SUTCLIFFE RESOURCES LTD.
Management’s Discussion & Analysis
For the second quarter ended June 30, 2005
Form 51-102F1 as at August 22, 2005
DESCRIPTION OF BUSINESS
The Company is engaged in the business of pursuing, acquiring and developing mineral exploration projects. The Company has acquired options to purchase a 50% interest in the Harrison Lake Nickel Copper Project and a 100% interest in the Beale Lake Property, both located in British Columbia. Other exploration properties and projects, both in Canada as well as international, are also being considered. A prospectus offering was recently completed raising a net amount of approximately $2,000,000 which will allow the Company to finance the preliminary work programs on both these properties.
The Beale Lake Project in north western British Columbia, 60 km southeast of Cassiar is a recently identified intrusion-related gold prospect with significant anomalous geochemical values of gold and copper in quartz veins and breccia associated with a Cretaceous intrusive. The target is a multimillion ounce type deposit similar to those in the Tintina Gold belt in the adjacent state of Alaska. The Company has initiated a multi-phase program this summer involving geological mapping and geophysical surveying, to be followed by diamond drilling in the fall.
The Harrison Lake Project located in southwestern British Columbia 130 km east of Vancouver is an advanced exploration stage copper nickel platinum group target with significant geophysical and anomalous geochemical signatures associated with a 60 km long belt. Field work during the past three years has outlined a similar geological environment and identified some similar regional geophysical zones to that found at the B.C. Nickel Mine which is located on the southeast end of this belt. Using data from the airborne geophysical survey completed in 2004, the Company has identified 15 high priority targets associated with both the ultramafic and schist rocks on the property. Detailed geological mapping and geophysical surveying has started, with diamond drilling to follow in the fall of 2005.
OPERATIONS AND EXPENDITURES
During the second quarter ended June 30, 2005, field programs for both the Beale Lake and Harrison Lake projects were initiated. Both programs will involve geological mapping and geophysical surveying to be followed by diamond drilling.
SUMMARY OF QUARTERLY RESULTS
2005 | 2004 | 2003 | ||||||||||||||
Jun 30 $ | Mar 31 $ | Dec 31 $ | Sep 30 $ | Jun 30 $ | Mar 31 $ | Dec 31 $ | Sep 30 $ | |||||||||
Total revenue | nil | nil | nil | nil | nil | nil | nil | nil | ||||||||
Gen & Adm Exp. | 177,188 | 46,452 | 16,806 | 27,610 | 10,688 | 15,527 | 42,159 | 9,954 | ||||||||
Stock-based Comp | nil | nil | nil | nil | nil | nil | 122,500 | nil | ||||||||
Loss | (177,188 | ) | (46,452 | ) | (16,806 | ) | (27,610 | ) | (10,688 | ) | (15,527 | ) | (164,659 | (9,954 | ) | |
Net Loss | (177,188 | ) | (46,452 | ) | (49,018 | ) | (30,610 | ) | (10,688 | ) | (15,527 | ) | (164,659 | (9,954 | ) | |
Loss/share | (0.0137 | ) | (0.0040 | ) | (0.0042 | ) | (0.0026 | ) | (0.0009 | ) | (0.0062 | ) | (0.0683 | (0.0041 | ) | |
Def Min Prop Costs | 72,588 | 43,511 | 140,051 | 32,496 | 37,098 | 18,450 | 60,560 | 20,000 | ||||||||
Total Assets | 2,302,417 | 490,281 | 472,366 | 316,812 | 337,192 | 268,251 | 263,838 | 142,381 |
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GENERAL AND ADMINISTRATIVE EXPENSES
3 months ended | 3 months ended | |||||
Jun 30, 2005 | Jun 30, 2004 | |||||
Professional fees | $ | 31,249 | $ | - | ||
Consulting | 16,308 | - | ||||
Management and administration fees | 7,500 | 7,500 | ||||
Financing fees | 53,874 | - | ||||
Office, rent & supplies | 9,717 | - | ||||
Investor relations and communications | 324 | - | ||||
Regulatory and transfer agent fees | 29,830 | 2,557 | ||||
Automotive and travel | 450 | 564 | ||||
Interest on demand loans | 27,647 | - | ||||
Bank charges and interest (net) | 289 | 67 | ||||
Total general and administrative expenses | ||||||
for the quarter | $ | 177,188 | $ | 10,688 |
The administrative expenditures made during the quarter were indicative of the Company’s activities after completion of its public offering. Expenditures in most categories reflected the costs involved in the preparation of materials for and the successful completion of funding. The categories of professional fees, consulting, financing fees, regulatory and transfer fees and interest on demand loans are all much higher compared to the previous fiscal period due to the ancillary costs of the prospectus financing and also a result of the requirement for additional working capital funding due to the delays in completing the prospectus financing.
RELATED PARTY TRANSACTIONS
For the second quarter ended June 30, 2005, management fees charged by a company controlled by a director totaled $7,500.
LIQUIDITY AND SOLVENCY
The Company had working capital for the second quarter ending June 30, 2005 of $1,404,312 compared to a deficiency of $337,252 for the year ended December 31, 2004. The continued operations of the Company are dependent upon its ability to raise adequate financing. To this end the Company will be seeking future funding through private placement offerings as well as the exercise of outstanding share purchase warrants to maintain adequate working capital and to raise funds for exploration expenditures.
Jun 30, 2005 | Jun 30, 2004 | |||||
Working Capital (Deficiency) | $ | 1,404,312 | $ | (108,773 | ) | |
Deficit | $ | (6,079,422 | ) | $ | (5,776,154 | ) |
There have been no changes in accounting policies and the Company has made no off-balance sheet arrangements and none are contemplated in the future. The Company does not utilize financial or other instruments in its operations.
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CAPITALIZED EXPLORATION AND DEVELOPMENT COSTS
Beale Lake $ | Harrison $ | Total $ | |||||||
Balance, December 31, 2004 | 112,673 | 245,007 | 357,680 | ||||||
Property Acquisition Costs (cash) | 30,000 | - | 30,000 | ||||||
Property Acquisition Costs (shares) | 37,500 | 30,000 | 67,500 | ||||||
Assays and Reports | 2,023 | 300 | 2,323 | ||||||
Equipment Rental and Supplies | - | 5,573 | 5,573 | ||||||
Field Personnel | - | 2,520 | 2,520 | ||||||
Geophysical Survey | - | 8,183 | 8,183 | ||||||
Net Mineral Interest Costs for the Period | 69,523 | 46,576 | 116,099 | ||||||
Balance, June 30, 2005 | 182,196 | 291,583 | 473,779 |
DISCLOSURE OF OUTSTANDING SHARE DATA as of August 22, 2005
Share Capital Authorized – unlimited common shares
Share Capital Issued – 22,000,900
Shares held in escrow
- - 3,304,800
Options Outstanding
- - 4,350,000 exercisable for 4,350,000 common shares at $0.25 per share
Warrants Outstanding
- - 6,771,400 warrants exercisable for 6,771,400 common shares at $0.25 per share
- - 4,850,000 warrants exercisable for 4,850,000 common shares at $0.35 per share
- - 1,104,000 agent’s warrants exercisable for 1,104,000 common shares at $0.25 per share