CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED
MARCH 31, 2011
(Unaudited)
(Expressed in thousands of Canadian Dollars, unless otherwise stated)
GREAT BASIN GOLD LTD.
Consolidated Statement of Income
For the three months ended March 31, 2011 and 2010
(Expressed in thousands of Canadian dollars, except per share data - unaudited)
Note | 2011 | 2010 | |||||||
$ '000 | $ '000 | ||||||||
Revenue | 26,343 | 6,822 | |||||||
Cost of operations | |||||||||
Production cost | (14,146 | ) | (5,090 | ) | |||||
Depletion charge | (1,134 | ) | (140 | ) | |||||
Depreciation charge | (1,214 | ) | (203 | ) | |||||
Expenses | |||||||||
Exploration expenses | (2,901 | ) | (2,284 | ) | |||||
Pre-development expenses | (3,739 | ) | (2,872 | ) | |||||
Corporate and administrative cost | (2,282 | ) | (1,670 | ) | |||||
Environmental impact study | (437 | ) | (496 | ) | |||||
Foreign exchange gain - net | 2,463 | 1,518 | |||||||
Salaries and compensation | |||||||||
Salaries and wages | (2,339 | ) | (1,296 | ) | |||||
Share based payments expense | 8(b) | (1,441 | ) | (890 | ) | ||||
Loss from operating activities | (827 | ) | (6,601 | ) | |||||
Net interest (expense) income | (4,682 | ) | 630 | ||||||
Loss on settlement of senior secured notes | 6(c) | (8,817 | ) | – | |||||
Net unrealized loss on financial instruments recognized | 7 | (7,279 | ) | – | |||||
Net unrealized marked-to-market adjustments on financial instruments | 7 | 1,264 | – | ||||||
Loss before income tax | (20,341 | ) | (5,971 | ) | |||||
Income tax | – | (116 | ) | ||||||
Loss for the period | (20,341 | ) | (6,087 | ) | |||||
Basic and diluted loss per share | (0.05 | ) | (0.02 | ) | |||||
Weighted average number of common shares outstanding (thousands) | 431,624 | 336,893 |
The accompanying notes are an integral part of these consolidated interim financial statements
2
GREAT BASIN GOLD LTD.
Consolidated Statement of Comprehensive Loss
For the three months ended March 31, 2011 and 2010
(Expressed in thousands of Canadian dollars - unaudited)
2011 | 2010 | |||||
$ '000 | $ '000 | |||||
Loss for the period | (20,341 | ) | (6,087 | ) | ||
Other comprehensive loss | ||||||
Changes in fair value of available-for-sale financial instruments | – | (104 | ) | |||
Cumulative translation adjustment | (26,649 | ) | (9,870 | ) | ||
Other comprehensive loss for the period | (26,649 | ) | (9,974 | ) | ||
Comprehensive loss for the period | (46,990 | ) | (16,061 | ) |
3
GREAT BASIN GOLD LTD.
Consolidated Statement of Financial Position
(Expressed in thousands of Canadian dollars - unaudited)
March 31 | December 31 | January 1 | ||||||||||
Note | 2011 | 2010 | 2010 | |||||||||
$ '000 | $ '000 | $ '000 | ||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 68,017 | 12,855 | 89,464 | |||||||||
Trade and other receivables | 7,292 | 9,340 | 5,053 | |||||||||
Inventories | 4 | 29,257 | 18,440 | 26,312 | ||||||||
Other current assets | 1,067 | 1,283 | 6,033 | |||||||||
105,633 | 41,918 | 126,862 | ||||||||||
Non-current assets | ||||||||||||
Loan due from related party | 12,940 | 13,372 | – | |||||||||
Property, plant and equipment | 5 | 700,937 | 695,374 | 359,281 | ||||||||
Restricted cash | – | – | 2,439 | |||||||||
Other assets | 4,948 | 4,719 | 4,590 | |||||||||
Total assets | 824,458 | 755,383 | 493,172 | |||||||||
Liabilities | ||||||||||||
Current liabilities | ||||||||||||
Trade payables and accrued liabilities | 55,147 | 61,731 | 29,206 | |||||||||
Current portion of long-term debt | 6 | 33,712 | 53,516 | 43,768 | ||||||||
Current portion of other liabilities | 7 | 406 | 278 | – | ||||||||
89,265 | 115,525 | 72,974 | ||||||||||
Non-current liabilities | ||||||||||||
Long-term debt | 6 | 203,185 | 156,062 | �� | 86,948 | |||||||
Other liabilities | 7 | 17,824 | 12,419 | – | ||||||||
Site reclamation obligations | 5,470 | 5,660 | 3,990 | |||||||||
Total liabilities | 315,744 | 289,666 | 163,912 | |||||||||
Equity | ||||||||||||
Share capital | 799,444 | 709,449 | 567,596 | |||||||||
Warrants | 5,042 | 6,108 | 13,104 | |||||||||
Contributed surplus | 78,734 | 77,676 | 74,403 | |||||||||
Accumulated other comprehensive (loss) income | (254 | ) | 26,395 | 927 | ||||||||
Deficit | (374,252 | ) | (353,911 | ) | (326,770 | ) | ||||||
508,714 | 465,717 | 329,260 | ||||||||||
Total liabilities and equity | 824,458 | 755,383 | 493,172 | |||||||||
Segment disclosure | 10 | |||||||||||
Subsequent events | 11 |
The accompanying notes are an integral part of these consolidated interim financial statements
Approved by the Board of Directors
/s/ Ferdinand Dippenaar | /s/ Ronald W. Thiessen |
Ferdinand Dippenaar | Ronald W. Thiessen |
Chief Executive Officer | Director |
4
GREAT BASIN GOLD LTD.
Consolidated Statements of Changes in Equity
(Expressed in thousands of Canadian dollars - unaudited)
Accumulated | ||||||||||||||||||||||||
other | ||||||||||||||||||||||||
Share capital | Warrants | Contributed | comprehensive | |||||||||||||||||||||
Common shares | Amount | Warrants | Amount | surplus | loss | Deficit | Total | |||||||||||||||||
(thousands) | $'000 | (thousands) | $'000 | $'000 | $'000 | $'000 | $'000 | |||||||||||||||||
Balance - January 1, 2011 | 414,015 | 709,449 | 24,918 | 6,108 | 77,676 | 26,395 | (353,911 | ) | 465,717 | |||||||||||||||
Net loss for the period | - | - | - | - | - | - | (20,341 | ) | (20,341 | ) | ||||||||||||||
Other comprehensive loss | - | - | - | - | - | (26,649 | ) | - | (26,649 | ) | ||||||||||||||
Comprehensive loss for the period | - | - | - | - | - | (26,649 | ) | (20,341 | ) | (46,990 | ) | |||||||||||||
Employee stock options | ||||||||||||||||||||||||
Value of services recognized (note 8(b)) | - | - | - | - | 1,870 | - | - | 1,870 | ||||||||||||||||
Proceeds on issuing shares | 949 | 2,221 | - | - | (812 | ) | - | - | 1,409 | |||||||||||||||
Warrants | ||||||||||||||||||||||||
Proceeds on issuing shares | 4,350 | 6,504 | (4,350 | ) | (1,066 | ) | - | - | - | 5,438 | ||||||||||||||
Proceeds on issuance of shares for public offering net of issue cost (note 8(c)) | 33,827 | 81,270 | - | - | - | - | - | 81,270 | ||||||||||||||||
Balance - March 31, 2011 | 453,141 | 799,444 | 20,568 | 5,042 | 78,734 | (254 | ) | (374,252 | ) | 508,714 | ||||||||||||||
Balance - January 1, 2010 | 334,158 | 567,596 | 86,179 | 13,104 | 74,403 | 927 | (326,770 | ) | 329,260 | |||||||||||||||
Net loss for the period | - | - | - | - | - | - | (6,087 | ) | (6,087 | ) | ||||||||||||||
Other comprehensive loss | - | - | - | - | - | (9,974 | ) | - | (9,974 | ) | ||||||||||||||
Comprehensive loss for the period | - | - | - | - | - | (9,974 | ) | (6,087 | ) | (16,061 | ) | |||||||||||||
Employee stock options | ||||||||||||||||||||||||
Value of services recognized (note 8(b)) | - | - | - | - | 1,229 | - | - | 1,229 | ||||||||||||||||
Proceeds on issuing shares | 890 | 1,650 | - | - | (436 | ) | - | - | 1,214 | |||||||||||||||
Shares issued for mineral properties | 3,074 | 5,518 | - | - | - | - | - | 5,518 | ||||||||||||||||
Balance - March 31, 2010 | 338,122 | 574,764 | 86,179 | 13,104 | 75,196 | (9,047 | ) | (332,857 | ) | 321,160 |
The accompanying notes are an integral part of these consolidated interim financial statements.
5
GREAT BASIN GOLD LTD.
Consolidated Statements of Cash Flows
For the three months ended March 31, 2011 and 2010
(Expressed in thousands of Canadian dollars - unaudited)
2011 | 2010 | |||||
$ '000 | $ '000 | |||||
Operating activities | ||||||
Loss for the period | (20,341 | ) | (6,087 | ) | ||
Items not involving cash | ||||||
Production non-cash charges | 170 | 53 | ||||
Pre-development non-cash charges | 388 | 194 | ||||
Exploration non-cash charges | 59 | 74 | ||||
Depreciation | 1,394 | 255 | ||||
Unrealized (gain) loss on financial instruments | (30 | ) | 12 | |||
Unrealized loss on financial instruments recognized | 7,279 | – | ||||
Unrealized marked-to-market adjustments on financial instruments | (1,264 | ) | – | |||
Share based payments expense | 1,441 | 890 | ||||
Unrealized foreign exchange gain | (2,812 | ) | (1,739 | ) | ||
Depletion | 1,134 | 140 | ||||
Interest expense | 5,071 | 49 | ||||
Interest income | (389 | ) | (679 | ) | ||
Loss on settlement of senior secured notes | 8,817 | – | ||||
Changes in non-cash operating working capital | ||||||
Trade and other receivables | 1,784 | (4,576 | ) | |||
Prepaid expenses | 183 | (446 | ) | |||
Inventories | (8,540 | ) | (8,093 | ) | ||
Trade payables and accrued liabilities | (3,826 | ) | 778 | |||
Net cash utilized by operating activities | (9,482 | ) | (19,175 | ) | ||
Investing activities | ||||||
Purchase of property, plant and equipment | (36,534 | ) | (29,957 | ) | ||
Interest income | 170 | 607 | ||||
Reclamation deposits | (361 | ) | 128 | |||
Net cash utilized by investing activities | (36,725 | ) | (29,222 | ) | ||
Financing activities | ||||||
Common shares and warrants issued for cash, net of issue costs | 88,117 | 1,139 | ||||
Proceeds on issuance of debt | 68,810 | – | ||||
Repayment of debt | (53,686 | ) | (286 | ) | ||
Interest expense | (1,128 | ) | (49 | ) | ||
Net cash generated from financing activities | 102,113 | 804 | ||||
Increase (decrease) in cash and cash equivalents | 55,906 | (47,593 | ) | |||
Cash and cash equivalents, beginning of period | 12,855 | 89,464 | ||||
Foreign exchange movement on cash and cash equivalents | (744 | ) | (423 | ) | ||
Cash and cash equivalents, end of period | 68,017 | 41,448 |
Refer note 9 of the notes to the consolidated interim financial statements for supplementary information to the cash flow statement.
6
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
1. | General information |
Great Basin Gold Ltd. (“Great Basin” or the “Company”) is incorporated under the laws of the Province of British Columbia and its registered address is 1108-1030 West Georgia Street, Vancouver BC, Canada. The Company is a mineral exploration and development company that is currently focused on delivering two advanced stage projects: the Hollister Project on the Carlin Trend in Nevada, USA and the Burnstone Project in the Witwatersrand Goldfields in South Africa. The Company, currently recognized as an emerging producer, will migrate to the rank of a junior gold producer as production from these two projects increase during 2011 and 2012. Over and above the exploration being conducted at the above mentioned properties, greenfields exploration is being undertaken in Tanzania and Mozambique. | |
Operating results for the three month period ended March 31, 2011 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2011. In the opinion of management, these unaudited interim consolidated financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim period presented. | |
2. | Basis of preparation and adoption of IFRS |
The Company prepares its financial statements in accordance with Canadian Generally Accepted Accounting Principles (“GAAP”) as set out in the Handbook of the Canadian Institute of Chartered Accountants (“CICA Handbook”). In 2010, the CICA Handbook was revised to incorporate International Financial Reporting Standards (“IFRS”), and require publicly accountable enterprises to apply such standards effective for years beginning on or after January 1, 2011. Accordingly, the Company has commenced reporting on this basis in these interim consolidated financial statements. In the financial statements, the term “Canadian GAAP” refers to Canadian GAAP before the adoption of IFRS. | |
These condensed interim consolidated financial statements have been prepared in accordance with IFRS applicable to the preparation of interim financial statements, including IAS34 and IFRS 1. Subject to certain transition elections disclosed in note 12, the Company has consistently applied the same accounting policies in its opening IFRS statement of financial position at January 1, 2010 and throughout all periods presented, as if these policies had always been in effect. Note 12 discloses the impact of the transition to IFRS on the Company’s reported financial position, financial performance and cash flows, 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, which are available through the internet on SEDAR atwww.sedar.com. | |
The policies applied in these condensed interim consolidated financial statements are based on IFRS issued and outstanding as of May 5, 2011, the date the Board of Directors approved the 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 the transition adjustments recognized on change-over to IFRS. | |
The condensed interim consolidated financial statements should be read in conjunction with the Company’s Canadian GAAP annual financial statements for the year ended December 31, 2010. |
7
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
3. | Significant accounting policies, judgments and estimation uncertainty |
Significant accounting policies | |
These unaudited interim consolidated financial statements follow the same accounting policies and methods of application as the Company’s most recent annual financial statements, except for those changes recognized on change-over to IFRS, as described in note 12. | |
Critical accounting estimates and judgments | |
The Company makes estimates and assumptions concerning the future that will, by definition, seldom equal actual results. The following are the estimates and judgments applied by management that most significantly affect the Company’s financial statements. These estimates and judgments have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to impairment of mineral property interests, valuation of inventories, allocation of purchase price consideration to the fair value of identifiable assets and liabilities acquired, the determination of amortization, depletion and accretion, determination of reclamation obligations, the determination of the fair values of financial instruments, assumptions used in determining the fair value of non-cash share based payments, warrants and derivatives, determination of valuation allowances for deferred income tax liabilities, estimated market related interest rate used to calculate the equity component of compound financial instruments and allocation of indirect mining and overhead expenses to production and development costs. | |
4. | Inventories |
March 31 | December 31 | ||||||
2011 | 2010 | ||||||
$‘000 | $‘000 | ||||||
Stores and materials | 4,771 | 3,534 | |||||
Unprocessed ore | 6,537 | 3,220 | |||||
Precious metals in process | 17,949 | 11,686 | |||||
29,257 | 18,440 |
Cost of operations recognized in the statement of income consists of direct and indirect mining costs, overhead costs, royalties, depreciation of mining equipment and depletion of mineral properties. During the three months ended March 31, 2011, stores and materials, unprocessed ore and precious metal in process of $16.5 million (2010: $5.4 million) have been included under cost of operations.
8
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
5. | Property, plant and equipment |
Mineral | |||||||||||||||||||
Mineral | properties | Mine | |||||||||||||||||
properties | not | infrastructure | |||||||||||||||||
subject to | subject to | and | Leased | Other | |||||||||||||||
depletion | depletion | equipment | assets | assets | Total | ||||||||||||||
$’000 | $’000 | $’000 | $’000 | $’000 | $’000 | ||||||||||||||
At January 1, 2010: | |||||||||||||||||||
Cost | 147,909 | 29,183 | 196,296 | 2,545 | 4,102 | 380,035 | |||||||||||||
Accumulated depreciation | (9,285 | ) | - | (8,971 | ) | (392 | ) | (2,106 | ) | (20,754 | ) | ||||||||
Net book value | 138,624 | 29,183 | 187,325 | 2,153 | 1,996 | 359,281 | |||||||||||||
Year ended December 31, 2010 | |||||||||||||||||||
Opening net book value | 138,624 | 29,183 | 187,325 | 2,153 | 1,996 | 359,281 | |||||||||||||
Additions | - | 19,399 | 293,739 | 7,317 | 2,095 | 322,550 | |||||||||||||
Disposals | - | - | - | - | |||||||||||||||
Depletion and depreciation | (6,158 | ) | - | (9,278 | ) | (819 | ) | (553 | ) | (16,808 | ) | ||||||||
Foreign exchange differences | 2,116 | (172 | ) | 27,868 | 388 | 151 | 30,351 | ||||||||||||
Closing net book value | 134,582 | 48,410 | 499,654 | 9,039 | 3,689 | 695,374 | |||||||||||||
At December 31, 2010: | |||||||||||||||||||
Cost | 149,313 | 48,410 | 518,210 | 10,250 | 6,351 | 732,534 | |||||||||||||
Accumulated depreciation | (14,731 | ) | - | (18,556 | ) | (1,211 | ) | (2,662 | ) | (37,160 | ) | ||||||||
Net book value | 134,582 | 48,410 | 499,654 | 9,039 | 3,689 | 695,374 | |||||||||||||
Period ended March 31, 2011 | |||||||||||||||||||
Opening net book value | 134,582 | 48,410 | 499,654 | 9,039 | 3,689 | 695,374 | |||||||||||||
Additions | - | - | 39,330 | 809 | 582 | 40,721 | |||||||||||||
Transferred | - | - | 1,153 | (1,153 | ) | - | - | ||||||||||||
Depletion and depreciation | (1,263 | ) | - | (4,322 | ) | (285 | ) | (426 | ) | (6,296 | ) | ||||||||
Foreign exchange differences | (5,368 | ) | (77 | ) | (23,193 | ) | (80 | ) | (144 | ) | (28,862 | ) | |||||||
Closing net book value | 127,951 | 48,333 | 512,622 | 8,330 | 3,701 | 700,937 | |||||||||||||
At March 31, 2011: | |||||||||||||||||||
Cost | 143,557 | 48,333 | 534,723 | 9,821 | 6,611 | 743,045 | |||||||||||||
Accumulated depreciation | (15,606 | ) | - | (22,101 | ) | (1,491 | ) | (2,910 | ) | (42,108 | ) | ||||||||
Net book value | 127,951 | 48,333 | 512,622 | 8,330 | 3,701 | 700,937 |
As at March 31, 2011, $5.7 million of plant and equipment included under mine infrastructure and equipment is not being amortized (December 31, 2010, $435.3 million).
Leased assets are pledged as security for the related finance leases (refer note 6). Mineral properties subject to depletion consist of the Hollister and Burnstone properties that have been pledged as security for the term loans (refer note 6(a) and (b)).
9
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
6. | Long-term debt |
Non-current portion of long-term debt |
March 31 | December 31 | ||||||
2011 | 2010 | ||||||
$‘000 | $‘000 | ||||||
Convertible debentures | 93,567 | 91,677 | |||||
Finance lease liabilities | - | 436 | |||||
Term loan I (note 6(a)) | 56,696 | 63,949 | |||||
Term loan II (note 6(b)) | 52,922 | - | |||||
203,185 | 156,062 |
Current portion of long-term debt
March 31 | December 31 | ||||||
2011 | 2010 | ||||||
$‘000 | $‘000 | ||||||
Convertible debentures | 2,219 | - | |||||
Finance lease liabilities | 6,331 | 6,955 | |||||
Senior secured notes (note 6(c)) | - | 40,101 | |||||
Term loan I (note 6(a)) | 12,116 | 6,460 | |||||
Term loan II (note 6(b)) | 13,046 | - | |||||
33,712 | 53,516 |
The continuity of long-term debt is as follows:
March 31 | December 31 | ||||||
2011 | 2010 | ||||||
$‘000 | $‘000 | ||||||
Opening balance at January 1 | 209,578 | 130,716 | |||||
New debt (note 6(b)) | 68,810 | 75,942 | |||||
New leases | 809 | 7,261 | |||||
Transaction cost (note 6(b)) | (2,076 | ) | (3,707 | ) | |||
Repayment of debt | (53,196 | ) | (25,092 | ) | |||
Settlement loss on senior secured notes (note 6(c)) | 8,817 | - | |||||
Amortized transaction cost | 207 | 505 | |||||
Interest expense | 7,436 | 30,406 | |||||
Foreign exchange | (3,488 | ) | (6,453 | ) | |||
236,897 | 209,578 |
(a) Term loan I
Term loan I has a maximum term of 4 years from date of first draw down and will be repaid in 13 quarterly consecutive installments, commencing on May 26, 2011, 12 months after initial draw down. The interest rate for Term loan I is linked to the USD London interbank offered rate (“USD LIBOR”) at a premium of 4% above USD LIBOR and is fixed on a quarterly basis. The floating rate on March 31, 2011 is 4.3105% (USD LIBOR of 0.3105% plus 4% premium).
The Company has the option to retire the loan 12 months after draw down at no additional cost.
The Burnstone Property, its assets and certain subsidiary guarantees serve as security for the loan.
10
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
6. | Long-term debt (continued) | |
(a) | Term loan I (continued) | |
Term loan I contains certain financial covenants customary to facilities of this nature and includes borrower tangible net worth, debt to equity ratio, debt service cover ratio and a loan life cover ratio. As at March 31, 2011, the Company assessed and complied with all covenants. | ||
Refer to note 7(a) for details of the hedge entered into under the Term loan I agreement. | ||
(b) | Term loan II | |
The Company closed a $69 million (US$70 million) term loan with Credit Suisse AG in March 2011 (“Term loan II”) | ||
Term loan II has a maximum term of 4 years from date of first draw down and will be repaid in 13 quarterly consecutive installments, commencing September, 2011. The interest rate for Term loan II is linked to the USD LIBOR at a premium of 3.75% above USD LIBOR and is fixed on a quarterly basis. The floating rate on March 31, 2011 is 4.0050% (USD LIBOR of 0.255% plus 3.75% premium). | ||
The Company has the option to retire the loan 12 months after draw down at no additional cost. | ||
The Hollister project and a surety signed by the Company serve as security for the loan. | ||
Term loan II contains certain financial covenants customary to facilities of this nature and includes borrower tangible net worth, debt to equity ratio, debt service cover ratio and a loan life cover ratio. As at March 31, 2011, the Company assessed and complied with all covenants. | ||
Refer to note 7(b) for details of the hedge entered into under the Term loan II agreement. | ||
(c) | Senior secured notes | |
On March 15, 2011, the Company applied $50.3 million (US$51.4 million) from the Term loan II proceeds towards full and final settlement of the senior secured notes issued in December 2008. | ||
The liability was settled at a loss of $8.8 million (US$8.9 million). | ||
7. | Other liabilities | |
Non-current portion of other liabilities |
March 31 | December 31 | ||||||
2011 | 2010 | ||||||
$‘000 | $‘000 | ||||||
Financial guarantee | 2,470 | 2,597 | |||||
Zero cost collar program I (note 7(a)) | 7,054 | 9,822 | |||||
Zero cost collar program II (note 7(b)) | 8,300 | - | |||||
17,824 | 12,419 |
11
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
7. | Other liabilities (continued) |
Current portion of other liabilities |
March 31 | December 31 | ||||||
2011 | 2010 | ||||||
$‘000 | $‘000 | ||||||
Zero cost collar program I (note 7(a)) | 397 | 278 | |||||
Zero cost collar program II (note 7(b)) | 9 | - | |||||
406 | 278 |
The continuity of other liabilities is as follows:
March 31 | December 31 | ||||||
2011 | 2010 | ||||||
$‘000 | $‘000 | ||||||
Opening balance at January 1 | 12,697 | - | |||||
Fair value of guarantee | - | 2,597 | |||||
ZCC fair value upon inception (note 7(b)) | 7,279 | 3,606 | |||||
Marked-to-market adjustments – ZCC I | (2,436 | ) | 6,860 | ||||
Marked-to-market adjustments – ZCC II | 1,172 | - | |||||
Foreign exchange | (482 | ) | (366 | ) | |||
18,230 | 12,697 |
(a) Zero cost collar program I
In connection with Term loan I (refer note 6(a)), the Company executed a zero cost collar (“ZCC”) hedging program for a total 105,000 gold ounces over a period of three years that commenced in January 2011.
Gold delivery positions as at March 31, 2011:
March 31 | December 31 | ||
2011 | 2010 | ||
Expired unexercised at no cost | 3,750 ounces | Nil ounces | |
Remaining positions | 101,250 ounces | 105,000 ounces |
The program includes put options priced at US$850 and call options priced at US$1,705 per gold oz.
Marked-to-market movements were calculated using an option pricing model with inputs based on the following assumptions:
March 31 | December 31 | ||
2011 | 2010 | ||
Gold price (per ounce) | US$1,430 | US$1,419 | |
Risk free interest rate | 0.24% - 1.50% | 0.25% - 1.34% | |
Expected life | 1 - 33 months | 1 - 36 months | |
Gold price volatility | 14.01% - 25.07% | 17.3% - 27% |
12
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
7. | Other liabilities (continued) |
(a) Zero cost collar program I (continued) | |
The fair values of the derivative instruments as of March 31, 2011 were as follows: |
Asset | Liability | Net | |||||||||||
Derivatives | derivatives | derivatives | |||||||||||
Estimated | Estimated | Estimated | |||||||||||
Derivatives not designated as | Balance sheet | fair value | fair value | fair value | |||||||||
hedging instruments | classification | $‘000 | $‘000 | $‘000 | |||||||||
Commodity contracts – ZCC 1 | Current other liabilities | 2 | (399 | ) | (397 | ) | |||||||
Commodity contracts – ZCC 1 | Other liabilities | 568 | (7,622 | ) | (7,054 | ) |
(b) Zero cost collar program II
In connection with Term loan II (refer note 6(b)), the Company executed a ZCC hedging program for a total 117,500 gold ounces over a period of four years, commencing in January 2012.
The Company will be required to deliver 875 gold ounces per month over a twelve month period followed by 3,000 gold ounces per month over a twenty four month period. The remaining 35,000 gold ounces will be delivered in 12 equal monthly deliveries of 2,916 gold ounces, starting January 30, 2015. The program includes put options priced at US$1,050 and call options priced at US$1,930 per gold oz.
The fair value on inception and subsequent mark-to-market movements were calculated using an option pricing model with inputs based on the following assumptions:
March 31 | March 10 | ||
2011 | 2011 | ||
Gold price (per ounce) | US$1,430 | US$1,410 | |
Risk free interest rate | 0.44% - 2% | 0.4% - 1.91% | |
Expected life | 9 - 57 months | 10 - 57 months | |
Gold price volatility | 19.12% - 26.34% | 19.65% - 26.26% |
The fair values of the derivative instruments as of March 31, 2011 were as follows:
Asset | Liability | Net | |||||||||||
Derivatives | derivatives | derivatives | |||||||||||
Estimated | Estimated | Estimated | |||||||||||
Derivatives not designated as | Balance sheet | fair value | fair value | fair value | |||||||||
hedging instruments | classification | $‘000 | $‘000 | $‘000 | |||||||||
Commodity contracts – ZCC 2 | Current other liabilities | 13 | (22 | ) | (9 | ) | |||||||
Commodity contracts – ZCC 2 | Other liabilities | 6,743 | (15,043 | ) | (8,300 | ) |
13
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
8. | Share capital (continued) | |
(a) | Authorized share capital | |
The Company’s authorized share capital consists of an unlimited number of common shares without par value. | ||
(b) | Share option plan | |
The continuity of share purchase options is as follows: |
Contractual weighted | ||||||||||
Weighted average | Number of options | average remaining life | ||||||||
exercise price | (thousands) | (years) | ||||||||
Opening total at January 1 | $1.75 | 16,441 | 2.26 | |||||||
Granted | $2.46 | 7,245 | ||||||||
Exercised | $1.49 | (949 | ) | |||||||
Expired | $3.16 | (300 | ) | |||||||
Forfeited | $1.90 | (511 | ) | |||||||
$1.97 | 21,926 | 2.51 |
As at March 31, 2011, 11 million of the outstanding options were exercisable at an average exercise price of $1.97 per option and expiry dates ranging between April 30, 2010 and March 11, 2016.
Out of plan options to acquire 677,766 shares at an exercise price of $0.60 and expiry date of June 1, 2012, remain outstanding in connection with the acquisition of Rusaf.
Costs previously recognized on options were, upon forfeiture, reversed through the current year’s profit or loss.
The exercise prices of all share purchase options granted during the three months ended March 31, 2011 and 2010 were at or above the market price at the grant date.
Using an option pricing model with the assumptions noted below, the estimated fair value of options granted for the three months ended March 31, 2011 and 2010, which have been included in the statement of income, is as follows:
Three months ended March 31 | |||||||
2011 | 2010 | ||||||
$‘000 | $‘000 | ||||||
Total compensation cost recognized, credited to contributed surplus | 1,870 | 1,229 | |||||
Compensation cost allocated to development expenses | - | (45 | ) | ||||
Compensation cost allocated to production cost | (333 | ) | (106 | ) | |||
Compensation cost capitalized on Burnstone mine development | (96 | ) | (149 | ) | |||
Compensation cost allocated to bonus provision | - | (39 | ) | ||||
Share based payments expense | 1,441 | 890 |
14
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
8. | Share capital (continued) |
(b) Share option plan (continued) | |
The weighted-average assumptions used to estimate the fair value of options granted during the respective periods were as follows: |
Three months ended March 31 | |||
2011 | 2010 | ||
Risk free interest rate | 2.65% | 2.8% | |
Expected life | 3.4 years | 3.5 years | |
Expected volatility | 82% | 80% | |
Expected dividends | Nil | Nil |
(c) Share issuance, February 2011 - Public Offering | |
The Company completed a public offering on February 23, 2011 whereby it issued 33,827,250 shares at a price of $2.55 per share thereby raising gross proceeds of $86.3 million. | |
The Company paid the underwriters a fee of $4.3 million and incurred other share issue costs of approximately $0.7 million for net proceeds of $81.3 million which has been recorded as share capital. | |
9. | Additional cash flow information |
Supplementary information |
March 31 | March 31 | ||||||
2011 | 2010 | ||||||
$’000 | $’000 | ||||||
Income taxes paid | - | (116 | ) | ||||
Non-cash investing activities: | |||||||
Shares issued for property, plant and equipment | - | 5,594 | |||||
Accrued interest capitalized to property, plant and machinery (note 5) | 2,515 | 9,507 | |||||
Share based compensation capitalized (refer note 8(b)) | 96 | 149 | |||||
Non-cash financing activities: | |||||||
Fair value of stock options transferred to share capital on options exercised from contributed surplus | 812 | 436 | |||||
Fair value of warrants transferred to share capital on warrants exercised | 1,066 | - |
10. | Segment disclosure |
The Company operates in reportable operating segments to deliver on its strategy to explore, development and operate mineral properties. Management has determined the operating segments based on the reports reviewed by the Company's Chief Operating Decision Maker ("CODM") that are used to make strategic decisions. The Company's CODM is its Chief Executive Officer. |
15
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
10. | Segment disclosure (continued) |
Geographic information is as follows: | |
Assets |
March 31 | December 31 | ||||||
2011 | 2010 | ||||||
$‘000 | $‘000 | ||||||
Corporate entities | |||||||
Assets other than mineral property interests | 60,337 | 14,159 | |||||
Tanzanian exploration | |||||||
Assets other than mineral property interests | 595 | 618 | |||||
Mineral property interests | 45,127 | 45,127 | |||||
Nevada operations | |||||||
Assets other than mineral property interests | 26,100 | 21,640 | |||||
Mine development and equipment | 38,762 | 40,508 | |||||
Mineral property interests | 51,243 | 53,742 | |||||
South African operations | |||||||
Assets other than mineral property interests | 38,378 | 25,764 | |||||
Mine development and equipment | 484,003 | 469,702 | |||||
Mineral property interests | 79,913 | 84,123 | |||||
824,458 | 755,383 |
Revenue
March 31 | March 31 | ||||||
2011 | 2010 | ||||||
$‘000 | $ ‘000 | ||||||
Nevada operations | |||||||
Sale of refined precious metals | 22,509 | 6,822 | |||||
South African operations | |||||||
Sale of refined precious metals | 3,834 | - | |||||
26,343 | 6,822 |
During the three months ended March 31, 2011 the Company generated net revenue from both its Nevada ($22.5 million) (US$22.8 million) and South African ($3.8 million) (ZAR27.2 million) operations. | |
Refined precious metals are sold to Red Kite Explorer Trust under the terms of an off-take agreement. | |
11. | Subsequent events |
In April 2011, the Company advanced, in accordance with the amended 2010 guarantee agreement, a further $1.6 million (ZAR11 million) to Tranter Burnstone (Pty) Ltd (“Tranter”) (related party) to enable Tranter to meet its interest payment obligation to Investec Limited. |
16
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
12. | Transition to IFRS | |
The effect of the Company’s transition to IFRS, described in note 2, is summarized below. | ||
(a) | Reconciliation of equity and comprehensive loss as previously reported under Canadian GAAP to IFRS |
December 31, 2010 | March 31, 2010 | January 1, 2010 | ||||||||||||||||||||||||||
$'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | ||||||||||||||||||||
Note | Cdn GAAP | Adj | IFRS | Cdn GAAP | Adj | IFRS | Cdn GAAP | Adj | IFRS | |||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||
Cash and cash equivalents | 12,855 | - | 12,855 | 41,448 | - | 41,448 | 89,464 | - | 89,464 | |||||||||||||||||||
Amounts receivable | 9,340 | - | 9,340 | 9,405 | - | 9,405 | 5,053 | - | 5,053 | |||||||||||||||||||
Inventory | 18,440 | - | 18,440 | 35,394 | - | 35,394 | 26,312 | - | 26,312 | |||||||||||||||||||
Available-for-sale financial instruments | - | - | - | 4,857 | - | 4,857 | 4,961 | - | 4,961 | |||||||||||||||||||
Held-for-trading financial instruments | - | - | - | 196 | - | 196 | 207 | - | 207 | |||||||||||||||||||
Other assets | 1,283 | - | 1,283 | 1,313 | - | 1,313 | 865 | - | 865 | |||||||||||||||||||
41,918 | - | 41,918 | 92,613 | - | 92,613 | 126,862 | - | 126,862 | ||||||||||||||||||||
Loans due from related parties | 13,372 | - | 13,372 | - | - | - | - | - | ||||||||||||||||||||
Property, plant and equipment | 512,384 | - | 512,384 | 234,102 | - | 234,102 | 191,474 | - | 191,474 | |||||||||||||||||||
Reclamation deposits | 4,719 | - | 4,719 | 4,333 | - | 4,333 | 4,590 | - | 4,590 | |||||||||||||||||||
Restricted cash | - | - | - | 2,453 | - | 2,453 | 2,439 | - | 2,439 | |||||||||||||||||||
Mineral property interests | (i) | 245,649 | (62,659 | ) | 182,990 | 223,864 | (55,896 | ) | 167,968 | 222,919 | (55,112 | ) | 167,807 | |||||||||||||||
Total Assets | 818,042 | (62,659 | ) | 755,383 | 557,365 | (55,896 | ) | 501,469 | 548,284 | (55,112 | ) | 493,172 | ||||||||||||||||
Liabilities and Shareholders' Equity | ||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | 61,731 | - | 61,731 | 37,260 | - | 37,260 | 29,206 | - | 29,206 | |||||||||||||||||||
Current portion of long term borrowings | 53,516 | - | 53,516 | 23,035 | - | 23,035 | 43,768 | - | 43,768 | |||||||||||||||||||
Current portion of other liabilities | 278 | - | 278 | - | - | - | - | - | - | |||||||||||||||||||
115,525 | - | 115,525 | 60,295 | - | 60,295 | 72,974 | - | 72,974 | ||||||||||||||||||||
Long term borrowings | 156,062 | - | 156,062 | 116,104 | - | 116,104 | 86,948 | - | 86,948 | |||||||||||||||||||
Future income taxes | (i);(ii) | 18,939 | (18,939 | ) | - | 13,057 | (13,057 | ) | - | 10,659 | (10,659 | ) | - | |||||||||||||||
Other liabilities | 12,419 | - | 12,419 | - | - | - | - | - | - | |||||||||||||||||||
Site reclamation obligations | 5,660 | - | 5,660 | 3,910 | - | 3,910 | 3,990 | - | 3,990 | |||||||||||||||||||
193,080 | (18,939 | ) | 174,141 | 133,071 | (13,057 | ) | 120,014 | 101,597 | (10,659 | ) | 90,938 | |||||||||||||||||
Shareholders' equity | ||||||||||||||||||||||||||||
Share capital | 709,449 | - | 709,449 | 574,764 | - | 574,764 | 567,596 | - | 567,596 | |||||||||||||||||||
Warrants | 6,108 | - | 6,108 | 13,104 | - | 13,104 | 13,104 | - | 13,104 | |||||||||||||||||||
Contributed surplus | (ii) | 86,540 | (8,864 | ) | 77,676 | 84,060 | (8,864 | ) | 75,196 | 83,267 | (8,864 | ) | 74,403 | |||||||||||||||
Deficit | (iv) | (294,625 | ) | (59,286 | ) | (353,911 | ) | (272,225 | ) | (60,632 | ) | (332,857 | ) | (265,713 | ) | (61,057 | ) | (326,770 | ) | |||||||||
Accumulated other comprehensive income (loss | (iii) | 1,965 | 24,430 | 26,395 | (35,704 | ) | 26,657 | (9,047 | ) | (24,541 | ) | 25,468 | 927 | |||||||||||||||
509,437 | (43,720 | ) | 465,717 | 363,999 | (42,839 | ) | 321,160 | 373,713 | (44,453 | ) | 329,260 | |||||||||||||||||
Total Liabilities and Shareholders' Equity | 818,042 | (62,659 | ) | 755,383 | 557,365 | (55,896 | ) | 501,469 | 548,284 | (55,112 | ) | 493,172 |
17
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
12. | Transition to IFRS (continued) | |
(a) | Reconciliation of equity and comprehensive loss as previously reported under Canadian GAAP to IFRS (continued) |
Year ended December 31, | Three months ended March 31, 2010 | ||||||||||||||||||
$ '000 | $ '000 | $ '000 | $ '000 | $ '000 | $ '000 | ||||||||||||||
Note | Cdn GAAP | Adj | IFRS | Cdn GAAP | Adj | IFRS | |||||||||||||
Revenue | 99,706 | 99,706 | 6,822 | 6,822 | |||||||||||||||
(Expenses) income | |||||||||||||||||||
Production cost | (70,326 | ) | (70,326 | ) | (5,297 | ) | (5,297 | ) | |||||||||||
Depletion charge | (i) | (8,444 | ) | 1,771 | (6,673 | ) | (565 | ) | 425 | (140 | ) | ||||||||
Exploration expenses | (10,450 | ) | (10,450 | ) | (2,284 | ) | (2,284 | ) | |||||||||||
Pre-development expenses | (13,397 | ) | (13,397 | ) | (2,872 | ) | (2,872 | ) | |||||||||||
Corporate and administrative cost | (7,630 | ) | (7,630 | ) | (1,654 | ) | (1,654 | ) | |||||||||||
Environmental impact study | (2,580 | ) | (2,580 | ) | (496 | ) | (496 | ) | |||||||||||
Foreign exchange gain - net | 4,641 | 4,641 | 1,518 | 1,518 | |||||||||||||||
Salaries and compensation | – | – | |||||||||||||||||
Salaries and wages | (7,528 | ) | (7,528 | ) | (1,296 | ) | (1,296 | ) | |||||||||||
Stock-based compensation | (4,887 | ) | (4,887 | ) | (890 | ) | (890 | ) | |||||||||||
Loss before the undernoted and income taxes | (20,895 | ) | 1,771 | (19,124 | ) | (7,014 | ) | 425 | (6,589 | ) | |||||||||
Interest expense | (64 | ) | (64 | ) | (49 | ) | (49 | ) | |||||||||||
Interest income | 1,827 | 1,827 | 679 | 679 | |||||||||||||||
Net realized gain on available-for-sale financial instruments | 489 | 489 | – | – | |||||||||||||||
Net realized loss on held-for-trading financial instruments | (67 | ) | (67 | ) | – | – | |||||||||||||
Net unrealized gain (loss) on held-for-trading financial instruments | 86 | 86 | (12 | ) | (12 | ) | |||||||||||||
Net unrealized loss on held-for-trading financial instruments recognized | (3,606 | ) | (3,606 | ) | – | – | |||||||||||||
Net unrealized market-to-market adjustments on held-for-trading financial instruments | (6,860 | ) | (6,860 | ) | – | – | |||||||||||||
Loss before income taxes | (29,090 | ) | 1,771 | (27,319 | ) | (6,396 | ) | 425 | (5,971 | ) | |||||||||
Taxes recovered (paid) | 9 | 9 | (116 | ) | (116 | ) | |||||||||||||
Future income tax recovery | 169 | 169 | – | – | |||||||||||||||
Loss for the year | (28,912 | ) | 1,771 | (27,141 | ) | (6,512 | ) | 425 | (6,087 | ) | |||||||||
Other comprehensive income (loss) | |||||||||||||||||||
Unrealized gain on available-for-sale financial instruments | 603 | 603 | (104 | ) | (104 | ) | |||||||||||||
Realized gain on available-for-sale financial instruments upon transfer | (1,530 | ) | (1,530 | ) | - | – | |||||||||||||
Unrealized gain (loss) on foreign exchange translation of self-sustaining foreign operations | (i) | 27,433 | (1,038 | ) | 26,395 | (11,059 | ) | 1,189 | (9,870 | ) | |||||||||
Other comprehensive income (loss) | 26,506 | (1,038 | ) | 25,468 | (11,163 | ) | 1,189 | (9,974 | ) | ||||||||||
Total comprehensive loss for the year | (2,406 | ) | 733 | (1,673 | ) | (17,675 | ) | 1,614 | (16,061 | ) | |||||||||
Basic and diluted loss per share | (0.08 | ) | (0.08 | ) | (0.02 | ) | (0.02 | ) | |||||||||||
Weighted average number of common shares outstanding (thousands) | 358,711 | 358,711 | 336,893 | 336,893 |
(i)Mineral property interests
Under Canadian GAAP the fair value allocation on acquisition of mineral properties, treated as asset acquisitions, included a gross-up of deferred tax on the allocated fair value with the debit entry capitalized to the mineral property and the credit entry accounted for as a future income tax (deferred tax) liability. An IFRS adjusting entry in the amount of $65 million was processed on the January 1, 2010 balance sheet to eliminate the future income tax entry accounted for on acquisition of mineral properties.
18
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
12. | Transition to IFRS (continued) | |
(a) | Reconciliation of equity and comprehensive loss as previously reported under Canadian GAAP to IFRS (continued) | |
(i)Mineral property interests (continued) | ||
The adjustment to the values of mineral properties also affected other comprehensive income as well as depletion charges recorded in 2009 and 2010 on the Hollister mineral property. The impact on other comprehensive income relates to the foreign exchange translation of these mineral properties. Adjusting entries were processed to mineral properties, accumulated other comprehensive income (refer (iii) below) and deficit (refer (iv) below). | ||
(ii)Future income taxes (deferred taxes) | ||
In addition to the adjustment to future income taxes as noted in (i) above an additional adjustment was processed to eliminate the future income tax liability recognized under Canadian GAAP on the temporary difference between the accounting and tax base of mineral properties. Under IFRS, deferred taxes should not be recognized for the acquisition of assets that do not constitute a business combination and had no income statement impact on initial recognition. | ||
A third adjustment to future income taxes was processed to account for a deferred tax liability on the temporary difference between the convertible debt instrument’s tax and accounting bases. Under IFRS the debit entry is recognized with the equity component of this compounded financial instrument in contributed surplus. | ||
(iii)Accumulated other comprehensive income | ||
In accordance with IFRS transitional provisions, the Company has elected to reset the foreign cumulative translation reserve (”FCTR”), which includes gains and losses arising from the translation of foreign operations, at the date of transition to IFRS. | ||
The following is a summary of transition adjustments to the Company’s accumulated other comprehensive loss from Canadian GAAP to IFRS: |
December 31 | March 31 | January 1 | ||||||||
2010 | 2010 | 2010 | ||||||||
$‘000 | $‘000 | $ ‘000 | ||||||||
Accumulated other comprehensive income (loss) as reported under Canadian GAAP | 1,965 | (35,704 | ) | (24,541 | ) | |||||
IFRS adjustments (increase) decrease: | ||||||||||
Deferred income tax on mineral properties (note (i)) | 6,441 | 8,668 | 7,479 | |||||||
Cumulative translation reserve (note (iii)) | 17,989 | 17,989 | 17,989 | |||||||
Accumulated other comprehensive income (loss) as reported under IFRS | 26,395 | (9,047 | ) | 927 |
19
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
12. | Transition to IFRS (continued) | |
(a) | Reconciliation of equity and comprehensive loss as previously reported under Canadian GAAP to IFRS (continued) |
(iv)Deficit
The following is a summary of transition adjustments to the Company’s deficit from Canadian GAAP to IFRS:
December 31 | March 31 | January 1 | ||||||||
2010 | 2010 | 2010 | ||||||||
$‘000 | $‘000 | $‘000 | ||||||||
Deficit as reported under Canadian GAAP | (294,625 | ) | (272,225 | ) | (265,713 | ) | ||||
IFRS adjustments (increase) decrease: | ||||||||||
Mineral properties (note (i);(ii)) | (54,530 | ) | (54,530 | ) | (54,530 | ) | ||||
2008 depletion (note (i)) | 1,657 | 1,657 | 1,657 | |||||||
2009 depletion (note (i)) | 941 | 941 | 941 | |||||||
Depletion (note (i)) | 1,771 | 425 | - | |||||||
Convertible debt (note (ii)) | 8,864 | 8,864 | 8,864 | |||||||
Cumulative translation reserve (note (iii)) | (17,989 | ) | (17,989 | ) | (17,989 | ) | ||||
Deficit as reported under IFRS | (353,911 | ) | (332,857 | ) | (326,770 | ) |
(b) | Adjustments to the statement of cash flows |
The transition from Canadian GAAP to IFRS had no significant impact of cash flows generated by the Company except that, under IFRS, cash flows relating to interest are classified in a consistent manner under operating, investing or financing activities each period. Under Canadian GAAP, cash flows relating to interest were classified under operating activities.
(c) | Other transition elections and accounting policy choices | ||
(i) | Property, Plant and Equipment | ||
The Company has elected to continue valuing Property, Plant and Equipment on the cost model. Significant assets within the Company were all constructed or acquired within the last 3 years, with the result that the book value of the assets remains a fair reflection of market prices. | |||
Assets under construction over the last 3 years included the refurbishment and optimization of the Esmeralda plant and construction of the Burnstone mine. Construction costs were grouped into significant components with the depreciation models set up to deprecate these components separately over their estimated useful life. No other significant assets exist within the Group. |
20
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
12. | Transition to IFRS (continued) |
(c) | Other transition elections and accounting policy choices (continued) |
(ii) | Exploration expenses | |
The Company has elected to continue with its policy to expense exploration expenses as permitted under IFRS 6 – Exploration for and Evaluation of Mineral Resources. | ||
(iii) | Functional currency | |
The functional currency of each subsidiary within the Group has been assessed in terms of IAS 21- The effects of changes in foreign exchange rates. No material differences were noted from this assessment compared to the assessment previously prepared under Canadian GAAP. | ||
(iv) | Borrowing costs | |
Under Canadian GAAP, specific borrowing costs were allocated to the construction of any qualifying asset and were capitalized during the period of time that is required to complete and prepare the asset for its intended use. General borrowing costs eligible for capitalization were determined by applying a capitalization rate to the expenditure on qualifying assets. The conversion to IAS 23 – Borrowing costs, had no material impact on the Company’s capitalized borrowing costs. | ||
(v) | Site reclamation obligations | |
Under IFRS, reclamation obligations are required to be re-measured in line with changes in discount rates, and timing or amount of costs to be incurred. The conversion to IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, had no material impact on the Company’s reclamation obligations. |
(d) | Accounting policies |
The transition to IFRS did not have a material impact on the Company’s accounting policies, except for the following policies which were impacted on change-over to IFRS:
(i)Foreign currency translation
Items included in the financial statements of each of the Company’s subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”).
The functional currency of Great Basin Gold Limited, the parent entity, is the Canadian dollar, which is also the presentation currency of the Company’s financial statements.
21
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
12. | Transition to IFRS (continued) |
(d) | Accounting policies (continued) |
(i) Foreign currency translation (continued)
Transactions in foreign currencies are translated to the functional currency of the entity at the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the statement of financial position date are retranslated at the period end date exchange rates. Non-monetary items which are measured using historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Foreign operations are translated from their functional currencies into Canadian dollars on consolidation. Items in the statement of income are translated using the average exchange rates that reasonably approximate the exchange rate at the transaction date.
Items in the consolidated statement of financial position are translated into Canadian dollars at the closing exchange rate. Exchange differences on the translation of the net assets of entities with functional currencies other than the Canadian dollar are recognized in a separate component of equity through other comprehensive income.
Exchange differences that arise relating to long-term intercompany balances that form part of the net investment in a foreign operation are also recognized in this separate component of equity through other comprehensive income.
On disposition or partial disposition of a foreign operation, the cumulative amount of related exchange differences recorded in a separate component of equity is recognized in the statement of income.
(ii) Income taxes
Income taxes are recognized in the statement of income, except where they relate to items recognized in other comprehensive income or directly in equity, in which case the related taxes are recognized in other comprehensive income or equity. Taxes on income in interim periods are recorded using the tax rate that would be applicable to expected annual profit.
Deferred tax assets and liabilities are recognized based on the difference between the tax and accounting values of assets and liabilities and are calculated using enacted or substantively enacted tax rates for the periods in which the differences are expected to reverse. The effect of tax rate changes is recognized in earnings or equity, as the case may be, in the period of substantive enactment.
Deferred tax assets are recognized only to the extent that it is probable that future taxable profits of the relevant entity or group of entities, in a particular jurisdiction, will be available against which the assets can be utilized.
22
GREAT BASIN GOLD LTD. |
Notes to the Consolidated Financial Statements |
For the three months ended March 31, 2011 and 2010 |
(Expressed in thousands of Canadian dollars - unaudited) |
12. | Transition to IFRS (continued) |
(d) | Accounting policies (continued) |
(ii) Income taxes (continued)
Deferred tax assets and liabilities are not recognized if the temporary differences arise from the initial recognition of goodwill or an asset or liability in a transaction (other than a business combination) that affects neither accounting profit nor taxable profit at the time of the transaction.
The Company is subject to assessments by various taxation authorities that may interpret tax legislation differently. The final amount of taxes to be paid depends on a number of factors including the outcomes of audits, appeals, or negotiated settlements. The Company account for such differences based on our best estimate of the probable outcome of these matters.
(e) | Financial statement presentation changes |
The transition to IFRS resulted in the following financial statement presentation changes:
(i) | Property, plant and equipment consist of property, plant and equipment and mineral properties, previously presented as a separate line item on the statement of financial position. | |
(ii) | Other assets consist of reclamation deposits, previously presented as a separate line item on the statement of financial position. |
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