if deemed advisable, pass with or without variation, a special resolution (the “Arrangement Resolution”) of Shareholders authorizing, approving and adopting, an arrangement (the “Arrangement”) involving the Petitioner, the Shareholders and Corvus Gold Inc. (“Corvus”) as set forth in the plan of arrangement implementing the Arrangement (the “Plan of Arrangement”), substantially in the form included as Schedule “B” to the management information circular (the “Circular”) of the Petitioner which is attached as Exhibit “B” to the Affidavit #1 of Lawrence Talbot sworn July 8, 2010; and | ||
(b) | transact such other business as is contemplated in the Circular, or that may properly come before the Meeting or any adjournment thereof |
2. | The Meeting shall be called, held and conducted on August 12, 2010, in accordance with the provisions of theBusiness Corporations Act,S.B.C. 2002, c. 57 (the“Business Corporations Act”),as amended, the notice of articles and articles of incorporation of the Petitioner and applicable securities laws, or such other date as may be permitted under this Interim Order, and subject to the terms of this Interim Order and any further Order of this Court, and the rulings and directions of the Chair of the Meeting, such rulings and directions not to be inconsistent with this Interim Order, and to the extent of any inconsistency or discrepancy between this Interim Order and the terms of any instrument creating or governing or collateral to the Common Shares or to which such shares are collateral, or the articles of the Petitioner, this Interim Order shall govern. |
3. | The Petitioner is authorized to make, in the manner contemplated by and subject to the arrangement agreement between Corvus and ITH dated July 8, 2010 (the “Arrangement Agreement”) and the Plan of Arrangement, such amendments, revisions or supplements to the Arrangement Agreement, Plan of Arrangement, notice of special meeting for the Meeting or the Circular as it may determine without any additional notice to Shareholders or any further Order of this Court. The Arrangement Agreement and the Plan of Arrangement as so amended, revised or supplemented shall be the Arrangement Agreement and Plan of Arrangement that are the subject of the Arrangement Resolution. |
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4. | Notwithstanding the provisions of theBusiness Corporations Actand the articles of the Petitioner, the Board of Directors of the Petitioner by resolution shall be entitled to adjourn or postpone the Meeting on one or more occasions without the necessity of first convening the Meeting or first obtaining any vote of the Shareholders respecting the adjournment or postponement and without the need for approval of the Court. Notice of any such adjournment shall be given by press release, news release, newspaper advertisement, or by notice sent to the Shareholders by one of the methods specified in paragraph 6 of this Interim Order, as determined to be the most appropriate method of communication by the Board of Directors of the Petitioner. |
5. | The record date (the “Record Date”) for determining Shareholders entitled to receive notice of and attend at the Meeting is the close of business on July 9, 2010 as previously approved by the Board of Directors of the Petitioner, or such other date as the Board of Directors of the Petitioner may determine and as disclosed to the Shareholders in the manner they see fit. |
6. | The following information: |
(a) | the notice of special meeting for the Meeting; | ||
(b) | the Circular; | ||
(c) | the Arrangement Agreement; | ||
(d) | the Plan of Arrangement; | ||
(e) | the Notice of Hearing of Application to this Honourable Court for a final order approving the Arrangement (the “Final Order”); and | ||
(f) | the form of proxy for use by the Shareholders, |
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(collectively the “Meeting Materials”); | ||
and this Interim Order (collectively with the Meeting Materials, the “Mailed Materials”), in substantially the form contained in Exhibit “B” to the Affidavit #1 of Lawrence W. Talbot sworn July 8, 2010, with such amendments and inclusions thereto as counsel for the Petitioner may deem necessary or desirable, provided that such amendments and inclusions are not inconsistent with the terms of this Interim Order, shall be sent to: |
(a) | the Shareholders as they appear on the securities registers of the Petitioner on the Record Date, such Meeting Materials to be sent at least twenty-one (21) days prior to the date of the Meeting, excluding the date of mailing, by one of the following methods: |
(i) | by prepaid ordinary or air mail addressed to the Shareholder at his, her, or its address as it appears on the applicable securities registers of the Petitioner as at the Record Date; | ||
(ii) | by delivery in person or by delivery to the addresses specified in paragraph 6(a)(i) above; or | ||
(iii) | by email or facsimile transmission to any Shareholder who identifies himself, herself or itself to the satisfaction of the Petitioner, acting through its representatives, who requests such email or facsimile transmission; |
(b) | the directors and auditors of the Petitioner by mailing the Meeting Materials by prepaid ordinary mail, or by email or facsimile transmission, to such persons at least twenty-one (21) days prior to the date of the Meeting, excluding the date of mailing or transmittal; and | ||
(c) | in the case of non-registered Shareholders, by providing copies of the Mailed Materials to intermediaries and registered nominees for sending to beneficial owners in accordance with National Instrument 54-101 —Communications with Beneficial Owners of Securities of a Reporting Issuerof the Canadian Securities |
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Administrators at least four (4) business days prior to the twenty-first (21st) day prior to the date of the Meeting. |
7. | Delivery of the Mailed Materials as ordered herein shall constitute compliance with the requirements of section 290(1)(a)of the Business Corporations Act | |
8. | The Circular, Notice of Hearing of Application and this Interim Order (the “Notice Materials”) in substantially the form contained in Exhibit “B” to the Affidavit #1 of Lawrence W. Talbot sworn July 8, 2010, with such amendments and inclusions thereto as counsel for the Petitioner may deem necessary or desirable, provided that such amendments and inclusions are not inconsistent with the terms of this Interim Order, shall be mailed by prepaid ordinary mail or sent by email or facsimile transmission to the registered holders of options to purchase shares of the Petitioner and warrants to purchase shares of the Petitioner at their registered addresses as they appear on the books of the Petitioner on the Record Date, which mailing shall occur on or around July 15, 2010. | |
9. | The sending of the Mailed Materials as herein described to the Shareholders, directors and auditors of the Petitioner and the sending of the Notice Materials as herein described to the registered holders of options to purchase shares of the Petitioner and warrants to purchase shares of the Petitioner shall constitute good and sufficient service of the Notice of Hearing of Application upon all who may wish to appear in these proceedings, and no other service need be made. | |
10. | The accidental failure or omission to give notice of the Meeting or Notice of Hearing of Application to, or the non-receipt of such notices by, or any failure or omission to give such notice as a result of events beyond the reasonable control of the Petitioner (including, without limitation, any inability to use postal services) to any one or more of the persons specified herein shall not constitute a breach of this Interim Order, or in relation to notice to the shareholders of the Petitioner, a defect in the calling of the Meeting, and shall not invalidate any resolution passed or proceeding taken at the Meeting, but if any such failure or omission is brought to the attention of the Petitioner then it shall use reasonable best efforts to rectify it by the method and in the time most reasonably practicable in the circumstances. |
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11. | The Petitioner be at liberty to give notice of this application to persons outside the jurisdiction of this Court in the manner specified herein. |
12. | The Meeting Materials shall be deemed, for the purposes of this Interim Order, to have been received: |
(a) | in the case of mailing, the day, Saturdays and holidays excepted, following the date of mailing; | ||
(b) | in the case of delivery in person, the day following personal delivery or the day following delivery to the person’s address in paragraph 6 above; and | ||
(c) | in the case of any means of transmitted, recorded or electronic communication, when dispatched or delivered for dispatch. |
13. | Notice of any amendments, updates or supplement to any of the information provided in the Meeting Materials may be communicated to the shareholders of the Petitioner by press release, news release, newspaper advertisement or by notice sent to the shareholders by any of the means set forth in paragraph 6 herein, as determined to be the most appropriate method of communication by the Board of Directors of the Petitioner. |
14. | The Chair of the Meeting shall be an officer or director of the Petitioner or such other person as may be appointed by the Shareholders for that purpose. | |
15. | The Chair of the Meeting is at liberty to call on the assistance of legal counsel to the Petitioner at any time and from time to time, as the Chair of the Meeting may deem necessary or appropriate, during the Meeting, and such legal counsel is entitled to attend the Meeting for this purpose. |
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16. | The only persons entitled to attend or speak at the Meeting shall be the Shareholders, their proxyholders, the auditors of the Petitioner, the officers and directors of the Petitioner, employees and agents of the transfer agent, Computershare Investor Services, employees and agents of the solicitation agent, the advisors to the Petitioner (including legal and financial advisors), and such other persons with the permission of the Chair of the Meeting. Directors and officers of Corvus and Corvus’s advisors (including legal and financial advisors) shall be entitled to attend the Meeting. | |
17. | The Meeting may be adjourned for any reason upon the approval of the Chair of the Meeting, and if the Meeting is adjourned, it shall be reconvened at a place and time to be designated by the Chair of the Meeting to a date which is not more than 30 days thereafter except for the reason of a lack of quorum. |
18. | The quorum required at the Meeting shall be the quorum required by the Articles of the Petitioner. | |
19. | If no quorum of Shareholders is present within one-half hour from the time set for the holding of the Meeting, the Meeting shall stand adjourned to the same day in the next week at the same time and place and, if such day is a non-business day, the next business day following such day at the same time and place, and if at such adjourned meeting a quorum is not present within one-half hour from the time set for the holding of the Meeting, the Shareholders present, or represented by proxy, and being one or more Shareholders entitled to vote at the Meeting, shall constitute a quorum. | |
20. | Each Shareholder shall be entitled to one vote for each Common Share held by such Shareholder. | |
21. | The vote of Shareholders required to adopt the Arrangement Resolution at the Meeting shall be the affirmative vote of not less than 662/3% of the votes cast by Shareholders who vote in person or by proxy at the Meeting. |
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22. | A representative of the Petitioner who attends the Meeting, shall, in due course, file with the Court an affidavit verifying the actions taken and the decisions reached by the Shareholders with respect to the Arrangement. | |
23. | The only persons entitled to vote at the Meeting or any adjournment(s) thereof either in person or by proxy shall be the registered holders of the Common Shares as at the close of business on July 9, 2010 (and under applicable securities legislation and policies, the beneficial owners of the Common Shares registered in the name of intermediaries). Such persons and the directors and auditors of the Petitioner shall also be entitled to notice of the Meeting. |
24. | A representative of the Petitioner’s registrar and transfer agent (or any agent thereof) is authorized to act as a scrutineer for the Meeting. |
25. | The Petitioner is authorized to use the form of proxy in connection with the Meeting, in substantially the same form contained in Exhibit “B” to the Affidavit #1 of Lawrence Talbot sworn July 8, 2010 and the Petitioner may in its discretion waive generally the time limits for deposit of proxies by Shareholders if the Petitioner deems it reasonable to do so. The Petitioner is authorized, at its expense, to solicit proxies, directly and through its officers, directors and employees, and through such agents or representatives as it may retain for that purpose, and by mail or such other forms of personal or electronic communication as it may determine. | |
26. | The procedure for the use of proxies at the Meeting shall be as set out in the Meeting Materials. |
27. | Each Shareholder be accorded the rights of dissent with respect to the Arrangement Resolution approving the Arrangement, as set out in Division 2 of Part 8 of theBusiness |
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Corporations Act,as modified by the Plan of Arrangement, the Interim Order and the Final Order. |
28. | Unless the directors of the Petitioner by resolution determine to abandon the Arrangement, upon the approval, with or without variation by the Shareholder of the Arrangement Resolution, in the manner set forth in this Interim Order, the Petitioner may apply to this Court for an order (being the Final Order): |
(a) | pursuant to section 291(4)(c) of theBusiness Corporations Act,declaring that the Arrangement, including the terms and conditions thereof and the distributions, issuances, exchanges and/or adjustments of securities contemplated therein, is fair and reasonable to the shareholders of the Petitioner; and | ||
(b) | pursuant to section 291(4)(a) of theBusiness Corporations Act,approving the Arrangement, including the terms and conditions thereof and the distributions, issuances, exchanges, reduction of capital, and/or adjustments of securities contemplated therein, |
and that the application for the Final Order (the “Final Application”) be set down for hearing before the presiding Master or Judge in Chambers at the Courthouse at 800 Smithe Street, Vancouver, British Columbia, on August 20, 2010 at 9:45 a.m., or such other date and time as the directors of the Petitioner may by resolution decide, and that the Petitioner be at liberty to proceed with the Final Application on that date. | ||
29. | Any securityholder of the Petitioner, any director or auditor of the Petitioner, or any other interested party with leave of the Court desiring to support or oppose the application, may appear (either in person or by counsel) and make submissions at the hearing of the Final Application provided that such person must request a copy of the Petition for the proceedings, and any other court document as may be desired, on or before 4:00 p.m. on August 6, 2010 and must file with the Court at the Court Registry, 800 Smithe Street, Vancouver, British Columbia, a response to petition in the form prescribed by the Supreme Court Civil Rules and deliver a copy thereof, together with all material on |
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which such person intends to rely at the hearing of the Final Application, to the solicitor for the Petitioner at the address for delivery set out below by or before 4:00 p.m. (Vancouver time) on August 13, 2010. |
30. | The only persons entitled to notice of any further proceedings herein, including any hearing to sanction and approve the Arrangement, shall be the solicitors for the Petitioner and persons who have delivered a response to petition in the form prescribed by the Supreme Court Civil Rules in accordance with this Interim Order. | |
31. | Subject to other provisions in this Interim Order, no material other than that contained in the Circular need be served on any persons in respect of these proceedings. | |
32. | If the Final Application is adjourned, only those persons who have filed and delivered a response to petition in the form prescribed by the Supreme Court Civil Rules in accordance with this Interim Order need to be served and provided with notice of the adjourned date. | |
33. | The Petitioner shall be entitled, at any time, to apply to vary this Interim Order. | |
34. | The provisions of Rules 8-1, 8-2, 8-3, 16-1 and 17-1 of theSupreme Court Civil Rulesbe hereby dispensed with for the purposes of any further application to be made pursuant to this Petition. | |
35. | The Petitioner and the Shareholders, directors and auditors shall, and hereby do, have liberty to apply for such further orders as may be appropriate. |
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/s/ David J. Sutherland | |||||||
David J. Sutherland | |||||||
Signature of Lawyer for the Petitioner | |||||||
BY THE COURT | ||||
[ILLEGIBLE] | ||||
REGISTRAR | ||||
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Vancouver Registry
S.B.C. 2002, c. 57 AS AMENDED
TOWER HILL MINES LTD., CORVUS GOLD INC. AND THE SHAREHOLDERS OF
INTERNATIONAL TOWER HILL MINES LTD.
TO: | The shareholders, directors and auditors of the Petitioner. |
1. | Date of hearing |
Table of Contents
2. | Duration of hearing |
3. | Jurisdiction |
Suite 2300, 550 Burrard Street
PO Box 30, Bentall 5
Vancouver, B.C. V6C 2B5
Telephone: (604) 683-6498
Attention: David J. Sutherland
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/s/ David J. Sutherland | ||||
SOLICITOR FOR THE PETITIONER |
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(An Exploration Stage Company)
Table of Contents
(An Exploration Stage Company)
Financial Statements
(Expressed in Canadian dollars)
May 31, 2010 | Page | |||
3 | ||||
4 | ||||
5 | ||||
6 | ||||
7-10 |
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CHARTERED | 1100-1177 West Hastings Street | |||
ACCOUNTANTS | Vancouver, BC V6 E 4T5 | |||
Tel: 604-687-4511 | ||||
MacKay LLP | Fax: 604-687-5805 | |||
Toll Free: 1-800-351-0426 | ||||
www.MacKayLLP.ca |
Vancouver, Canada | “MacKay LLP” | |
June 15, 2010 | Chartered Accountants |
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(An Exploration Stage Company)
Balance Sheet
As at May 31, 2010
(Expressed in Canadian dollars)
ASSETS | ||||
Current | ||||
Accounts receivable | $ | 55 | ||
$ | 55 | |||
LIABILITIES | ||||
Current | ||||
Due to related party (note 5) | $ | 1,238 | ||
SHARE CAPITAL AND DEFICIT | ||||
Share capital (note 4) | 1 | |||
Deficit | (1,184 | ) | ||
(1,183 | ) | |||
$ | 55 | |||
Subsequent event(note 7)
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(An Exploration Stage Company)
Statement of Operations, Comprehensive Loss and Deficit
For the Period from April 13, 2010 to May 31, 2010
(Expressed in Canadian dollars)
For the period | |||||
from April 13, 2010 | |||||
to May 31, 2010 | |||||
Expenses | |||||
Incorporation fees | $ | 1,184 | |||
Loss and comprehensive loss for the period | 1,184 | ||||
Deficit, beginning of period | — | ||||
Deficit, end of period | $ | 1,184 | |||
Weighted average number of shares outstanding | 1 | ||||
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(An Exploration Stage Company)
(Expressed in Canadian dollars)
For the period from | ||||
April 13, 2010 to | ||||
May 31, 2010 | ||||
Operating Activities | ||||
Loss for the period | $ | (1,184 | ) | |
Changes in non-cash items: | ||||
Accounts receivable | (55 | ) | ||
Due to related party | 1,238 | |||
Cash Used in Operating Activities | (1 | ) | ||
Financing Activity | ||||
Issuance of capital stock | 1 | |||
Cash Provided by Financing Activity | 1 | |||
Increase in cash | — | |||
Cash, beginning of period | — | |||
Cash, end of period | $ | — | ||
Supplemental cash flow information | ||||
Interest paid | $ | — | ||
Income taxes paid | $ | — | ||
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(An Exploration Stage Company)
(Expressed in Canadian dollars)
a) | Measurement uncertainty | ||
The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those reported. | |||
b) | Financial instruments — Recognition and measurement; Disclosure and presentation | ||
All financial instruments are classified into one of the following five categories: held-for-trading, held-to-maturiry, loans and receivables, available-for-sale financial assets, or other financial liabilities. Initial and subsequent measurement and recognition of changes in the value of financial instruments depends on their initial classification. Transaction costs related to financial instruments will be expensed in the period incurred. | |||
The Company classified its financial instruments as follows: |
• | Due to related party is classified as other liabilities. |
c) | Comprehensive income | ||
Comprehensive income is the change in shareholders’ equity during a period from transactions and other events from non-owner sources. CICA Handbook Section 1530 requires certain gains and losses that would otherwise be recorded as part of the net earnings to be presented in other “comprehensive income” until it is considered appropriate to recognize into net earnings. This standard requires the presentation of comprehensive income, and its components in a separate financial statement that is displayed with the same prominence as the other financial statements. | |||
There are no material differences between comprehensive income (loss) and net loss for the period reported. |
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(An Exploration Stage Company)
Notes to the Financial Statements
For the Period from April 13, 2010 to May 31, 2010
(Expressed in Canadian dollars)
d) | Loss per share | ||
Basic loss per share is calculated using the weighted average number of shares outstanding during the period. There is one share and no options or warrants outstanding during the period; therefore loss per share and diluted loss per share have not been presented. | |||
e) | Future accounting changes | ||
International Financial Reporting Standards (“IFRS”) | |||
In 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed that the transition to IFRS from Canadian GAAP will be effective for fiscal years beginning on or after January 1, 2011 for publicly accountable enterprises. The Company will therefore be required to present IFRS financial statements for its August 31, 2011 interim financial statements. The effective date will require the restatement for comparative purposes of amounts reported by the Company for the interim periods and for the year ended May 31, 2011. The Company is currently evaluating the impact of the conversion on the Company’s financial statements and is considering accounting policy choices available under IFRS. |
a) | Credit risk | ||
Credit risk is the risk of financial loss to the Company if a counter party to a financial instrument fails to meet its contractual obligations. | |||
The Company is not exposed to significant credit risk as the receivables are from governmental agencies. | |||
b) | Liquidity risk | ||
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. | |||
At May 31, 2010, the Company had an obligation to a related party of $1,238, which is payable within three months and is expected to be settled from available working capital. |
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(An Exploration Stage Company)
Notes to the Financial Statements
For the Period from April 13, 2010 to May 31, 2010
(Expressed in Canadian dollars)
c) | Market risk | ||
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises interest rate risk, foreign currency risk, and other price risk. |
i. | Interest rate risk | ||
The Company does not hold cash in bank accounts and does not earn interest income; therefore, the Company is not subject to interest rate risk. | |||
ii. | Foreign currency risk | ||
The Company does not have monetary financial instruments denominated in foreign currency; therefore the Company is not exposed to foreign currency risk. | |||
iii. | Other price risk | ||
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from interest rate risk or foreign exchange risk or commodity price risk. The Company is not exposed to other price risk. |
Number of | Share | Contributed | ||||||||||
shares | Capital | Surplus | ||||||||||
Balance, April 13,2010 | — | $ | — | $ | — | |||||||
Issued for cash | ||||||||||||
Founder’s share | 1 | 1 | — | |||||||||
Balance, May 31,2010 | 1 | $ | 1 | $ | — | |||||||
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(An Exploration Stage Company)
Notes to the Financial Statements
For the Period from April 13, 2010 to May 31, 2010
(Expressed in Canadian dollars)
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Table of Contents
(An Exploration Stage Company)
May 31, 2010 and 2009
Table of Contents
(An Exploration Stage Company)
Pro-Forma Consolidated Financial Statements
(Unaudited—Prepared by Management)
(Expressed in Canadian dollars)
May 31, 2010 | Page | |||
3 | ||||
4 | ||||
5 | ||||
6-7 |
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(An Exploration Stage Company)
As at May 31, 2010
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nevada and | Pro-forma | |||||||||||||||||||
Other Alaska | consolidated | |||||||||||||||||||
Corvus Gold | Business | Pro-forma | Corvus Gold | |||||||||||||||||
Inc. | Note 2a | Notes | adjustments | Inc. | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current | ||||||||||||||||||||
Cash | $ | — | $ | — | 2b | $ | 3,300,000 | $ | 3,300,000 | |||||||||||
Accounts receivable | 55 | — | 55 | |||||||||||||||||
3,300,055 | ||||||||||||||||||||
Mineral properties | — | 12,597,678 | 12,597,678 | |||||||||||||||||
$ | 55 | $ | 12,597,678 | $ | 15,897,733 | |||||||||||||||
LIABILITIES | ||||||||||||||||||||
Current | ||||||||||||||||||||
Accounts payable and accrued liabilities | $ | — | $ | 23,499 | $ | 23,499 | ||||||||||||||
Due to related party | 1,238 | — | 1,238 | |||||||||||||||||
1,238 | 23,499 | 24,737 | ||||||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Share capital | 1 | — | 3 | 23,566,465 | ||||||||||||||||
2c | (3,880,199 | ) | 19,686,267 | |||||||||||||||||
Contributed surplus | — | 20,266,465 | 2b | 3,300,000 | ||||||||||||||||
3 | (23,566,465 | ) | ||||||||||||||||||
2c | 3,880,199 | 3,880,199 | ||||||||||||||||||
Deficit | (1,184 | ) | (7,692,286 | ) | (7,693,470 | ) | ||||||||||||||
(1,183 | ) | 12,574,179 | 15,872,996 | |||||||||||||||||
$ | 55 | $ | 12,597,678 | $ | 15,897,733 | |||||||||||||||
“Lawrence Talbot”Director |
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(An Exploration Stage Company)
For the year ended May 31, 2010
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Pro-forma | ||||||||||||
Nevada and | consolidated | |||||||||||
Corvus | Other Alaska | Corvus Gold | ||||||||||
Gold Inc. | Business | Inc. | ||||||||||
Expenses | ||||||||||||
Administration | $ | — | $ | 9,887 | $ | 9,887 | ||||||
Consulting fees | — | 162,924 | 162,924 | |||||||||
Donations | — | 8,701 | 8,701 | |||||||||
Incorporation fees | 1,184 | — | 1,184 | |||||||||
Insurance | — | 40,165 | 40,165 | |||||||||
Investor relations | — | 202,893 | 202,893 | |||||||||
Office and miscellaneous | — | 39,045 | 39,045 | |||||||||
Professional fees | — | 141,699 | 141,699 | |||||||||
Property investigations | — | 383 | 383 | |||||||||
Rent | — | 28,957 | 28,957 | |||||||||
Regulatory | — | 82,239 | 82,239 | |||||||||
Travel and promotion | — | 41,183 | 41,183 | |||||||||
Wages and benefits | — | 1,198,015 | 1,198,015 | |||||||||
(1,184 | ) | (1,956,091 | ) | (1.957,275 | ) | |||||||
Other item | ||||||||||||
Gain on foreign exchange | — | 23,183 | 23,183 | |||||||||
Loss and comprehensive loss for the year | $ | (1,184 | ) | $ | (1,932,908 | ) | $ | (1,934,092 | ) | |||
Basic and diluted loss per share | $ | (0.06 | ) | |||||||||
Weighted average number of shares outstanding | 29,787,433 | |||||||||||
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(An Exploration Stage Company)
For the year ended May 31, 2009
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Pro-forma | ||||||||||||
Nevada and | consolidated | |||||||||||
Corvus | Other Alaska | Corvus Gold | ||||||||||
Gold Inc. | Business | Inc. | ||||||||||
Expenses | ||||||||||||
Administration | $ | — | $ | 14,529 | $ | 14,529 | ||||||
Consulting fees | — | 611,203 | 611,203 | |||||||||
Donations | — | 9,946 | 9,946 | |||||||||
Insurance | — | 39,496 | 39,496 | |||||||||
Investor relations | — | 256,261 | 256,261 | |||||||||
Office and miscellaneous | — | 54,382 | 54,382 | |||||||||
Professional fees | — | 146,507 | 146,507 | |||||||||
Property investigations | — | 34,455 | 34,455 | |||||||||
Rent | — | 39,758 | 39,758 | |||||||||
Regulatory | — | 30,151 | 30,151 | |||||||||
Travel and promotion | — | 90,229 | 90,229 | |||||||||
Wages and benefits | — | 1,071,598 | 1,071,598 | |||||||||
— | (2,398,515 | ) | (2,398,515 | ) | ||||||||
Other item | ||||||||||||
Gain on foreign exchange | — | 54,275 | 54,275 | |||||||||
Loss and comprehensive loss for the year | $ | — | $ | (2,344,240 | ) | $ | (2,344,240 | ) | ||||
Basic and diluted loss per share | $ | (0.10 | ) | |||||||||
Weighted average number of shares outstanding | 22,544,778 | |||||||||||
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(An Exploration Stage Company)
May 31, 2010
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
1. | PLAN OF ARRANGEMENT AND BASIS OF PRESENTATION |
2. | PRO-FORMA ASSUMPTIONS |
a) | ITH will transfer its wholly-owned subsidiaries, Talon Gold Nevada Inc. (“Talon Nevada”), incorporated in Nevada, United States and Raven Gold Alaska Inc. (“Raven Gold”), incorporated in Alaska, United States. Talon Nevada holds the Nevada assets and Raven Gold holds the existing Other Alaska assets which include the interests in a number of precious and base metal projects, being the Chisna, West Pogo, LMS, Terra and North Bullfrog properties. The balances used in the pro-forma balance sheet are those of the Nevada and Other Alaska Business as at February 28, 2010. | $ | 12,574,179 | |||||
b) | ITH will contribute $3,300,000 as additional working capital. | 3,300,000 | ||||||
c) | Corvus will reclassify ITH contributions made by way of stock-based compensation from share capital to contributed surplus | 3,880,199 |
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(An Exploration Stage Company)
Notes to the Consolidated Pro-Forma Financial Statements
May 31, 2010
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
2. | PRO-FORMA ASSUMPTIONS (cont’d) |
d) | The expenses used in the pro-forma consolidated statement of operations and comprehensive loss for the year ended May 31, 2010 are those of the Nevada and Other Alaska Business for the nine months ended February 28, 2010 plus a straight-line increase to reflect a full year of operations. | ||
e) | The expenses used in the pro-forma consolidated statement of operations and comprehensive loss for the year ended May 31, 2009 are those of the Nevada and Other Alaska Business for the year then ended. |
3. | SHAREHOLDERS’ EQUITY |
Unlimited common shares without par value.
Number of | Contributed | |||||||||||||||||||
Issued | shares | Share Capital | Surplus | Deficit | Total | |||||||||||||||
Issued for Cash | 1 | $ | 1 | $ | — | $ | (1,184 | ) | $ | (1,183 | ) | |||||||||
Nevada and Other Alaska Business | — | — | 20,266,465 | (7,692,286 | ) | 12,574,179 | ||||||||||||||
ITH working capital contribution | — | — | 3,300,000 | — | 3,300,000 | |||||||||||||||
Shares issued under Plan of Arrangement | 33,611,366 | 23,566,465 | (23,566,465 | ) | — | — | ||||||||||||||
Corvus reclassify contributions by way of stock-based compensation from share capital to contributed surplus (note 2d) | — | (3,880,199 | ) | 3,880,199 | — | — | ||||||||||||||
Pro-forma Shareholders’ Equity — May 31, 2010 | 33,611,367 | $ | 19,686,267 | $ | 3,880,199 | $ | (7,693,470 | ) | $ | 15,872,996 | ||||||||||
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(An Exploration Stage Company)
February 28, 2010 and 2009
(An Exploration Stage Company)
Pro – Forma Consolidated Financial Statements
(Unaudited — Prepared by Management)
(Expressed in Canadian dollars)
February 28, 2010 | Page | |||
3 | ||||
4 | ||||
5 | ||||
6-8 |
Table of Contents
(An Exploration Stage Company)
Interim Consolidated Balance Sheet
As at February 28, 2010
(Expressed in Canadian dollars)
(Unaudited-Prepared by Management)
Transfer of | ||||||||||||||||||||
International | Nevada and Other | Pro-forma | ||||||||||||||||||
Tower Hill | Alaska Business | Pro-forma | consolidated | |||||||||||||||||
Mines Ltd. | (note 2a) | Notes | adjustments | Corvus Gold Inc. | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current | ||||||||||||||||||||
Cash | $ | 20,018,617 | $ | — | 2b | $ | (3,300,000 | ) | $ | 16,718,617 | ||||||||||
Marketable securities | 162,500 | — | 162,500 | |||||||||||||||||
Accounts receivable | 90,412 | — | 90,412 | |||||||||||||||||
Prepaid expenses | 138,603 | — | 138,603 | |||||||||||||||||
20,410,132 | — | 17,110,132 | ||||||||||||||||||
Property and equipment | 83,466 | — | 83,466 | |||||||||||||||||
Mineral properties | 49,036,283 | (12,597,678 | ) | 36,438,605 | ||||||||||||||||
$ | 69,529,881 | $ | (12,597,678 | ) | $ | 53,632,203 | ||||||||||||||
LIABILITIES | ||||||||||||||||||||
Current | ||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 1,585,577 | $ | (23,499 | ) | $ | 1,562,078 | |||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Share capital (Old) | 92,810,790 | — | 2c | (23,566,465 | ) | |||||||||||||||
2e | (69,244,325 | ) | — | |||||||||||||||||
Share capital (New) | — | — | 2e | 69,244,325 | 69,244,325 | |||||||||||||||
Contributed surplus | 6,614,808 | (20,266,465 | ) | 2b | (3,300,000 | ) | ||||||||||||||
2c | 23,566,463 | 6,614,808 | ||||||||||||||||||
Deficit | (31,481,294 | ) | 7,692,286 | (23,789,008 | ) | |||||||||||||||
67,944,304 | (12,574,179 | ) | 52,070,125 | |||||||||||||||||
$ | 69,529,881 | $ | (12,597,678 | ) | $ | 53,632,203 | ||||||||||||||
Approved on behalf of the Directors: | ||||
“Hendrik Van Alphen” Director | ||||
“Anton J. Drescher” Director | ||||
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(An Exploration Stage Company)
Pro-Forma Consolidated Statement of Operations and Comprehensive Loss
For the Nine months ended February 28, 2010
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Pro-Forma | ||||||||||||
Transfer of | Consolidated | |||||||||||
International | Nevada and | International | ||||||||||
Tower Hill | Other Alaska | Tower Hill | ||||||||||
Mines Ltd. | Business | Mines Ltd. | ||||||||||
Expenses | ||||||||||||
Administration | $ | 28,863 | $ | (7,415 | ) | $ | 21,448 | |||||
Amortization | 22,062 | — | 22,062 | |||||||||
Consulting fees | 475,633 | (122,193 | ) | 353,440 | ||||||||
Donations | 25,399 | (6,526 | ) | 18,873 | ||||||||
Insurance | 117,255 | (30,124 | ) | 87,131 | ||||||||
Investor relations | 592,320 | (152,170 | ) | 440,150 | ||||||||
Office and miscellaneous | 114,165 | (29,283 | ) | 84,882 | ||||||||
Professional fees | 414,097 | (106,274 | ) | 307,823 | ||||||||
Property investigations | 1,471 | (287 | ) | 1,184 | ||||||||
Rent | 84.536 | (21,718 | ) | 62,818 | ||||||||
Regulatory | 240,085 | (61,679 | ) | 178,406 | ||||||||
Travel and promotion | 120,225 | (30,887 | ) | 89,338 | ||||||||
Wages and benefits | 3,497,443 | (898,512 | ) | 2,598,931 | ||||||||
(5,733,554 | ) | 1,467,068 | (4,266,486 | ) | ||||||||
Other items | ||||||||||||
Gain on foreign exchange | 30,437 | (17,387 | ) | 13,050 | ||||||||
Interest income | 87,293 | — | 87,293 | |||||||||
Write-off of mineral properties | (2,385,656 | ) | — | (2,385,656 | ) | |||||||
Unrealized gain (loss) on marketable securities | 48,750 | — | 48,750 | |||||||||
(2,219,176 | ) | (17,387 | ) | (2,236,563 | ) | |||||||
Loss and comprehensive loss for the period | $ | (7,952,730 | ) | $ | 1,449,681 | $ | (6,503,049 | ) | ||||
Basic and diluted loss per share | $ | (0.11 | ) | |||||||||
Weighted average number of shares outstanding | 58,129,208 | |||||||||||
4
Table of Contents
(An Exploration Stage Company)
Pro–Forma Consolidated Statement of Operations and Comprehensive Loss
For the Nine months ended February 28, 2009
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Pro-Forma | ||||||||||||
Transfer of | Consolidated | |||||||||||
International | Nevada and | International | ||||||||||
Tower Hill | Other Alaska | Tower Hill | ||||||||||
Mines Ltd. | Business | Mines Ltd. | ||||||||||
Expenses | ||||||||||||
Administration | $ | 34,300 | $ | (12,278 | ) | $ | 22,022 | |||||
Amortization | 36,648 | — | 36,648 | |||||||||
Consulting fees | 1,180,284 | (422,481 | ) | 757,803 | ||||||||
Donations | 11,129 | (3,983 | ) | 7,146 | ||||||||
Insurance | 86,226 | (30,864 | ) | 55,362 | ||||||||
Investor relations | 663,352 | (237,446 | ) | 425,906 | ||||||||
Office and miscellaneous | 125,671 | (44,984 | ) | 80,687 | ||||||||
Professional fees | 206,134 | (73,786 | ) | 132,348 | ||||||||
Property investigations | 96,290 | (29,088 | ) | 67,202 | ||||||||
Rent | 87,135 | (31,190 | ) | 55,945 | ||||||||
Regulatory | 32,341 | (11,576 | ) | 20,765 | ||||||||
Travel and promotion | 213,432 | (76,397 | ) | 137,035 | ||||||||
Wages and benefits | 1,368,129 | (489,721 | ) | 878,408 | ||||||||
(4,141,071 | ) | 1,463,794 | (2,677,277 | ) | ||||||||
Other Items | ||||||||||||
Gain on foreign exchange | 217,048 | (51,984 | ) | 165,064 | ||||||||
Interest income | 112,704 | — | 112,704 | |||||||||
Write-off of mineral properties | (2,618,034 | ) | — | (2,618,034 | ) | |||||||
Loss on sale of equipment | (7,040 | ) | — | (7,040 | ) | |||||||
Unrealized gain (loss) on marketable securities | (169,000 | ) | — | (169,000 | ) | |||||||
(2,464,322 | ) | (51,984 | ) | (2,516,306 | ) | |||||||
Loss and comprehensive loss for the period | $ | (6,605,393 | ) | $ | 1,411,810 | $ | (5,193,583 | ) | ||||
Basic and diluted loss per share | $ | (0,12 | ) | |||||||||
Weighted average number of shares outstanding | 43,111,245 | |||||||||||
5
Table of Contents
(An Exploration Stage Company)
February 28, 2010
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
1. | PLAN OF ARRANGEMENT AND BASIS OF PRESENTATION | |
The accompanying pro-forma consolidated financial statements have been compiled for purposes of inclusion in an Information Circular of International Tower Hill Mines Ltd. (“ITH”) dated July 9, 2010 which gives effect to a plan of arrangement (“Arrangement”) whereby after the Arrangement, ITH shareholder will receive one Corvus Gold Inc. (“Corvus”) common share for every two ITH common shares held as at the effective date of the Arrangement as a return of capital and will then exchange each common share of ITH for a new common share of ITH. | ||
The unaudited pro-forma consolidated balance sheet and statements of operations and comprehensive loss reflect the Arrangement as a spin-out whereby ITH will spin-out to Corvus all of ITH’s other existing Alaska (other than the Livengood project) and Nevada assets and approximately $3,300,000 in working capital. This Arrangement is subject to approval by ITH’s shareholders and the appropriate regulatory authorities. | ||
The pro-forma consolidated balance sheet and statements of operations and comprehensive loss is not necessarily indicative of ITH as at the time of closing the transaction referred to above. The pro-forma consolidated balance sheet and statements of opetations and comprehensive loss should be read in conjunction with the interim financial statements of ITH for the period ended February 28, 2010 and the interim financial statements of the Nevada and Other Alaska Business for the periods ended February 28, 2010 and 2009, which are incorporated in or by reference in the Information Circular. | ||
2. | PRO-FORMA ASSUMPTIONS | |
The unaudited pro-forma consolidated financial statement gives effect to the accounting continuation of the Nevada and Other Alaska Business as Corvus as described in the Information Circular, as if it had occurred as at February 28, 2010 for purposes of the consolidated balance sheet and as of June 1, 2008 for purposes of the consolidated statements of operations and comprehensive loss and is based on the following assumptions: |
a) | ITH will transfer its wholly-owned subsidiaries, Talon Gold Nevada Inc. (“Talon Nevada”), incorporated in Nevada, United States and Raven Gold Alaska Inc. (“Raven Gold”), incorporated in Alaska, United States. Talon Nevada holds the Nevada assets and Raven Gold holds the existing Other Alaska assets which include the interests in a number of precious and base metal projects, being the Chisna, West Pogo, LMS, Terra and North Bullfrog properties. The balances used in the pro-forma balance sheet are those of the Nevada and Other Alaska Business as at February 28, 2010. | $ | 12,574,179 | |||||
b) | ITH will contribute $3,300,000 as additional working capital. | 3,300,000 | ||||||
c) | ITH will distribute, as a return of capital (“ROC”) to its existing shareholders, an amount equal to the fair market value through a distribution of the common shares of Corvus. | 23,566,465 |
6
Table of Contents
(An Exploration Stage Company)
Notes to the Consolidated Pro-Forma Financial Statements
February 28, 2010
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
2. | PRO-FORMA ASSUMPTIONS (cont’d) |
d) | The existing common shares of ITH (“Share Capital (Old)”) will then be exchanged for new common shares (“Share Capital (New)”) at a ratio of 1:1. | $ | 69,244,325 |
7
Table of Contents
(An Exploration Stage Company)
Notes to the Consolidated Pro-Forma Financial Statements
February 28, 2010
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
3. | SHAREHOLDERS’ EQUITY | |
Authorized | ||
500,000,000 common shares without par value. |
Number of | Share Capital | Number of | Share Capital | Contributed | ||||||||||||||||||||||||
Issued | shares (Old) | (Old) | shares (New) | (New) | Surplus | Deficit | Total | |||||||||||||||||||||
Balance at February 28, 2010 | 60,434,557 | $ | 92,810,790 | — | $ | — | $ | 6,614,808 | $ | (31,481,294 | ) | $ | 67,944,304 | |||||||||||||||
Nevada and Other Alaska Business | — | — | — | — | (20,266,465 | ) | 7,692,286 | (12,574,179 | ) | |||||||||||||||||||
ITH working capital contributions to Corvus | — | — | — | — | (3,300,000 | ) | — | (3,300,000 | ) | |||||||||||||||||||
ITH will distribute, as a ROC to its existing shareholders, an amount equal to the fair market value through a distribution of the common shares of Corvus | — | (23,566,465 | ) | — | — | 23,566,465 | — | — | ||||||||||||||||||||
The share capital (Old) of ITH will then be exchange for Share Capital (New) of ITH at a ratio of 1:1 | (60,434,557 | ) | (69,244,325 | ) | 60,434,557 | 69,244,325 | — | — | — | |||||||||||||||||||
Pro-Forma Shareholders’ Equity February 28, 2010 | — | $ | — | 60,434,557 | $ | 69,244,325 | $ | 6,614,808 | $ | (23,789,008 | ) | $ | 52,070,125 | |||||||||||||||
8
Table of Contents
(An Exploration Stage Entity)
Table of Contents
(An Exploration Stage Entity)
Consolidated Financial Statements
(Expressed in Canadian dollars)
May 31, 2009 and 2008 | Page | |||
3 | ||||
4 | ||||
5 | ||||
6 | ||||
7 | ||||
8-30 |
2
Table of Contents
CHARTERED | 1100 - 1177 West Hastings Street | |||
ACCOUNTANTS | Vancouver, BC V6E 4T5 | |||
Tel: 604-687-4511 | ||||
MacKay LLP | Fax: 604-687-5805 | |||
Toll Free: 1-800-351-0426 | ||||
www.MacKayLLP.ca |
Vancouver, Canada June 25, 2010 | “MacKay LLP” Chartered Accountants |
3
Table of Contents
CHARTERED | 1100 - 1177 West Hastings Street | |||
ACCOUNTANTS | Vancouver, BC V6E 4T5 | |||
Tel: 604-687-4511 | ||||
MacKay LLP | Fax: 604-687-5805 | |||
Toll Free: 1-800-351-0426 | ||||
www.MacKayLLP.ca |
Vancouver, Canada June 25, 2010 | “MacKay LLP” Chartered Accountants |
4
Table of Contents
(An Exploration Stage Entity)
As at May 31
(Expressed in Canadian dollars)
2009 | 2008 | |||||||||||
ASSETS | ||||||||||||
Mineral properties (note 5) | $ | 11,054,413 | $ | 9,181,079 | ||||||||
$ | 11,054,413 | $ | 9,181,079 | |||||||||
LIABILITIES | ||||||||||||
Current | ||||||||||||
Accounts payable and accrued liabilities | $ | 32,898 | $ | 116,284 | ||||||||
CONTRIBUTED SURPLUS AND DEFICIT | ||||||||||||
Contributed surplus (note 7) | 17,264,120 | 12,963,160 | ||||||||||
Deficit | (6,242,605 | ) | (3,898,365 | ) | ||||||||
11,021,515 | 9,064,795 | |||||||||||
$ | 11,054,413 | $ | 9,181,079 | |||||||||
Nature and continuance of operations (note 2)
Subsequent events (note 13)
“Hendrik Van Alphen”Director | ||
“Anton Drescher”Director |
5
Table of Contents
(An Exploration Stage Entity)
For the Year ended May 31
(Expressed in Canadian dollars)
2009 | 2008 | 2007 | ||||||||||
Expenses | ||||||||||||
Administration (note 9) | $ | 14,529 | $ | 18,411 | $ | 37,827 | ||||||
Charitable donations | 9,946 | 12,497 | 17,738 | |||||||||
Consulting (note 9) | 611,203 | 116,302 | 1,263,514 | |||||||||
Insurance | 39,496 | 32,732 | 15,605 | |||||||||
Investor relations (note 9) | 256,261 | 310,375 | 267,840 | |||||||||
Office | 46,528 | 47,234 | 38,528 | |||||||||
Professional fees (note 9) | 146,507 | 80,673 | 68,424 | |||||||||
Property investigation | 34,455 | 38,769 | 41,339 | |||||||||
Regulatory | 30,151 | 43,657 | 34,019 | |||||||||
Rent (note 9) | 39,758 | 34,172 | 24,820 | |||||||||
Telephone | 7,854 | 9,971 | 8,221 | |||||||||
Travel | 90,229 | 81,307 | 59,123 | |||||||||
Wages and benefits (note 9) | 1,071,598 | 431,140 | 821,663 | |||||||||
(2,398,515 | ) | (1,257,240 | ) | (2,698,661 | ) | |||||||
Other item | ||||||||||||
Gain on foreign exchange | 54,275 | 53,457 | 4,079 | |||||||||
Loss and comprehensive loss for the year | (2,344,240 | ) | (1,203,783 | ) | (2,694,582 | ) | ||||||
Deficit, beginning of the year | (3,898,365 | ) | (2,694,582 | ) | — | |||||||
Deficit, end of the year | $ | (6,242,605 | ) | $ | (3,898,365 | ) | $ | (2,694,582 | ) | |||
Basic and fully diluted loss per share | $ | (0.10 | ) | $ | (0.06 | ) | $ | (0.20 | ) | |||
Weighted average number of shares outstanding | 22,544,778 | 19,596,680 | 13,550,552 | |||||||||
6
Table of Contents
(An Exploration Stage Entity)
Consolidated Statements of Cash Flows
For the Year ended May 31
(Expressed in Canadian dollars)
2009 | 2008 | 2007 | ||||||||||
Operating Activities | ||||||||||||
Loss and comprehensive loss for the year | $ | (2,344,240) | $ | (1,203,783) | $ | (2,694,582 | ) | |||||
Add item not affecting cashe Stock based compensation | 1,356,730 | 151,480 | 2,091,833 | |||||||||
Cash used in operating activities | (987,510 | ) | (1,052,303 | ) | (602,749 | ) | ||||||
Financing Activity | ||||||||||||
Funding provided by ITH | 2,117,480 | 5,661,766 | 4,098,060 | |||||||||
Cash provided by financing activity | 2,117,480 | 5,661,766 | 4,098,060 | |||||||||
Investing Activity | ||||||||||||
Expenditures on mineral properties | (1,129,970 | ) | (4,609,463 | ) | (3,495,311 | ) | ||||||
Cash used in investing activity | (1,129,970 | ) | (4,609,463 | ) | (3,495,311 | ) | ||||||
Increase in cash | — | — | — | |||||||||
Cash, beginning of year | — | — | — | |||||||||
Cash, end of year | $ | — | $ | — | $ | — | ||||||
Supplemental cash flow information | ||||||||||||
Interest paid | $ | — | $ | — | $ | — | ||||||
Income taxes paid | $ | — | $ | — | $ | — | ||||||
Non-cash financing and investing transactions | ||||||||||||
Shares issued to acquire mineral properties | $ | 826,750 | $ | — | $ | 960,021 | ||||||
Prepaid expenses included in mineral property expenditures | $ | — | $ | — | $ | 10,734 | ||||||
Accounts payable included in mineral property expenditures | $ | 32,898 | $ | 116,284 | $ | 436,478 |
7
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009 and 2008
(Expressed in Canadian dollars)
1. | TRANSFER OF ASSETS | |
On May 14, 2010, International Tower Hill Mines Ltd. (“ITH”) announced an agreement (the “Arrangement”) whereby its other existing Alaska (other than the Livengood project) and Nevada assets would be carved out into a new public company Corvus Gold Inc. (“Corvus”). | ||
Under the Arrangement, each shareholder of ITH will receive one Corvus common share for every two ITH common shares held as at the effective date of the Arrangement as a return of capital and will then exchange each common share of ITH for a new common share of ITH. ITH will transfer its wholly-owned subsidiaries, Raven Gold Alaska Inc. (“Raven Gold”), incorporated in Alaska, United States, and Talon Gold Nevada Inc. (“Talon Nevada”), incorporated in Nevada, United States. Following this transfer and related transactions, there will be an indirect spin-out of certain of its mineral properties, Chisna, West Pogo, Terra, LMS, and North Bullfrog (the “Spin-out Properties”), together (the “Nevada and Other Alaska Business”). | ||
The Arrangement is subject to shareholder approval and regulatory acceptance, including the acceptance for filing by Toronto Stock Exchange and the approval of the NYSE Amex and the Supreme Court of British Columbia, which is expected to be implemented through a plan of arrangement under the Business Corporation Act (BC). | ||
Nevada and Other Alaska Business’ consolidated financial statements reflect the balance sheets, statements of operations, comprehensive loss and deficit and cash flows for the business as if it had been an independent operator during the years reported. The statements of operations, comprehensive loss and deficit for the years ended May 31, 2009, 2008 and 2007 include an allocation of ITH’s general and administrative expenses incurred in each of these years. The allocation of general and administrative expenses was calculated on the basis of the ratio of costs incurred on the Spin-out Properties in each year presented as compared to the costs incurred on all mineral properties of ITH in each of these years. The financial statements have been presented under the continuity of interests basis of accounting with balance sheet amounts based on the amounts recorded by ITH. Management cautions readers of these financial statements, that the allocation of expenses does not necessarily reflect future general and administrative expenses. | ||
Nevada and Other Alaska Business’ opening deficit at June 1, 2006 is $Nil as the balance for the Spin-out Properties was $Nil. | ||
2. | NATURE AND CONTINUANCE OF OPERATIONS | |
The Nevada and Other Alaska Business (the “Entity”) is an exploration stage entity engaged in the business of acquiring, exploring and evaluating mineral properties, and either joint venturing or developing these properties further or disposing of them when the evaluation is completed. At May 31, 2009, the Entity was in the exploration stage and had interests in properties in Alaska and Nevada, U.S.A. |
8
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009 and 2008
(Expressed in Canadian dollars)
2. | NATURE AND CONTINUANCE OF OPERATIONS (cont’d) | |
The business of mining and exploration involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The Entity has no source of revenue, and has significant cash requirements to meet its administrative overhead and maintain its mineral property interests. The recoverability of amounts shown for mineral properties is dependent on several factors. These include the discovery of economically recoverable reserves, the ability of the Entity to obtain the necessary financing to complete the development of these properties, and future profitable production or proceeds from disposition of mineral properties. The carrying value of the Entity’s mineral property interests does not reflect current or future values. | ||
These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) on a going concern basis, which presume the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. The Entity’s ability to continue as a going concern is dependent upon achieving profitable operations and/or obtaining additional financing. The Entity has sustained losses from operations, and has an ongoing requirement for capital investment to explore its mineral properties. The Entity expects that it will need to raise substantial additional capital to accomplish its business plan over the next several years. The Entity expects to seek additional financing through equity financing. There can be no assurance as to the availability or terms upon which such financing might be available. | ||
These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Entity be unable to continue in business. | ||
3. | SIGNIFICANT ACCOUNTING POLICIES | |
The following is a summary of the significant accounting policies used by management in the preparation of these consolidated financial statements in accordance with Canadian GAAP. |
a) | Basis of consolidation | ||
These consolidated financial statements include the accounts of the Entity and its wholly-owned subsidiaries Talon Nevada (a Nevada corporation) and Raven Gold (an Alaska corporation) (note 13(h)). All intercompany transactions and balances have been eliminated. | |||
b) | Basis of presentation | ||
These consolidated financial statements have been prepared on a carve-out basis from ITH as if the Entity had operated as a stand-alone entity during the reporting years. | |||
Assets, liabilities and equity contributions directly attributable to the Entity have been allocated to the Entity. Revenues and expenses have generally been allocated based on the allocation of ITH and each subsidiary head office general and administrative expenses based upon the ratio of costs incurred on the Spin-out Properties in each year presented as compared to the costs incurred on all mineral properties of ITH in each of these years. Amounts were allocated using management’s best estimates in order to provide the most reasonable allocation. |
9
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009 and 2008
(Expressed in Canadian dollars)
3. | SIGNIFICANT ACCOUNTING POLICIES (cont’d) |
b) | Basis of Presentation (cont’d) | ||
As a result of the basis of presentation, described above, these consolidated financial statements may not necessarily be indicative of the results that would have been obtained if the Entity had operated as a stand-alone entity, nor are they necessarily indicative of the result for any future periods. The continuing operation of the Entity is dependent on obtaining required funding from outside sources. While ITH has been successful in raising the required funding from outside sources in the past, it cannot be certain that any such funding would be available in the future to the Entity, or that funds would be available on terms acceptable to the management of the Entity. | |||
c) | Foreign currency translation | ||
Monetary assets and liabilities are translated at period-end exchange rates; other assets and liabilities have been translated at the rates prevailing at the date of transaction. Revenue and expense items, except for amortization, are translated at the average rate of exchange for the period. Amortization is converted using rates prevailing at dates of acquisition. Gains and losses from foreign currency translation are included in the consolidated statements of operations. | |||
d) | Mineral properties | ||
Mineral properties consist of mining claims, leases and options. Acquisition option payments, leasehold and exploration costs are capitalized and deferred until such time as the property is put into production or the properties are disposed of either through sale or abandonment. If the property is put into production, the costs of acquisition and exploration will be written-off over the life of the property, based on estimated economic reserves, Proceeds received from the sale of any interest in a property will first be credited against the carrying value of the property, with any excess included in operations for the period. If a property is abandoned, the property and deferred exploration costs will be written-off to operations in the period of abandonment. | |||
Recorded costs of mineral properties and deferred exploration and development expenditures are not intended to reflect present or future values of mineral properties. | |||
Deferred costs related to mineral property interests are periodically reviewed for impairment. A review for potential impairment is subject to potentially material measurement uncertainty. If a review indicates that a mineral property interest has been impaired the related deferred costs are written down or written off. | |||
Although the Entity has taken steps to verify title to mineral properties in which it has an interest, based on industry norms for the current stage of exploration of such properties, these procedures do not guarantee the Entity’s title. Property title may be subject to unregistered prior agreements and inadvertent non-compliance with regulatory requirements. |
10
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009 and 2008
(Expressed in Canadian dollars)
3. | SIGNIFICANT ACCOUNTING POLICIES (cont’d) |
e) | Asset retirement obligation | ||
Asset retirement obligations are recognized for legal obligations related to the retirement of long-lived tangible assets that arise from the acquisition, construction, development or normal operation of such assets. A liability for an asset retirement obligation is recognized in the period in which it is incurred and when a reasonable estimate of the fair value of the liability can be made with the corresponding asset retirement cost recognized by increasing the carrying amount of the related long-lived asset. The asset retirement cost is subsequently allocated in a rational and systematic method over the underlying asset’s useful life. The initial fair value of the liability is accreted, by charges to operations, to its estimated future value. | |||
f) | Loss per share | ||
Basic loss per share is calculated using the weighted average number of shares outstanding during the period. Given that the shareholders of ITH will receive one Corvus common share for two ITH common shares, the weighted average number of shares used is half of the weighted number of shares of ITH for the respective years. The weighted average number of shares outstanding during the year was 22,544,778 (2008 — 19,596,680; 2007 — 13,550,552). Diluted loss per share has not been presented separately as the outstanding options and warrants are anti-dilutive for each of the periods presented. | |||
The Entity uses the treasury stock method of calculating fully diluted per share amounts whereby any proceeds from the exercise of stock options or other dilutive instruments are assumed to be used to purchase common shares at the average market price during the year. | |||
g) | Income tax | ||
Income taxes are accounted for using the future income tax method. Under this method income taxes are recognized for the estimated income taxes payable for the current year and future income taxes are recognized for temporary differences between the tax and accounting bases of assets and liabilities and for the benefit of losses available to be carried forward for tax purposes that are more likely than not to be realized. Future income tax assets and liabilities are measured using tax rates expected to apply in the years in which the temporary differences are expected to be recovered or settled. To the extent that future income tax assets are not considered more likely than not to be realized, a valuation allowance is recorded. | |||
h) | Measurement uncertainty | ||
The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those reported. |
11
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009 and 2008
(Expressed in Canadian dollars)
3. | SIGNIFICANT ACCOUNTING POLICIES (cont’d) |
h) | Measurement uncertainty (cont’d) | ||
Significant areas requiring the use of management estimates relate to the determination of impairment of mineral properties and determination of the fair value of asset retirement obligations. By their nature, these estimates and related future cash flows are subject to measurement uncertainty, and the impact on the financial statements of future periods could be material. | |||
i) | Financial instruments — Recognition and measurement; disclosure and presentation | ||
All financial instruments are classified into one of the following five categories: held for trading, held-to-maturity, loans and receivables, available-for-sale financial assets, or other financial liabilities. Initial and subsequent measurement and recognition of changes in the value of financial instruments depends on their initial classification. Transaction costs related to financial instruments will be expensed in the period incurred. | |||
The Entity classified its financial instruments as follows: |
• | Accounts payable and accrued liabilities have been classified as other liabilities. |
j) | Future accounting changes |
i. | International Financial Reporting Standards (“IFRS”) | ||
In 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed that the transition to IFRS from Canadian GAAP will be effective for fiscal years beginning on or after January 1, 2011 for publicly accountable enterprises. The Entity will therefore be required to present IFRS financial statements for its August 31, 2011 interim financial statements. The effective date will require the restatement for comparative purposes of amounts reported by the Entity for the interim periods and for the year ended May 31, 2011. The Entity is currently evaluating the impact of the conversion on the Entity’s consolidated financial statements and is considering accounting policy choices available under IFRS. | |||
ii. | Business combinations | ||
In January 2009, the CICA issued Handbook Section 1582, Business Combinations, which replaces the existing standards. This section establishes the standards for the accounting of business combinations, and states that all assets and liabilities of an acquired business will be recorded at fair value. Estimated obligations for contingent considerations and contingencies will also be recorded at fair value at the acquisition date. The standard also states that acquisition-related costs will be expensed as incurred and that restructuring charges will be expensed in the periods after the acquisition date. This standard is equivalent to the International Financial Reporting Standards on business combinations. |
12
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009 and 2008
(Expressed in Canadian dollars)
3. | SIGNIFICANT ACCOUNTING POLICIES (cont’d) |
j) | Future accounting changes (cont’d) |
ii. | Business combinations (cont’d) | ||
This standard is applied prospectively to business combinations with acquisition dates on or after January 1, 2011. Earlier adoption is permitted. The Entity is currently evaluating the impact of adopting this standard on its consolidated financial statements. This standard is not expected to be adopted prior to the transition to IFRS. | |||
iii. | Consolidated financial statements | ||
In January 2009, the CICA issued Handbook Section 1601, consolidated financial statements, which replaces the existing standards. This section establishes the standards for preparing consolidated financial statements and is effective for interim and annual consolidated financial statements beginning on or after January 1, 2011. The Entity is currently evaluating the impact of adopting this standard on its consolidated financial statements. This standard is not expected to be adopted prior to the transition to IFRS. | |||
iv. | Non-controlling interests | ||
In January 2009, the CICA issued Handbook Section 1602, Non-controlling interests, which establishes standards for the accounting of non-controlling interests of a subsidiary in the preparation of consolidated financial statements subsequent to a business combination. This standard is equivalent to the International Financial Reporting Standards on consolidated and separate financial statements. This standard is effective for interim and annual consolidated financial statements beginning on or after January 1, 2011. The Entity is currently evaluating the impact of adopting this standard on its consolidated financial statements. This standard is not expected to be adopted prior to the transition to IFRS. |
4. | RISK MANAGEMENT AND FINANCIAL INSTRUMENTS | |
The carrying values of accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments. | ||
The Entity’s risk exposure and the impact on its financial instruments are summarized below: |
a) | Credit risk | ||
Credit risk is the risk of financial loss to the Entity if a counter-party to a financial instrument fails to meet its contractual obligations. | |||
The Entity is not exposed to significant credit risk. |
13
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009 and 2008
(Expressed in Canadian dollars)
4. | RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (cont’d) |
b) | Liquidity risk | ||
Liquidity risk is the risk that the Entity will not be able to meet its financial obligations as they fall due. The Entity’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Entity manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. | |||
At May 31, 2009, the Entity had accounts payable and accrued liabilities of $32,898 (2008 - - $116,284), which are all payable within six months and are expected to be settled from available working capital as they come due. | |||
c) | Market risk | ||
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises four types of risk: interest rate risk, foreign currency risk, and other price risk. |
a. | Interest rate risk | ||
The Entity does not hold cash in bank accounts and does not earn interest income; therefore, the Entity is not subject to interest rate risk. | |||
b. | Foreign currency risk | ||
The Entity’s sensitivity analysis suggests that a consistent 5% change in the absolute rate of exchange for the United States dollars, the foreign currency for which the Entity has net assets employed, would affect net assets and foreign exchange gain (loss) by approximately $1,507. | |||
As at May 31, 2009, the Entity had the following financial instruments in US$: |
CADS equivalent | US$ | |||||||
Accounts payable and accrued liabilities | $ | 32,898 | $ | 30,135 | ||||
As at May 31, 2009, US$ amounts were converted at a rate of US$1 to $1.0917 Canadian dollars. | |||
c. | Other price risk | ||
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from interest rate risk or foreign exchange risk or commodity price risk. The Entity has no financial instruments exposed to such risk. |
14
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009 and 2008
(Expressed in Canadian dollars)
5, MINERAL PROPERTIES | ||
Accumulated costs in respect of mineral tenures and mineral rights owned, leased or under option, consist of the following: |
Other Alaska Properties | Nevada Property | |||||||||||||||||||||||||||
Chisna | West Pogo | LMS | Terra | Total Alaska | North Bullfrog | |||||||||||||||||||||||
(note 5(a)) | (note 5(a)) | (note 5(b) | (note 5(b)) | Properties | (note 5(c)) | Total | ||||||||||||||||||||||
Balance May 31, 2007 | $ | 923,855 | $ | 432,119 | 1,482,126 | $ | 1,148,759 | $ | 3,986,859 | $ | 894,217 | $ | 4,881,076 | |||||||||||||||
Acquisition costs: | ||||||||||||||||||||||||||||
Cash payments | — | — | — | — | — | 7,693 | 7,693 | |||||||||||||||||||||
Common shares issued | — | — | — | — | — | — | — | |||||||||||||||||||||
— | — | — | — | — | 7,693 | 7,693 | ||||||||||||||||||||||
Deferred exploration costs: | ||||||||||||||||||||||||||||
Contract services | 310,748 | 156 | 142,462 | 721,540 | 1,174,906 | 186,263 | 1,361,169 | |||||||||||||||||||||
Assay | 46,476 | — | 43,708 | 100,789 | 190,973 | 364,259 | 555,232 | |||||||||||||||||||||
Drilling | — | — | — | 620,404 | 620,404 | 463,291 | 1,083,695 | |||||||||||||||||||||
Field costs | 34,171 | — | 23,714 | 311,373 | 369,258 | 112,893 | 482,151 | |||||||||||||||||||||
Equipment rental | 7,417 | — | 55,789 | 76,316 | 139,522 | 19,962 | 159,484 | |||||||||||||||||||||
Land maintenance & tenure | 79,090 | 9,564 | 10,010 | 103,894 | 202,558 | 112,600 | 315,158 | |||||||||||||||||||||
Transportation | 17,114 | — | 31,109 | 196,845 | 245,068 | 10,256 | 255,324 | |||||||||||||||||||||
Travel | 46,152 | — | 255 | 6,477 | 52,884 | 27,213 | 80,097 | |||||||||||||||||||||
541,168 | 9,720 | 307,047 | 2,137,638 | 2,995,573 | 1,296,737 | 4,292,310 | ||||||||||||||||||||||
Total expenditures for the year | 541,168 | 9,720 | 307,047 | 2,137,638 | 2,995,573 | 1,304,430 | 4,300,003 | |||||||||||||||||||||
Balance May 31, 2008 | 1,465,023 | 441,839 | 1,789,173 | 3,286,397 | 6,982,432 | 2,198,647 | 9,181,079 | |||||||||||||||||||||
Acquisition costs: | ||||||||||||||||||||||||||||
Cash payments | — | — | — | — | — | — | — | |||||||||||||||||||||
Common shares issued | — | — | 371,250 | 371,250 | 742,500 | 84,250 | 826,750 | |||||||||||||||||||||
— | — | 371,250 | 371,250 | 742,500 | 84,250 | 826,750 | ||||||||||||||||||||||
Deferred exploration costs: | ||||||||||||||||||||||||||||
Contract services | 239,119 | 12,646 | 18,510 | 143,118 | 413,393 | 67,150 | 480,543 | |||||||||||||||||||||
Assay | 25,911 | 3,962 | 23,085 | — | 52,958 | 15,328 | 68,286 | |||||||||||||||||||||
Drilling | — | — | — | — | — | (702 | ) | (702 | ) | |||||||||||||||||||
Field costs | 26,746 | 4,661 | 85 | (22,296 | ) | 9,196 | 9,123 | 18,319 | ||||||||||||||||||||
Equipment rental | 16,023 | — | 690 | 2,293 | 19,006 | — | 19,006 | |||||||||||||||||||||
Land maintenance & tenure | 40,827 | 23 | 16,587 | 144,679 | 202,116 | 219,045 | 421,161 | |||||||||||||||||||||
Transportation | 3,035 | — | 1,828 | — | 4,863 | — | 4,863 | |||||||||||||||||||||
Travel | 32,929 | — | — | 440 | 33,369 | 1,739 | 35,108 | |||||||||||||||||||||
384,590 | 21,292 | 60,785 | 268,234 | 734,901 | 311,683 | 1,046,584 | ||||||||||||||||||||||
Total expenditures for the year | 384,590 | 21,292 | 432,035 | 639,484 | 1,477,401 | 395,933 | 1,873,334 | |||||||||||||||||||||
Balance May 31, 2009 | $ | 1,849,613 | $ | 463,131 | $ | 2,221,208 | $ | 3,925,881 | $ | 8,459,833 | $ | 2,594,580 | $ | 11,054,413 | ||||||||||||||
15
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
5. | MINERAL PROPERTIES (cont’d) |
a) | Properties acquired from AngloGold, Alaska | ||
Pursuant to an Asset Purchase and Sale and Indemnity Agreement dated June 30, 2006, as amended on July 26, 2006, (the “AngloGold Agreement”) among ITH, AngloGold Ashanti (U.S.A.) Exploration Inc. (“AngloGold”) and Talon Gold Alaska, Inc. (ITH’s wholly-owned Alaskan subsidiary), ITH acquired all of AngloGold’s interest in a portfolio of seven mineral exploration projects in Alaska (then aggregating 246 square kilometres) and referred to as the Livengood, Chisna, Gilles, Coffee Dome, West Pogo, Blackshell, and Caribou properties (the “Sale Properties”) in consideration of cash payment USD50,000 on August 4, 2006, and the issuance of 5,997,295 ITH common shares, representing approximately 19.99% of ITH’s issued shares following the closing of the acquisition and two private placement financings raising an aggregate of $11,479,348. AngloGold had the right to maintain its percentage equity interest in ITH, on an ongoing basis, provided that such right will terminate if AngloGold’s interest falls below 10% at any time after January 1,2009. (note 13(a)) | |||
As further consideration for the transfer of the Sale Properties, ITH granted to AngloGold a 90 day right of first offer with respect to the Sale Properties and any additional mineral properties in Alaska in which ITH acquires an interest and which interest ITH proposes to farm out or otherwise dispose of. If AngloGold’s equity interest in ITH is reduced to less than 10%, then this right of first offer will terminate. | |||
Pursuant to the Arrangement, ITH will spin-out the Chisna and West Pogo properties to the Entity. Details of the Chisna and West Pogo properties are as follows: |
i | Chisna Property | ||
The Chisna property is located in the eastern Alaska Range, Alaska, and consists of 608 State of Alaska mining claims divided into 5 blocks (approximately 32,935 hectares total) owned 100% by the Entity pursuant to the Arrangement. | |||
Subsequent to May 31, 2009, on November 2, 2009, ITH entered into a joint venture agreement (as amended) with Ocean Park Ventures Corp. (“OPV”). Pursuant to the agreement, an Alaskan subsidiary of OPV (“Subco”) and Raven Gold, an Alaskan subsidiary of the Entity, will form a joint venture (the “JV”) for the purpose of exploring and developing the property. | |||
The initial interests of Subco and Raven Gold in the JV will be 51% and 49% respectively. Raven Gold’s initial contribution to the JV will be its interest in the Chisna Project. Subco’s contribution to the JV will be funding for the JV totalling USD20,000,000 over five years; of which USD5,000,000 must be provided during the first year. The first year amount is reduced to USD2,000,000 if, at any time during such year, the London PM gold fix price and the LME closing copper price are each below USD700/oz and USD1.70/lb, respectively, for a period of 10 consecutive trading days. If Subco fails to fund any portion of the initial USD5,000,000 (or USD2,000,000 as applicable) in the first year, Raven Gold will be entitled to terminate the JV and OPV and |
16
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
5. | MINERAL PROPERTIES (cont’d) |
a) | Properties acquired from AngloGold, Alaska (cont’d) |
i | Chisna Property (cont’d) | ||
Subco will be jointly indebted to Raven Gold for the difference between USD5,000,000 (or USD2,000,000 as applicable) and the amount actually funded. | |||
Raven Gold will be the operator of the JV during the first two years. After two years, Subco will be entitled to assume the operatorship of the JV and to maintain operatorship until and unless it ceases to hold a majority interest in the JV. Any work program proposed by the operator will be subject to approval by the five member JV management committee. After Subco has completed its USD20,000,000 initial contribution, the JV participant with the greatest interest in the JV will be entitled to nominate three members of the management committee. | |||
If Subco funds the entire USD20,000,000 within five year period, it will have the option to acquire a further 19% interest in the JV by producing a positive bankable feasibility study in respect of the Chisna Project within five years after electing to exercise such option, and by funding and additional exploration required to produce such a study. The feasibility study must support a mining operation at a minimum level of 300,000 ounces per year of gold equivalent production. | |||
In consideration for ITH providing the resources for Raven Gold to enter into the JV, OPV will issue 200,000 common shares (received subsequent to year-end) to ITH following satisfaction of the conditions precedent to the formation of the JV and an additional 200,000 shares each anniversary thereafter, to a total of 1,000,000 shares, provided the JV is in good standing. | |||
The formation of the JV, and the rights of OPV/Subco under the JV Agreement, were subject to a pre-emptive right in favour of AngloGold under the AngloGold Agreement (note 5(a)), which was waived by AngloGold on November 17, 2009. Consequently, Subco and Raven Gold proceeded with the JV, and will be bound by the existing Indemnity and Pre-emptive Rights Agreement among AngloGold, ITH and Talon Gold Alaska Inc., as provided for in the AngloGold Agreement. The principal effect of that agreement on the JV will be indemnity provisions relating to the Chisna Project and AngloGold will have no further pre-emptive right in respect of the Chisna Project. | |||
The formation of the JV is subject to certain conditions precedent, including the transfer of the Chisna Project claims to Raven Gold (presently underway), and the acceptance of the JV Agreement by the TSX Venture Exchange on behalf of OPV (accepted for filing by the TSXV on behalf of OPV on March 15, 2010). | |||
Subsequent to May 31, 2009, ITH entered into a Mineral Exploration Agreement with Option to Lease dated March 30, 2010 (“Exploration Agreement”) with Ahtna Incorporated, an Alaska Native Regional Corporation, concerning approximately 26,516 hectares of fee simple lands in the Ahtell Area of Alaska surrounding portions of the Entity’s Chisna property. The property subject to the Exploration Agreement will become part of the joint venture with OPV. |
17
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
5. | MINERAL PROPERTIES (cont’d) |
a) | Properties acquired from AngloGold, Alaska (cont’d) |
ii | West Pogo Property | ||
The West Pogo property is located approximately 50 kilometres north of Delta Junction, Alaska, and consists of 96 State of Alaska mining claims (1,944 hectares) owned 100% by the Entity pursuant to the Arrangement. | |||
Subsequent to May 31, 2009, ITH entered into a binding letter of intent dated March 24, 2010 with First Star Resources Inc. (“First Star”) in connection with the West Pogo property (“WP LOI”). Under the terms of the WP LOI, First Star has to ability to earn an initial 55% interest, and a second option to earn a further 45%, for a total 100% interest. To earn the 55% interest First Star will pay USD250,000 and expend USD2,800,000 on exploration. To acquire a 100% ownership, First Star will fund the project through to an advanced exploration stage by spending a further USD2,000,000 prior to December 31, 2015, or by producing, filing and having accepted by the TSXV a NI43-101 compliant inferred resource of one million ounces of gold using a 0.5 g/t cutoff grade, whichever costs less. An NSR royalty of 3% or 4% on gold/silver and 1% on all other products will be payable to Raven Gold. The royalty can be reduced by 1% by paying Raven Gold USD3,000,000. |
b) | Properties optioned from AngloGold, Alaska | ||
In conjunction with the closing of the acquisition of the Sale Properties, ITH entered into an option/joint venture with AngloGold with respect to two additional mineral projects in Alaska, referred to as the LMS and the Terra properties (the “Optioned Properties”). | |||
Pursuant to the Arrangement, ITH will spin-out the LMS and Terra properties to the Entity. Details of the LMS and Terra properties are as follows: |
i | LMS Property | ||
The LMS properly consists of 92 State of Alaska unpatented lode mining claims (5,691 hectares) owned by AngloGold. | |||
With respect to the LMS property, ITH will have the right to earn a 60% interest by incurring aggregate exploration expenditures of USD3,000,000 by January 30, 2010 (incurred), of which ITH has committed to incur minimum exploration expenditures of USD1,000,000 during the 2006 calendar year and of USD750,000 during the 2007 calendar year. | |||
Upon ITH having earned its 60% interest in the LMS property, AngloGold will have the right to re-acquire a 20% interest (for an aggregate 60% interest) and become manager of the joint venture by incurring a further USD4,000,000 in exploration expenditures over a further two years. |
18
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
b) | Properties optioned from AngloGold, Alaska (cont’d) |
ii | Terra Property | ||
The Terra Property now consists of 235 State of Alaska unpatented lode mining claims (15,552 hectares) held by or on behalf of AngloGold and 5 State of Alaska unpatented lode mining claims (324 hectares) leased from an individual. The lease requires a payment on execution of USD25,000 (paid), and advance minimum royalties of USD25,000 on or before March 22, 2006 (paid), USD50,000 on or before March 22, 2007 (paid), USD75,000 on or before March 22, 2008 (paid), USD100,000 on or before March 22, 2009 (paid) and each subsequent March 22 until March 22, 2015 (March 22, 2010 payment paid on February 2, 2010), and thereafter USD125,000 until the expiry of the lease (all of which are recoverable from production royalties). The lessor is entitled to receive a net smelter returns production royalty on gold equal to 3.0% if the gold price is less than USD450/ounce and 4% if the gold price is USD450/ounce or higher, plus a net smelter returns royalty of 4% on all other mineral products other than gold. 1% of the royalty may be purchased for USDl,000,000 and a further 1% for USD3,000,000. | |||
With respect to the Terra property, ITH will have the right to earn a 60% interest by incurring aggregate exploration expenditures of USD3,000,000 by January 30, 2010, of which ITH has committed to incur minimum exploration expenditures of USD500,000 during the 2006 calendar year and of USD750,000 during the 2007 calendar year. | |||
Upon ITH having earned its 60% interest in the Terra property, AngloGold will have the right to re-acquire a 20% interest (for an aggregate 60% interest) and become manager of the joint venture by incurring a further USD4,000,000 in exploration expenditures over a further two years. | |||
In either case, following the parties having earned their final respective interests, each party will be required to contribute its pro rata share of further exploration expenditures or be diluted. A party that is diluted to 10% or less will have its interest converted to a 2% net smelter return royalty. | |||
On November 5, 2007 ITH provided notice to AngloGold that it has incurred sufficient expenditures to vest its 60% ownership in the Terra project. AngloGold had 90 days to decide whether or not to exercise its right to earn back an additional 20% interest in the Terra project by incurring USD4,000,000 in expenditures over the next two years, and elected not to do so. As AngloGold elected not to exercise its back-in right, each party is therefore responsible for contribution its share of ongoing joint venture expenditures. |
On June 10, 2008, ITH entered into an agreement to acquire all of the interest of AngloGold in the Terra and LMS projects, plus certain other AngloGold rights on the Gilles and West Pogo properties, for the purchase price of $751,500 to be satisfied by the issuance of 450,000 shares of ITH to AngloGold (issued). The transaction was approved by NYSE Alternext-US Stock Exchange on July 31, 2008 and by the TSXV on September 10, 2008. | |||
Pursuant to the Arrangement the Entity has all of the interests of the Terra and LMS projects. |
19
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
5. | MINERAL PROPERTIES (cont’d) |
b) | Properties optioned from AngloGold, Alaska (cont’d) | ||
Subsequent to May 31, 2009, ITH entered into a binding letter of intent (“LOI”) dated March 24, 2010 with First Star in connection with the LMS property. Under the terms of the LMS LOI, First Star has the ability to earn an initial 55% interest, and a second option to earn a further 45%, for a total 100% interest. To earn the 55% interest First Star will pay USD280,000 and expend USD3,500,000 on exploration. To acquire a 100% ownership, First Star will fund the project through to an advanced exploration stage by spending a further USD3,000,000 prior to December 31, 2015, or by producing, filing and having accepted by the TSXV a NI 43-101 compliant inferred resource of two million ounces of gold using a 0.5 g/t cutoff grade, whichever costs less. An NSR royalty of 3% or 4% on gold/silver and 1% on all other products will be payable to Raven Gold. The royalty can be reduced by 1% by paying Raven Gold USD3,000,000. | |||
Subsequent to May 31, 2009, on February 26, 2010, ITH signed a LOI to enter into a joint venture with American Mining Corporation (“AMC”), a private Nevada corporation, on the Terra Gold Project. Pursuant to the LOI, an Alaskan subsidiary of AMC (“AMC Subco”) and Raven Gold will form a joint venture (the “JV”) with the aim of developing the Terra Project to production. It is anticipated that AMC Subco, as operator, will commence a project development program in June 2010. | |||
The initial interests of AMC Subco and Raven Gold in the JV will be 51% and 49% respectively. Raven’s initial contribution to the JV will be its interest in the Terra Project, including all related data and property facilities. AMC Subco’s initial contribution to the JV will be funding for the JV totalling USD6,000,000 over three years (USD1,000,000 in 2010). Of these expenditures, USD100,000 will be paid to ITH in each of the first and second years to partially reimburse ITH for the cost of constructing the existing camp facility at Terra. As consideration for ITH causing Raven Gold to enter into the JV, AMC will pay ITH USD300,000 and issue 750,000 common shares of AMC, over the same three-year period (USD50,000 and 250,000 shares in 2010). If AMC Subco fails to make its full initial contribution, or AMC fails to make all required payments and share issuances to the ITH, over such three-year period, then the JV will terminate and AMC Subco will not retain any residual interest in the Terra project. | |||
In addition, the JV has granted Raven Gold a sliding scale NSR royalty of between 0.5% and 5% (depending upon the gold price) on all precious metal production from the property and a 1% NSR royalty on all base metal production. The royalty to Raven Gold is in addition to the current royalty payable to the underlying lessor. | |||
Upon having completed its initial contribution, AMC Subco will have the option to increase its JV interest by 29% (to 80% total) by providing a subsequent contribution of an additional USD3,050,000 in funding in the fourth year. In addition, AMC will be required to pay ITH an additional USD150,000 and issue an additional 150,000 common shares. Should Raven Gold’s interest be diluted below 10% as a consequence of it not funding its proportionate share of JV expenditure following AMC Subco’s having completed its initial contribution (and subsequent contribution, if applicable), Raven Gold’s JV interest will be converted to an additional 1% property wide NSR royalty on all metals produced, for an aggregate NSR |
20
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
5. | MINERAL PROPERTIES (cont’d) |
b) | Properties optioned from AngloGold, Alaska (cont’d) | ||
royalty to Raven of 1.5% to 6% (depending upon the gold price) on precious metals and 2% on base metals). | |||
Formation of the JV is subject to the settlement and execution of a formal agreement and the completion by AMC of due diligence on the Terra project, both to be completed on or before May 19, 2010 (extended to July 30, 2010). On May 17, 2010, AMC assigned the Terra project LOI with ITH to Terra Mining Corporation, a company incorporated under the laws of British Columbia. |
c) | Properties optioned from Redstar Gold Corp., Nevada | ||
On March 15, 2007, ITH signed two binding letters of intent with Redstar Gold Corp. of Vancouver, B.C. (“Redstar”), pursuant to which ITH could earn up to a 70% interest in two gold projects, referred to as North Bullfrog and Painted Hills, located in Nevada. ITH could earn an initial 60% interest in each project by making payments and exploration expenditures and had the option to earn an additional 10% interest (aggregate 70%) by funding all expenditures to take a project to feasibility. There is no time limit by which a feasibility study is required to be delivered. | |||
Pursuant to the Arrangement, ITH will spin-out the North Bullfrog property to the Entity. Details of the North Bullfrog property are as follows: |
i | North Bullfrog | ||
To earn its initial 60% interest, ITH must make total payments of USD190,000 and incur total expenditures of USD4,000,000 over 4 years to March 15, 2011. The first year requirement is a payment of USD20,000 on TSXV acceptance (paid) plus exploration expenditures of USD500,000 (incurred). The second payment of USD30,000 is due by September 15, 2008 (paid). The third payment of USD40,000 is due by March 15, 2009 (paid). The fourth payment of USD50,000 is due by March 15, 2010 (acquisition completed on October 9, 2009) and the fifth payment of USD50,000 is due by March 15, 2011. |
ITH is also required to pay the advance minimum royalty payments to the owners of certain patented mining claims which are fully recoupable against production royalties. The advance minimum royalty in year 1 to 3 is USD32,300 per year and year 4 onwards is USD37,700. Production royalties range from 2% to 4%. All production royalties may be bought out at a price of USD1,000,000 per 1% except for one 3% royalty that may be bought out for USD850,000 per 1%. | |||
ITH is also required to issue an aggregate of 20,000 common shares to Redstar, as to 5,000 shares on each on September 15, 2008 (issued), March 15, 2009 (issued), March 15, 2010 (acquisition completed on October 9, 2009) and March 15, 2011, so long as ITH is earning into at least one of the North Bullfrog or Painted Hills projects. |
21
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
5. | MINERAL PROPERTIES (cont’d) |
c) | Properties optioned from Redstar Gold Corp., Nevada (cont’d) | ||
Subsequent to May 31, 2009, on October 9, 2009, ITH completed the acquisition of all of the interests of Redstar and Redstar Gold U.S.A. Inc. in the North Bullfrog project (including the Mayflower (note 5(d)) and Connection (note 5(e)) properties) under an agreement dated July 30, 2009, thereby giving ITH 100% ownership of the project. Consideration for the acquisition was a cash payment of USD250,000 and the issuance of 200,000 common shares. Completion of the acquisition eliminated ITH’s vesting requirements for expenditures and issuance of shares. |
d) | Mayflower property, Nevada | ||
Pursuant to a mining lease and option to purchase agreement made effective December 1, 2007 between ITH and a group of arm’s length limited partnerships, ITH has leased (and has the option to purchase) eleven patented mining claims (approximately 76 hectares) located adjacent to its North Bullfrog project in south-western Nevada. The terms of the lease/option are as follows: |
• | Terms: Initial term of 5 years, commencing December 1, 2007, with the option to extend the lease for an additional 5 years. The lease will continue for so long thereafter as the property is in commercial production or, alternatively, for an additional three years if ITH makes advance minimum royalty payments of USD100,000/year (which are recoupable against actual production royalties). | ||
• | Lease Payments: USD5,000 (paid) and 25,000 common shares of ITH (issued) following regulatory acceptance of the transaction; and an additional USD5,000 and 20,000 common shares on each of the first through fifth lease anniversaries (USD5,000 paid on each of December 10, 2008 and October 14, 2009 and 20,000 common shares issued on each of September 8, 2008 and November 25, 2009). If ITH elects to extend the lease for a second 5 year term, it will pay USD10,000 and issue 50,000 common shares upon election being made, and an additional USD10,000 and 50,000 common shares on each of the sixth through tenth anniversaries. | ||
• | Work Commitments: USD100,000 per year for the first three years, USD200,000 per year for the years 4-6 and USD300,000 for the years 7-10. Excess expenditures in any year may be carried forward. If ITH does not incur the required expenditures in year 1, the deficiency is required to be paid to the lessors. | ||
• | Retained Royalty: ITH will pay the lessors a net smelter returns royalty of 2% if the average gold price is USD400/ounce or less, 3% if the average gold price is between USD401 and USD 500/ounce and 4% if the average gold price is greater than USD500/ounce. | ||
• | Purchase Option: ITH has the right to purchase all the interest of the lessors in the property during the first 10 years for USD7,500,000 plus a 0.5% net smelter royalty if the gold price is under USD500/ounce and 1% if the gold price is USD500/ounce or above. After the initial 10 year period, the cash portion of the purchase price will be escalated annually based on the US annual Consumer Price Index increase for that year. |
The Mayflower property, and the associated acquisition costs, has been added to the North Bullfrog Redstar Joint Venture property in which ITH has the right to earn a 70% interest (subsequently increased to 100% interest upon acquisition of all of the interest of Redstar) |
22
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
5. | MINERAL PROPERTIES (cont’d) |
d) | Mayflower property Nevada (cont’d) | ||
(note 5(c)). Pursuant to the Arrangement, the right to earn the interest will be transferred from ITH to the Entity. |
e) | Connection property, Nevada | ||
Pursuant to a mining lease and option to purchase agreement made effective October 27, 2008 between Redstar and an arm’s length limited liability company, Redstar has leased (and has the option to purchase) twelve patented mining claims located adjacent to the North Bullfrog project and referred to as the “Connection” property. The 10 year, renewable mining lease requires payments of USD 10,800 (paid) on signing and annual payments for the first three anniversaries of USD10,800 and USD16,200 for every year thereafter (USD10,800 paid on September 30, 2009). Redstar has an option to purchase is the property for USD1,000,000 at any time during the life of the lease. Production is subject to a 4% NSR royalty, which may be purchased for USD5,000,000. | |||
The Connection property, and the associated acquisition costs, has been added to the North Bullfrog Redstar Joint Venture property in which ITH has the right to earn a 70% interest (subsequently increased to 100% interest upon acquisition of all of the interest of Redstar) (note 5(c)). Pursuant to the Arrangement, the right to earn the interest will be transferred from ITH to the Entity. |
6. | STOCK-BASED COMPENSATION | |
Stock options awarded to employees and non-employees by ITH are measured and recognized in the consolidated statement of operations, comprehensive loss and deficit or added to mineral properties at the fair value of the award. The fair value of all forms of stock-based compensation is charged to operations or capitalized to mineral properties over the vesting period of the options granted. Fair value is estimated using the Black-Scholes Option Pricing Model. | ||
Since the Entity was not incorporated, there have been no stock options issued directly by the Entity during the periods presented. Stock-based compensation amounts included in the consolidated financial statements represent an allocation of ITH’s related stock-based compensation amounts on a direct basis for employees and non-employees working directly on the Spin-out Properties and on a pro rata basis for head office employees and directors as outlined in note 1. | ||
Stock-based compensation has been allocated as follows for the year ended May 31: |
For the Year ended | 2009 | 2008 | 2007 | |||||||||
Administration | $ | — | $ | — | $ | 22,970 | ||||||
Consulting | 513,254 | 21,773 | 1,228,934 | |||||||||
Investor relations | 112,646 | 86,161 | 193,800 | |||||||||
Professional fees | 18,751 | — | — | |||||||||
Wages and benefits | 712,079 | 43,546 | 646,129 | |||||||||
$ | 1,356,730 | $ | 151,480 | $ | 2,091,833 | |||||||
23
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
7. | CONTRIBUTED SURPLUS | |
Funding provided by ITH related to the Entity’s activities is classified as contributed surplus: |
Stock-based | ||||||||||||
compensation | ||||||||||||
on options | ||||||||||||
granted during | Funding | |||||||||||
the year | provided by | |||||||||||
allocated from | and expenses | Total funding | ||||||||||
ITH | paid by ITH | provided by ITH | ||||||||||
Balance, May 31, 2006 | $ | — | $ | — | $ | — | ||||||
Additions in fiscal 2007 | 2,091,833 | 5,058,081 | 7,149,914 | |||||||||
Balance, May 31, 2007 | 2,091,833 | 5,058,081 | 7,149,914 | |||||||||
Additions in fiscal 2008 | 151,480 | 5,661,766 | 5,813,246 | |||||||||
Balance, May 31, 2008 | 2,243,313 | 10,719,847 | 12,963,160 | |||||||||
Additions in fiscal 2009 | 1,356,730 | 2,944,230 | 4,300,960 | |||||||||
Balance, May 31, 2009 | $ | 3,600,043 | $ | 13,664,077 | $ | 17,264,120 | ||||||
8. | INCOME TAXES | |
A reconciliation of income taxes at statutory rates with the reported taxes is as follows for the year ended May 31: |
2009 | 2008 | 2007 | ||||||||||
Loss before income taxes | $ | (2,344,240 | ) | $ | (1,203,783 | ) | $ | (2,694,582 | ) | |||
Statutory Canadian corporate tax rate | 30.38 | % | 33.03 | % | 35.29 | % | ||||||
Income tax recovery at statutory rates | $ | (712,180 | ) | $ | (397,610 | ) | $ | (950,918 | ) | |||
Unrecognized items for tax purposes | 771,809 | 457,143 | 979,468 | |||||||||
Difference in tax rates in other jurisdictions | (59,629 | ) | (59,533 | ) | (28,550 | ) | ||||||
$ | — | $ | — | $ | — | |||||||
At May 31, 2009, the Entity has $Nil (2008 — $Nil) future income tax assets. | ||
9. | RELATED PARTY TRANSACTIONS | |
During the year, the Entity paid $262,955 (2008 — $210,452; 2007 — $153,131) in consulting, investor relations, wages and benefits to officers, directors and companies controlled by directors of the Entity and $24,018 (2008 — $24,855; 2007 — $9,155) in rent and administration to a company with common officers and directors. Professional fees of $14,748 (2008 — $Nil, 2007 — $Nil) to a company related to an officer who is also a director of the Entity. These figures do not include stock-based compensation (note 6). | ||
These amounts were unsecured, non-interest bearing and had no fixed terms of repayment. Accordingly, fair value could not be readily determined. |
24
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
9. | RELATED PARTY TRANSACTIONS (cont’d) | |
ITH’s purchase of AngloGold’s interest in the Terra and LMS Projects in Alaska (Note 5(b)) completed on November 24, 2008 is considered a related party transaction by virtue of a common directorship and the ownership by AngloGold of in excess of 10% of the ITH’s outstanding common shares. | ||
These transactions with related parties have been valued in these financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties. | ||
10. | GEOGRAPHIC SEGMENTED INFORMATION |
Canada | United States | Total | ||||||||||
2009 | ||||||||||||
Mineral properties | $ | — | $ | 11,054,413 | $ | 11,054,413 | ||||||
2008 | ||||||||||||
Mineral properties | $ | — | $9,181,079 | $ | 9,181,079 | |||||||
2009 | 2008 | 2007 | ||||||||||
Net loss for the year- Canada | $ | (1,899,048 | ) | $ | (648,808 | ) | $ | (2,345,531 | ) | |||
Net loss for the year- United States | (445,192 | ) | (554,975 | ) | (349,051 | ) | ||||||
Net loss for the year | $ | (2,344,240 | ) | $ | (1,203,783 | ) | $ | (2,694,582 | ) | |||
11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) | |
These consolidated financial statements are prepared in accordance with GAAP in Canada, which differs in certain respects from GAAP in the United States. The material differences between Canadian and United States GAAP, in respect of these financial statements, are as follows: |
a) | Mineral property exploration and development | ||
Under United States GAAP, all mineral exploration and development property expenditures are expensed in the year incurred in an exploration stage company until there is substantial evidence that a commercial body of minerals has been located. Canadian GAAP allows mineral exploration and development property expenditures to be deferred during this process. |
25
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (cont’d) |
a) | Mineral property exploration and development (cont’d) | ||
The effect on the Entity’s financial statements is summarized below: |
Consolidated statements of operations and deficit | 2009 | 2008 | 2007 | |||||||||
Loss for the year under | ||||||||||||
Canadian GAAP | $ | (2,344,240 | ) | $ | (1,203,783 | ) | $ | (2,694,582 | ) | |||
Mineral property expenditures, net | (1,046,584 | ) | (4,292,310 | ) | (3,885,625 | ) | ||||||
Loss for the year under United States GAAP | $ | (3,390,824 | ) | $ | (5,496,093 | ) | $ | (6,580,207 | ) | |||
Loss per share — US GAAP | $ | (0.15 | ) | $ | (0.28 | ) | $ | (0.49 | ) | |||
Consolidated balance sheets | May 31, 2009 | May 31, 2008 | ||||||
Mineral Properties | ||||||||
Canadian GAAP | $ | 11,054,413 | $ | 9,181,079 | ||||
Mineral property expenditures (cumulative) | (9,224.519 | ) | (8,177,935 | ) | ||||
Mineral Properties under United States GAAP | $ | 1,829,894 | $ | 1,003,144 | ||||
Deficit | ||||||||
Canadian GAAP | $ | (6,242,605 | ) | $ | (3,898,365 | ) | ||
Mineral property expenditures (cumulative) | (9,224,519 | ) | (8,177,935 | ) | ||||
Deficit under United States GAAP | $ | (15,467,124 | ) | $ | (12,076,300 | ) | ||
Consolidated statements of cash flows | 2009 | 2008 | 2007 | |||||||||
Operating activities | ||||||||||||
Cash used per Canadian GAAP | $ | (987,510 | ) | $ | (1,052,303 | ) | $ | (602,749 | ) | |||
Effect of the write-off of exploration expenditures | (1,129,970 | ) | (4,601,770 | ) | (3,459,881 | ) | ||||||
Cash used per United States GAAP | $ | (2,117,480 | ) | $ | (5,654,073 | ) | $ | (4,062,630 | ) | |||
Investing activities | ||||||||||||
Cash used per Canadian GAAP | $ | (1,129,970 | ) | $ | (4,609,463 | ) | $ | (3,495,311 | ) | |||
Effect of the write-off of exploration expenditures | 1,129,970 | 4,601,770 | 3,459,881 | |||||||||
Cash used per United States GAAP | $ | — | $ | (7,693 | ) | $ | (35,430 | ) | ||||
26
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (cont’d) |
b) | Stock based compensation | ||
The Entity has adopted Statement of Financial Accounting Standards No. 123R (Codified under ASC 718 and ASC 505-50), and records compensation cost for stock-based employee compensation plans at fair value. Accordingly, compensation cost for stock options granted is measured as the fair value at the date of grant, and there is no difference in these consolidated financial statements. | |||
c) | Loss per share | ||
Under both Canadian and United States GAAP basic loss per share is calculated using the weighted average number of common shares outstanding during the year. | |||
Under United States GAAP, the weighted average number of common shares outstanding excludes any shares that remain in escrow, but may be earned out based on the Entity incurring a certain amount of exploration and development expenditures. The weighted average number of shares outstanding under United States GAAP for the year ended May 31, 2009, 2008 and 2007 was 22,544,778, 19,596,680 and 13,550,552 respectively. | |||
d) | Income taxes | ||
Under United States GAAP, the Entity would have initially recorded an income tax asset for the benefit of the resource deduction pools. This asset would have been reduced to $Nil by a valuation allowance. The result is no difference in net income reported between Canadian and United States GAAP. | |||
e) | Recent US accounting pronouncements |
i | In May 2009, the FASB issued Accounting Standards Codification (“ASC”) 855-10,Subsequent Events(“ASC 855-10”) (amended in February 2010) (formerly SFAS Statement No 165), which establishes principles and requirements for subsequent events. In particular, ASC 855-10 sets forth: (a) the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (b) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements; and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. The adoption of this new standard is not expected to have an impact on the Entity’s consolidated financial statements. |
27
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (cont’d) |
e) | Recent US accounting pronouncements (cont’d) |
ii | In June 2009, the FASB issued new guidance which is now a part of ASC 860-10 (formerly SFAS Statement No 166), to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. The FASB undertook this project to address (1) practices that have developed since the issuance of FASB Statement No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities(which is now a part of ASC 860-10), that are not consistent with the original intent and key requirements of that Statement and (2) concerns of financial statement users that many of the financial assets (and related obligations) that have been derecognized should continue to be reported in the financial statements of transferors. This new guidance is effective for fiscal years beginning after November 15, 2009 and is not expected to have a material impact on the Entity’s consolidated financial statements. | ||
iii | In June 2009, the FASB issued new guidance which is now part of ASC 810-10 (formerly SFAS Statement No. 167), to improve financial reporting by enterprises involved with variable interest entities. The FASB undertook this project to address (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003),Consolidation of Variable Interest Entities(which is now part of ASC 810-10), as a result of the elimination of the qualifying special-purpose entity, and (2) constituent concerns about the application of certain key provisions of ASC 810-10, including those in which the accounting and disclosures under ASC 810-10 do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. This new guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. This new guidance is not expected to have a material impact on the Entity’s consolidated financial statements. | ||
iv | In June 2009, the FASB issued new guidance which is now part of ASC 105-10 (the “Codification”) (formerly Statement of Financial Accounting Standards No. 168, TheFASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles),which will become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of the Codification, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of the Codification only had the effect of amending references to authoritative accounting guidance in the Entity’s consolidated financial statements. |
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Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (cont’d) |
e) | Recent US accounting pronouncements (cont’d) |
v | In August 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Measuring Liabilities at Fair Value” (“ASU 2009-05”). This update provides amendments to ASC 820, “Fair Value Measurements and Disclosure”, for the fair value measurement of liabilities when a quoted price in an active market is not available. ASU 2009-05 is effective for reporting periods beginning after August 28, 2009. This new guidance is not expected to have a material impact on the Entity’s consolidated financial statements. | ||
vi | In September 2009, the FASB issued Accounting Standards Update No. 2009-12, “Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)” (“ASU 2009-12”). This update provides amendments to ASC Topic 820, “Fair Value Measurements and Disclosure”, permitting companies to estimate the fair value of investments within ASC 820’s scope using the net asset value per share. ASU 2009-05 is effective for reporting periods ending after December 15, 2009. | ||
vii | In September 2009, the FASB reached a consensus on Accounting Standards Update (“ASU”) -2009-13 “Revenue Recognition” (“ASC 605”) — “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”), and ASU 2009-14 “Software” (“ASC 985”) - “Certain Revenue Arrangements That Include Software Elements (“ASU 2009-14”). ASU 2009-13 modifies the requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. ASU 2009-13 eliminates the requirement that all undelivered elements must have either: (i) VSOE or (ii) third-party evidence, or TPE, before an entity can recognize the portion of an overall arrangement consideration that is attributable to items that already have been delivered. In the absence of VSOE or TPE of the standalone selling price for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. Overall arrangement consideration will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. The residual method of allocating arrangement consideration has been eliminated. ASU 2009-14 modifies the software revenue recognition guidance to exclude from its scope tangible products that contain both software and non-software components that function together to deliver a product’s essential functionality. These new updates are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. However, these provisions are not expected to have a material impact on the Entity’s consolidated financial statements. |
29
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
Years ended May 31, 2009, 2008 and 2007
(Expressed in Canadian dollars)
12. | CAPITAL MANAGEMENT |
13. | SUBSEQUENT EVENTS |
a) | On July 10, 2009, AngloGold elected to exercise its right to maintain its 13.2907% equity interest in ITH pursuant to the AngloGold Agreement (note 5(a)). | ||
b) | On October 9, 2009, ITH completed the acquisition of all of the interests of Redstar and Redstar Gold U.S.A. Inc. in the North Bullfrog project (including the Mayflower (note 5(d)) and Connection (note 5(e)) properties) under an agreement dated July 30, 2009, thereby giving ITH 100% ownership of the project. | ||
c) | On November 2, 2009, ITH entered into a joint venture agreement (as amended) with OPV (note 5(a)(i)). | ||
d) | On February 26, 2010, ITH signed a LOI to enter into a joint venture with AMC on the Terra Gold Project (note 5(b)(ii)). | ||
e) | ITH entered into a binding LOI dated March 24, 2010 with First Star in connection with the West Pogo property (note 5(a)(ii)). | ||
f) | ITH entered into a binding LOI dated March 24, 2010 with First Star in connection with the LMS property (note 5(b)(i)). | ||
g) | ITH entered into an Exploration Agreement with Option to Lease dated March 30, 2010 with Ahtna Incorporated, concerning the Ahtell Area of Alaska surrounding portions of the Entity’s Chisna Property. The property subject to the Exploration Agreement will become part of the joint venture with OPV (note 5(a)(i)). | ||
h) | Raven Gold was incorporated in Alaska on July 2, 2009. |
30
Table of Contents
of
International Tower Hill Mines Ltd.
(An Exploration Stage Entity)
(An Exploration Stage Entity)
Consolidated Financial Statements
(Expressed in Canadian dollars)
February 28, 2010 | Page | |||
3 | ||||
4 | ||||
5 | ||||
6-29 |
2
Table of Contents
(An Exploration Stage Entity)
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
February 28, 2010 | May 31, 2009 | |||||||
(audited) | ||||||||
ASSETS | ||||||||
Mineral properties(note 5) | $ | 12,597,678 | $ | 11,054,413 | ||||
$ | 12.597.678 | $ | 11,054,413 | |||||
LIABILITIES | ||||||||
Current | ||||||||
Accounts payable and accrued liabilities | $ | 23,499 | $ | 32,898 | ||||
CONTRIBUTED SURPLUS AND DEFICIT | ||||||||
Contributed surplus(note 7) | 20,266,465 | 17,264,120 | ||||||
Deficit | (7,692,286 | ) | (6,242,605 | ) | ||||
12,574,179 | 11,021,515 | |||||||
$ | 12,597,678 | $ | 11,054,413 | |||||
Nature and continuance of operations(note 2)
Subsequent events(note 13)
“Hendrik Van Alphen” Director | ||
“Anton Drescher” Director | ||
3
Table of Contents
(An Exploration Stage Entity)
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Three months ended | Nine months ended | |||||||||||||||
February | February | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Expenses | ||||||||||||||||
Administration (note 9) | $ | 2,375 | $ | 3,338 | $ | 7,415 | $ | 12,278 | ||||||||
Charitable donations | 3,185 | 2,173 | 6,526 | 3,983 | ||||||||||||
Consulting (note 9) | 11,361 | 34,836 | 122,193 | 422,481 | ||||||||||||
Insurance | 10,466 | 10,055 | 30,124 | 30,864 | ||||||||||||
Investor relations (note 9) | 66,245 | 39,109 | 152,170 | 237,446 | ||||||||||||
Office | 7,173 | 17,113 | 24,321 | 38,902 | ||||||||||||
Professional fees (note 9) | 35,344 | 31,051 | 106,274 | 73,786 | ||||||||||||
Property investigation | 38 | (446 | ) | 287 | 29,088 | |||||||||||
Regulatory | 53,924 | 1,370 | 61,679 | 11,576 | ||||||||||||
Rent (note 9) | 7,050 | 12,217 | 21,718 | 31,190 | ||||||||||||
Telephone | 1,945 | 2,453 | 4,962 | 6,082 | ||||||||||||
Travel | 10,349 | 22,154 | 30,887 | 76,397 | ||||||||||||
Wages and benefits (note 9) | 328,735 | 161,244 | 898,512 | 489,721 | ||||||||||||
(538,190 | ) | (336,667 | ) | (1,467,068 | ) | (1,463,794 | ) | |||||||||
Other item | ||||||||||||||||
Gain on foreign exchange | 6,536 | 22,870 | 17,387 | 51,980 | ||||||||||||
Loss and comprehensive loss for the period | (531,654 | ) | (313,797 | ) | (1,449,681 | ) | (1,411,814 | ) | ||||||||
Deficit, beginning of the period | (7,160,632 | ) | (4,996,382 | ) | (6,242,605 | ) | (3,898,365 | ) | ||||||||
Deficit, end of the period | $ | (7,692,286 | ) | $ | (5,310,179 | ) | $ | (7,692,286 | ) | $ | (5,310,179 | ) | ||||
Basic and fully diluted loss per share | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.05 | ) | $ | (0.07 | ) | ||||
Weighted average number of shares outstanding | 29,925,796 | 21,656,461 | 29,064,604 | 21,555,623 | ||||||||||||
4
Table of Contents
(An Exploration Stage Entity)
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Three months ended | Nine months ended | |||||||||||||||
February | February | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Operating Activities | ||||||||||||||||
Loss and comprehensive loss for the | $ | (531,654 | ) | $ | (313,797 | ) | $ | (1,449,681 | ) | $ | (1,411,814 | ) | ||||
Add item not affecting cash Stock based compensation | 269,577 | 7,296 | 280,156 | 647,580 | ||||||||||||
Cash used in operating activities | (262,077 | ) | (306,501 | ) | (1,169,525 | ) | (764,234 | ) | ||||||||
Financing Activity | ||||||||||||||||
Funding provided by ITH | 429,795 | 528,240 | 1,921,189 | 1,803,331 | ||||||||||||
Cash provided by financing activity | 429,795 | 528,240 | 1,921,189 | 1,803,331 | ||||||||||||
Investing Activity | ||||||||||||||||
Expenditures on mineral properties | (167,718 | ) | (221,739 | ) | (751,664 | ) | (1,039,097 | ) | ||||||||
Cash used in investing activity | (167,718 | ) | (221,739 | ) | (751,664 | ) | (1,039,097 | ) | ||||||||
Increase in cash | — | — | — | — | ||||||||||||
Cash, beginning of period | — | — | — | — | ||||||||||||
Cash, end of period | $ | — | $ | — | $ | — | $ | — | ||||||||
Supplemental cash flow information | ||||||||||||||||
Interest paid | $ | — | $ | — | $ | — | $ | — | ||||||||
Income taxes paid | $ | — | $ | — | $ | — | $ | — | ||||||||
Non-cash financing and investing transactions | ||||||||||||||||
Shares issued to acquire mineral properties | $ | — | $ | 30,950 | $ | 801,000 | $ | 813,450 | ||||||||
Accounts payable included in mineral property expenditures | $ | 23,499 | $ | 2,432 | $ | 23,499 | $ | 2,432 | ||||||||
5
Table of Contents
(An Exploration Stage Entity)
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
1. | TRANSFER OF ASSETS | |
On May 14, 2010, International Tower Hill Mines Ltd. (“ITH”) announced an agreement (the “Arrangement”) whereby its other existing Alaska (other than the Livengood project) and Nevada assets would be carved out into a new public company Corvus Gold Inc. (“Corvus”). | ||
Under the Arrangement, each shareholder of ITH will receive one Corvus common share for every two ITH common shares held as at the effective date of the Arrangement as a return of capital and will then exchange each common share of ITH for a new common share of ITH. ITH will transfer its wholly-owned subsidiaries, Raven Gold Alaska Inc. (“Raven Gold”), incorporated in Alaska, United States, and Talon Gold Nevada Inc. (“Talon Nevada”), incorporated in Nevada, United States. Following this transfer and related transactions, there will be an indirect spin-out of certain of its mineral properties, Chisna, West Pogo, Terra, LMS, and North Bullfrog (the “Spin-out Properties”), together (the “Nevada and Other Alaska Business”). | ||
The Arrangement is subject to shareholder approval and regulatory acceptance, including the acceptance for filing by Toronto Stock Exchange and the approval of the NYSE Amex and the Supreme Court of British Columbia, which is expected to be implemented through a plan of arrangement under the Business Corporation Act (BC). | ||
Nevada and Other Alaska Business’ consolidated financial statements reflect the balance sheets, statements of operations, comprehensive loss and deficit and cash flows for the business as if it had been an independent operator during the periods reported. The statements of operations, comprehensive loss and deficit for the periods ended February 28, 2010 and 2009 include an allocation of ITH’s general and administrative expenses incurred in each of these periods. The allocation of general and administrative expenses was calculated on the basis of the ratio of costs incurred on the Spin-out Properties in each period presented as compared to the costs incurred on all mineral properties of ITH in each of these periods. The financial statements have been presented under the continuity of interests basis of accounting with balance sheet amounts based on the amounts recorded by ITH. Management cautions readers of these financial statements, that the allocation of expenses does not necessarily reflect future general and administrative expenses. | ||
2. | NATURE AND CONTINUANCE OF OPERATIONS | |
The Nevada and Other Alaska Business (the “Entity”) is an exploration stage entity engaged in the business of acquiring, exploring and evaluating mineral properties, and either joint venturing or developing these properties further or disposing of them when the evaluation is completed. At February 28, 2010, the Entity was in the exploration stage and had interests in properties in Alaska and Nevada, U.S.A. | ||
The business of mining and exploration involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The Entity has no source of revenue, and has significant cash requirements to meet its administrative overhead and maintain its mineral property interests. The recoverability of amounts shown for mineral properties is dependent on several factors. These include the discovery of economically recoverable reserves, the ability of the Entity to obtain the necessary financing to complete the |
6
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
a) | Basis of consolidation | ||
These consolidated financial statements include the accounts of the Entity and its wholly-owned subsidiaries Talon Nevada (a Nevada corporation) and Raven Gold (an Alaska corporation). All intercompany transactions and balances have been eliminated. | |||
b) | Basis of presentation | ||
These consolidated financial statements have been prepared on a carve-out basis from ITH as if the Entity had operated as a stand-alone entity during the reporting periods. | |||
Assets, liabilities and equity contributions directly attributable to the Entity have been allocated to the Entity. Revenues and expenses have generally been allocated based on the allocation of ITH and each subsidiary head office general and administrative expenses based upon the ratio of costs incurred on the Spin-out Properties in each period presented as compared to the costs incurred on all mineral properties of ITH in each of these periods. Amounts were allocated using management’s best estimates in order to provide the most reasonable allocation. |
7
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
b) | Basis of presentation (cont’d) | ||
As a result of the basis of presentation described above, these consolidated financial statements may not necessarily be indicative of the results that would have been obtained if the Entity had operated as a stand-alone entity, nor are they necessarily indicative of the result for any future periods. The continuing operation of the Entity is dependent on obtaining required funding from outside sources. While ITH has been successful in raising the required funding from outside sources in the past, it cannot be certain that any such funding would be available in the future to the Entity, or that funds would be available on terms acceptable to the management of the Entity. | |||
c) | Foreign currency translation | ||
Monetary assets and liabilities are translated at period-end exchange rates; other assets and liabilities have been translated at the rates prevailing at the date of transaction. Revenue and expense items, except for amortization, are translated at the average rate of exchange for the period. Amortization is converted using rates prevailing at dates of acquisition. Gains and losses from foreign currency translation are included in the consolidated statements of operations. | |||
d) | Mineral properties | ||
Mineral properties consist of mining claims, leases and options. Acquisition option payments, leasehold and exploration costs are capitalized and deferred until such time as the property is put into production or the properties are disposed of either through sale or abandonment. If the property is put into production, the costs of acquisition and exploration will be written-off over the life of the property, based on estimated economic reserves. Proceeds received from the sale of any interest in a property will first be credited against the carrying value of the property, with any excess included in operations for the period. If a property is abandoned, the property and deferred exploration costs will be written-off to operations in the period of abandonment. | |||
Recorded costs of mineral properties and deferred exploration and development expenditures are not intended to reflect present or future values of mineral properties. | |||
Deferred costs related to mineral property interests are periodically reviewed for impairment. A review for potential impairment is subject to potentially material measurement uncertainty. If a review indicates that a mineral property interest has been impaired the related deferred costs are written down or written off. | |||
Although the Entity has taken steps to verify title to mineral properties in which it has an interest, based on industry norms for the current stage of exploration of such properties, these procedures do not guarantee the Entity’s title. Property title may be subject to unregistered prior agreements and inadvertent non-compliance with regulatory requirements. |
8
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
e) | Asset retirement obligation | ||
Asset retirement obligations are recognized for legal obligations related to the retirement of long-lived tangible assets that arise from the acquisition, construction, development or normal operation of such assets. A liability for an asset retirement obligation is recognized in the period in which it is incurred and when a reasonable estimate of the fair value of the liability can be made with the corresponding asset retirement cost recognized by increasing the carrying amount of the related long-lived asset. The asset retirement cost is subsequently allocated in a rational and systematic method over the underlying asset’s useful life. The initial fair value of the liability is accreted, by charges to operations, to its estimated future value. | |||
f) | Loss per share | ||
Basic loss per share is calculated using the weighted average number of shares outstanding during the period. Given that the shareholders of ITH will receive one Corvus common share for two ITH common shares, the weighted average number of shares used is half of the weighted number of shares of ITH for the respective periods. The weighted average number of shares outstanding during the period was 29,064,604 (Year ended May 31, 2009 - 22,544,778). Diluted loss per share has not been presented separately as the outstanding options and warrants are anti-dilutive for each of the periods presented. | |||
The Entity uses the treasury stock method of calculating fully diluted per share amounts whereby any proceeds from the exercise of stock options or other dilutive instruments are assumed to be used to purchase common shares at the average market price during the period. | |||
g) | Income tax | ||
Income taxes are accounted for using the future income tax method. Under this method income taxes are recognized for the estimated income taxes payable for the current period and future income taxes are recognized for temporary differences between the tax and accounting bases of assets and liabilities and for the benefit of losses available to be carried forward for tax purposes that are more likely than not to be realized. Future income tax assets and liabilities are measured using tax rates expected to apply in the years in which the temporary differences are expected to be recovered or settled. To the extent that future income tax assets are not considered more likely than not to be realized, a valuation allowance is recorded. | |||
h) | Measurement uncertainty | ||
The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those reported. |
9
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
h) | Measurement uncertainty (cont’d) | ||
Significant areas requiting the use of management estimates relate to the determination of impairment of mineral properties and determination of the fair value of asset retirement obligations. By their nature, these estimates and related future cash flows are subject to measurement uncertainty, and the impact on the financial statements of future periods could be material. | |||
i) | Financial instruments — Recognition and measurement; disclosure and presentation | ||
All financial instruments are classified into one of the following five categories: held for trading, held-to-maturity, loans and receivables, available-for-sale financial assets, or other financial liabilities. Initial and subsequent measurement and recognition of changes in the value of financial instruments depends on their initial classification. Transaction costs related to financial instruments will be expensed in the period incurred. | |||
The Entity classified its financial instruments as follows: |
• | Accounts payable and accrued liabilities have been classified as other liabilities, |
j) | Future accounting changes |
i. | International Financial Reporting Standards (“IFRS”) | ||
In 2008, the Canadian Accounting Standards Board (“AcSB”) confirmed that the transition to IFRS from Canadian GAAP will be effective for fiscal years beginning on or after January 1, 2011 for publicly accountable enterprises. The Entity will therefore be required to present IFRS financial statements for its August 31, 2011 interim financial statements. The effective date will require the restatement for comparative purposes of amounts reported by the Entity for the interim periods and for the year ended May 31, 2011. The Entity is currently evaluating the impact of the conversion on the Entity’s consolidated financial statements and is considering accounting policy choices available under IFRS. | |||
ii. | Business combinations | ||
In January 2009, the CICA issued Handbook Section 1582, Business Combinations, which replaces the existing standards. This section establishes the standards for the accounting of business combinations, and states that all assets and liabilities of an acquired business will be recorded at fair value. Estimated obligations for contingent considerations and contingencies will also be recorded at fair value at the acquisition date. |
10
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
j) | Future accounting changes (cont’d) |
ii. | Business combinations (cont’d) | ||
The standard also states that acquisition-related costs will be expensed as incurred and that restructuring charges will be expensed in the periods after the acquisition date. This standard is equivalent to the International Financial Reporting Standards on business combinations. This standard is applied prospectively to business combinations with acquisition dates on or after January 1, 2011. Earlier adoption is permitted. The Entity is currently evaluating the impact of adopting this standard on its consolidated financial statements. This standard is not expected to be adopted prior to the transition to IFRS. | |||
iii. | Consolidated financial statements | ||
In January 2009, the CICA issued Handbook Section 1601, consolidated financial statements, which replaces the existing standards. This section establishes the standards for preparing consolidated financial statements and is effective for interim and annual consolidated financial statements beginning on or after January 1, 2011. The Entity is currently evaluating the impact of adopting this standard on its consolidated financial statements. This standard is not expected to be adopted prior to the transition to IFRS. | |||
iv. | Non-controlling interests | ||
In January 2009, the CICA issued Handbook Section 1602, Non-controlling interests, which establishes standards for the accounting of non-controlling interests of a subsidiary in the preparation of consolidated financial statements subsequent to a business combination. This standard is equivalent to the International Financial Reporting Standards on consolidated and separate financial statements. This standard is effective for interim and annual consolidated financial statements beginning on or after January 1, 2011. The Entity is currently evaluating the impact of adopting this standard on its consolidated financial statements. This standard is not expected to be adopted prior to the transition to IFRS. |
The carrying values of accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments. | |||
The Entity’s risk exposure and the impact on its financial instruments are summarized below: | |||
a) | Credit risk |
Credit risk is the risk of financial loss to the Entity if a counter-party to a financial instrument fails to meet, its contractual obligations. | |||
The Entity is not exposed to significant credit risk. |
11
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
b) | Liquidity risk | ||
Liquidity risk is the risk that the Entity will not be able to meet its financial obligations as they fall due. The Entity’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Entity manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. | |||
At February 28, 2010, the Entity had accounts payable and accrued liabilities of $23,499 (May 31, 2009 — $32,898), which are all payable within six months and are expected to be settled from available working capital as they come due. | |||
c) | Market risk | ||
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises four types of risk: interest rate risk, foreign currency risk, and other price risk. |
a. | Interest rate risk | ||
The Entity does not hold cash in bank accounts and does not earn interest income; therefore, the Entity is not subject to interest rate risk. | |||
b. | Foreign currency risk | ||
The Entity’s sensitivity analysis suggests that a consistent 5% change in the absolute rate of exchange for the United States dollars, the foreign currency for which the Entity has net assets employed, would affect net assets and foreign exchange gain (loss) by approximately $1,116. | |||
As at February 28, 2010 the Entity had the following financial instruments in US$: |
CADS equivalent | US$ | |||||||
Accounts payable and accrued liabilities | $ | 23,499 | $ | 22,327 | ||||
As at February 28, 2010, US$ amounts were converted at a rate of US$1 to $1.0525 Canadian dollars. | |||
c. | Other price risk | ||
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from interest rate risk or foreign exchange risk or commodity price risk. The Entity has no financial instruments exposed to such risk. |
12
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited—Prepared by Management)
Nine months ended February 28, 2010 and 2009
5. | MINERAL PROPERTIES |
Other Alaska Properties | ||||||||||||||||||||||||||||
West | Nevada Property | |||||||||||||||||||||||||||
Chisna | Pogo | LMS | Terra | Total Alaska | North Bullfrog | |||||||||||||||||||||||
(note 5(a)) | (note 5(a)) | (note 5(b) | (note 5(b)) | Properties | (note 5(c)) | Total | ||||||||||||||||||||||
Balance May 31, 2008 | $ | 1,465,023 | $ | 441,839 | $ | 1,789,173 | $ | 3,286,397 | $ | 6,982,432 | $ | 2,198,647 | $ | 9,181,079 | ||||||||||||||
Acquisition costs: | ||||||||||||||||||||||||||||
Cash payments | — | — | — | — | — | — | — | |||||||||||||||||||||
Common shares issued | — | — | 371,250 | 371,250 | 742,500 | 84,250 | 826,750 | |||||||||||||||||||||
— | — | 371,250 | 371,250 | 742,500 | 84,250 | 826,750 | ||||||||||||||||||||||
Deferred exploration costs: | ||||||||||||||||||||||||||||
Contract services | 239,119 | 12,646 | 18,510 | 143,118 | 413,393 | 67,150 | 480,543 | |||||||||||||||||||||
Assay | 25,911 | 3,962 | 23,085 | — | 52,958 | 15,328 | 68,286 | |||||||||||||||||||||
Drilling | — | — | — | — | — | (702 | ) | (702 | ) | |||||||||||||||||||
Field costs | 26,746 | 4,661 | 85 | (22,296 | ) | 9,196 | 9,123 | 18,319 | ||||||||||||||||||||
Equipment rental | 16,023 | — | 690 | 2,293 | 19,006 | — | 19,006 | |||||||||||||||||||||
Land maintenance & tenure | 40,827 | 23 | 16,587 | 144,679 | 202,116 | 219,045 | 421,161 | |||||||||||||||||||||
Transportation | 3,035 | — | 1,828 | — | 4,863 | — | 4,863 | |||||||||||||||||||||
Travel | 32,929 | — | — | 440 | 33,369 | 1,739 | 35,108 | |||||||||||||||||||||
384,590 | 21,292 | 60,785 | 268,234 | 734,901 | 311,683 | 1,046,584 | ||||||||||||||||||||||
Total expenditures for the year | 384,590 | 21,292 | 432,035 | 639,484 | 1,477,401 | 395,933 | 1,873,334 | |||||||||||||||||||||
Balance May 31,2009 | 1,849,613 | 463,131 | 2,221,208 | 3,925,881 | 8,459,833 | 2,594,580 | 11,054,413 | |||||||||||||||||||||
Acquisition costs: | ||||||||||||||||||||||||||||
Cash payments | — | — | — | — | — | 250,000 | 250,000 | |||||||||||||||||||||
Common shares issued | — | — | — | — | — | 801,000 | 801,000 | |||||||||||||||||||||
— | — | — | — | — | 1,051,000 | 1,051,000 | ||||||||||||||||||||||
Deferred exploration costs: | ||||||||||||||||||||||||||||
Advance to contractors | — | — | — | (10,849 | ) | (10,849 | ) | — | (10,849 | ) | ||||||||||||||||||
Contract services | 42,660 | 5,329 | 13,733 | 23,711 | 85,433 | 57,407 | 142,840 | |||||||||||||||||||||
Assay | 4,943 | 2,729 | — | — | 7,672 | 2,707 | 10,379 | |||||||||||||||||||||
Field costs | 9,291 | 1,010 | 800 | (62,316 | ) | (51,215 | ) | 12,060 | (39,155 | ) | ||||||||||||||||||
Equipment rental | 2,485 | 1,380 | 3,489 | — | 7,354 | — | 7,354 | |||||||||||||||||||||
Land maintenance & tenure | 68,782 | 18,903 | 28,428 | 167,833 | 283,946 | 47,873 | 331,819 | |||||||||||||||||||||
Transportation | 27,241 | 9,080 | 2,019 | — | 38,340 | 6,413 | 44,753 | |||||||||||||||||||||
Travel | 3,293 | 1,831 | — | — | 5,124 | — | 5,124 | |||||||||||||||||||||
158,695 | 40,262 | 48,469 | 118,379 | 365,805 | 126,460 | 492,265 | ||||||||||||||||||||||
Total expenditures for the period | 158,695 | 40,262 | 48,469 | 118,379 | 365,805 | 1,177,460 | 1,543,265 | |||||||||||||||||||||
Balance February 28, 2010 | $ | 2,008,308 | $ | 503,393 | $ | 2,269,677 | $ | 4,044,260 | $ | 8,825,638 | $ | 3,772,040 | $ | 12,597,678 | ||||||||||||||
13
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
5. | MINERAL PROPERTIES (cont’d) | |
Pursuant to the Arrangement, the obligations and interests in the Spin-out Properties under the various Agreements will be transferred from ITH to the Entity. |
a) | Properties acquired from AngloGold, Alaska | ||
Pursuant to an Asset Purchase and Sale and Indemnity Agreement dated June 30, 2006, as amended on July 26, 2006, (the “AngloGold Agreement”) among ITH, AngloGold Ashanti (U.S.A.) Exploration Inc. (“AngloGold”) and Talon Gold Alaska, Inc. (ITH’s wholly-owned Alaskan subsidiary), ITH acquired all of AngloGold’s interest in a portfolio of seven mineral exploration projects in Alaska (then aggregating 246 square kilometres) and referred to as the Livengood, Chisna, Gilles, Coffee Dome, West Pogo, Blackshell, and Caribou properties (the “Sale Properties”) in consideration of cash payment USD50,000 on August 4, 2006, and the issuance of 5,997,295 ITH common shares, representing approximately 19.99% of ITH’s issued shares following the closing of the acquisition and two private placement financings raising an aggregate of $11,479,348. AngloGold had the right to maintain its percentage equity interest in ITH, on an ongoing basis, provided that such right will terminate if AngloGold’s interest falls below 10% at any time after January 1, 2009. On July 10, 2009, AngloGold elected to exercise its right to maintain its 13.2907% equity interest in ITH pursuant to the AngloGold Agreement. | |||
As further consideration for the transfer of the Sale Properties. ITH granted to AngloGold a 90 day right of first offer with respect to the Sale Properties and any additional mineral properties in Alaska in which ITH acquires an interest and which interest ITH proposes to farm out or otherwise dispose of. If AngloGold’s equity interest in ITH is reduced to less than 10%, then this right of first offer will terminate. | |||
Pursuant to the Arrangement, ITH will spin-out the Chisna and West Pogo properties to the Entity. Details of the Chisna and West Pogo properties are as follows: |
i | Chisna Property |
14
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
5. | MINERAL PROPERTIES (cont’d) |
a) | Properties acquired from AngloGold, Alaska (cont’d) |
i | Chisna Property (cont’d) | ||
USD700/oz and USD1.70/lb, respectively, for a period of 10 consecutive trading days. If Subco fails to fund any portion of the initial USD5,000,000 (or USD2,000,000 as applicable) in the first year, Raven Gold will be entitled to terminate the JV and OPV and Subco will be jointly indebted to Raven Gold for the difference between USD5,000,000 (or USD2,000,000 as applicable) and the amount actually funded. | |||
Raven Gold will be the operator of the JV during the first two years. After two years, Subco will be entitled to assume the operatorship of the JV and to maintain operatorship until and unless it ceases to hold a majority interest in the JV. Any work program proposed by the operator will be subject to approval by the five member JV management committee. After Subco has completed its USD20,000,000 initial contribution, the JV participant with the greatest interest in the JV will be entitled to nominate three members of the management committee. | |||
If Subco funds the entire USD20,000,000 within five year period, it will have the option to acquire a further 19% interest in the JV by producing a positive bankable feasibility study in respect of the Chisna Project within five years after electing to exercise such option, and by funding and additional exploration required to produce such a study. The feasibility study must support a mining operation at a minimum level of 300,000 ounces per year of gold equivalent production. | |||
In consideration for ITH providing the resources for Raven Gold to enter into the JV, OPV will issue 200,000 common shares (received subsequent to period-end) to ITH following satisfaction of the conditions precedent to the formation of the JV and an additional 200,000 shares each anniversary thereafter, to a total of 1,000,000 shares, provided the JV is in good standing. | |||
The formation of the JV, and the rights of OPV/Subco under the JV Agreement, were subject to a pre-emptive right in favour of AngloGold under the AngloGold Agreement (note 5(a)), which was waived by AngloGold on November 17, 2009. Consequently, Subco and Raven Gold proceeded with the JV, and will be bound by the existing Indemnity and Pre-emptive Rights Agreement among AngloGold, ITH and Talon Gold Alaska Inc., as provided for in the AngloGold Agreement. The principal effect of that agreement on the JV will be indemnity provisions relating to the Chisna Project, and AngloGold will have no further pre-emptive right in respect of the Chisna Project. | |||
The formation of the JV is subject to certain conditions precedent, including the transfer of the Chisna Project claims to Raven Gold (presently underway), and the acceptance of the JV Agreement by the TSX Venture Exchange on behalf of OPV (accepted for filing by the TSXV on behalf of OPV on March 15, 2010). |
15
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
5. | MINERAL PROPERTIES (cont’d) |
a) | Properties acquired from AngloGold, Alaska (cont’d) |
i. | Chisna Property (cont’d) | ||
Subsequent to February 28, 2010, ITH entered into a Mineral Exploration Agreement with Option to Lease dated March 30, 2010 (“Exploration Agreement”) with Ahtna Incorporated, an Alaska Native Regional Corporation, concerning approximately 26,516 hectares of fee simple lands in the Ahtell Area of Alaska surrounding portions of the Entity’s Chisna property. The property subject to the Exploration Agreement will become part of the joint venture with OPV. | |||
ii | West Pogo Property | ||
The West Pogo property is located approximately 50 kilometres north of Delta Junction, Alaska, and consists of 96 State of Alaska mining claims (1,944 hectares) owned 100% by the Entity pursuant to the Arrangement. | |||
Subsequent to February 28, 2010, ITH entered into a binding letter of intent dated March 24, 2010 with First Star Resources Inc. (“First Star”) in connection with the West Pogo property (“WP LOI”). Under the terms of the WP LOI, First Star has to ability to earn an initial 55% interest, and a second option to earn a further 45%, for a total 100% interest. To earn the 55% interest First Star will pay USD250,000 and expend USD2,800,000 on exploration. To acquire a 100% ownership, First Star will fund the project through to an advanced exploration stage by spending a further USD2,000,000 prior to December 31, 2015, or by producing, filing and having accepted by the TSXV a NI43-101 compliant inferred resource of one million ounces of gold using a 0.5 g/t cutoff grade, whichever costs less. An NSR royalty of 3% or 4% on gold/silver and 1% on all other products will be payable to Raven Gold. The royalty can be reduced by 1% by paying Raven Gold USD3,000,000. |
b) | Properties optioned from AngloGold, Alaska | ||
In conjunction with the closing of the acquisition of the Sale Properties, ITH entered into an option/joint venture with AngloGold with respect to two additional mineral projects in Alaska, referred to as the LMS and the Terra properties (the “Optioned Properties”). | |||
Pursuant to the Arrangement, ITH will spin-out the LMS and Terra properties to the Entity. Details of the LMS and Terra properties are as follows: |
i | LMS Property | ||
The LMS property consists of92State of Alaska unpatented lode mining claims (5,691 hectares) owned by AngloGold. |
16
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
5. | MINERAL PROPERTIES (cont’d) |
b) | Properties optioned from AngloGold, Alaska (cont’d) |
i | LMS Property (cont’d) | ||
With respect to the LMS property, ITH will have the right to earn a 60% interest by incurring aggregate exploration expenditures of USD3,000,000 by January 30, 2010 (incurred), of which ITH has committed to incur minimum exploration expenditures of USD1,000,000 during the 2006 calendar year and of USD750,000 during the 2007 calendar year. | |||
Upon ITH having earned its 60% interest in the LMS property, AngloGold will have the right to re-acquire a 20% interest (for an aggregate 60% interest) and become manager of the joint venture by incurring a further USD4,000,000 in exploration expenditures over a further two years. | |||
ii | Terra Property | ||
The Terra Property now consists of 235 State of Alaska unpatented lode mining claims (15,552 hectares) held by or on behalf of AngloGold and 5 State of Alaska unpatented lode mining claims (324 hectares) leased from an individual. The lease requires a payment on execution of USD25,000 (paid), and advance minimum royalties of USD25,000 on or before March 22, 2006 (paid), USD50,000 on or before March 22, 2007 (paid), USD75,000 on or before March 22, 2008 (paid), USD100,000 on or before March 22, 2009 (paid) and each subsequent March 22 until March 22, 2015 (March 22, 2010 payment paid on February 2, 2010), and thereafter USD125,000 until the expiry of the lease (all of which are recoverable from production royalties). The lessor is entitled to receive a net smelter returns production royalty on gold equal to 3.0% if the gold price is less than USD450/ounce and 4% if the gold price is USD450/ouncc or higher, plus a net smelter returns royalty of 4% on all other mineral products other than gold. 1% of the royalty may be purchased for USD1,000,000 and a further 1% for USD3,000,000. | |||
With respect to the Terra property, ITH will have the right to earn a 60% interest by incurring aggregate exploration expenditures of USD3,000,000 by January 30, 2010, of which ITH has committed to incur minimum exploration expenditures of USD500,000 during the 2006 calendar year and of USD750,000 during the 2007 calendar year. | |||
Upon ITH having earned its 60% interest in the Terra property, AngloGold will have the right to re-acquire a 20% interest (for an aggregate 60% interest) and become manager of the joint venture by incurring a further USD4,000,000 in exploration expenditures over a further two years. | |||
In either case, following the parties having earned their final respective interests, each party will be required to contribute its pro rata share of further exploration expenditures or be diluted. A party that is diluted to 10% or less will have its interest converted to a 2% net smelter return royalty. |
17
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
5. | MINERAL PROPERTIES (cont’d) |
b) | Properties optioned from AngloGold, Alaska (cont’d) |
On November 5, 2007 ITH provided notice to AngloGold that it has incurred sufficient expenditures to vest its 60% ownership in the Terra project. AngloGold had 90 days to decide whether or not to exercise its right to earn back an additional 20% interest in the Terra project by incurring USD4,000,000 in expenditures over the next two years, and elected not to do so. As AngloGold elected not to exercise its back-in right, each party is therefore responsible for contribution its share of ongoing joint venture expenditures. |
On June 10, 2008, ITH entered into an agreement to acquire all of the interest of AngloGold in the Terra and LMS projects, plus certain other AngloGold rights on the Gilles and West Pogo properties, for the purchase price of $751,500 to be satisfied by the issuance of 450,000 shares of ITH to AngloGold (issued). The transaction was approved by NYSE Alternext-US Stock Exchange on July 31, 2008 and by the TSXV on September 10, 2008. | |||
On February 26, 2010, ITH signed a LOI to enter into a joint venture with American Mining Corporation (“AMC”), a private Nevada corporation, on the Terra Gold Project. Pursuant to the LOI, an Alaskan subsidiary of AMC (“AMC Subco”) and Raven Gold will form a joint venture (the “JV”) with the aim of developing the Terra Project to production. It is anticipated that AMC Subco, as operator, will commence a project development program in June 2010. | |||
The initial interests of AMC Subco and Raven Gold in the JV will be 51% and 49% respectively. Raven’s initial contribution to the JV will be its interest in the Terra Project, including all related data and property facilities. AMC Subco’s initial contribution to the JV will be funding for the JV totalling USD6,000,000 over three years (USD1,000,000 in 2010). Of these expenditures, USD100,000 will be paid to ITH in each of the first and second years to partially reimburse ITH for the cost of constructing the existing camp facility at Terra. As consideration for ITH causing Raven Gold to enter into the JV, AMC will pay ITH USD300,000 and issue 750,000 common shares of AMC, over the same three-year period (USD50,000 and 250,000 shares in 2010). If AMC Subco fails to make its full initial contribution, or AMC fails to make all required payments and share issuances to the ITH, over such three-year period, then the JV will terminate and AMC Subco will not retain any residual interest in the Terra project. | |||
In addition, the JV has granted Raven Gold a sliding scale NSR royalty of between 0.5% and 5% (depending upon the gold price) on all precious metal production from the property and a 1% NSR royalty on all base metal production. The royalty to Raven Gold is in addition to the current royalty payable to the underlying lessor. |
18
Table of Contents
(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
5. | MINERAL PROPERTIES (cont’d) |
b) | Properties optioned from AngloGold, Alaska (cont’d) | ||
Upon having completed its initial contribution, AMC Subco will have the option to increase its JV interest by 29% (to 80% total) by providing a subsequent contribution of an additional USD3,050,000 in funding in the fourth year. In addition, AMC will be required to pay ITH an additional USD150,000 and issue an additional 150,000 common shares. Should Raven Gold’s interest be diluted below 10% as a consequence of it not funding its proportionate share of JV expenditure following AMC Subco’s having completed its initial contribution (and subsequent contribution, if applicable), Raven Gold’s JV interest will be converted to an additional 1% property wide NSR royalty on all metals produced, for an aggregate NSR royalty to Raven of 1.5% to 6% (depending upon the gold price) on precious metals and 2% on base metals). | |||
Formation of the JV is subject to the settlement and execution of a formal agreement and the completion by AMC of due diligence on the Terra project, both to be completed on or before May 19, 2010 (extended to July 30, 2010). On May 17, 2010, AMC assigned the Terra project LOI with ITH to Terra Mining Corporation, a company incorporated under the laws of British Columbia. | |||
Pursuant to the Arrangement the Entity has all of the interests of the Terra and LMS projects. | |||
Subsequent to February 28, 2010, ITH entered into a binding letter of intent (“LOI”) dated March 24, 2010 with First Star in connection with the LMS property. Under the terms of the LMS LOI, First Star has the ability to earn an initial 55% interest, and a second option to earn a further 45%, for a total 100% interest. To earn the 55% interest First Star will pay USD280,000 and expend USD3,500,000 on exploration. To acquire a 100% ownership, First Star will fund the project through to an advanced exploration stage by spending a further USD3,000,000 prior to December 31, 2015, or by producing, filing and having accepted by the TSXV a NI 43-101 compliant inferred resource of two million ounces of gold using a 0.5 g/t cutoff grade, whichever costs less. An NSR royalty of 3% or 4% on gold/silver and 1% on all other products will be payable to Raven Gold. The royalty can be reduced by 1% by paying Raven Gold USD3,000,000. | |||
c) | Properties optioned from Redstar Gold Corp., Nevada | ||
On March 15, 2007, ITH signed two binding letters of intent with Redstar Gold Corp. of Vancouver, B.C. (“Redstar”), pursuant to which ITH could earn up to a 70% interest in two gold projects, referred to as North Bullfrog and Painted Hills, located in Nevada. ITH could earn an initial 60% interest in each project by making payments and exploration expenditures and had the option to earn an additional 10% interest (aggregate 70%) by funding all expenditures to take a project to feasibility. There is no time limit by which a feasibility study is required to be delivered. |
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(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
5. | MINERAL PROPERTIES (cont’d) |
c) | Properties optioned from Redstar Gold Corp., Nevada (cont’d) | ||
Pursuant to the Arrangement, ITH will spin-out the North Bullfrog property to the Entity. Details of the North Bullfrog property are as follows: |
i | North Bullfrog | ||
To earn its initial 60% interest, ITH must make total payments of USD190,000 and incur total expenditures of USD4,000,000 over 4 years to March 15, 2011. The first year requirement is a payment of USD20,000 on TSXV acceptance (paid) plus exploration expenditures of USD500,000 (incurred). The second payment of USD30,000 is due by September 15, 2008 (paid). The third payment of USD40,000 is due by March 15, 2009 (paid). The fourth payment of USD50,000 is due by March 15, 2010 (acquisition completed on October 9, 2009) and the fifth payment of USD50,000 is due by March 15, 2011. |
ITH is also required to pay the advance minimum royalty payments to the owners of certain patented mining claims which are fully recoupable against production royalties. The advance minimum royalty in year 1 to 3 is USD32,300 per year and year 4 onwards is USD37,700. Production royalties range from 2% to 4%. All production royalties may be bought out at a price of USD1,000,000 per 1% except for one 3% royalty that may be bought out for USD850,000 per 1%. | |||
ITH is also required to issue an aggregate of 20,000 common shares to Redstar, as to 5,000 shares on each on September 15, 2008 (issued), March 15, 2009 (issued), March 15, 2010 (acquisition completed on October 9, 2009) and March 15, 2011, so long as ITH is earning into at least one of the North Bullfrog or Painted Hills projects. | |||
On October 9, 2009, ITH completed the acquisition of all of the interests of Redstar and Redstar Gold U.S.A. Inc. in the North Bullfrog project (including the Mayflower (note 5(d)) and Connection (note 5(e)) properties) under an agreement dated July 30, 2009, thereby giving ITH 100% ownership of the project. Consideration for the acquisition was a cash payment of USD250,000 and the issuance of 200,000 common shares. Completion of the acquisition eliminated ITH’s vesting requirements for expenditures and issuance of shares. |
d) | Mayflower property, Nevada | ||
Pursuant to a mining lease and option to purchase agreement made effective December 1, 2007 between ITH and a group of arm’s length limited partnerships, ITH has leased (and has the option to purchase) eleven patented mining claims (approximately 76 hectares) located adjacent to its North Bullfrog project in south-western Nevada. The terms of the lease/option are as follows: |
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(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
5. | MINERAL PROPERTIES (cont’d) |
d) | Mayflower property Nevada (cont’d) |
• | Terms: Initial term of 5 years, commencing December 1, 2007, with the option to extend the lease for an additional 5 years. The lease will continue for so long thereafter as the property is in commercial production or, alternatively, for an additional three years if ITH makes advance minimum royalty payments of USD100,000/year (which are recoupable against actual production royalties). | ||
• | Lease Payments: USD5,000 (paid) and 25,000 common shares of ITH (issued) following regulatory acceptance of the transaction; and an additional USD5,000 and 20,000 common shares on each of the first through fifth lease anniversaries (USD5,000 paid on each of December 10, 2008 and October 14, 2009 and 20,000 common shares issued on each of September 8, 2008 and November 25, 2009). If ITH elects to extend the lease for a second 5 year term, it will pay USD10,000 and issue 50,000 common shares upon election being made, and an additional USD10,000 and 50,000 common shares on each of the sixth through tenth anniversaries. | ||
• | Work Commitments: USD100,000 per year for the first three years, USD200,000 per year for the years 4-6 and USD300,000 for the years 7-10. Excess expenditures in any year may be carried forward. If ITH does not incur the required expenditures in year 1, the deficiency is required to be paid to the lessors. | ||
• | Retained Royalty: ITH will pay the lessors a net smelter returns royalty of 2% if the average gold price is USD400/ounce or less, 3% if the average gold price is between USD401 and USD 500/ounce and 4% if the average gold price is greater than USD500/ounce. | ||
• | Purchase Option: ITH has the right to purchase all the interest of the lessors in the property during the first 10 years for USD7,500,000 plus a 0.5% net smelter royalty if the gold price is under USD500/ounce and 1% if the gold price is USD500/ounce or above. After the initial 10 year period, the cash portion of the purchase price will be escalated annually based on the US annual Consumer Price Index increase for that year. |
The Mayflower property, and the associated acquisition costs, has been added to the North Bullfrog Redstar Joint Venture property in which ITH has the right to earn a 100% interest (note 5(c)). Pursuant to the Arrangement, the right to earn the interest will be transferred from ITH to the Entity. |
e) | Connection property, Nevada | ||
Pursuant to a mining lease and option to purchase agreement made effective October 27, 2008 between Redstar and an arm’s length limited liability company, Redstar has leased (and has the option to purchase) twelve patented mining claims located adjacent to the North Bullfrog project and referred to as the “Connection” property. The 10 year, renewable mining lease requires payments of USD10,800 (paid) on signing and annual payments for the first three anniversaries of USD10,800 and USD16,200 for every year thereafter (USD10,800 paid on September 30, 2009). Redstar has an option to purchase is the property for USD1,000,000 at any time during the life of the lease. Production is subject to a 4% NSR royalty, which may be purchased for USD5,000,000. |
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(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
5. | MINERAL PROPERTIES (cont’d) |
e) | Connection property, Nevada (cont’d) | ||
The Connection property, and the associated acquisition costs, has been added to the North Bullfrog Redstar Joint Venture property in which ITH has the right to earn a 100% interest (note 5(c)). Pursuant to the Arrangement, the right to earn the interest will be transferred from ITH to the Entity. |
6. | STOCK-BASED COMPENSATION | |
Stock options awarded to employees and non-employees by ITH are measured and recognized in the consolidated statement of operations, comprehensive loss and deficit or added to mineral properties at the fair value of the award. The fair value of all forms of stock-based compensation is charged to operations or capitalized to mineral properties over the vesting period of the options granted. Fair value is estimated using the Black-Scholes Option Pricing Model. | ||
Since the Entity was not incorporated, there have been no stock options issued directly by the Entity during the periods presented. Stock-based compensation amounts included in the consolidated financial statements represent an allocation of ITH’s related stock-based compensation amounts on a direct basis for employees and non-employees working directly on the Spin-out Properties and on a pro rata basis for head office employees and directors as outlined in note 1. | ||
Stock-based compensation has been allocated as follows: |
For the nine months ended February 28 | 2010 | 2009 | ||||||
Administration | $ | — | $ | — | ||||
Consulting | — | 347,914 | ||||||
Investor relations | 54,204 | 117,073 | ||||||
Professional fees | — | — | ||||||
Wages and benefits | 225,952 | 182,593 | ||||||
$ | 280,156 | $ | 647,580 | |||||
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(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
7. | CONTRIBUTED SURPLUS | |
Funding provided by ITH related to the Entity’s activities is classified as contributed surplus: |
Stock-based | ||||||||||||
compensation on | ||||||||||||
options granted | Funding | |||||||||||
during the year | provided by and | Total funding | ||||||||||
allocated from | expenses paid | provided by | ||||||||||
ITH | by ITH | ITH | ||||||||||
Balance, May 31, 2008 | $ | 2,243,313 | $ | 10,719,847 | $ | 12,963,160 | ||||||
Additions in fiscal 2009 | 1,356,730 | 2,944,230 | 4,300,960 | |||||||||
Balance, May 31, 2009 | 3,600,043 | 13,664,077 | 17,264,120 | |||||||||
Additions in nine months period of fiscal 2010 | 280,156 | 2,722,189 | 3,002,345 | |||||||||
Balance, February 28, 2010 | $ | 3,880,199 | $ | 16,386,266 | $ | 20,266,465 | ||||||
8. | INCOME TAXES | |
A reconciliation of income taxes at statutory rates with the reported taxes is as follows for the nine months ended February 28: |
2010 | 2009 | |||||||
Loss before income taxes | $ | (1,449,681 | ) | $ | (1,411,814 | ) | ||
Statutory Canadian corporate tax rate | 29.58 | % | 30.38 | % | ||||
Income tax recovery at statutory rates | $ | (428,816 | ) | $ | (428,909 | ) | ||
Unrecognized items for tax purposes | 536,094 | 471,935 | ||||||
Difference in tax rates in other jurisdictions | (107,278 | ) | (43,026 | ) | ||||
$ | — | $ | — | |||||
At February 28, 2010, the Entity has $Nil (2009 — $Nil) future income tax assets. |
9. | RELATED PARTY TRANSACTIONS | |
During the period, the Entity paid $508,980 (2009 — $115,040), including bonuses of $359,531 (2009 — $Nil), in consulting, investor relations, wages and benefits to officers, directors and companies controlled by directors of the Entity and $12,337 (2009 - $20,260) in rent and administration to a company with common officers and directors. Professional fees of $13,057 (2009 — $11,171) to a company related to an officer who is also a director of the Entity. These figures do not include stock-based compensation (note 6). | ||
These amounts were unsecured, non-interest bearing and had no fixed terms of repayment. Accordingly, fair value could not be readily determined. |
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(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
9. | RELATED PARTY TRANSACTIONS (cont’d) | |
ITH’s purchase of AngloGold’s interest in the Terra and LMS Projects in Alaska (Note 5(b)) completed on November 24, 2008 is considered a related party transaction by virtue of a common directorship and the ownership by AngloGold of in excess of 10% of the ITH’s outstanding common shares. | ||
These transactions with related parties have been valued in these financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties. | ||
10. | GEOGRAPHIC SEGMENTED INFORMATION |
Canada | United States | Total | ||||||||||
February 28, 2010 | ||||||||||||
Mineral properties | $ | — | $ | 12,597,678 | $ | 12,597,678 | ||||||
May 31, 2009 | ||||||||||||
Mineral properties | $ | — | $ | 11,054,413 | $ | 11,054,413 | ||||||
February 28, 2010 | February 28, 2009 | |||||||
Net loss for the period- Canada | $ | (676,583 | ) | $ | (1,074,094 | ) | ||
Net loss for the period- United States | (773,098 | ) | (337,720 | ) | ||||
Net loss for the period | $ | (1,449,681 | ) | $ | (1,411,814 | ) | ||
11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) | |
These consolidated financial statements are prepared in accordance with GAAP in Canada, which differs in certain respects from GAAP in the United States. The material differences between Canadian and United States GAAP, in respect of these financial statements, are as follows: |
a) | Mineral property exploration and development | ||
Under United States GAAP, all mineral exploration and development property expenditures are expensed in the year incurred in an exploration stage company until there is substantial evidence that a commercial body of minerals has been located. Canadian GAAP allows mineral exploration and development property expenditures to be deferred during this process. |
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(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (cont’d) |
a) | Mineral property exploration and development (cont’d) | ||
The effect on the Entity’s financial statements is summarized below: |
Nine months ended February 28 | 2010 | 2009 | ||||||
Consolidated statements of operations and deficit | ||||||||
Loss for the period under | ||||||||
Canadian GAAP | $ | (1,449,681 | ) | $ | (1,411,814 | ) | ||
Mineral property expenditures, net | (492,265 | ) | (925,245 | ) | ||||
Loss for the period under United States GAAP | $ | (1,941,946 | ) | $ | (2,337,059 | ) | ||
Loss per share – US GAAP | $ | (0.07 | ) | $ | (0.11 | ) | ||
February 28, | May 31, 2009 | |||||||
Consolidated balance sheets | 2010 | (audited) | ||||||
Mineral Properties | ||||||||
Canadian GAAP | $ | 12,597,678 | $ | 11,054,413 | ||||
Mineral property expenditures (cumulative) | (9,716,784 | ) | (9,224,519 | ) | ||||
Mineral properties under United States GAAP | $ | 2,880,894 | $ | 1,829,894 | ||||
Deficit | ||||||||
Canadian GAAP | $ | (7,692,286 | ) | $ | (6,242,605 | ) | ||
Mineral property expenditures (cumulative) | (9,716,784 | ) | (9,224,519 | ) | ||||
Deficit under United States GAAP | $ | (17,409,070 | ) | $ | (15,467,124 | ) | ||
Nine months ended February 28 | 2010 | 2009 | ||||||
Consolidated statements of cash flows | ||||||||
Operating activities | ||||||||
Cash used per Canadian GAAP | $ | (1,169,525 | ) | $ | (764,234 | ) | ||
Effect of the write-off of exploration expenditures | (501,664 | ) | (1,039,097 | ) | ||||
Cash used per United States GAAP | $ | (1,671,189 | ) | $ | (1,803,331 | ) | ||
Investing activities | ||||||||
Cash used per Canadian GAAP | $ | (751,664 | ) | $ | (1,039,097 | ) | ||
Effect of the write-off of exploration expenditures | 501,664 | 1,039,097 | ||||||
Cash used per United States GAAP | $ | (250,000 | ) | $ | — | |||
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(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (cont’d) |
b) | Stock based compensation | ||
The Entity has adopted Statement of Financial Accounting Standards No. 123R (Codified under ASC 718 and ASC 505-50),and records compensation cost for stock-based employee compensation plans at fair value. Accordingly, compensation cost for stock options granted is measured as the fair value at the date of grant, and there is no difference in these consolidated financial statements. |
c) | Loss per share | ||
Under both Canadian and United States GAAP basic loss per share is calculated using the weighted average number of common shares outstanding during the year. | |||
Under United States GAAP, the weighted average number of common shares outstanding excludes any shares that remain in escrow, but may be earned out based on the Entity incurring a certain amount of exploration and development expenditures. The weighted average number of shares outstanding under United States GAAP for the period ended February 28, 2010 and 2009 was 29,064,604 and 21,555,623 respectively. |
d) | Income taxes | ||
Under United States GAAP, the Entity would have initially recorded an income tax asset for the benefit of the resource deduction pools. This asset would have been reduced to $Nil by a valuation allowance. The result is no difference in net income reported between Canadian and United States GAAP. |
e) | Recent US accounting pronouncements |
i | In May 2009, the FASB issued Accounting Standards Codification (“ASC”) 855-10,Subsequent Events(“ASC 855-10”) (amended in February 2010) (formerly SFAS Statement No 165), which establishes principles and requirements for subsequent events. In particular, ASC 855-10 sets forth: (a) the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (b) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements; and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. The adoption of this new standard is not expected to have an impact on the Entity’s consolidated financial statements. |
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(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (cont’d) |
e) | Recent US accounting pronouncements (cont’d) |
ii | In June 2009, the FASB issued new guidance which is now a part of ASC 860-10 (formerly SFAS Statement No 166), to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. The FASB undertook this project to address (1) practices that have developed since the issuance of FASB Statement No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities(which is now a part of ASC 860-10), that are not consistent with the original intent and key requirements of that Statement and (2) concerns of financial statement users that many of the financial assets (and related obligations) that have been derecognized should continue to be reported in the financial statements of transferors. This new guidance is effective for fiscal years beginning after November 15, 2009 and is not expected to have a material impact on the Entity’s consolidated financial statements. | ||
iii | In June 2009, the FASB issued new guidance which is now part of ASC 810-10 (formerly SFAS Statement No. 167), to improve financial reporting by enterprises involved with variable interest entities. The FASB undertook this project to address (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003),Consolidation of Variable Interest Entities(which is now part of ASC 810-10), as a result of the elimination of the qualifying special-purpose entity, and (2) constituent concerns about the application of certain key provisions of ASC 810-10, including those in which the accounting and disclosures under ASC 810-10 do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. This new guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. This new guidance is not expected to have a material impact on the Entity’s consolidated financial statements. | ||
iv | In June 2009, the FASB issued new guidance which is now part of ASC 105-10 (the “Codification”) (formerly Statement of Financial Accounting Standards No. 168, TheFASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles),which will become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of the Codification, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of the Codification only had the effect of amending references to authoritative accounting guidance in the Entity’s consolidated financial statements. |
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(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) (cont’d) |
e) | Recent US accounting pronouncements (cont’d) |
v | In August 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Measuring Liabilities at Fair Value” (“ASU 2009-05”). This update provides amendments to ASC 820, “Fair Value Measurements and Disclosure”, for the fair value measurement of liabilities when a quoted price in an active market is not available. ASU 2009-05 is effective for reporting periods beginning after August 28, 2009. This new guidance is not expected to have a material impact on the Entity’s consolidated financial statements. | ||
vi | In September 2009, the FASB issued Accounting Standards Update No. 2009-12, “Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)” (“ASU 2009-12”). This update provides amendments to ASC Topic 820, “Fair Value Measurements and Disclosure”, permitting companies to estimate the fair value of investments within ASC 820’s scope using the net asset value per share. ASU 2009-05 is effective for reporting periods ending after December 15, 2009. | ||
vii | In September 2009. the FASB reached a consensus on Accounting Standards Update (“ASU”) -2009-13 “Revenue Recognition” (“ASC 605”) — “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”), and ASU 2009-14 “Software” (“ASC 985”) - “Certain Revenue Arrangements That Include Software Elements (“ASU 2009-14”). ASU 2009-13 modifies the requirements that must be met for an entity to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. ASU 2009-13 eliminates the requirement that all undelivered elements must have either: (i) VSOE or (ii) third-party evidence, or TPE, before an entity can recognize the portion of an overall arrangement consideration that is attributable to items that already have been delivered. In the absence of VSOE or TPE of the standalone selling price for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. Overall arrangement consideration will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. The residual method of allocating arrangement consideration has been eliminated. ASU 2009-14 modifies the software revenue recognition guidance to exclude from its scope tangible products that contain both software and non-software components that function together to deliver a product’s essential functionality. These new updates are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. However, these provisions are not expected to have a material impact on the Entity’s consolidated financial statements. |
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(An Exploration Stage Entity)
Notes to the Consolidated Financial Statements
(Expressed in Canadian dollars)
(Unaudited — Prepared by Management)
Nine months ended February 28, 2010 and 2009
12. | CAPITAL MANAGEMENT | |
The Entity manages its capital structure and makes adjustments to it, based on the funds available to the Entity, in order to support future business opportunities. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Entity’s management to sustain future development of the business. | ||
The Entity currently has no source of revenues. As such, the Entity is dependent upon external financings to fund activities. In order to carry future projects and pay for administrative costs, the Entity will spend its available working capital and raise additional funds as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Entity, is reasonable. | ||
There were no changes in the Entity’s approach to capital management during the period ended February 28, 2010. The Entity is not subject to externally imposed capital requirements. |
13. | SUBSEQUENT EVENTS | |
Subsequent to February 28, 2010, |
a) | ITH entered into a binding LOI dated March 24, 2010 with First Star in connection with the West Pogo property (note 5(a)(ii)). | ||
b) | ITH entered into a binding LOI dated March 24, 2010 with First Star in connection with the LMS property (note 5(b)(i)). | ||
c) | ITH entered into an Exploration Agreement with Option to Lease dated March 30, 2010 with Ahtna Incorporated, concerning the Ahtell Area of Alaska surrounding portions of the Entity’s Chisna Property. The property subject to the Exploration Agreement will become part of the joint venture with OPV (note 5(a)(i)). |
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(a) | Talon Gold Alaska Inc., a corporation incorporated in Alaska on June 27, 2006, which will hold the Livengood Project and is 100% owned by the Company; and | ||
(b) | Talon Gold (U.S.) LLC, a limited liability company formed in Colorado on June 27, 2006, which carries on all of the Company’s mineral exploration operations and is wholly owned by Talon Alaska. |
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(a) | the right, twice a year, to maintain its then current equity ownership percentage in the Company on an ongoing basis thereby avoiding dilution as a result of the issuance of Common Shares (or New Common Shares upon completion of the Arrangement) by the Company in connection with property payments or warrant or option exercises; and | ||
(b) | the right to participate in any equity financings by the Company up to its then pre-financing percentage equity interest, |
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• | Most Livengood ores can be considered moderately soft to moderately hard with an average Bond Ball Work index of 15.8 ranging from 11.1 to 19.1. | |
• | The majority of ores are considered non-abrasive with an average abrasion index of 0.0809 and a range of 0.0023 to 0.2872. | |
• | All Livengood ores respond to cyanide leaching to some degree. | |
• | Some unoxidized ore with organic carbon has “active” or “preg-robbing” carbon. | |
• | Leach times and gravity concentration indicate that some ores contain coarse gold. | |
• | Gold recovery exceeded 90% at 10 mesh for some ores. | |
• | Gold recovery improved for some ores with finer grinding. | |
• | Gold recovery for various leach tests suggests that organic carbon is present in varying degrees in some ores, particularly in unoxidized ore. | |
• | Carbon in Leach bottle roll tests indicate an average 84% recovery for the Sunshine Zone. |
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• | Gold with sulfide is not classified as refractory ore. | |
• | Combined gravity and flotation produced on average 90% recovery of gold. | |
• | Conventional milling using gravity recovery combined with intensive Carbon in Leach (CIL) leaching of gravity recovered gold concentrate achieved gold recoveries averaging 86%. |
Classification | Au Cutoff (g/t) | Tonnes (millions) | Au (g/t) | Million Ounces Au | ||||||||||||
Indicated | 0.30 | 789 | 0.62 | 15.7 | ||||||||||||
Inferred | 0.30 | 229 | 0.55 | 4.9 | ||||||||||||
Indicated | 0.50 | 409 | 0.83 | 10.9 | ||||||||||||
Inferred | 0.50 | 94 | 0.79 | 2.4 | ||||||||||||
Indicated | 0.70 | 202 | 1.07 | 6.9 | ||||||||||||
Inferred | 0.70 | 40 | 1.06 | 1.4 |
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• | Continue step out drilling to identify the extent of mineralization. | |
• | Focus infill drilling on areas where Inferred resource blocks can be converted to Indicated resources laterally and at depth. | |
• | Drill close spaced holes to define a variographic cross. | |
• | Drill core holes to gather sample material for advance metallurgical testing. | |
• | Continue and advance metallurgical, ore characterization, and mineral processing studies. | |
• | Assess geotechnical characteristics of the mineralized zone. | |
• | Begin the sterilization process for land that might be covered by facilities. | |
• | Continue and expand environmental base line studies. | |
• | Complete the combined mill/heap leach preliminary economic analysis that is currently in progress. This should evaluate the basic economic, logistic, and processing factors for a mining operation at Livengood. |
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• | the global credit/liquidity crisis could impact the cost and availability of financing and the Company’s overall liquidity; | |
• | the volatility of gold and other base metal prices may impact the Company’s future revenues, profits and cash flow; | |
• | volatile energy prices, commodity and consumables prices and currency exchange rates impact potential production costs; and | |
• | the devaluation and volatility of global stock markets impacts the valuation of the Common Shares (and the New Common Shares which will replace the Common Shares on the Effective Date), which may impact the Company’s ability to raise funds through the issuance of New Common Shares. |
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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As at | After Completion of the | |||||||||||
Designation | Authorized | July 9, 2010 | Arrangement | |||||||||
Common Shares | 500,000,000(1) | 66,909,534 | 67,222,734 (2) | |||||||||
Long-term Debt | N/A | Nil | Nil(3) | |||||||||
Notes: | ||
(1) | On the Effective Date, the Company’s authorized share capital will consist of 500,000,000 New Common Shares (which will replace the Common Shares). | |
(2) | Based on the number of issued and outstanding Common Shares of the Company as of the date hereof and the Company’s expectation that Options exercisable to purchase 313,200 Common Shares which expire on July 16, 2010 will be exercised on or before such expiry date. The number of New Common Shares to be issued pursuant to the Arrangement (the existing Common Shares will no longer exist following the Arrangement). | |
(3) | The Company currently has no long-term liabilities and is not expected to have any after completion of the Arrangement. |
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Number of New | ||||
Designation of New Security | Common Shares | Percentage | ||
New Common Shares issued to Shareholders in accordance with the Arrangement | 67,222,734 | 93.39% | ||
New Common Shares that may be issued pursuant to the exercise of Options | 4,765,000 | 6.61% | ||
New Common Shares that may be issued pursuant to the exercise of Warrants | 5,488 | 0.008% | ||
Total: | 71,993,222 | 100% | ||
Date of Issuance | Number of Common Shares Issued | Issuance Price | ||
Balance, 31-May- 2009 | 56,457,973 | |||
09-July-2009 | 1,218,283 | $2.95(1) | ||
08–September-2009 – 27 January-2010 | 181,501 | $2.95(1) | ||
15-September-2009 – 28-January-2010 | 2,006,800 | $1.75(2) | ||
08-October-2009 | 200,000 | $3.40(3) | ||
25-November-2009 | 20,000 | $5.85(3) | ||
10-December-2009 – 11-January-2010 | 130,000 | $1.52(2) | ||
21-December-2009 | 100,000 | $2.66(2) | ||
27-January-2010 | 20,000 | $3.15(2) | ||
02-February-2010 | 100,000 | $2.15(2) | ||
12-March-2010 – 11-June-2010 | 1,101,000 | $1.75(2) | ||
26-March-2010 | 67,966 | $5.38(4) | ||
01-April-2010 – 06-April-2010 | 5,000,000 | $6.00(4) | ||
08-April-2010 – 19-April-2010 | 93,800 | $2.95(1) | ||
18-May-2010 | 20,000 | $2.66(2) | ||
16-June-2010 – 06-July-2010 | 179,000 | $1.75(2) | ||
30-June-2010 | 13,211 | $2.95(1) | ||
Total: | 66,909,534 |
Notes: | ||
(1) | Exercise of previously granted common share purchase warrants. | |
(2) | Exercise of incentive stock options. | |
(3) | Property acquisition. | |
(4) | Non-brokered private placement. |
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Year | Month | Open ($) | High ($) | Low ($) | Close ($) | Volume | ||||||||
2009 | June | 3.55 | 4.00 | 3.19 | 3.70 | 2,857,098 | ||||||||
July | 3.72 | 3.74 | 2.81 | 3.74 | 3,257,092 | |||||||||
August | 3.74 | 3.87 | 3.12 | 3.40 | 3,406,262 | |||||||||
September | 3.47 | 4.88 | 3.26 | 4.32 | 2,953,979 | |||||||||
October | 4.23 | 6.18 | 4.12 | 5.05 | 6,443,195 | |||||||||
November | 5.17 | 8.00 | 5.00 | 7.74 | 6,771,702 | |||||||||
December(1) | 7.80 | 8.15 | 6.85 | 7.50 | 13,920,064 | |||||||||
2010 | January | 7.60 | 8.35 | 6.40 | 6.40 | 7,289,104 | ||||||||
February | 6.40 | 7.20 | 5.88 | 6.94 | 5,814,805 | |||||||||
March | 7.02 | 7.30 | 5.67 | 5.89 | 7,326,666 | |||||||||
April | 5.88 | 7.83 | 5.85 | 7.12 | 4,958,149 | |||||||||
May | 7.20 | 7.68 | 6.55 | 7.56 | 4,094,587 | |||||||||
June | 7.63 | 7.65 | 6.70 | 7.17 | 2,773,856 | |||||||||
July 1-9 | 6.91 | 7.0 | 6.25 | 6.40 | 677,337 |
Notes: | ||
(1) | On December 1, 2009, the Company’s Common Shares commenced trading on the TSX. |
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Shares | ||||||||
Beneficially | ||||||||
Name, Position(s) with the | Owned or Over | |||||||
Company(1)and Province | which Control | |||||||
or State and Country of | Period (s) | or Direction is | ||||||
Residence | Principal Occupation(1) | Served(2) | Exercised | |||||
Jeffrey A. Pontius(7) President and Chief Executive Officer Colorado, USA | Geologist; President and CEO of the Company since September 2006; previously North American Exploration Manager and also a Director of Anglo American (USA) Exploration Inc. (a mineral exploration and development company), 1999 to 2006. | President and Chief Executive Officer since September 22, 2006 | 792,332 | |||||
Hendrik van Alphen(5)(7) Chairman of the Board, Director British Columbia, Canada | Businessman; President of Cardero Resource Corp, a public mineral exploration company trading on the TSX since 1999; also President of Wealth Minerals Ltd. (a mineral exploration and development company) and a director of Ethos Capital Corp. (TSX-V) and Balmoral Resources Ltd. (NEX), both public mineral exploration and development companies. | Director since September 22, 2006 Chairman since September 22, 2006 | 1,106,500 | |||||
Anton J. Drescher(3)(5)(6)(8) Director British Columbia, Canada | Businessman, Certified Management Accountant; President, Harbour Pacific Capital Corp. (a private management company) since 1998; President, Westpoint Management Consultants Limited (a private management company) since 1979; CFO and Director, USA Video Interactive Corp. (a public company providing electronic anti-piracy systems and involved in streaming video and video-on-demand) since 1994; Director, Trevali Resources Corp. (a public natural resources company) since 2007; Director of Dorato Resources Ltd. (a public natural resource company) since 1993 | Director since August, 1991 President, 1991 — September 22, 2006 | 539,218 | |||||
Rowland Perkins(3)(4)(6)(8) Director Alberta, Canada | Businessman; President and director, e-Backup Inc. (a private company providing public online backup services) since 2001; Director, USA Video Interactive Corp. (a public company providing electronic anti-piracy systems and involved in streaming video and video-on-demand) since 2005. | Director since June, 1999 | 2,000 | |||||
Ronald Sheardown(3)(4)(8) Director Alaska, USA | Businessman; President, Greatland Exploration, Inc. (a private geological consulting/mineral exploration company) since 1976 and has been involved in mineral exploration in Alaska and Canada for over 50 years. | Director since May 23, 2007 | 110,000 | |||||
Michael Bartlett(8) Director Florida, USA | Businessman; President, Leisure Capital & Management Inc. (a private business consulting company) since 1989; director, Wealth Minerals Ltd. (a public natural resource company), since January 31, 2000. | Director since May 23, 2007 | Nil |
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Shares | ||||||||||||
Beneficially | ||||||||||||
Name, Position(s) with the | Owned or Over | |||||||||||
Company(1)and Province | which Control | |||||||||||
or State and Country of | Period (s) | or Direction is | ||||||||||
Residence | Principal Occupation(1) | Served(2) | Exercised | |||||||||
Steve Aaker(4)(7)(8) Director Oregon, USA | Geologist; Chief of U.S. Operations, Franco-Nevada Corporation (a public natural resources royalty company) since 2007; previously, Group Executive, Newmont Capital Limited (a mineral exploration and development company) 2002 to 2007. | Director since March 12, 2009 | Nil | |||||||||
Timothy J. Haddon(7) Director Colorado, USA | Mining Engineer, President, International Natural Resource Management Co. (a mining industry consulting service provider and investor), also Chairman of Anatolia Minerals Development Limited (a mineral exploration and development company) since 2002 and Lead Director, Thompson Creek Metals Company Inc. (a mineral exploration and development company) since 2007. | Director since April 14, 2010 | Nil | |||||||||
Daniel A. Carriere(7) Director British Columbia, Canada | Businessman; previously, Senior Vice- President, Corriente Resources Inc. (a public natural resources company) 2004 to 2010. | Director since April 14, 2010 | 100,000 | |||||||||
Lawrence W.E. Talbot(7) Vice-President and General Counsel British Columbia Canada | Barrister & Solicitor; shareholder & President, Lawrence W. Talbot Law Corporation (law firm) since April, 2006; Partner, Gowling Lafleur Henderson LLP (law firm) 2001 to June, 2006; Vice-President & General Counsel, Cardero Resource Corp. and Wealth Minerals Ltd. (public mineral exploration companies) since July 1, 2006, Vice-President & General Counsel for the Company since September 22, 2006. | Vice-President & General Counsel since September 22, 2006 | 221,900 | |||||||||
Michael W. Kinley, C.A. Chief Financial Officer British Columbia, Canada | Chartered Accountant; President, Winslow Associates Management & Communications Inc. (a private consulting firm) 1973 to present; Chief Financial Officer of Wealth Minerals Ltd. since August 2005, Dorato Resources Inc. since July 2008, Trevali Resources Corp. since July 2008 and Cardero Resource Corp. since January 2006 (all public natural resource companies); Director, Indico Resources Limited since January 21, 2005 (a public natural resource company); President, GFK Resources Ltd. since October 8, 1997 (a public natural resource company). | Chief Financial Officer since September 22, 2006 | Nil | |||||||||
Russell B. Myers, PhD. Vice-President, Exploration Colorado, USA | Geologist; previously, senior geologist, AngloGold Ashanti (USA) Exploration Inc. (a natural resource company) since 2000. | Vice-President, Exploration of the Company since September, 2006 | 125,767 |
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Shares | ||||||||
Beneficially | ||||||||
Name, Position(s) with the | Owned or Over | |||||||
Company(1)and Province | which Control | |||||||
or State and Country of | Period (s) | or Direction is | ||||||
Residence | Principal Occupation(1) | Served(2) | Exercised | |||||
Quentin Mai Vice-President, Corporate Communications British Columbia, Canada | Businessman; Manager, Corporate Communications, of Cardero Resource Corp. (a public natural resource company) since 2004; President, Quatloo Investment Management Inc. (a private investor relations firm) since 2004. | Vice-President, Corporate Communicatio ns since September 22, 2006 | 524,100(9) | |||||
Carl Brechtel Chief Operating Officer Colorado, USA | Mining Engineer; formerly on various mining development projects internationally for AngloGold Ashanti Limited (a natural resource company) since 1998, most recently as Pre-feasibility Manager of the La Colosa operation in Colombia. | Chief Operating Officer since January 12, 2010 | Nil | |||||
Marla K. Ritchie Corporate Secretary British Columbia, Canada | Corporate Administrator and Corporate Secretary for Cardero Resource Corp. (a public mineral exploration company) since May, 2001; Secretary/Administrator to several public natural resource companies since 2001. | Corporate Secretary since September 22, 2006 | 55,000 |
Notes: | ||
(1) | The information as to place of residence and principal occupation, not being within the knowledge of the Company, has been furnished by the respective directors individually. | |
(2) | All directorships expire at the next Annual General Meeting of the shareholders of the Company. All officers hold office at the pleasure of the board. | |
(3) | Denotes member of the Audit Committee. | |
(4) | Denotes member of the Compensation Committee. | |
(5) | Denotes member of the Sustainable Development Committee. | |
(6) | Denotes member of the Corporate Governance and Nominating Committee. | |
(7) | Denotes member of the Mergers and Acquisitions Committee. | |
(8) | Denotes member of the Special Committee. | |
(9) | 35,500 shares of this total are held by Quatloo Investment Management Inc., a company controlled by Mr. Mai. |
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1. | The section entitled “Interest of Management and Others in Material Transactions” in the AIF describes the interest of management and others in material transactions up until August 25, 2009 and is specifically incorporated by reference herein. | |
2. | On February 10, 2010 AngloGold exercised its right to maintain its 13.2907% equity interest in the Company pursuant to the AngloGold Option. AngloGold’s equity interest had been diluted by virtue of the Company’s issuance of shares since May 19, 2009, principally due to the exercise of incentive stock options, broker options and in connection with the purchase of the interest of Redstar Gold Corp. in the Company’s North Bullfrog Project. As a consequence, the Company sold to AngloGold, on a private placement basis, an aggregate of 67,965 Common Shares at a price of $5.38 per Common Share (reflecting the 5 day volume-weighted average price of the Company’s Common Shares on the TSX preceding February 10, 2010 less the maximum allowable discount (15%), as required by the provisions of the AngloGold Option) for gross proceeds of $365,899.54. The private placement closed on March 26, 2010. | |
2. | On April 6, 2010, the Company issued 664,210 Common Shares to AngloGold representing the pro rata portion of the Company’s non-brokered private placement of a total of 5,000,000 Common Shares at a price of $6.00 per Common Share allocated to AngloGold under the AngloGold Option. |
• | the Arrangement Agreement; and | ||
• | the Shareholder Rights Plan Agreement dated August 25, 2009 between the Company and Computershare Investor Services Inc. |
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(a) | Talon Gold Nevada Inc., a corporation incorporated in Nevada on April 9, 2007, which will hold the North Bullfrog Project and will be 100% owned by Corvus; and | ||
(b) | Raven Gold Alaska Inc., a corporation incorporated in Alaska on July 2, 2009, which will hold the West Pogo Project, the Chisna Project, the Terra Project and the LMS Project and will be 100% owned by Corvus. Raven Gold was recently acquired by Corvus from the Company pursuant to the Raven Gold Purchase Agreement. Raven Gold will acquire the Spin-Off Alaska Assets in connection with the Arrangement and the Alaska Purchase Agreement. |
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(a) | living within environmental limits, | ||
(b) | ensuring a strong, healthy and just society, | ||
(c) | achieving a sustainable economy, | ||
(d) | using sound science responsibly, and | ||
(e) | promoting good governance. |
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• | annual option payments of US $1.00 — US $1.25 per acre; | |
• | minimum exploration expenditures of US $4 — US $8 per acre, provided that if the agreement is not terminated at the end of any option year, the exploration expenditures for the next year become a firm commitment; | |
• | at the end of the third year, Raven Gold will release at least 50% of the original lands subject to the Ahtna Agreement; | |
• | preferential contracting, hiring and training practices for Ahtna shareholders or designees; | |
• | scholarship contributions to the Ahtna Heritage Foundation (US $10,000/year, subject to increase for inflation); and | |
• | all surface work subject to Ahtna archaeological and cultural clearance. |
• | exclusive mining rights for an initial term of ten years and so long thereafter as commercial production continues; | |
• | minimum exploration expenditures of US $4.00 — US $9.00 per acre subject to the lease until commercial production is achieved, escalating over time advance minimum royalty payments of US $6 — US $12 per acre escalating over time (50% deductible from production royalties); |
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• | net smelter returns production royalties for gold and silver scaled from 2.5% (gold price US$550 per ounce or less) to 14% (gold price per ounce US$1,900 or higher per ounce), 2.5% on base metals and 3% on all minerals other than gold, silver or base metals; | |
• | in the event Raven Gold acquires rights to minerals within the area subject to the lease, the acquired minerals lands are subject to a production royalty in favour of Ahtna of 2% of the gross value of any gold and silver and a net smelter returns royalty of 1% on base metals; | |
• | Ahtna is also entitled to receive an amount by which 20% of the net profits realized by Raven Gold from its mining operations on Ahtna minerals (10% in the case of non-Ahtna minerals) in any year exceed the aggregate royalties paid by Raven Gold to Ahtna in that year; and | |
• | Ahtna has the right to acquire a working interest in the lands subject to the lease, which is to be greater than or equal to 10% but not more than 15%, upon Raven Gold having made a production decision, and in consideration, Ahtna will be required to fund ongoing operations after such exercise in an amount equal to 200% of Ahtna’s percentage share of the pre-production expenditures incurred by Raven Gold (not including advance minimum royalty payments to Ahtna). Should Ahtna exercise such option, it would become a participant in the JV. |
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• | the global credit/liquidity crisis could impact the cost and availability of financing and Corvus’ overall liquidity; | |
• | the volatility of gold and other base metal prices may impact Corvus’ future revenues, profits and cash flow; | |
• | volatile energy prices, commodity and consumables prices and currency exchange rates impact potential production costs; and | |
• | the devaluation and volatility of global stock markets will impact the valuation of the Corvus Common Shares, which may impact Corvus’ ability to raise funds through the issuance of Corvus Common Shares. |
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MANAGEMENT’S DISCUSSION AND ANALYSIS
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Carve-out Financial | ||||||||||||
Statements | Carve-out Financial | Pro-forma for the year | ||||||||||
February 28, 2010 | Statements May 31, | ended May 31, 2010 | ||||||||||
(unaudited) | 2009 | (unaudited) | ||||||||||
Net Loss and Comprehensive Loss | $ | (1,449,681 | ) | $ | (2,344,240 | ) | $ | (1,934,092 | ) | |||
Total assets | $ | 12,597,678 | $ | 11,054,413 | 15,897,733 | |||||||
Contributed surplus | $ | 20,266,465 | $ | 17,264,120 | $ | 3,880,199 | ||||||
Share capital | — | — | $ | 19,686,267 | ||||||||
Total long term financial liabilities | — | — | — | |||||||||
Cash dividends declared per share | — | — | — |
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(a) | use of estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant areas requiring the use of estimates include accrued liabilities, the determination of the assumptions used in the calculation of stock-based compensation expense and the valuation allowance for future income tax assets. Actual results could differ from those estimates used in the financial statements; | ||
(b) | mineral property costs — It is expected that Corvus will regularly review the carrying value of each mineral property for conditions that suggest impairment. This review will require significant judgment where Corvus does not have any proven or probable reserves that would enable an estimate of future cash flows to be compared to the carrying values. Factors considered in the assessment of impairment include, but are not limited to, whether there has been a significant decrease in market price of the property; whether there has been a significant adverse change in the legal, regulatory, accessibility, title, environmental or political factors that could affect the property’s value; whether there has been an accumulation of costs significantly in excess of the amounts originally expected for the property’s acquisition, development or cost of holding; whether exploration activities produced results that are not promising such that no more work is being planned in the foreseeable future and whether Corvus has funds to be able to maintain its interest in the mineral property; | ||
(c) | stock-based compensation — It is expected that Corvus will provide additional compensation benefits to its employees, directors, officers and consultants through a stock-based compensation plan. The fair value of each option award will be estimated on the date of the grant using the Black-Scholes option pricing model. Expected volatility is normally based on historical volatility of the stock. However, with no or limited historical volatility available, Corvus may need to rely upon peer group data to establish volatility in the near term. It is expected that Corvus will utilize historical data to estimate the expected option term for input into the valuation model. The risk-free rate for the expected term of the applicable option is based on the Government of Canada yield curve in effect at the time of the grant; | ||
(d) | mineral properties — Mineral properties consist of mining claims, leases and options. Acquisition option payments, leasehold and exploration costs are capitalized and deferred until such time as |
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the property is put into production or the properties are disposed of either through sale or abandonment. If the property is put into production, the costs of acquisition and exploration will be written-off over the life of the property, based on estimated economic reserves. Proceeds received from the sale of any interest in a property will first be credited against the carrying value of the property, with any excess included in operations for the period. If a property is abandoned, the property and deferred exploration costs will be written-off to operations in the period of abandonment. Recorded costs of mineral properties and deferred exploration and development expenditures are not intended to reflect present or future values of mineral properties. Deferred costs related to mineral property interests are periodically reviewed for impairment. A review for potential impairment is subject to potentially material measurement uncertainty. If a review indicates that a mineral property interest has been impaired the related deferred costs are written down or written off. Although the Company has taken steps to verify title to mineral properties in which it has an interest, based on industry norms for the current stage of exploration of such properties, these procedures do not guarantee the Company’s or Corvus’ title. Property title may be subject to unregistered prior agreements and inadvertent non-compliance with regulatory requirements. Actual results may differ materially from those estimates based on these assumptions. |
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After Completion of the | ||||||
Designation | Authorized | As at July 9, 2010 | Arrangement | |||
Corvus Common Shares | Unlimited | 2 | 33,611,367(1) | |||
Long-term Debt | N/A | Nil | Nil(2) | |||
(1) | 33,611,365 Corvus Common Shares will be issued pursuant to the Arrangement. | |
(2) | Corvus currently has no long-term liabilities and is not expected to have any immediately after completion of the Arrangement. |
Number of Corvus | ||||
Designation of Corvus Common Shares | Common Shares | Percentage | ||
Corvus Common Shares outstanding and to be distributed to Shareholders in accordance with the Arrangement | 33,611,367 | 99.99% | ||
Corvus Common Shares that may be issued pursuant to the exercise of Warrants | 2,744 | 0.008% | ||
Corvus Common Shares that may be issued pursuant to the exercise of Corvus Options | 0 | 0% | ||
Total: | 33,614,111 | 100% | ||
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Shares | ||||||||
Beneficially | ||||||||
Name, Position(s) with the | Owned or Over | |||||||
Company(1) and Province or | which Control | |||||||
State and Country of | Period (s) | or Direction is | ||||||
Residence | Principal Occupation(1) | Served(2) | Exercised | |||||
Jeffrey A. Pontius President and Chief Executive Officer, Director Colorado, USA | Geologist; President and CEO of the Company since September 2006; previously North American Exploration Manager and also a Director of Anglo American (USA) Exploration Inc. (a mineral exploration and development company), 1999 to 2006. | Since April 13, 2010 as President and Chief Executive Officer; to be appointed as a Director on or before the Effective Date | 396,166 | |||||
Michael W. Kinley, C.A. Chief Financial Officer British Columbia, Canada | Chartered Accountant; President, Winslow Associates Management & Communications Inc. (a private consulting firm) 1973 to present; Chief Financial Officer of Wealth Minerals Ltd. since August 2005, Dorato Resources Inc. since July 2008, Trevali Resources Corp. since July 2008 and Cardero Resource Corp. since January 2006 (all public natural resource companies); Director, Indico Resources Limited since January 21, 2005 (a public natural resource company); President, GFK Resources Ltd. since October 8, 1997 (a public natural resource company). | Chief Financial Officer since April 13, 2010 | Nil | |||||
Russell B. Myers, PhD. Vice-President, Exploration Colorado, USA | Geologist; previously, senior geologist, AngloGold Ashanti (USA) Exploration Inc. (a natural resource company) since 2000. | To be appointed as Vice- President, Exploration on or before the Effective Date | 62,883 | |||||
Marla K. Ritchie Corporate Secretary British Columbia, Canada | Corporate Administrator and Corporate Secretary for Cardero Resource Corp. (a public mineral exploration company) since May 2001; Secretary/Administrator to several public natural resource companies since 2001. | April 13, 2010 | 27,500 | |||||
Rowland Perkins(3) Director Alberta, Canada | Businessman; President and director of e-Backup Inc. (a private company providing public online backup services) since 2001; Director, USA Video Interactive Corp. (a public company providing electronic anti-piracy systems) since 2005. | To be appointed as a Director on or before the Effective Date | 1,000 |
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Shares | ||||||||
Beneficially | ||||||||
Name, Position(s) with the | Owned or Over | |||||||
Company(1) and Province or | which Control | |||||||
State and Country of | Period (s) | or Direction is | ||||||
Residence | Principal Occupation(1) | Served(2) | Exercised | |||||
Anton J. Drescher(3) Director British Columbia, Canada | Businessman, Certified Management Accountant; President, Harbour Pacific Capital Corp. (a private management company) since 1998; President, Westpoint Management Consultants Limited (a private management company) since 1979, CFO and Director of USA Video Interactive Corp. a public company involved in streaming video and video-on-demand since 1994; Director of Trevali Resources Corp. (a public natural resources company) since 2007; Director of Dorato Resources Inc (a public natural resource company) since 1993. | To be appointed as a Director on or before the Effective Date | 269,609 | |||||
Steve Aaker Director, Oregon, USA | Geologist; Chief of U.S. Operations, Franco-Nevada Corporation (a public natural resources royalty company) since 2007; previously, Group Executive, Newmont Capital Limited (a mineral exploration and development company) 2002 to 2007. | To be appointed as a Director on or before the Effective Date | Nil | |||||
Lawrence W.E. Talbot(4) Vice-President and General Counsel British Columbia Canada | Barrister & Solicitor; shareholder & President, Lawrence W. Talbot Law Corporation (law firm) since April 2006; Partner, Gowling Lafleur Henderson LLP (law firm) 2001 to June, 2006; Vice- President & General Counsel, Cardero Resource Corp. and Wealth Minerals Ltd. (public mineral exploration companies) since July 1, 2006. | April 13, 2010 | 110,950 | |||||
Daniel A. Carriere(3) Director British Columbia, Canada | Businessman, previously, Senior Vice- President, Corriente Resources Inc. (a natural resources company) 2004 to 2010. | To be appointed as a Director on or before the Effective Date | 50,000 |
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Shares | ||||||
Beneficially | ||||||
Name, Position(s) with the | Owned or Over | |||||
Company(1) and Province or | which Control | |||||
State and Country of | Period (s) | or Direction is | ||||
Residence | Principal Occupation(1) | Served(2) | Exercised | |||
Edward Yarrow Director British Columbia, Canada | Geologist; Director of Anglo Coal Canada Ltd. (a private natural resources company) and Wildcat Exploration Ltd. (a public mineral exploration company); President of SKY Geological Consulting Ltd. (a private geological consulting firm) since January, 2010; Vice-President, Exploration Division, North America-Europe for Anglo American plc (a public natural resources company) and President and a Director of Anglo American Exploration (Canada) Ltd. from 2000 until December, 2009; Vice President, Exploration for Hudson Bay Mining and Smelting Co. Ltd. (a public natural resources company) from 1995 — 2000. | To be appointed as a Director on or before the Effective Date | Nil |
Notes: | ||
(1) | The information as to place of residence and principal occupation, not being within the knowledge of the Company or Corvus, has been furnished by the respective directors individually. | |
(2) | All directorships expire at the next annual general meeting of the shareholders of Corvus. All officers hold office at the pleasure of the board. | |
(3) | Denotes expected member of the Audit Committee. | |
(4) | Lawrence Talbot is currently the sole director of Corvus and plans to resign as such on or before the Effective Date. |
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Name | Issuer | Jurisdiction | ||
Steve Aaker | International Tower Hill Mines Ltd. Franco-Nevada Corporation | TSX, NYSE Amex TSX | ||
Daniel Carriere | International Tower Hill Mines Ltd. | TSX, NYSE Amex | ||
Anton Drescher | International Tower Hill Mines Ltd. Dorato Resources Inc. Trevali Resources Corp. USA Video Interactive Corp. Ravencrest Resources Inc. | TSX, NYSE Amex TSX-V CNSX TSX-V None |
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Name | Issuer | Jurisdiction | ||
Jeffrey Pontius | Alderon Resource Corp. Lithium One Inc. Wealth Minerals Ltd. | TSX-V TSX-V TSX-V | ||
Rowland Perkins | International Tower Hill Mines Ltd. USA Video Interactive Corp. | TSX, NYSE Amex TSX-V | ||
Edward Yarrow | Wildcat Exploration Ltd. | TSX-V |
• | to the extent feasible, satisfying itself as to the integrity of the CEO and other executive officers and that the executive officers create a culture of integrity throughout the company, | ||
• | Corvus’ strategic planning process, | ||
• | the identification of the principal risks of the company’s business and ensuring the implementation of appropriate systems to manage risk, | ||
• | Corvus’ succession planning, including appointing, training and monitoring senior management, | ||
• | Corvus’ major business development initiatives, | ||
• | the integrity of Corvus’ internal control and management information systems, | ||
• | Corvus’ policies for communicating with shareholders and others, and | ||
• | the general review of Corvus’ results of operations. |
• | approval of the annual capital budget and any material changes to the operating budget, | ||
• | approval of Corvus’ business plan, | ||
• | acquisition of, or investments in new business, | ||
• | changes in the nature of Corvus’ business, |
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• | changes in senior management, and | ||
• | all matters as required under applicable law and stock exchange rules and regulations. |
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(the “Company”)
1. | OBJECTIVES |
(a) | attract and retain qualified directors, officers, employees and consultants of the Company and its Affiliates, | ||
(b) | promote a proprietary interest in the Company and its Affiliates among its employees, officers, directors and consultants, and | ||
(c) | stimulate the active interest of such persons in the development and financial success of the Company and its Affiliates. |
2. | DEFINITIONS |
(a) | an individual who is (or would be if he were employed in Canada) considered an employee of the Company or any of its Affiliates under theIncome Tax Act(Canada); | ||
(b) | an individual who works full-time for the Company or any of its Affiliates providing services normally provided by an employee and who is subject to the same direction and control by the Company or such Affiliate over the details and methods of work as an employee of the Company or such Affiliate; and |
(c) | an individual who works for the Company or any of its Affiliates on a continuing and regular basis for a minimum amount of time per week or month providing services normally provided by an employee and who is subject to the same control and direction by the Company or such Affiliate over the details of work as an employee of the Company or such Affiliate; |
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3. | ADMINISTRATION OF THE PLAN | |
3.1 | The Plan will be administered by the Compensation Committee. Notwithstanding the existence of the Compensation Committee, the Board itself will retain independent and concurrent power to undertake any action hereunder delegated to the Compensation Committee, whether with respect to the Plan as a whole or with respect to individual Options granted or to be granted under the Plan. | |
3.2 | Subject to the limitations of the Plan, the Compensation Committee shall have full power to grant Options, to determine the terms, limitations, restrictions and conditions respecting such Options and to settle, execute and deliver Option Agreements and bind the Company accordingly, to interpret the Plan and to adopt such rules, regulations and guidelines for carrying out the Plan as it may deem necessary or proper and to reserve, allot, fix the price of and issue Shares pursuant to the grant and exercise of Options, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of the Plan. | |
3.3 | Notwithstanding any provision of this Plan, the Compensation Committee may, in its discretion, grant Options as it sees fit, or otherwise, accelerate the vesting or exercisability of any Option, eliminate or make less restrictive any restrictions contained in an Option, waive any restriction or other provision of the Plan or an Option or otherwise amend or modify an Option in any manner that is either: |
(a) | not adverse to the Optionee holding such Option; or |
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(b) | consented to by such Optionee; |
and, subject to any required approvals of any stock exchange or regulatory body having jurisdiction over the securities of the Company and the provisions of section 8.1 of the Plan, provide for the extension of the Option Period of an outstanding Option. | ||
3.4 | The Compensation Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Option in the manner and to the extent the Compensation Committee deems necessary or desirable to carry it into effect. Any decision of the Compensation Committee in the interpretation and administration of the Plan shall lie within its absolute discretion and shall be final, conclusive and binding on all parties concerned. No member of the Compensation Committee shall be liable for anything done or omitted to be done by such member, by any other member of the Compensation Committee or by any officer of the Company, in connection with the performance of any duties under the Plan, except those which arise from such member’s own wilful misconduct or as expressly provided by statute. | |
3.5 | The Company shall pay all administrative costs of the Plan. | |
4. | ELIGIBILITY FOR OPTIONS | |
4.1 | Options may be granted to Employees, Officers, Directors, Non-Employee Directors, Management Company Employees, and Consultants of the Company and its Affiliates who are, in the opinion of the Compensation Committee, in a position to contribute to the success of the Company or any of its Affiliates or who, by virtue of their service to the Company or any predecessors thereof or to any of its Affiliates, are in the opinion of the Compensation Committee, worthy of special recognition. Except as may be otherwise set out in this Plan, the granting of Options is entirely discretionary. Nothing in this Plan shall be deemed to give any person any right to participate in this Plan or to be granted an Option and the designation of any Optionee in any year or at any time shall not require the designation of such person to receive an Option in any other year or at any other time. The Compensation Committee shall consider such factors as it deems pertinent in selecting participants and in determining the amounts and terms of their respective Options, including, without limitation, the recommendations of the Company’s Chief Executive Officer in connection therewith. | |
4.2 | Subject to any applicable regulatory approvals/acceptances, Options may also be granted under the Plan in substitution for outstanding options of one or more other companies in connection with a plan of arrangement or exchange, amalgamation, merger, consolidation, acquisition of property or shares, or other reorganization between or involving such other companies the Company or any of its Affiliates. | |
5. | NUMBER OF SHARES RESERVED UNDER THE PLAN | |
5.1 | The number of Shares that may be reserved for issuance under the Plan is limited as follows: |
(a) | the maximum aggregate number of Shares issuable pursuant to the exercise of Options granted under the Plan shall be a maximum of TEN (10%) PERCENT of the number of issued and outstanding Shares at the date of any grant provided that: |
(i) | if any Option subject to the Plan is forfeited, expires, is terminated or is cancelled for any reason whatsoever (other than by reason of the exercise thereof, in which case the Shares are automatically reloaded and available for future Option grants), then the maximum number of Shares for which Options may be granted hereunder shall be increased by the number of Shares which were the subject of such forfeited, expired, terminated or cancelled Option; | ||
(ii) | such maximum number of Shares shall be appropriately adjusted in the event of any subdivision or consolidation of the Shares; and |
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(b) | if and for so long as the Shares are listed on the TSX, the maximum aggregate number of Shares that may be issued under the Plan or other share compensation arrangements of the Company to: |
(i) | Insiders, at any time, may not exceed ten (10%) percent of the issued and outstanding number of Shares; and | ||
(ii) | Insiders within a one-year period may not exceed ten (10%) percent of the issued and outstanding Shares. |
6. | NUMBER OF OPTIONED SHARES PER OPTION | |
6.1 | Subject always to the limitations in subsection 5.1, the number of Optioned Shares under an Option shall be determined by the Compensation Committee, in its discretion, at the time such Option is granted, taking into consideration the Optionee’s present and potential contribution to the success of the Company and taking into account all other Options then held by such Optionee. | |
7. | PRICE | |
7.1 | The exercise price per Optioned Share under an Option shall be determined by the Compensation Committee, in its discretion, at the time such Option is granted, but such price shall be fixed in compliance with the applicable provisions of the TSX Company Manual in force at the time of grant and, in any event, shall not be less than the greater of: |
(a) | the “market price” of the Shares on the TSX on the trading day immediately preceding the day on which the Option is granted (calculated in accordance with the TSX Company Manual); and | ||
(b) | the closing price of the Shares on the TSX on the trading day immediately preceding the day on which the Option is granted (provided that if there are no trades on such day then the last closing price within the preceding ten trading days will be used, and if there are no trades within such ten-day period, then the simple average of the closing bid and ask prices on the trading day immediately preceding the day of grant will be used). |
The exercise price at which, and the number of optioned securities for which, an outstanding Option may be exercised following a subdivision or consolidation of the Shares shall be subject to adjustment in accordance with section 11. | ||
7.2 | The exercise price per Optioned Share under an Option may be reduced at the discretion of the Compensation Committee if: |
(a) | at least six (6) months has elapsed since the later of the date such Option was granted and the date the exercise price for such Option was last amended; and | ||
(b) | disinterested shareholder approval is obtained for any reduction in the exercise price under an Option held by an Insider of the Company; |
provided that no such conditions will apply in the case of an adjustment made under section 11 and that, notwithstanding anything to the contrary in this subsection 7.2, in no event will the exercise price of an Option held by a U.S. Participant be reduced below the fair market value of a Share on the date of such repricing. | ||
8. | OPTION PERIOD AND EXERCISE OF OPTIONS | |
8.1 | The Option Period for an Option shall be determined by the Compensation Committee at the time the Option is granted and may, subject to subsection 8.6, be up to ten (10) years from the date the Option is granted. At the time an Option is granted, the Compensation Committee may determine that, with respect |
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to that Option, upon the occurrence of one of the events described in subsection 10.1 there shall come into force a time limit for exercise of such Option which is different than the Option Period, and in the event of such a determination, the Option Agreement for such Option shall contain provisions which specify the events and time limits related to that determination. Subject to the applicable maximum Option Period provided for in this subsection 8.1 and subject to applicable regulatory requirements and approvals/acceptances, the Compensation Committee may extend the Option Period of an outstanding Option beyond its original expiration date, provided that disinterested shareholder approval is obtained for any extension of the Option Period of an outstanding Option held by an Insider. | ||
8.2 | The Compensation Committee may determine when any Option will become exercisable and may determine that the Option shall be exercisable in instalments. | |
8.3 | If there is a takeover bid or tender offer made for all or any of the issued and outstanding Shares, then the Board may, in its sole and absolute discretion and if permitted by applicable legislation, unilaterally determine that outstanding Options, whether fully vested and exercisable or subject to vesting provisions or other limitations on exercise, shall be conditionally exercisable in full to enable the Optioned Shares subject to such Options to be conditionally issued and tendered to such bid or offer, subject to the condition that if the bid or offer is not duly completed the exercise of such Options and the issue of such Shares will be rescinded and nullified and the Options, including any vesting provisions or other limitations on exercise which were in effect will be re-instated. | |
8.4 | The vested portions of Options will be exercisable, in whole or in part, at any time after vesting. If an Option is exercised for fewer than all of the Optioned Shares for which the Option has then vested, the Option shall remain in force and exercisable for the remaining Optioned Shares for which the Option has then vested, according to the terms of such Option. | |
8.5 | The exercise of any Option will be contingent upon receipt by the Company of payment in full for the exercise price of the Shares being purchased in cash by way of certified cheque or bank draft or other method of payment acceptable to the Company. Neither an Optionee nor the legal representatives, legatees or distributees of such Optionee will be, or will be deemed to be, a holder of any Shares subject to an Option under the Plan unless and until certificates for such Shares are issuable to the Optionee or such other persons pursuant to the Option or the Plan. | |
8.6 | Notwithstanding the provisions of subsection 8.1 or the date of expiration of an Option determined in accordance with this Plan (“Fixed Term”), the date of expiration of an Option will be adjusted, without being subject to Board or Compensation Committee discretion, to take into account any blackout period imposed on the Optionee by the Company as follows: |
(a) | if the Fixed Term expiration date falls within a blackout period imposed on the Optionee by the Company, then the Fixed Term expiration date is extended to the close of business on the tenth (10th) business day after the end of such blackout period (the “Blackout Expiration Term”); or | ||
(b) | if the Fixed Term expiration date falls within two (2) business days after the end of a blackout period imposed on the Optionee by the Company, then the Fixed Term expiration date will be that date which is the Blackout Expiration Term reduced by the number of business days between the Fixed Term expiration date and the end of such blackout period (i.e. Options whose Fixed Term expires two (2) business days after the end of the blackout period will only have an additional eight (8) business days to exercise). |
8.7 | Unless registered under theUnited States Securities Act of 1933, as amended (the “U.S. Securities Act”) and any applicable state securities laws, the Options and the Optioned Shares underlying the Options granted pursuant to this Plan to an Optionee in the United States or an Optionee that is a U.S. Person (as defined in Regulation S under the U.S. Securities Act) shall be “restricted securities” within the meaning of Rule 144(a)(3) of the U.S. Securities Act and the Optioned Shares shall not be offered, sold or transferred absent registration under the U.S. Securities Act and any applicable state securities laws or an available exemption from such registration requirements. No Option may be granted or exercised, and no Optioned |
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Shares shall be issued, in the United States or by or to, or for the account or benefit of, a U.S. Person or person in the United States unless the grant of the Option or the exercise of the Option and the issuance of the Optioned Shares, as the case may be, has been registered under the U.S. Securities Act and any applicable state securities laws or there is an available exemption from such registration requirements. | ||
8.8 | Absent registration under the U.S. Securities Act, all Options issued into the United States or to a U.S. Person will contain a provision substantially to the following effect: | |
“The Options and the Common Shares issuable upon exercise hereof have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or the securities laws of any state of the United States. The Options may not be exercised in the United States or by or for the account or benefit of a U.S. Person or a person in the United States and the underlying Common Shares may not be delivered within the United States unless the underlying Common Shares to be delivered upon exercise of these Options have been registered under the U.S. Securities Act and the securities laws of all applicable states of the United States or an exemption from such registration requirements is available. “United States” and “U.S. Person” are used herein as such terms are defined by Regulation S under the U.S. Securities Act.” | ||
8.9 | Absent registration under the U.S. Securities Act, all certificates representing the Optioned Shares issued to an Optionee in the United States or an Optionee that is a U.S. Person under this Plan shall bear a restrictive legend in substantially the following form: | |
“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND ARE RESTRICTED SECURITIES AS THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT. THE HOLDER HEREOF AGREES THAT THE SHARES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (D) PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS, AND IN THE CASE OF (D) ABOVE, WHERE THE HOLDER HAS PROVIDED A LEGAL OPINION OF COUNSEL OF RECOGNIZED STANDING TO THE SATISFACTION OF THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES ACT IS NOT REQUIRED.”, | ||
provided, that if the Optioned Shares are being sold under clause (C) above, at a time when the Company is a “foreign issuer” as defined in Rule 902 of Regulation S under the U.S. Securities Act, the legend set forth above may be removed by providing a declaration to the Company and its transfer such evidence of exemption as the Company or its transfer agent may from time to time prescribe, to the effect that the sale of the securities is being made in compliance with Rule 904 of Regulation S under the U.S. Securities Act. | ||
9. | STOCK OPTION AGREEMENT | |
9.1 | Upon the grant of an Option to an Optionee, the Company and the Optionee shall enter into an Option Agreement setting out the number of Optioned Shares subject to the Option, the Option Period and, if applicable, any termination date fixed under subsection 8.1 and any vesting schedule fixed under subsection 8.2 for the Option, and incorporating the terms and conditions of the Plan and any other requirements of regulatory authorities and stock exchanges having jurisdiction over the securities of the Company, together with such other terms and conditions as the Compensation Committee may determine in accordance with the Plan. | |
10. | EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH |
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10.1 | An outstanding Option shall remain in full force and effect and exercisable according to its terms for the Option Period notwithstanding that the holder of such Option ceases to be a Director, Employee, Officer or Consultant of the Company for any reason, including death, subject always to any express term in any Option Agreement made pursuant to subsection 8.1 which provides that upon the occurrence of one of such events there shall come into force a time limit for exercise of such Option which is different than the Option Period. So long as the Shares are listed on the TSX (unless otherwise permitted by the TSX) the maximum period within which the heirs or administrators of a deceased Optionee may exercise any portion of an outstanding Option is one (1) year from the date of death or the balance of the Option Period, whichever is earlier. | |
10.2 | In the event of the death of an Optionee, an Option which remains exercisable may be exercised in accordance with its terms by the person or persons to whom such Optionee’s rights under the Option shall have passed under the Optionee’s will or pursuant to law. | |
11. | ADJUSTMENT IN SHARES SUBJECT TO THE PLAN | |
11.1 | Following the date an Option is granted, the exercise price for and the number of Optioned Shares which are subject to an Option will be adjusted, with respect to the then unexercised portion thereof, by the Compensation Committee from time to time (on the basis of such advice as the Compensation Committee considers appropriate, including, if considered appropriate by the Compensation Committee, a certificate of the auditor of the Company) in the events and in accordance with the provisions and rules set out in this section 11, with the intent that the rights of Optionees under their Options are, to the extent possible, preserved notwithstanding the occurrence of such events. The Compensation Committee will conclusively determine any dispute that arises at any time with respect to any adjustment pursuant to such provisions and rules, and any such determination will be binding on the Company, the Optionee and all other affected parties. | |
11.2 | The number of Optioned Shares to be issued on the exercise of an Option shall be adjusted from time to time to account for each dividend of Shares (other than a dividend in lieu of cash dividends paid in the ordinary course), so that upon exercise of the Option for an Optioned Share the Optionee shall receive, in addition to such Optioned Share, an additional number of Shares (“Additional Shares”), at no further cost, to adjust for each such dividend of Shares. The adjustment shall take into account every dividend of Shares that occurs between the date of the grant of the Option and the date of exercise of the Option for such Optioned Share. If there has been more than one such dividend, the adjustment shall also take into account that the dividends that are later in time would have been distributed not only on the Optioned Share had it been outstanding, but also on all Additional Shares which would have been outstanding as a result of previous dividends. | |
11.3 | If the outstanding Shares are changed into or exchanged (directly, or through a series of related transactions) for a different number of shares or into or for other securities of the Company or securities of another Company or entity, whether through an arrangement, amalgamation or other similar procedure or otherwise, or a share recapitalization, subdivision or consolidation, then on each exercise of the Option which occurs following such events, for each Optioned Share for which the Option is exercised, the Optionee shall instead receive the number and kind of shares or other securities of the Company or other Company into which such Option Share would have been changed or for which such Option Share would have been exchanged if it had been outstanding on the date of such event. | |
11.4 | If the outstanding Shares are changed into or exchanged (directly, or through a series of related transactions) for a different number of shares or into or for other securities of the Company or securities of another Company or entity, in a manner other than as specified in subsections 11.2 or 11.3, then the Compensation Committee, in its sole discretion, may make such adjustment to the securities to be issued pursuant to any exercise of the Option and the exercise price to be paid for each such security following such event as the Compensation Committee in its sole and absolute discretion determines to be equitable to give effect to the principle described in subsection 11.1, and such adjustments shall be effective and binding upon the Company and the Optionee for all purposes. |
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11.5 | If the Company distributes, by way of a dividend or otherwise, to all or substantially all holders of Shares, property, evidences of indebtedness or shares or other securities of the Company (other than Shares) or rights, options or warrants to acquire Shares or securities convertible into or exchangeable for Shares or other securities or property of the Company, other than as a dividend in the ordinary course, then, if the Compensation Committee, in its sole discretion, determines that such action equitably requires an adjustment in the exercise price under any outstanding Option or in the number(s) of Optioned Shares subject to any such Option, or both, such adjustment may be made by the Compensation Committee and shall be effective and binding on the Company and the Optionee for all purposes. | |
11.6 | No adjustment or substitution provided for in this section 11 shall require the Company to issue a fractional share in respect of any Option. Fractional shares shall be eliminated. | |
11.7 | The grant or existence of an Option shall not in any way limit or restrict the right or power of the Company to effect adjustments, reclassifications, reorganizations, arrangements or changes of its capital or business structure, or to amalgamate, merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets. | |
12. | NON-ASSIGNABILITY | |
12.1 | Neither the Options nor the benefits and rights of any Optionee under any Option or under the Plan shall be assignable or otherwise transferable, except as specifically provided in subsection 10.2 in the event of the death of the Optionee. During the lifetime of the Optionee, all such Options, benefits and rights may only be exercised by the Optionee. | |
13. | EMPLOYMENT | |
13.1 | Nothing contained in the Plan shall confer upon any Optionee, or any person employing a Management Company Optionee, any right with respect to employment or continuance of employment with, or the provision of services to, the Company or any of its Affiliates, or interfere in any way with the right of the Company or any of its Affiliates to terminate the Optionee’s employment or the services of any such person at any time. Participation in the Plan by an Optionee is voluntary. | |
14. | REGULATORY ACCEPTANCES | |
14.1 | The Plan is subject to the acceptance of the Plan for filing by the TSX, and the Compensation Committee is authorized to amend the Plan from time to time in order to comply with any changes required from time to time by such applicable regulatory authorities, whether as conditions to the acceptance for filing of the Plan or otherwise, provided that no such amendment will in any way derogate from the rights held by Optionees holding Options (vested or unvested) at the time thereof without the consent of such Optionees. | |
14.2 | The obligation of the Company to issue and deliver Optioned Shares pursuant to the exercise of any Options granted under the Plan is subject to the acceptance of the Plan for filing by the TSX. If any Shares cannot be issued to any Optionee for any reason, including, without limitation, the failure to obtain such acceptance for filing, then the obligation of the Company to issue such Optioned Shares shall terminate and any amounts paid to the Company for such Optioned Shares shall be returned to the Optionee forthwith without interest or deduction. | |
15. | SECURITIES REGULATION AND TAX WITHHOLDING | |
15.1 | Where necessary to enable the Company to use an exemption from requirements to register Optioned Shares or file a prospectus or use a registered dealer to distribute Optioned Shares under securities laws applicable to the securities of the Company in any jurisdiction, an Optionee, upon the acquisition of any Optioned Shares by the exercise of Options and as a condition to such exercise, shall provide to the Compensation Committee such evidence as the Compensation Committee requires to demonstrate that the Optionee or recipient will acquire such Optioned Shares with investment intent (i.e. for investment |
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purposes) and not with a view to their distribution, including an undertaking to that effect in a form acceptable to the Compensation Committee. The Compensation Committee may cause a legend or legends to be placed upon any certificates for the Optioned Shares to make appropriate reference to applicable resale restrictions, and the Optionee or recipient shall be bound by such restrictions. The Compensation Committee also may take such other action or require such other action or agreement by such Optionee or proposed recipient as may from time to time be necessary to comply with applicable securities laws. This provision shall in no way obligate the Company to undertake the registration or qualification of any Options or the Option Shares under any securities laws applicable to the securities of the Company. | ||
15.2 | For all purposes of the Plan, the Compensation Committee and the Company may take all such measures as they deem appropriate or necessary to comply with applicable laws, including income tax laws and securities laws and regulations, as well as the rules of regulatory authorities having jurisdiction over the Company or in respect of the securities of the Company. Without limitation to the foregoing, the Compensation Committee and the Company may withhold and remit to tax authorities such sums which might otherwise be due or accruing due by the Company to an Optionee, if such withholding and remittance are required under applicable income tax laws in connection with the grant or exercise of the Optionee’s Options. | |
15.3 | Issuance, transfer or delivery of certificates for Optioned Shares acquired pursuant to the Plan may be delayed, at the discretion of the Compensation Committee, until the Compensation Committee is satisfied that the requirements of applicable laws and regulations, and applicable rules of regulatory authorities, have been met. | |
16. | AMENDMENT AND TERMINATION OF PLAN | |
16.1 | Subject to the policies, rules and regulations of any lawful authority having jurisdiction (including the TSX), the Board may, at any time, without further action or approval by the shareholders of the Company, amend the Plan or any Option granted hereunder in such respects as it may consider advisable and, without limiting the generality of the foregoing, it may do so to: |
(a) | ensure that the Options granted hereunder will comply with any provisions respecting stock options in tax and other laws in force in any country or jurisdiction of which a Optionee to whom an Option has been granted may from time to time be resident or a citizen; | ||
(b) | make amendments of an administrative nature; | ||
(c) | change vesting provisions of an Option or the Plan; | ||
(d) | change termination provisions of an Option provided that the expiry date does not extend beyond the original expiry date; | ||
(e) | reduce the exercise price of an Option for an Optionee who is not an Insider; | ||
(f) | make any amendments required to comply with applicable laws or TSX requirements; and | ||
(g) | make any other amendments which are accepted for filing by the TSX. |
16.2 | No Shares shall be issued under any amendment to this Plan unless and until the amended Plan has been accepted for filing by the TSX. | |
16.3 | The Plan may be abandoned or terminated in whole or in part at any time by the Board, except with respect to any Option then outstanding under the Plan. | |
16.4 | The Board may not, without the consent of the Optionee, alter or impair any of the rights or obligations under an Option theretofore granted. |
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17. | NO REPRESENTATION OR WARRANTY | |
17.1 | The Company makes no representation or warranty as to the future market value of any Shares or Optioned Shares. | |
18. | GENERAL PROVISIONS | |
18.1 | Nothing contained in the Plan shall prevent the Company or any of its Affiliates from adopting or continuing in effect other compensation arrangements (subject to shareholder approval if such approval is required by TSX) and such arrangements may be either generally applicable or applicable only in specific cases. | |
18.2 | The validity, construction and effect of the Plan, the grants of Options, the issue of Option Shares, any rules and regulations relating to the Plan any Option Agreement, and all determinations made and actions taken pursuant to the Plan, shall be governed by and determined in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein. | |
18.3 | If any provision of the Plan or any Option Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any person or Option, or would disqualify the Plan or any Option under any law deemed applicable by the Compensation Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Compensation Committee, materially altering the intent of the Plan or the Option, such provision shall be stricken as to such jurisdiction, person, or Option and the remainder of the Plan and any such Option Agreement shall remain in full force and effect. | |
18.4 | Neither the Plan nor any Option shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any of its Affiliates and an Optionee or any other person. | |
18.5 | Headings are given to the sections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. | |
19. | TERM OF THE PLAN | |
19.1 | The Plan shall be effective as of July 8, 2010, subject to its approval by the shareholders of the Company and acceptance for filing by the TSX pursuant to section 14. | |
19.2 | The Plan shall be effective until July 8, 2020 unless the Plan is earlier terminated by the Board pursuant to section 16, and no Option shall be granted under the Plan after that date. Unless otherwise expressly provided in the Plan or in an applicable Option Agreement, the Option Period for any Option granted hereunder will, and any authority of the Board to amend, alter, adjust, suspend, discontinue or terminate any such Option or to waive any conditions or rights under any such Option shall, continue after termination of the Plan on July 8, 2020 or any earlier termination date of the Plan, notwithstanding such termination. |
Approved by the Shareholders on: •
Accepted for filing by the TSX on: July 9, 2010
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(a) | in the case of a dissent in respect of a resolution, the fair value that the notice shares had immediately before the passing of the resolution, | ||
(b) | in the case of a dissent in respect of an arrangement approved by a court order made under section 291(2)(c) that permits dissent, the fair value that the notice shares had immediately before the passing of the resolution adopting the arrangement, or | ||
(c) | in the case of a dissent in respect of a matter approved or authorized by any other court order that permits dissent, the fair value that the notice shares had at the time specified by the court order, |
(2) | This Division applies to any right of dissent exercisable by a shareholder except to the extent that |
(a) | the court orders otherwise, or | ||
(b) | in the case of a right of dissent authorized by a resolution referred to in section 238(1)(g), the court orders otherwise or the resolution provides otherwise. |
(a) | under section 260, in respect of a resolution to alter the articles to alter restrictions on the powers of the company or on the business it is permitted to carry on; | ||
(b) | under section 272, in respect of a resolution to adopt an amalgamation agreement; | ||
(c) | under section 287, in respect of a resolution to approve an amalgamation under Division 4 of Part 9; | ||
(d) | in respect of a resolution to approve an arrangement, the terms of which arrangement permit dissent; | ||
(e) | under section 301(5), in respect of a resolution to authorize or ratify the sale, lease or other disposition of all or substantially all of the company’s undertaking; |
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(f) | under section 309, in respect of a resolution to authorize the continuation of the company into a jurisdiction other than British Columbia; | ||
(g) | in respect of any other resolution, if dissent is authorized by the resolution; | ||
(h) | in respect of any court order that permits dissent. |
(2) | A shareholder wishing to dissent must |
(a) | prepare a separate notice of dissent under section 242 for |
(i) | the shareholder, if the shareholder is dissenting on the shareholder’s own behalf, and | ||
(ii) | each other person who beneficially owns shares registered in the shareholder’s name and on whose behalf the shareholder is dissenting, |
(b) | identify in each notice of dissent, in accordance with section 242(4), the person on whose behalf dissent is being exercised in that notice of dissent, and | ||
(c) | dissent with respect to all of the shares, registered in the shareholder’s name, of which the person identified under paragraph (b) of this subsection is the beneficial owner. |
(3) | Without limiting subsection (2), a person who wishes to have dissent exercised with respect to shares of which the person is the beneficial owner must |
(a) | dissent with respect to all of the shares, if any, of which the person is both the registered owner and the beneficial owner, and | ||
(b) | cause each shareholder who is a registered owner of any other shares of which the person is the beneficial owner to dissent with respect to all of those shares. |
(2) | A shareholder wishing to waive a right of dissent with respect to a particular corporate action must |
(a) | provide to the company a separate waiver for |
(i) | the shareholder, if the shareholder is providing a waiver on the shareholder’s own behalf, and | ||
(ii) | each other person who beneficially owns shares registered in the shareholder’s name and on whose behalf the shareholder is providing a waiver, and |
(b) | identify in each waiver the person on whose behalf the waiver is made. |
(a) | the shareholder in respect of the shares of which the shareholder is both the registered owner and the beneficial owner, and |
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(b) | any other shareholders, who are registered owners of shares beneficially owned by the first mentioned shareholder, in respect of the shares that are beneficially owned by the first mentioned shareholder. |
(a) | a copy of the proposed resolution, and | ||
(b) | a notice of the meeting that specifies the date of the meeting, and contains a statement advising of the right to send a notice of dissent. |
(a) | a copy of the proposed resolution, and | ||
(b) | a statement advising of the right to send a notice of dissent. |
(a) | a copy of the resolution, | ||
(b) | a statement advising of the right to send a notice of dissent, and | ||
(c) | if the resolution has passed, notification of that fact and the date on which it was passed. |
(a) | a copy of the entered order, and | ||
(b) | a statement advising of the right to send a notice of dissent. |
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(a) | if the company has complied with section 240(1) or (2), send written notice of dissent to the company at least 2 days before the date on which the resolution is to be passed or can be passed, as the case may be, | ||
(b) | if the company has complied with section 240(3), send written notice of dissent to the company not more than 14 days after receiving the records referred to in that section, or | ||
(c) | if the company has not complied with section 240(1), (2) or (3), send written notice of dissent to the company not more than 14 days after the later of |
(i) | the date on which the shareholder learns that the resolution was passed, and | ||
(ii) | the date on which the shareholder learns that the shareholder is entitled to dissent. |
(a) | on or before the date specified by the resolution or in the statement referred to in section 240(2) (b) or (3)(b) as the last date by which notice of dissent must be sent, or | ||
(b) | if the resolution or statement does not specify a date, in accordance with subsection (1) of this section. |
(a) | within the number of days, specified by the court order, after the shareholder receives the records referred to in section 241, or | ||
(b) | if the court order does not specify the number of days referred to in paragraph (a) of this subsection, within 14 days after the shareholder receives the records referred to in section 241. |
(a) | if the notice shares constitute all of the shares of which the shareholder is both the registered owner and beneficial owner and the shareholder owns no other shares of the company as beneficial owner, a statement to that effect; | ||
(b) | if the notice shares constitute all of the shares of which the shareholder is both the registered owner and beneficial owner but the shareholder owns other shares of the company as beneficial owner, a statement to that effect and |
(i) | the names of the registered owners of those other shares, | ||
(ii) | the number, and the class and series, if applicable, of those other shares that are held by each of those registered owners, and | ||
(iii) | a statement that notices of dissent are being, or have been, sent in respect of all of those other shares; |
(c) | if dissent is being exercised by the shareholder on behalf of a beneficial owner who is not the dissenting shareholder, a statement to that effect and |
(i) | the name and address of the beneficial owner, and |
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(ii) | a statement that the shareholder is dissenting in relation to all of the shares beneficially owned by the beneficial owner that are registered in the shareholder’s name. |
(a) | if the company intends to act on the authority of the resolution or court order in respect of which the notice of dissent was sent, send a notice to the dissenter promptly after the later of |
(i) | the date on which the company forms the intention to proceed, and | ||
(ii) | the date on which the notice of dissent was received, or |
(b) | if the company has acted on the authority of that resolution or court order, promptly send a notice to the dissenter. |
(a) | be dated not earlier than the date on which the notice is sent, | ||
(b) | state that the company intends to act, or has acted, as the case may be, on the authority of the resolution or court order, and | ||
(c) | advise the dissenter of the manner in which dissent is to be completed under section 244. |
(a) | a written statement that the dissenter requires the company to purchase all of the notice shares, | ||
(b) | the certificates, if any, representing the notice shares, and | ||
(c) | if section 242(4)(c) applies, a written statement that complies with subsection (2) of this section. |
(a) | be signed by the beneficial owner on whose behalf dissent is being exercised, and | ||
(b) | set out whether or not the beneficial owner is the beneficial owner of other shares of the company and, if so, set out |
(i) | the names of the registered owners of those other shares, | ||
(ii) | the number, and the class and series, if applicable, of those other shares that are held by each of those registered owners, and | ||
(iii) | that dissent is being exercised in respect of all of those other shares. |
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(a) | the dissenter is deemed to have sold to the company the notice shares, and | ||
(b) | the company is deemed to have purchased those shares, and must comply with section 245, whether or not it is authorized to do so by, and despite any restriction in, its memorandum or articles. |
(a) | promptly pay that amount to the dissenter, or | ||
(b) | if subsection (5) of this section applies, promptly send a notice to the dissenter that the company is unable lawfully to pay dissenters for their shares. |
(a) | determine the payout value of the notice shares of those dissenters who have not entered into an agreement with the company under subsection (1), or order that the payout value of those notice shares be established by arbitration or by reference to the registrar, or a referee, of the court, | ||
(b) | join in the application each dissenter, other than a dissenter who has entered into an agreement with the company under subsection (1), who has complied with section 244(1), and | ||
(c) | make consequential orders and give directions it considers appropriate. |
(a) | pay to each dissenter who has complied with section 244(1) in relation to those notice shares, other than a dissenter who has entered into an agreement with the company under subsection (1) of this section, the payout value applicable to that dissenter’s notice shares, or | ||
(b) | if subsection (5) applies, promptly send a notice to the dissenter that the company is unable lawfully to pay dissenters for their shares. |
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(a) | the dissenter may, within 30 days after receipt, withdraw the dissenter’s notice of dissent, in which case the company is deemed to consent to the withdrawal and this Division, other than section 247, ceases to apply to the dissenter with respect to the notice shares, or | ||
(b) | if the dissenter does not withdraw the notice of dissent in accordance with paragraph (a) of this subsection, the dissenter retains a status as a claimant against the company, to be paid as soon as the company is lawfully able to do so or, in a liquidation, to be ranked subordinate to the rights of creditors of the company but in priority to its shareholders. |
(a) | the company is insolvent, or | ||
(b) | the payment would render the company insolvent. |
(a) | the corporate action approved or authorized, or to be approved or authorized, by the resolution or court order in respect of which the notice of dissent was sent is abandoned; | ||
(b) | the resolution in respect of which the notice of dissent was sent does not pass; | ||
(c) | the resolution in respect of which the notice of dissent was sent is revoked before the corporate action approved or authorized by that resolution is taken; | ||
(d) | the notice of dissent was sent in respect of a resolution adopting an amalgamation agreement and the amalgamation is abandoned or, by the terms of the agreement, will not proceed; | ||
(e) | the arrangement in respect of which the notice of dissent was sent is abandoned or by its terms will not proceed; | ||
(f) | a court permanently enjoins or sets aside the corporate action approved or authorized by the resolution or court order in respect of which the notice of dissent was sent; | ||
(g) | with respect to the notice shares, the dissenter consents to, or votes in favour of, the resolution in respect of which the notice of dissent was sent; | ||
(h) | the notice of dissent is withdrawn with the written consent of the company; | ||
(i) | the court determines that the dissenter is not entitled to dissent under this Division or that the dissenter is not entitled to dissent with respect to the notice shares under this Division. |
(a) | the company must return to the dissenter each of the applicable share certificates, if any, sent under section 244(1)(b) or, if those share certificates are unavailable, replacements for those share certificates, |
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(b) | the dissenter regains any ability lost under section 244(6) to vote, or exercise or assert any rights of a shareholder, in respect of the notice shares, and | ||
(c) | the dissenter must return any money that the company paid to the dissenter in respect of the notice shares under, or in purported compliance with, this Division. |
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(a) | ensure that the management of Corvus Gold Inc. (the “Company”) has designed and implemented an effective system of internal financial controls for reviewing and reporting on the Company’s financial statements; | ||
(b) | oversee, review and report on the integrity of the Company’s financial disclosure and reporting; | ||
(c) | review the Company’s compliance with regulatory and statutory requirements as they relate to financial statements, taxation matters and disclosure of material facts; and | ||
(d) | be directly responsible for: |
(i) | the selection of a firm of external auditors to be proposed for election as the external auditors of the Company, | ||
(ii) | the oversight of the work of the Company’s external auditors, and | ||
(iii) | subject to the grant by the shareholders of the authority to do so, if required, fixing the compensation of the external auditors of the Company. |
2.1 | The Committee will consist of at least three members of the Board of Directors (the “Board”), all of whom will be “independent1” and “unrelated directors2” of the Company within the meaning of all applicable legal and regulatory requirements (except in the circumstances, and only to the extent, permitted by all applicable legal and regulatory requirements). | |
2.2 | All of the members of the Committee will be “financially literate3”, at least one member of the Committee will have accounting or related financial expertise (i.e. able to analyze and interpret a full set of financial statements, including the notes thereto, in accordance with generally accepted accounting principles) and at least one member of the Committee will be a “financial expert” within the meaning of the rules and forms |
1 | Whether a director is “independent” will be determined in accordance with all applicable laws and regulations, including the applicable securities laws of Canada and the United States and the regulations and policies of any stock exchange or quotation system on which the Company’s securities are listed or quoted. | |
2 | “unrelated director” means a director who is: (a) not a member of management and is free from any interest and any business, family or other relationship which could reasonably be perceived to materially interfere with the director’s ability to act with a view to the best interests of the issuer, other than interests and relationships arising solely from holdings in the issuer, (b) not currently, or has not been within the last three years, an officer, employee of or material service provider to the issuer or any of its subsidiaries or affiliates; and (c) not a director (or similarly situated individual) officer, employee or significant shareholder of an entity that has a material business relationship with the issuer. A chair or vice chair of the board of directors who is not a member of management is not, for that reason alone, a related director. | |
3 | An individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally compatible to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements. |
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adopted by the Securities and Exchange Commission (except in the circumstances, and only to the extent, permitted by all applicable legal and regulatory requirements). | ||
2.3 | The Board, at its organizational meeting held in conjunction with each annual general meeting of the shareholders, will appoint the members of the Committee for the ensuing year. The Board may at any time remove or replace any member of the Committee and may fill any vacancy in the Committee. | |
2.4 | Unless the Board has appointed a chair of the Committee, the members of the Committee will elect a chair from among their number. | |
2.5 | The Committee will select an individual to act as secretary for the Committee, who will be either: |
(a) | a member of the Committee other than the chair, or | ||
(b) | another individual who is not a member of the management of the Company. |
2.6 | The quorum for meetings will be a majority of the members of the Committee, present in person or by telephone or other telecommunication device that permits all persons participating in the meeting to speak and to hear each other. Decisions by the Committee will be by the affirmative vote of a majority of the members of the Committee, or by consent resolutions in writing signed by each member of the Committee. | |
2.7 | The Committee will have access to such officers and employees of the Company and to the Company’s external auditors, and to such information respecting the Company, as it considers to be necessary or advisable in order to perform its duties and responsibilities. | |
2.8 | Meetings of the Committee will be conducted as follows: |
(a) | the Committee will meet: |
(i) | at least quarterly, and | ||
(ii) | may meet as many additional times: |
A. | as deemed necessary or appropriate by the Committee, | ||
B. | upon request by any member of the Committee, the Chief Executive Officer, the Chief Financial Officer or the external auditors, |
(b) | the external auditors and management representatives will be invited to attend as necessary in the discretion of the Committee. |
2.9 | The internal accounting staff, any external accounting consultant(s) and the external auditors will have a direct line of communication to the Committee through its chair and may bypass management if deemed necessary. The Committee, through its chair, may contact directly any employee in, or consultant of, the Company as it deems necessary, and any employee of, or consultant to, the Company may bring before the Committee any matter involving questionable, illegal or improper financial practices or transactions. |
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2.10 | The Committee may, in its sole discretion, retain, at the expense of the Company, such legal, financial or other advisors or consultants as it may deem necessary or advisable in order to properly and fully perform its duties and responsibilities hereunder. |
3.1 | The overall duties and responsibilities of the Committee will be as follows: |
(a) | be directly responsible for: |
(i) | the selection of a firm of external auditors to be proposed for election as the external auditors of the Company, | ||
(ii) | the oversight of the work of the Company’s external auditors, and | ||
(iii) | subject to the grant by the shareholders of the authority to do so, if required, fixing the compensation of the external auditors of the Company; |
(b) | to review with the management of the Company (and, in the case of the annual audited statements, with the external auditors) the annual audited consolidated and unaudited consolidated quarterly financial statements, including the notes thereto, to ensure that such statements present fairly the financial position of the Company and the results of its operations and, if appropriate, to recommend to the Board as to the approval of any such financial statements; | ||
(c) | to assist the Board in the discharge of its responsibilities relating to the Company’s accounting principles, reporting practices and internal controls and its approval of the Company’s annual and quarterly consolidated financial statements; | ||
(d) | to establish and maintain a direct line of communication with the Company’s internal accounting staff and any external accounting consultant(s) and assess their performance; | ||
(e) | to ensure that the management of the Company has designed, implemented and is maintaining an effective and appropriate system of internal financial controls; and | ||
(f) | to report regularly to the Board on the fulfilment of its duties and responsibilities. |
3.2 | The duties and responsibilities of the Committee as they relate to the external auditors will be as follows: |
(a) | to select a firm of external auditors to be proposed by management of the Company to the shareholders for election by the shareholders as the external auditors for the Company, and to verify the independence of such proposed external auditors; | ||
(b) | to review and approve the fee, scope and timing of the annual and any other audit performed by the external auditors; | ||
(c) | to review and evaluate the qualifications, performance and independence of the lead partner of the external auditors of the Company; | ||
(d) | to discuss with management of the Company the timing and process for implementing the rotation of the lead audit partner and the reviewing partners of the external auditors of the Company; | ||
(e) | to obtain confirmation from the external auditors of the Company that they will report directly to the Committee; |
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(f) | to obtain confirmation from the external auditors of the company that they will report in a timely matter to the Committee all critical accounting policies and practices to be used, all alternative accounting policies and practices, the ramifications of each of such accounting policies and practices and the accounting policy and practice preferred by the external auditors of the Company, for the financial information of the Company within applicable generally accepted accounting principles (“GAAP”) which have been discussed with management of the Company and will provide a copy of all material written communications between the external auditors of the Company and management of the Company including, without limitation, any management letter or schedule of unadjusted differences; | ||
(g) | obtain confirmation from the external auditors of the Company that they will ensure that all reports filed under the United StatesSecurities Exchange Act of 1934, as amended, which contain financial statements required to be prepared in accordance with Canadian GAAP and/or are reconciled to, United States GAAP, reflect all material correcting adjustments identified by the external auditors of the Company; | ||
(h) | to review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and any former external auditors of the Company; | ||
(i) | to review and pre-approve all non-audit services to be provided to the Company (or any of its subsidiaries) by the external auditors, provided that such pre-approval authority may be delegated by the Committee to any member of the Committee who is “independent” and “unrelated” on the condition that any such pre-approval must be presented to the Committee at its first schedule meeting following any such approval; | ||
(j) | review the audit plan of the external auditors prior to the commencement of the audit; | ||
(k) | to review with the external auditors, upon completion of their annual audit: |
(i) | the contents of their report, | ||
(ii) | the scope and quality of the audit work performed, | ||
(iii) | the adequacy of the Company’s financial and accounting personnel, | ||
(iv) | the co-operation received from the Company’s personnel and any external consultants during the audit, | ||
(v) | the scope and nature of the internal resources used, | ||
(vi) | any significant transactions outside of the normal business of the Company, | ||
(vii) | any significant proposed adjustments and recommendations for improving internal accounting controls, accounting principles or management systems, and | ||
(viii) | the non-audit services provided by the external auditors during the year under audit; |
(l) | to discuss with the external auditors not just the acceptability, but also the quality, of the Company’s accounting principles; and | ||
(m) | to implement structures and procedures to ensure that the Committee meets the external auditors on a regular basis in the absence of management. |
3.3 | The duties and responsibilities of the Committee as they relate to the internal control procedures of the Company are to: |
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(a) | review the appropriateness and effectiveness of the Company’s policies and business practices which impact on the financial integrity of the Company, including those relating to internal accounting, the use of and services provided by any external accounting consultant(s), insurance, information services and systems and financial controls, management reporting and risk management, and to ensure that the Company maintains: |
(i) | the necessary books, records and accounts in reasonable detail to accurately and fairly reflect the Company’s financial transactions, | ||
(ii) | effective internal control systems, and | ||
(iii) | adequate processes for assessing the risk of material misstatement of the financial statements and for detecting control weaknesses or fraud; |
(b) | establish procedures for: |
(i) | the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and | ||
(ii) | the confidential, anonymous submission by employees or any external consultants of the Company of concerns regarding questionable accounting or auditing matters; |
(c) | to periodically review this policy and recommend to the Board any changes which the Committee may deem appropriate; | ||
(d) | review any unresolved issues between management and the external auditors that could affect the financial reporting or internal controls of the Company; | ||
(e) | periodically review the Company’s financial and auditing procedures and the extent to which recommendations made by the internal accounting staff, by any external accounting consultant(s) or by the external auditors have been implemented; | ||
(f) | assist in the preparation of any internal control report by management, which provides that management of the Company is responsible for establishing and maintaining an adequate control structure and procedures for financial reporting by the Company, assessing the effectiveness of such control structure and procedures, and ensuring that the external auditors of the Company attest to, and report on, the assessment of such control structure and procedures by management of the Company; | ||
(g) | assist the Chief Executive Officer and the Chief Financial Officer of the Company in their assessment of the effectiveness of the Company’s internal control over financial reporting and in determining whether there has been any material change in the Company’s internal control over financial reporting which has materially affected or could materially affect such internal control subsequent to the date of the evaluation; and | ||
(h) | assist the Chief Executive Officer and the Chief Financial Officer of the Company in identifying and addressing any significant deficiencies or material weaknesses in the design or operation of the Company’s internal control over financial information and any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
3.4 | The Committee is also charged with the responsibility to: |
(a) | review the Company’s quarterly statements of earnings, including the impact of unusual items and changes in accounting principles and estimates and report to the Board with respect thereto; |
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(b) | review and approve the financial sections of: |
(i) | the annual report to shareholders; | ||
(ii) | the annual information form (if any); | ||
(iii) | any quarterly or annual management discussion and analysis; | ||
(iv) | prospectuses; and | ||
(v) | other public reports requiring approval by the Board, |
(c) | review regulatory filings and decisions as they relate to the Company’s consolidated annual and interim financial statements, including any press releases with respect thereto; | ||
(d) | ensure that the Company discloses in the periodic reports of the Company, as appropriate, whether at least one member of the Committee is a “financial expert” within the meaning of the rules and forms adopted by the Securities and Exchange Commission; | ||
(e) | ensure that all non-audit services approved by or on behalf of the Committee are disclosed in the periodic reports of the Company; | ||
(f) | ensure that each annual report and, to the extent required by any applicable legal or regulatory requirement, any quarterly report of the Company includes disclosure with respect to all material off-balance sheet transactions, arrangements, obligations (including contingent obligations) and other relationships of the Company with unconsolidated entities which may have a current or future effect on the Company in accordance with all applicable legal and regulatory requirements; | ||
(g) | ensure that all financial statements and other financial information, including pro forma financial information, included in any report filed by the Company with any regulatory authority or contained in any public disclosure or press release of the Company is presented in a manner which does not contain a material misstatement or omission and reconciles the pro forma information contained therein to Canadian GAAP, and if appropriate, reconciles such pro forma information contained therein to United States GAAP, and which otherwise complies with all applicable legal and regulatory requirements; | ||
(h) | review the appropriateness of the policies and procedures used in the preparation of the Company’s consolidated financial statements and other required disclosure documents, and consider recommendations for any material change to such policies; | ||
(i) | review and report on the integrity of the Company’s consolidated financial statements; | ||
(j) | review the minutes of any audit committee meeting of any subsidiaries of the Company; | ||
(k) | review with management, the external auditors and, if necessary, with legal counsel, any litigation, claim or other contingency, including tax assessments that could have a material effect upon the financial position or operating results of the Company and the manner in which such matters have been disclosed in the consolidated financial statements; | ||
(l) | review the Company’s compliance with regulatory and statutory requirements as they relate to financial statements, tax matters and disclosure of material facts; and |
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(m) | develop a calendar of activities to be undertaken by the Committee for each ensuing year and to submit the calendar in the appropriate format to the Board within a reasonable time following each annual general meeting of shareholders. |
3.5 | The Committee shall have the authority to determine: |
(a) | subject to the grant by the shareholders of the authority to do so, if required, the compensation to be received by the external auditors of the Company in connection with all audit services, and non-audit services, to be performed by the auditors; | ||
(b) | the compensation to be received by any legal, financial or other advisors or consultants engaged by the Committee to assist it in performing its duties and responsibilities hereunder; and | ||
(c) | the appropriate funding for the ordinary administrative expenses of the Committee. |
4.1 | The Committee will: |
(a) | prepare any report or other disclosure, including any recommendation of the Committee, required by any applicable legal or regulatory requirement to be included in the annual proxy or information circular of the Company; | ||
(b) | review this Charter at least annually and recommend any changes herein to the Board; | ||
(c) | report the activities of the Committee to the Board on a regular basis and make such recommendations thereto as the Committee may deem necessary or appropriate; and | ||
(d) | prepare and review with the Board an annual performance evaluation of the Committee, which performance evaluation must compare the performance of the Committee with the requirements of this Charter and be conducted in such manner as the Committee deems appropriate. Such report to the Board may be in such form as the Committee determines, which may include being in the form of an oral report by the chair of the Committee or by another member of the Committee designated by the Committee to make such report. |
4.2 | No member of the Committee will receive any compensation from the Company, other than fees for being a director of the Company, or a member of a committee of the Board. | |
4.3 | In addition to the foregoing, the Committee will perform such other duties as may be assigned to it by the Board from time to time or as may be required by any applicable stock exchanges, regulatory authorities or legislation. |
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