Western Copper Corporation
(an exploration stage company)
Interim Consolidated Financial Statements
June 30, 2011
(unaudited)
(expressed in Canadian dollars)
Western Copper Corporation | CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
CONSOLIDATED BALANCE SHEETS
June 30, 2011 | December 31, 2010 | ||||||||
Expressed in Canadian dollars | Note | $ | $ | ||||||
ASSETS | |||||||||
Cash and cash equivalents | - | 2,811,789 | 1,630,698 | ||||||
Short-term investments | 3 | 19,103,488 | 22,006,197 | ||||||
Other assets | - | 472,829 | 188,552 | ||||||
CURRENT ASSETS | 22,388,106 | 23,825,447 | |||||||
RECLAMATION BOND | - | 80,300 | 80,300 | ||||||
PROPERTY AND EQUIPMENT | - | 109,411 | 141,383 | ||||||
EXPLORATION AND EVALUATION ASSETS | 4 | 76,515,156 | 73,402,621 | ||||||
ASSETS | 99,092,973 | 97,449,751 | |||||||
LIABILITIES | |||||||||
CURRENT LIABILITIES | |||||||||
Accounts payable and accrued liabilities | - | 1,348,932 | 1,240,539 | ||||||
DEFERRED TAX LIABILITY | - | 1,945,136 | 1,945,136 | ||||||
LIABILITIES | 3,294,068 | 3,185,675 | |||||||
SHAREHOLDERS’ EQUITY | |||||||||
SHARE CAPITAL | 5 | 103,714,478 | 99,352,358 | ||||||
CONTRIBUTED SURPLUS | - | 27,880,372 | 29,271,320 | ||||||
DEFICIT | - | (35,795,945 | ) | (34,359,602 | ) | ||||
SHAREHOLDERS’ EQUITY | 95,798,905 | 94,264,076 | |||||||
LIABILITIES AND SHAREHOLDERS’EQUITY | 99,092,973 | 97,449,751 | |||||||
Commitments | 8 |
Approved by the Board of Directors
“Robert J. Gayton” | Director | “F. Dale Corman” | Director |
The accompanying notes are an integral part of these financial statements | - 2 - |
Western Copper Corporation | CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
Three months ended | Six months ended | |||||||||||
June 30, | June 30, | |||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||
Expressed in Canadian dollars | $ | $ | $ | $ | ||||||||
ADMINISTRATIVE EXPENSES | ||||||||||||
Accounting and legal | 164,764 | 51,601 | 240,469 | 101,185 | ||||||||
Filing and regulatory fees | 60,345 | 21,710 | 198,650 | 64,916 | ||||||||
Office and administration | 444,163 | 572,364 | 866,402 | 1,131,454 | ||||||||
Shareholder communication | 147,439 | 145,683 | 268,787 | 271,455 | ||||||||
LOSS BEFORE OTHER ITEMS | 816,711 | 791,358 | 1,574,308 | 1,569,010 | ||||||||
OTHER ITEMS | ||||||||||||
Foreign exchange | 3,401 | (2,292 | ) | 5,461 | 118 | |||||||
Interest income | (71,169 | ) | (13,618 | ) | (143,426 | ) | (31,854 | ) | ||||
LOSS BEFORE TAXES | 748,943 | 775,448 | 1,436,343 | 1,537,274 | ||||||||
Deferred tax expense | - | - | - | 1,260,136 | ||||||||
NET LOSS AND COMPREHENSIVE LOSS | 748,943 | 775,448 | 1,436,343 | 2,797,410 | ||||||||
BASIC AND DILUTED LOSS PER SHARE | 0.01 | 0.01 | 0.02 | 0.04 | ||||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | 92,407,957 | 80,329,981 | 92,013,107 | 79,843,196 |
The accompanying notes are an integral part of these financial statements | - 3 - |
Western Copper Corporation | CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended | Six months ended | |||||||||||
June 30, | June 30, | |||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||
Expressed in Canadian dollars | $ | $ | $ | $ | ||||||||
Cash flows provided by (used in) | ||||||||||||
OPERATING ACTIVITIES | ||||||||||||
Net loss for the period | (748,943 | ) | (775,448 | ) | (1,436,343 | ) | (2,797,410 | ) | ||||
ITEMS NOT AFFECTING CASH | ||||||||||||
Amortization | 2,308 | 4,507 | 4,616 | 8,799 | ||||||||
Common share donation | - | - | - | 117,900 | ||||||||
Stock-based compensation | 82,162 | 119,682 | 188,549 | 202,504 | ||||||||
Deferred tax expense | - | - | - | 1,260,136 | ||||||||
84,470 | 124,189 | 193,165 | 1,589,339 | |||||||||
Change in non-cash working capital items | (190,006 | ) | 271,866 | (205,079 | ) | (258,510 | ) | |||||
OPERATING ACTIVITIES | (854,479 | ) | (379,393 | ) | (1,448,257 | ) | (1,466,581 | ) | ||||
FINANCING ACTIVITIES | ||||||||||||
Common share issuance costs | - | - | (317,715 | ) | (2,217 | ) | ||||||
Exercise of stock options | 2,451,050 | 437,263 | 2,708,458 | 452,763 | ||||||||
Exercise of warrants | - | 2,406,250 | - | 2,455,000 | ||||||||
FINANCING ACTIVITIES | 2,451,050 | 2,843,513 | 2,390,743 | 2,905,546 | ||||||||
INVESTING ACTIVITIES | ||||||||||||
Sale of short-term investments | 2,500,000 | 4,228,692 | 3,000,000 | 4,228,692 | ||||||||
Exploration and evaluation expenditures | (1,790,482 | ) | (5,013,024 | ) | (2,761,395 | ) | (6,872,390 | ) | ||||
INVESTING ACTIVITIES | 709,518 | (784,332 | ) | 238,605 | (2,643,698 | ) | ||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 2,306,089 | 1,679,788 | 1,181,091 | (1,204,733 | ) | |||||||
Cash and cash equivalents – Beginning of period | 505,700 | 551,610 | 1,630,698 | 3,436,131 | ||||||||
CASH AND CASH EQUIVALENTS – END OFPERIOD | 2,811,789 | 2,231,398 | 2,811,789 | 2,231,398 |
The accompanying notes are an integral part of these financial statements | - 4 - |
Western Copper Corporation | CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
Number of | Share | Contributed | Deficit | Shareholders’ | |||||||||||
Shares | Capital | Surplus | Equity | ||||||||||||
Expressed in Canadian dollars | $ | $ | $ | $ | |||||||||||
JANUARY 1, 2010 | 79,275,036 | 77,772,857 | 25,715,857 | (30,322,487 | ) | 73,166,227 | |||||||||
Common share donation | 90,000 | 117,900 | - | - | 117,900 | ||||||||||
Share issuance costs | - | (2,217 | ) | - | - | (2,217 | ) | ||||||||
Exercise of warrants | 1,964,000 | 2,455,000 | - | - | 2,455,000 | ||||||||||
Transfer of warrant value | - | 736,400 | (736,400 | ) | - | - | |||||||||
Exercise of stock options | 533,500 | 452,763 | - | - | 452,763 | ||||||||||
Transfer of stock option value | - | 524,067 | (524,067 | ) | - | - | |||||||||
Stock-based compensation | - | - | 255,004 | - | 255,004 | ||||||||||
Net loss | - | - | - | (2,797,410 | ) | (2,797,410 | ) | ||||||||
JUNE 30, 2010 | 81,862,536 | 82,056,770 | 24,710,394 | (33,119,897 | ) | 73,647,267 | |||||||||
Financing – December 22, 2010 | 9,395,500 | 23,018,975 | - | - | 23,018,975 | ||||||||||
Share issuance costs | - | (1,700,012 | ) | - | - | (1,700,012 | ) | ||||||||
Warrants | - | (4,476,983 | ) | 4,476,983 | - | - | |||||||||
Exercise of stock options | 229,800 | 241,980 | - | - | 241,980 | ||||||||||
Transfer of stock option value | - | 211,628 | (211,628 | ) | - | - | |||||||||
Stock-based compensation | - | - | 295,571 | - | 295,571 | ||||||||||
Net loss | - | - | - | (1,239,705 | ) | (1,239,705 | ) | ||||||||
DECEMBER 31, 2010 | 91,487,836 | 99,352,358 | 29,271,320 | (34,359,602 | ) | 94,264,076 | |||||||||
Exercise of stock options | 1,487,734 | 2,708,458 | - | - | 2,708,458 | ||||||||||
Transfer of stock option value | - | 1,653,662 | (1,653,662 | ) | - | - | |||||||||
Stock-based compensation | - | - | 262,714 | - | 262,714 | ||||||||||
Net loss | - | - | - | (1,436,343 | ) | (1,436,343 | ) | ||||||||
JUNE 30, 2011 | 92,975,570 | 103,714,478 | 27,880,372 | (35,795,945 | ) | 95,798,905 |
The accompanying notes are an integral part of these financial statements | - 5 - |
Western Copper Corporation | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
1. | NATURE OF OPERATIONS |
Western Copper Corporation (“Western Copper” or the “Company”) is an exploration stage company that is directly engaged in exploration and development of mineral properties in Canada. The Company is incorporated in British Columbia, Canada. Its head office is located in Vancouver, British Columbia. | |
The recoverability of the amounts shown for exploration and evaluation assets is dependent upon the existence of economically recoverable reserves and the Company’s ability to secure and maintain title and beneficial interest in the properties, to obtain the necessary financing to continue the exploration and future development of the properties, or to realize the carrying amount through a sale or partial disposal. | |
2. | BASIS OF PRESENTATION AND ADOPTION OF IFRS |
These interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34 -Interim Financial Reportingand IFRS 1 –First- time Adoption of IFRS. The accounting policies followed in these interim financial statements are the same as those applied in the Company’s interim consolidated financial statements for the period ended March 31, 2011. The Company has consistently applied the same accounting policies throughout all periods presented, as if these policies had always been in effect. Note 11 discloses the impact of the transition to IFRS on the Company’s reported equity as at June 30, 2010 and comprehensive income for the three and six months ended June 30, 2010, including the nature and effect of significant changes in accounting policies from those used in the Company’s consolidated financial statements for the year ended December 31, 2010. | |
The accounting policies applied in these interim consolidated financial statements are based on IFRS effective for the year ending December 31, 2011, as issued and outstanding as of August 11, 2011, the date the Board of Directors approved these financial statements. Any subsequent changes to IFRS that are given effect in the Company’s annual consolidated financial statements for the year ending December 31, 2011 could result in restatement of these interim consolidated financial statements, including transition adjustments recognized on change-over to IFRS. | |
The interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto for the year ended December 31, 2010, prepared in accordance with Canadian generally accepted accounting principles, and the Company’s interim consolidated financial statements for the quarter ended March 31, 2011, prepared in accordance with IFRS. |
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Western Copper Corporation | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
In May 2011, the IASB issued the following standards which have not yet been adopted by the Company: IFRS 10, ‘Consolidated Financial Statements’, IFRS 11, ‘Joint Arrangements’, IFRS 12, ‘Disclosure of Interests in Other Entities’, IAS 27, ‘Separate Financial Statements’, IFRS 13, ‘Fair Value Measurement’ and amended IAS 28, ‘Investments in Associates and Joint Ventures’. Each of the new standards is effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. The Company has not yet begun the process of assessing the impact that the new and amended standards will have on its financial statements or whether to early adopt any of the new requirements. | |
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of policies and reported amounts of assets and liabilities and disclosures of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. | |
Actual results could differ from those estimates. Significant accounts that require estimates as the basis for determining the stated amounts include exploration and evaluation assets, share-based payments, allocation of financing proceeds, and income and mining taxes. Differences may be material. | |
3. | SHORT-TERM INVESTMENTS |
June 30, 2011 | December 31, 2010 | ||||||
Expressed in Canadian dollars | $ | $ | |||||
Guaranteed Investment Certificates | 19,000,000 | 22,000,000 | |||||
Accrued interest | 103,488 | 6,197 | |||||
SHORT-TERM INVESTMENTS | 19,103,488 | 22,006,197 |
Short-term investments consist of Guaranteed Investment Certificates held with Canadian chartered banks. All certificates are redeemable in full or in part at the Company’s option without penalty. Interest is paid on amounts redeemed subsequent to 30 days from the date of acquisition of the investment. Short-term investments held at June 30, 2011 bear interest rates ranging from 1.3% - 1.35% per year.
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Western Copper Corporation | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
4. | EXPLORATION AND EVALUATION ASSETS |
Canada | ||||||||||||||||
Yukon | British | Northwest | ||||||||||||||
Columbia | Territories | |||||||||||||||
Casino | Carmacks | Island Copper | Redstone | TOTAL | ||||||||||||
Expressed in Canadian dollars | $ | $ | $ | $ | $ | |||||||||||
JANUARY 1, 2010 | 22,710,511 | 15,786,163 | 13,596,905 | 8,769,525 | 60,863,104 | |||||||||||
Advance royalty | - | 100,000 | - | - | 100,000 | |||||||||||
Claims maintenance | 25,151 | 210 | - | 65,099 | 90,460 | |||||||||||
Detailed engineering | - | 48,940 | - | - | 48,940 | |||||||||||
Engineering studies | 1,251,250 | - | - | - | 1,251,250 | |||||||||||
Exploration | 6,187,151 | - | 29,101 | 252,643 | 6,468,895 | |||||||||||
Permitting | 3,255,525 | 777,806 | - | - | 4,033,331 | |||||||||||
Salary and wages | 269,290 | 143,653 | - | - | 412,943 | |||||||||||
Share-based payments | 97,746 | 35,952 | - | - | 133,698 | |||||||||||
DECEMBER 31, 2010 | 33,796,624 | 16,892,724 | 13,626,006 | 9,087,267 | 73,402,621 | |||||||||||
Advance royalty | - | 100,000 | - | - | 100,000 | |||||||||||
Claims maintenance | 3,572 | 2,835 | - | - | 6,407 | |||||||||||
Engineering studies | 471,612 | - | 130,646 | - | 602,258 | |||||||||||
Exploration | 637,153 | - | 262,721 | 69,196 | 969,070 | |||||||||||
Permitting | 987,782 | 185,714 | 10,093 | - | 1,183,589 | |||||||||||
Salary and wages | 107,465 | 14,795 | 54,786 | - | 177,046 | |||||||||||
Share-based payments | 47,029 | 4,497 | 22,639 | - | 74,165 | |||||||||||
JUNE 30, 2011 | 36,051,237 | 17,200,565 | 14,106,891 | 9,156,463 | 76,515,156 |
a. | Casino (100% - Yukon, Canada) | |
The Casino porphyry copper-gold-molybdenum property is located in Yukon, Canada. | ||
Should it make a production decision, Western Copper is required to make a cash payment of $1 million. Production from the claims is also subject to a 5% net profits interest. | ||
b. | Carmacks (100% - Yukon, Canada) | |
The Carmacks Copper Project is an oxide copper deposit that is located in Yukon, Canada. | ||
Any production from the Carmacks Copper Project is subject to either a 15% net profits interest or a 3% net smelter royalty, at Western Copper’s election. If Western Copper elects the net smelter royalty, it has the right to purchase the royalty for $2.5 million, less any advance royalty payments made to that date. The Company is required to make an advance royalty payment of $100,000 in any year in which the average daily copper price reported by the London Metal Exchange is US$1.10 per pound or greater. At June 30, 2011, Western Copper had made $800,000 in advance royalty payments. |
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Western Copper Corporation | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
c. | Island Copper (100% - British Columbia, Canada) | ||
The Island Copper property consists of three blocks of mineral claims located on northern Vancouver Island, British Columbia, Canada. The mineral claim blocks are referred to as the Hushamu claims, the Apple Bay claims, and the Rupert Block. | |||
Should a production decision be made on the Hushamu claims, Western Copper is required to make a cash payment of $1 million to an unrelated third party within 60 days of the production decision. These mineral claims are also subject to a 10% net profits interest. | |||
Should a production decision be made on the Apple Bay claims, Western Copper is required to pay $800,000 in cash or in Western Copper stock to the previous owner of the claims. The payment method is at the election of Western Copper. The previous owner also maintains the right to explore for non-metallic minerals on the Apple Bay claims. | |||
d. | Redstone (100% - Northwest Territories, Canada) | ||
The Redstone property comprises mining leases and mineral claims in the western part of the Northwest Territories. Should production be achieved, the mining leases are subject to a net smelter royalty of between 3% and 4% depending on the monthly average of the final daily spot price of copper reported on the New York Commodities Exchange relating to each production month, as follows: | |||
• | 3% if the price is less than, or equal to US$0.75 per pound; | ||
• | 3.5% if the price is greater than US$0.75 per pound, but less than or equal to US$1.00 per pound; and | ||
• | 4% if the price is greater than US$1.00 per pound. |
5. | SHARE CAPITAL |
a. | Share capital |
Authorized | Unlimited Class A voting shares with a par value of $0.00001 | |
Unlimited common shares without par value | ||
Unlimited number of preferred shares without par value | ||
Issued and outstanding | 92,975,570 common shares |
b. | Financing | |
On December 22, 2010, Western Copper issued 9,395,500 units at a price of $2.45. Each unit comprised one common share of the Company and half of one warrant. Each whole warrant is exercisable for one common share of the Company at a price of $3.45 and expires on December 22, 2012. The agent was paid a cash commission equal to 6.0% of gross proceeds. | ||
The fair value assigned to the warrants was $4,476,983. The fair value of the warrants was calculated using the Black-Scholes option pricing model and was based on the following assumptions: |
Expected stock price volatility | 114% |
Expected term, in years | 2.0 |
Average risk-free interest rate | 1.66% |
Expected dividend yield | - |
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Western Copper Corporation | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
6. | WARRANTS AND STOCK OPTIONS | |
a. | Warrants | |
There was no change to the number of warrants outstanding as at December 31, 2010 during the six months ended June 30, 2011. | ||
Warrants outstanding at June 30, 2011 are as follows: |
Warrants outstanding, | Number of | Average | ||||
by exercise price | warrants | remaining | ||||
contractual life | ||||||
Expressed in Canadian dollars | years | |||||
$2.50 | 86,000 | 0.43 | ||||
$2.60 | 2,150,000 | 1.43 | ||||
$3.45 | 4,697,750 | 1.48 | ||||
JUNE 30, 2011 | 6,933,750 | 1.45 |
b. | Stock options | |
Based on the stock option plan approved by the Company’s shareholders at the annual general meeting held on June 24, 2009, the Company may issue stock options for the purchase of up to 10% of issued capital. The exercise price of the stock options shall be greater than, or equal to, the market value of the Company’s common shares on the last trading day immediately preceding the date of grant. Stock options vest over a two year period from the date of grant unless otherwise determined by the directors. The maximum stock option term is 10 years. At June 30, 2011, the Company could issue an additional 6,631,957 stock options under the terms of the plan. | ||
A summary of the Company’s stock options outstanding at June 30, 2011 and the changes for the period then ended, is presented below: |
Number of | Weighted average | |||||
Stock options | exercise price | |||||
Expressed in Canadian dollars | $ | |||||
DECEMBER 31, 2010 | 4,203,334 | 1.41 | ||||
Exercised | (1,487,734 | ) | 1.82 | |||
Expired | (16,666 | ) | 0.97 | |||
Forfeited | (33,334 | ) | 0.89 | |||
JUNE 30, 2011 | 2,665,600 | 1.19 |
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Western Copper Corporation | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
Stock options outstanding at June 30, 2011 are as follows:
Stock options outstanding, | Number of | Weighted average | Average | |||||||
by exercise price | Stock options | exercise price | remaining | |||||||
$ | contractual life | |||||||||
Expressed in Canadian dollars | years | |||||||||
$0.60 - 0.86 | 1,250,600 | 0.76 | 3.57 | |||||||
$1.25 | 695,000 | 1.25 | 1.52 | |||||||
$1.64 – 2.02 | 720,000 | 1.87 | 2.13 | |||||||
JUNE 30, 2011 | 2,665,600 | 1.19 | 2.65 |
Of the total stock options outstanding, 1,720,599 were vested and exercisable at June 30, 2011. The weighted average exercise price of vested stock options is $1.26 and the average remaining contractual life is 1.89 years.
7. | SHARE-BASED PAYMENTS |
Costs associated with share-based payments have been allocated to the following line items: |
Three months ended | Six months ended | |||||||||||
June 30, | June 30, | |||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||
Expressed in Canadian dollars | $ | $ | $ | $ | ||||||||
STATEMENT OF LOSS | ||||||||||||
ADMINISTRATIVE EXPENSES | ||||||||||||
Office and administration | 62,942 | 113,734 | 150,320 | 188,116 | ||||||||
Shareholder communication | 19,220 | 5,948 | 38,229 | 14,388 | ||||||||
82,162 | 119,682 | 188,549 | 202,504 | |||||||||
BALANCE SHEET | ||||||||||||
EXPLORATION AND EVALUATION ASSETS | ||||||||||||
Casino | 16,993 | 12,477 | 47,029 | 27,545 | ||||||||
Carmacks | 3,051 | 6,206 | 4,497 | 24,955 | ||||||||
Island Copper | 14,882 | - | 22,639 | - | ||||||||
34,926 | 18,683 | 74,165 | 52,500 | |||||||||
SHARE-BASED PAYMENTS | 117,088 | 138,365 | 262,714 | 255,004 |
The value of share-based payments is determined at the time of grant using the Black-Scholes option pricing model.
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Western Copper Corporation | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
The Company last granted stock options on November 4, 2010. On that date, Western Copper granted 100,000 stock options to an employee at an exercise price of $1.64 per common share. The fair value assigned to the stock options is $106,747. This value was calculated using the Black-Scholes option pricing model and the following assumptions:
Expected stock price volatility | 104% |
Expected option term, in years | 3.12 |
Average risk-free interest rate | 1.57% |
Expected dividend yield | - |
Expected forfeiture rate | - |
Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options and/or warrants granted and/or vested during the period. | |
8. | COMMITMENTS |
The Company has an agreement to lease office space in Vancouver, British Columbia until May 31, 2014. The total amount of payments remaining during the course of the agreement as at June 30, 2011 is $624,000. Of this amount, $212,000 is due within the next twelve months. | |
Commitments related to exploration and evaluation assets are described in note 4. | |
9. | RELATED PARTY TRANSACTIONS |
The Company’s related parties include its directors and officers. The remuneration of directors and officers during the period was as follows: |
Three months ended | Six months ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||
Expressed in Canadian dollars | $ | $ | $ | $ | |||||||||
Salaries and director fees | 211,650 | 314,630 | 419,301 | 550,580 | |||||||||
Share-based payments | 83,546 | 102,227 | 188,264 | 194,220 | |||||||||
RELATED PARTY TRANSACTIONS | 295,196 | 416,857 | 607,565 | 744,800 |
Share-based payments represent the fair value of stock options previously granted to directors and officers that was amortized during the period.
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Western Copper Corporation | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
10. | SEGMENTED INFORMATION | |
a. | Operating segment | |
The Company’s operations are primarily directed towards the acquisition, exploration, and future development of resource properties in Canada. | ||
b. | Geographic information | |
All interest income is earned in Canada and all assets are held in Canada. | ||
11. | INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”) | |
IFRS use a conceptual framework that is similar to Canadian GAAP. However, significant differences exist in certain matters of recognition, measurement, and disclosure. While adoption of IFRS has not changed the Company’s cash flows, it has resulted in changes to the Company’s balance sheet and statement of loss and comprehensive loss. In order to allow the users of the financial statements to better understand these changes, the Company has reconciled its Canadian GAAP balance sheet as at June 30, 2010 and its statements of loss and comprehensive loss for the three and six months ended June 30, 2010 to IFRS. The differences are explained in the analysis below. | ||
a. | Deferred tax | |
Under IFRS, deferred taxes cannot be recognized for the acquisition of assets that do not constitute a business combination. There is no similar prohibition under Canadian GAAP. Under Canadian GAAP, all of the deferred tax liability balance as at January 1, 2010 related to Western Copper’s purchase of the Casino, Island Copper, and Redstone properties through the Company’s acquisition of Lumina Resources Corp. in 2006. As a result of implementing IFRS, the Company eliminated the deferred tax liability recorded on the acquisition, including any adjustments to the deferred tax liability balance since it was first recorded. Accordingly, Western Copper also reduced the carrying value of its exploration and evaluation assets by $11.9 million. | ||
b. | Flow-through common shares and units | |
Under IFRS, the net proceeds from flow-through shares issued as a part of an equity unit are allocated on a pro-rata basis between the equity instruments issued as part of the financing and the implied premium paid by investors for the tax benefit they receive as a result of acquiring the flow- through shares. The calculated tax benefit is recognized as a liability until the Company renounces the related exploration expenditures, at which point the liability is reversed and recorded as a tax recovery on the statement of loss. Canadian GAAP does not recognize the fair value of any implied tax benefits. | ||
Under IFRS, when flow-through exploration expenditures are renounced, the related deferred tax is recognized as a tax expense on the statement of loss. Under Canadian GAAP, the deferred tax on the renouncement of flow-through exploration expenditures amounts reduced share capital. |
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Western Copper Corporation | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
Upon transition to IFRS, the Company adjusted the allocation of the net proceeds received from the two flow-through unit financings that it completed in 2009. As a result, a flow-through share premium of $685,000 was recognized at January 1, 2010. The allocation of net proceeds to the flow-though share premium decreased the amount allocated to the flow-through shares and to the warrants issued as part of the financing. The flow-through share premium was reversed during the three months ended March 31, 2010.
The transition to IFRS led to a tax expense relating to the renouncement of flow-through exploration expenditures during the three months ended March 31, 2010. This amount was partly recovered as a result of the recognition of previously unrecognized deferred tax assets. The net tax expense totaled $1.3 million.
The Canadian GAAP balance sheet as at June 30, 2010 has been reconciled to IFRS as follows:
June 30, 2010 | |||||||||||||
Canadian | Effect of | IFRS | |||||||||||
GAAP | transition to IFRS | ||||||||||||
Expressed in Canadian dollars | $ | $ | $ | ||||||||||
ASSETS | Ref | ||||||||||||
CURRENT ASSETS | - | 8,540,919 | - | 8,540,919 | |||||||||
RECLAMATION BOND | - | 80,300 | - | 80,300 | |||||||||
PROPERTY AND EQUIPMENT | - | 173,353 | - | 173,353 | |||||||||
EXPLORATION AND EVALUATION ASSETS | a | 80,893,851 | (11,927,540 | ) | 68,966,311 | ||||||||
ASSETS | 89,688,423 | (11,927,540 | ) | 77,760,883 | |||||||||
LIABILITIES | |||||||||||||
CURRENT LIABILITIES | |||||||||||||
Accounts payable and accrued liabilities | - | 2,168,480 | - | 2,168,480 | |||||||||
DEFERRED TAX LIABILITY | a,b | 12,472,501 | (10,527,365 | ) | 1,945,136 | ||||||||
LIABILITIES | 14,640,981 | (10,527,365 | ) | 4,113,616 | |||||||||
SHAREHOLDERS’ EQUITY | |||||||||||||
SHARE CAPITAL | b | 79,790,495 | 2,266,275 | 82,056,770 | |||||||||
CONTRIBUTED SURPLUS | b | 24,851,014 | (140,620 | ) | 24,710,394 | ||||||||
DEFICIT | a,b | (29,594,067 | ) | (3,525,830 | ) | (33,119,897 | ) | ||||||
SHAREHOLDERS’ EQUITY | 75,047,442 | (1,400,175 | ) | 73,647,267 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | 89,688,423 | (11,927,540 | ) | 77,760,883 |
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Western Copper Corporation | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
An exploration stage company | (unaudited) |
The Canadian GAAP statement of loss and comprehensive loss for the three months ended June 30, 2010 has been reconciled to IFRS as follows:
For the three months ended June 30, 2010 | ||||||||||
Canadian GAAP | Effect of | IFRS | ||||||||
transition to IFRS | ||||||||||
$ | $ | |||||||||
LOSS AND COMPREHENSIVE LOSS | 775,448 | - | 775,448 | |||||||
BASIC AND DILUTED LOSS PER SHARE | 0.01 | 0.01 |
The Canadian GAAP statement of loss and comprehensive loss for the six months ended June 30, 2010 has been reconciled to IFRS as follows:
For the six months ended June 30, 2010 | |||||||||||||
Canadian GAAP | Effect of | IFRS | |||||||||||
transition to IFRS | |||||||||||||
Ref. | $ | $ | |||||||||||
LOSS BEFORE TAXES | 1,537,274 | - | 1,537,274 | ||||||||||
Tax expense | a,b | - | 1,260,136 | 1,260,136 | |||||||||
LOSS AND COMPREHENSIVE LOSS | 1,537,274 | 1,260,136 | 2,797,410 | ||||||||||
BASIC AND DILUTED LOSS PER SHARE | 0.02 | 0.04 |
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