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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 20-F/A
AMENDMENT NO. 1
TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL PERIOD ENDED JUNE 30, 2003
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COMMISSION FILE NUMBER 0-26636
[logo]
CREW GOLD CORPORATION
(Exact name of Registrant as specified in its charter)
YUKON TERRITORY, CANADA
(Jurisdiction of incorporation or organization)
ABBEY HOUSE BUSINESS CENTER, WELLINGTON WAY
WEYBRIDGE, SURREY KT13 OTT, UNITED-KINGDOM
(Address of principal executive offices)
+ (44) (0) 193 226 8755
(Registrant's telephone number)
--------------------
Securities registered or to be registered pursuant to Section 12(g) of the Act.
NONE NOT APPLICABLE
(Title of Class) (Name of each exchange on which registered)
Securities registered or to be registered pursuant to Section 12(b) of the
Act. COMMON SHARES WITHOUT PAR VALUE.
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act. NONE.
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report. 142,608,739 COMMON SHARES ISSUED AND OUTSTANDING AS AT NOVEMBER 15,
2003.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark which financial statement item the registrant has
elected to follow. ITEM 17 /X/ Item 18 / /
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EXPLANATORY NOTE
Crew Gold Corporation (the "Corporation") hereby amends its Annual Report on
Form 20-F for its fiscal year ended June 30, 2003 (the "Form 20-F") pursuant
to Rule 12b-15 under the Securities Exchange Act of 1394, as amended, by
setting forth herein the amended Auditors' Report and Consolidated Financial
Statements of the Corporation for the years ending June 30, 2003 and 2002
(the "Financial Statements") which were included as Exhibit A to the Form
20-F. The only amendment made to the Financial Statements is on page A-2 to
include a signed Auditors' Report and Comments by Auditor on Canada - United
States Reporting Differences; no amendments were made to the text of the
Auditors' Report or Comments by Auditor on Canada - United States Reporting
Differences.
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SIGNATURES
The Corporation hereby certifies that it meets all of the requirements for
filing on Form 20-F/A and has duly caused and authorized the undersigned to sign
this Annual Report on its behalf.
Dated March 23, 2005
By: /s/ Jan Vestrum
-----------------------------------
Jan Vestrum
Chief Executive Officer
Crew Gold Corporation
<Page>
CERTIFICATIONS
I, Jan Vestrum, certify that:
1. I have reviewed this annual report on Form 20-F/A of Crew Gold Corporation
(the "Corporation");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the consolidated financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Corporation as of, and for, the periods presented in this
annual report;
4. The Corporation's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the Corporation and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Corporation, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this annual report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the Corporation's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the Corporation's internal
control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is
reasonably likely to materially affect, the Corporation's internal
control over financial reporting.
5. The Corporation's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the Corporation's auditors and the audit committee of the Corporation's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Corporation's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Corporation's internal
control over financial reporting.
Dated March 23, 2005
By: /s/ Jan Vestrum
--------------------------------------------
Jan Vestrum
Chief Executive Officer
Crew Gold Corporation
<Page>
- 2 -
I, James Cole, certify that:
1. I have reviewed this annual report on Form 20-F/A of Crew Gold Corporation
(the "Corporation");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the consolidated financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Corporation as of, and for, the periods presented in this
annual report;
4. The Corporation's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the Corporation and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Corporation, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this annual report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the Corporation's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the Corporation's internal
control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is
reasonably likely to materially affect, the Corporation's internal
control over financial reporting.
5. The Corporation's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the Corporation's auditors and the audit committee of the Corporation's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Corporation's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Corporation's internal
control over financial reporting.
Dated March 23, 2005
By: /s/ James Cole
--------------------------------------------
James Cole
Chief Financial Officer
Crew Gold Corporation
<Page>
AUDITORS' REPORT AND CONSOLIDATED FINANCIAL STATEMENTS OF
CREW DEVELOPMENT CORPORATION
JUNE 30, 2003 AND 2002
A1
<Page>
AUDITOR'S REPORT
To the Shareholders of
Crew Development Corporation
We have audited the consolidated balance sheets of Crew Development Corporation
as at June 30, 2003 and 2002 and the consolidated statements of loss and deficit
and cash flows for each of the years in the three year period ended June 30,
2003. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with Canadian and United States generally
accepted auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at June 30, 2003 and
2002 and the results of its operations and its cash flows for each of the years
in the three year period ended June 30, 2003 in accordance with Canadian
generally accepted accounting principles.
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/s/ Deloitte & Touche
Chartered Accountants
Vancouver, British Columbia
September 3, 2003
COMMENTS BY AUDITOR ON CANADA - UNITED STATES REPORTING DIFFERENCES
United States reporting standards for auditors require the addition of an
explanatory paragraph when the financial statements reflect changes in
accounting policies, such as those described in Notes 2 (i) and 2 (l) to the
financial statements. During the year ended June 30, 2001, the Company
retroactively adopted new accounting policies for income taxes and employee
future benefits with no restatement of the prior year's amounts. The impact of
these changes in accounting policies is set out in the aforementioned Notes.
Although we conducted our audits in accordance with both Canadian generally
accepted auditing standards and United States generally accepted auditing
standards, our report to the Shareholders dated September 3, 2003 is expressed
in accordance with Canadian reporting standards which do not permit a reference
to such conditions and events in the auditors' report when these are adequately
disclosed in the financial statements.
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/s/ Deloitte & Touche
Chartered Accountants
Vancouver, British Columbia
September 3, 2003
A2
<Page>
CREW DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30
(EXPRESSED IN CANADIAN DOLLARS)
<Table>
<Caption>
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2003 2002
ASSETS
CURRENT
Cash $ 6,689,956 $ 4,376,481
Accounts receivable 359,147 198,812
Prepaid expenses 344,260 250,389
Due from Metorex Limited 638,591 2,263,232
Investment in Metorex Limited (Note 5) 3,716,398 -
Investment in Asia Pacific Resources (Note 6) 1,730,760 -
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13,479,112 7,088,914
NALUNAQ MINERAL PROPERTY INTEREST (Note 3) 45,135,182 34,460,247
SECURITY DEPOSIT (Note 3) 877,338 -
INVESTMENT IN AND ADVANCES TO BARBERTON MINES LTD. (Note 4) 5,257,843 -
INVESTMENT IN METOREX LIMITED (Note 5) - 28,809,532
INVESTMENT IN ASIA PACIFIC RESOURCES (Note 6) - 4,950,000
OTHER MINERAL PROPERTY INTEREST (Note 7) 3,453,462 5,858,894
OTHER 190,467 918,347
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$ 68,393,404 $ 82,085,934
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LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 2,858,560 $ 2,648,712
Accrued restructuring costs (Note 8) 327,685 -
Promissory notes due to related parties (Note 15) 379,152 -
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3,565,397 2,648,712
FUTURE INCOME TAXES (Note 9) 3,338,484 3,338,484
NON-CONTROLLING INTEREST 4,007,830 2,324,649
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10,911,711 8,311,845
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SHAREHOLDERS' EQUITY
Share capital (Note 10) 160,114,934 160,114,934
Share purchase warrants (Note 10 (g) and (h)) 21,340 275,250
Contributed surplus (Note 10 (g)) 275,250 -
Deficit (102,707,955) (83,846,598)
Cumulative translation adjustment (Note 11) (221,966) (2,769,497)
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57,481,693 73,774,089
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$ 68,393,404 $ 82,085,934
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</Table>
COMMITMENTS AND CONTIGENCIES (Notes 12 and 13)
ON BEHALF OF THE BOARD:
(SIGNED) JAN VESTRUM (SIGNED) CAM BELSHER
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Jan Vestrum, Director Cam Belsher, Director
A3
<Page>
CREW DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30
(EXPRESSED IN CANADIAN DOLLARS)
<Table>
<Caption>
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2003 2002 2001
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MINERAL SALES $ - $ 111,730,701 $ 79,702,138
DIRECT COSTS OF MINERAL SALES - (87,425,868) (66,508,590)
AMORIZATION - (4,108,590) (3,985,344)
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20,196,243 9,208,204
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EXPENSES
Administration, office and general 5,268,364 14,040,785 8,215,863
Interest 266,626 1,530,963 634,274
Professional fees 1,723,320 1,857,503 795,648
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7,258,310 17,429,251 9,645,785
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OTHER INCOME (EXPENSES)
Equity earnings from investment in Barberton Mines Ltd. (Note 4) 91,046 - -
Loss on investment in Metorex Limited (Note 5) (5,448,760) (8,811,498) 3,540,665
Provisions for impairment of Chibuluma South Mines (note 5 (b)) - (8,450,857) -
Loss on geothermal asset (Note 7(g)) (2,897,355) (1,503,055) -
Provision for impairment of investment in Asia Pacific
Resources (Note 8) (2,887,350) (19,593,056) -
Provision for decline in value of investment in Mindoro
Nickel Project Note 7(e)) - - (34,024,132)
Costs related to Mindoro Nickel Project (Note 7 (e)) - (1,572,585) -
Provision for impairment of other mineral property interests (Note 7) - (5,009,878) -
Restructuring costs (Note 8) (593,127) - -
Foreign exchange (loss) gain (119,409) 1,510,820 (1,043,032)
Interest and other income, net 34,890 2,157,547 4,436,349
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(11,820,065) (41,272,562) (27,090,150)
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LOSS BEFORE PROVISION FOR INCOME TAXES AND
NON-CONTROLLING INTEREST (19,078,375) (38,505,570) (27,527,731)
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PROVISION FOR INCOME TAXES (Note 9)
Current - 4,875,053 3,151,223
Future - (4,228,918) (7,499,169)
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- 646,135 (4,347,946)
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LOSS BEFORE PROVISION NON-CONTROLLING INTEREST (19,078,375) (39,151,705) (23,197,785)
NON-CONTROLLING INTEREST 217,018 (1,598,984) (3,103,752)
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NET LOSS (18,861,357) (40,750,689) (26,283,537)
DEFICIT, BEGINNING OF YEAR (83,846,598) (42,697,223) (14,951,424)
DIVIDEND (Note 7 (g)) - (228,284) -
NET LIABILITIES ACQUIRED ON REVERSE TAKEOVER OF
NORTH PACIFIC GEOPOWER (Note 7 (g)) - (170,402) -
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
POLICIES (Note 2 (i) and 2 (l)) - - (1,462,262)
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DEFICIT, END OF YEAR $(102,707,955) $(83,846,598) $ (42,697,223)
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LOSS PER SHARE - BASIC AND DILUTED $ (0.14) $ (0.31) $ (0.26)
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 138,664,295 131,790,183 101,708,357
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</Table>
See accompanying Notes to the Consolidated Financial Statements
A4
<Page>
[cad 192]
CREW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, (EXPRESSED IN CANADIAN
DOLLARS)
<Table>
<Caption>
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2002 2001 2000
OPERATING ACTIVITIES
Net (loss) income $ (40,750,689) $ (26,283,537) $ 2,390,060
Add (deduct) items not affecting cash:
Amortization 4,351,115 4,068,482 504,425
Loss (gain) on investment in Metorex Limited 8,036,773 (3,540,665) (4,031,132)
Provision for impairment of Chibuluma South Mine 8,450,857 - -
Provision for decline in value of investment in
Mindoro Nickel Project - 34,024,132 -
Provision for impairment of investment in Asia Pacific 19,593,056 - -
Provision for impairment of other mineral property
Interests 5,009,878 - -
Gain on sale of other assets (431,480) (211,113) (751,287)
Foreign exchange loss 682,881 1,043,032 -
Future income taxes (4,228,918) (7,499,169) -
Dividends received from associated companies - 805,454 759,340
Non-controlling interest 1,598,984 3,103,752 288,380
Other (560,823) - (154,446)
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Change in non-cash operating working capital items (8,801,059) (1,609,007) 828,526
(Note 20 (a))
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(7,049,425) 3,901,361 (166,134)
FINANCING ACTIVITIES
Issuance of common shares 3,364,032 42,920,892 18,095,801
Issuance of share purchase warrants 275,250 - -
Repayments of amount due from Metorex Limited 797,419 - -
Dividends paid (98,666) - -
Increase (decrease) in long-term debt 5,011,805 11,152,116 (493,974)
Paid to non-controlling interest of subsidiaries (1,670,765) (1,100,553) -
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7,679,075 52,972,455 17,601,827
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INVESTING ACTIVITIES
Acquisition of Metorex, net of cash acquired (Note 6 - 3,718,938 (434,373)
(a))
Acquisition of Nalunaq, net of cash acquired (Note 5) - 51,605 -
Proceeds on disposal of interest in Metorex
(Note 6 (d) (iii) 2,969,040 - -
Reduction of cash on de-consolidation of Metorex
(Note 6 (c)) (8,071,066) -
Investment in Asia Pacific Resources (Note 8) (5,000,000) (2,974,947) (1,570,184)
Expenditures on geothermal project (2,493,362) (249,853) -
Acquisition of property, plant and equipment (14,607,230) (18,086,429) (613,912)
Expenditures on Nalunaq mineral property interest (8,465,895) (8,099,734) (3,558,160)
Expenditures on other mineral property interests (224,225) (4,449,617) (602,583)
Proceeds on disposition of capital assets 843,756 207,566 -
Proceeds on disposition of investments - - 4,615,505
Acquisition of interest in Mindex ASA, net of cash
acquired - - (5,219,762)
Acquisition of interest in Botswana Diamondfields Inc.,
net of cash acquired - - 238,947
Disposal of cash on disposition of interest in Metorex - - (4,021,000)
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(35,048,982) (29,882,471) (11,165,522)
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NET CASH (OUTFLOW) INFLOW (34,419,332) 26,991,345 6,270,171
CASH POSITION, BEGINNING OF YEAR 38,795,813 11,804,468 5,534,297
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CASH POSITION, END OF YEAR $ 4,376,481 $ 38,795,813 $ 11,804,468
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REPRESENTED BY:
Cash $ 4,376,481 40,156,933$ 11,804,468
Bank indebtedness - (1,361,120) -
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$ 4,376,481 $ 38,795,813$ $ 11,804,468
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</Table>
SEE NOTE 20 FOR SUPPLEMENTAL CASH FLOW INFORMATION.
See accompanying Notes to the Consolidated Financial Statements
A5
<Page>
1. NATURE OF OPERATIONS
Crew Development Corporation ("Crew" or the "Company") is an international
mining exploration, development and operating company focused on
identifying, acquiring and developing resource projects world-wide. At
present, Crew controls development projects in Canada, Greenland, Norway,
Ghana and the Philippines. The Company's shares are traded on the Toronto,
Oslo and Frankfurt Stock Exchanges and on the over the counter market in
the United States.
2. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles. The significant
accounting policies used in these consolidated financial statements are as
follows:
(a) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and all of its subsidiaries. The principal subsidiaries of the
Company as at June 30, 2003 are as follows:
<Table>
<Caption>
SUBSIDIARY % INTEREST
Nalunaq Gold Mine A/S (Greenland) ("Nalunaq") 82.5%
Crew Norway AS (formerly Mindex ASA) 100%
North Pacific GeoPower Corp. (Canada) 86.1%
Hwini-Butre Minerals Ltd. (Ghana) 100%
</Table>
The Company's 67% interest in Nanortalik IS (Greenland) is subject to
joint control and is consolidated on a proportionate basis, whereby
the Company includes in its accounts its proportionate share of
Nanortalik's assets, liabilities, and expenses. Subsequent to year
end, the Company's interest in Nanortalik increased to 72%.
The Company's investment in Metorex Limited ("Metorex") was recorded
using the equity method until November 24, 2000, on which date the
Company increased its interest to 52% and acquired control of Metorex.
The Company then consolidated the results of operations and financial
position of Metorex, until its interest was reduced to 41.4% on April
30, 2002, at which time the Company reverted back to the equity
method. As a result of a share sale on June 20, 2003 the Company's
interest dropped to 5.34% and the Company commenced accounting for the
investment in Metorex on the cost basis (Note 5).
(b) USE OF ESTIMATES
The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results may
differ from those estimates.
(c) REVENUE RECOGNITION
Revenue from mineral sales is based on the value of minerals sold,
excluding value added tax, and is recognized at the time that mineral
ore is delivered to the customer, risks of ownership have passed and
collectability is reasonably assured.
A6
<Page>
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) FOREIGN CURRENCY TRANSLATION
For operations considered financially and operationally integrated
with the Company, foreign currency monetary assets and liabilities are
translated into Canadian dollars at the exchange rate in effect at the
balance sheet date. Non-monetary assets, liabilities, revenues and
expenses are translated into Canadian dollars at the rate of exchange
prevailing on the respective dates of the transactions. Exchange gains
and losses are included in earnings.
For operations considered self-sustaining, foreign currency assets and
liabilities are translated into Canadian dollars at the exchange rate
in effect at the balance sheet date. Revenues and expenses are
translated at the average rate for the fiscal period. The resulting
exchange gains and losses are accumulated in a separate component of
shareholders' equity until there has been a realized reduction in the
net investment in such operations.
(e) CASH
Cash includes short-term money market instruments with terms to
maturity, at the date of acquisition, not exceeding ninety days.
(f) INVESTMENTS
Investments where the Company has the ability to exercise significant
influence, generally 20% to 50% owned by the Company, are accounted
for using the equity method. Under this method, the Company's share of
the company's earnings or losses is included in operations and its
investments therein is adjusted by a like amount. Dividends received
are credited to the investment accounts.
Other long-term investments are accounted for using the cost method,
whereby income is included in operations when received or receivable.
Provisions for impairment of long-term investments are made, where
necessary, to recognize other than temporary declines in value.
Investments which are capable of reasonably prompt liquidation, and
which the Company intends to dispose of, are classified as short-term
investments and recorded at the lower of cost and market value.
(g) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are depreciated on a straight-line or
diminishing balance basis over their estimated useful lives. Details
of the method and estimated useful lives are as follows:
<Table>
Buildings - straight line basis over periods from 3-20 years
Plant and equipment - straight line basis over periods from 3-20 years
Vehicles - straight line basis over 5 years
Office equipment, furniture and fixtures - diminishing balance basis at annual rates of
between 20% and 30%
</Table>
Management reviews the carrying values of its property, plant and
equipment on a regular basis for evidence of impairment, primarily by
reference to estimated future operating results and undiscounted net
cash flows. When the carrying values of these assets exceed their
estimated net recoverable amounts, the Company records an impairment
provision.
A7
<Page>
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) MINERAL PROPERTY INTERESTS
All costs related to the acquisition, exploration and development of
mineral properties are capitalized until either commercial production
is established, the property is determined to be impaired or it is
abandoned. On achievement of commercial production, such costs will be
amortized on a systematic basis over the estimated productive life of
the property. The Company reviews the carrying value of each property
on a regular basis for evidence of impairment. This review generally
is made by reference to the timing of exploration work, work programs
proposed, exploration results achieved by the Company and others,
and/or management's estimates of the cash flow to be generated by any
producing property based on a mine plan feasibility study. When the
carrying value of a property is estimated to exceed its net
recoverable amount, provision is made for the decline in value.
The carrying value of mineral property interests represent costs
incurred to date and do not reflect present or future values. The
Company is in the process of exploring the other mineral properties
interests and has not yet determined whether they contain ore reserves
that are economically recoverable. Accordingly, the recoverability of
these capitalized costs is dependent upon the existence of
economically recoverable reserves, the ability of the Company to
obtain the necessary financing to complete their exploration and
development, and upon future profitable production.
(i) INCOME TAXES
Future income tax assets and liabilities are computed based on
differences between the carrying amount of assets and liabilities on
the balance sheet and their corresponding tax values, generally using
the enacted income tax rates at each balance sheet date. Future income
tax assets also result from unused loss carryforwards and other
deductions. The valuation of future income tax assets is adjusted, if
necessary, by use of a valuation allowance to reflect the estimated
realizable amount.
Until June 30, 2000, the Company followed the deferral method of
accounting for income taxes, whereby deferred taxes resulted from
timing differences between accounting and taxable income. The change
in accounting policy was adopted retroactively, effective July 1,
2000, with no restatement of prior year amounts. As a result, the
opening deficit of July 1, 2000 has been increased by $467,319 and the
carrying value of the investment in Metorex Limited at that date has
been reduced by $467,319.
(j) STOCK OPTIONS
Effective July 1, 2002 the Company adopted the new recommendations of
the CICA with respect to stock-based compensation and other
stock-based payments on a prospective basis. The new recommendations
require that stock-based payments to non-employees be accounted for
using a fair-value based method of accounting. The recommendations
encourage, but do not require, the use of a fair-value based method of
accounting for stock compensation to employees. The Company has
elected to continue to not record stock options issued to employees as
compensation expense and to disclose pro forma information on the fair
value of stock compensation issued during the period in the notes to
the financial statements. Had compensation cost for the Company's
stock-based compensation been accounted for under the fair-value based
method of accounting, the Company's net income and earnings per share
would have been as follows:
<Table>
Net loss for the period $ (18,861,357)
Fair value of share compensation to employees (474,767)
---------------------------------------------------------------------------------------------------
Pro forma net loss for the period $ (19,336,124)
---------------------------------------------------------------------------------------------------
Pro forma net loss per share $ (0.14)
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</Table>
A8
<Page>
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The fair value of stock compensation issued to employees was
determined using the Black-Scholes option pricing model assuming an
average volatility factor of 66%, an average risk-free rate of 3.9%
and an expected life of 1 or 5 years. The fair value is amortized on a
straight-line basis from the grant date over the vesting period of the
related options.
(k) EARNINGS (LOSS) PER SHARE
Basic loss per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per
share is computed using the weighted average number of common and
common equivalent shares outstanding during the period using the
treasury stock method. Common equivalent shares consist of the
incremental common shares issuable upon the exercise of stock options
and warrants, and are excluded from the computation if their effect is
antidilutive.
(l) EMPLOYEE FUTURE BENEFITS
Until June 30, 2000, the Company's subsidiary, Metorex, did not
recognize a liability for employee future benefits other than
pensions. Effective July 1, 2000, Metorex changed its accounting
policy, in accordance with the new CICA accounting standard for
employee future benefits, to accrue the cost of post-employment
benefits other than pensions during the participants' actual service
periods, up to the date they become eligible for full benefits. This
change in accounting policy was applied retroactively with no
restatement of the prior year's amounts, with the effect that the
carrying value of the Company's investment in Metorex at July 1, 2000
was decreased by $994,943 and the opening deficit at that date
increased by $994,943.
(m) COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform
with the current year's presentation.
3. NALUNAQ MINERAL PROPERTY INTEREST
The following table shows the continuity of the Nalunaq mineral property
interest during the years ended June 30:
<Table>
<Caption>
2003 2002
-------------- ------------
Balance, beginning of year $34,460,247 $25,994,352
Acquisition of interest 1,892,695 -
Expenditures incurred during the year 8,782,240 8,465,895
------------------------------------------------------------------------------------------------------------
Balance, end of year $45,135,182 $34,460,247
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</Table>
During the year ended June 30, 2000, the Company acquired a 57% interest in
the Nalunaq I/S joint venture whose principal asset is a gold development
project located in Greenland. This interest was subsequently increased to
67% through additional capital contributions. On June 5, 2001, pursuant to
an agreement with the joint venture partner, the Company increased its
interest to 82% for no additional cash consideration and obtained
operational control of the investment in exchange for various commitments
including an agreement to fully fund future development until completion of
the final feasibility study, which was completed in August 2002.
During the year ended June 30, 2003, a new operational structure was
introduced and the partners transferred the Nalunaq assets to Nalunaq Gold
Mine A/S, a Greenlandic limited liability company. The restructuring
resulted in an increase in the Company's interest in the Nalunaq project to
82.5% and a commitment by the Company to fund, or arrange all future
financing of, the project.
A9
<Page>
3. NALUNAQ MINERAL PROPERTY INTEREST (CONTINUED)
As a condition for obtaining the exploitation license for Nalunaq Gold
Mines A/S, the Company issued a guarantee to the Government of Greenland on
June 2, 2003 (Note 13). During the year ended June 30, 2003 Nalunaq Gold
Mine provided a security deposit of $877,338 (DKK 4.2 million) to the
government of Greenland to cover future estimated mine closure costs and a
three year monitoring program. The amount of the deposit was based on an
estimate of closure costs prepared by Greenland's Bureau of Minerals and
Petroleum ("BMP") as set out in a detailed closure plan provided by the
BMP. The terms set out in the closure plan are not exhaustive and BMP
reserve the right to set out additional terms in the event of future
exploration activities within these areas of the exploitation license.
The Company's ability to achieve its Nalunaq mining plan was dependent on
its ability to secure additional financing at June 30, 2003. Subsequent to
June 30, 2003 the Company completed a convertible bond offering for gross
proceeds of NOK 120 million (approximately $22.1 million) which management
believes will be sufficient to complete construction of the mine.
Achievement of the mine plan is also dependent on a number of estimates
included in the mine plan relating to future commodity prices, production
cost and recovery rates, exchange rates, and mineral ore reserves.
4. INVESTMENT IN AND ADVANCES TO BARBERTON MINES LTD.
Effective June 15, 2003, the Company acquired a 20% interest in the ETC
Division of Avgold Limited (now renamed "Barberton Mines Limited") for a
total cash injection of $5,133,000 (Rand 30 million). This cash payment was
comprised of a shareholder loan of $5,132,996 (Rand 30 million) and a
nominal equity investment of $4 (Rand 20). The shareholder loans are
unsecured, subordinated in favour of all creditors of Barberton, and bear
interest at such rate as determined by Barberton's board of directors, but
shall not exceed prime. The loans are repayable once certain conditions of
Barberton's term-loan facility agreement with its external financiers have
been met. Subject to these conditions, Barberton will distribute 66% of its
annual profits as repayment of shareholder loans or dividends, subject to
it's future cash flow needs.
The acquisition was made by a consortium consisting of Metorex Ltd., 54% ,
MCI Resources Ltd., 26%, and the Company, 20%. The total purchase price
paid by the consortium of Rand 255 million was funded by a Rand 105 million
term-loan facility and Rand 150 million of shareholder loans. The term loan
facility is secured by a pledge of all Barberton shares held by the
shareholders and by Barberton's assets. In addition, certain financial and
operational lending covenants must be achieved by Barberton, of which
failure to do so will result in restrictions on the payment of dividends,
repayments of shareholder loans and the repayment of interest thereunder.
Details of the Company's 20% equity share of the acquired assets and
liabilities of Barberton Mines Limited is as follows:
<Table>
Current assets $ 228,667
Producing mining property, plant and equipment 11,082,399
Other assets 632,197
Current liabilities (969,984)
Long-term debt (3,593,100)
Shareholder loans (5,323,721)
Other liabilities (2,056,454)
-------------------------------------------------------------------------------------------------
Crew's share of net assets acquired $ 4
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
</Table>
A10
<Page>
5. INVESTMENT IN METOREX LIMITED
In 1997, the Company acquired a 50% interest in Metorex (Proprietary)
Limited, a South African company owning shares in, and providing strategic
direction to, operating companies mining gold, coal and base metals. As a
result of a consolidation of interests which closed on December 6, 1999,
this 50% interest was replaced by a 41% interest in Consolidated Murchison
Ltd. (now renamed "Metorex Limited"), an affiliated company listed on the
London and Johannesburg Stock Exchanges. During November 2000, the Company
increased its interest in Metorex to 52% through the acquisition of
additional shares from existing shareholders and began consolidating the
results of operations and financial position of Metorex (Note 5 (d)).
At June 30, 2001, the Company held a 53% interest in Metorex and accounted
for this investment using the consolidation method.
On April 26, 2002, the Company's interest was reduced to 41% and the
Company ceased to consolidate it's interest in Metorex. A continuity of the
investment in Metorex for the two years ended June 30, 2003 is as follows:
<Table>
De-consolidation of investment in Metorex on April 30, 2002 (Note 5 (a)) $ 39,815,345
Loss on investment in Metorex before exchange loss realized on disposals (Note 5 (c)) (8,036,773)
Proceeds on disposal of investment (Note 5 (c) (iii)) (2,969,040)
-----------------------------------------------------------------------------------------------------------
Balance, June 30, 2002 28,809,532
Loss on investment in Metorex before exchange loss realized on disposals (Note 5 (c)) (4,232,051)
Proceeds on disposals of investment (Note 5 (c) (iii)) (21,333,405)
Dividends (858,500)
Translation adjustment 1,330,822
-----------------------------------------------------------------------------------------------------------
Balance, June 30, 2003 $ 3,716,398
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</Table>
(a) On April 26, 2002, the Company's interest in Metorex was reduced from
53% to 41% through the sale of shares and a concurrent private
placement by Metorex with other shareholders. As a result of the
dilution of the Company's interest and resulting loss of control, the
Company ceased to consolidate the investment effective April 30, 2002
and commenced recording its investment in Metorex Limited using the
equity method, effective May 1, 2002.
(b) Prior to April 26, 2002, Metorex's Chibuluma South mining operations
were placed on care and maintenance basis due to low copper prices and
high operating costs. As a result, the Company recorded a provision
for impairment of Metorex's Chibuluma South Mine of $8,450,857.
(c) The loss on the Company's investment in Metorex during the years ended
June 30, 2003 and 2002 consists of the following:
<Table>
<Caption>
2003 2002 2001
------------- -------------- ------------
Equity earnings from investment (i) $ 1,051,967 $ 1,549,819 $ 3,540,665
Dilution loss (ii) (1,133,928) -
Losses on disposals of interest (iii) (4,140,463) (1,071,479) -
Provisions for impairment of investment (iv) (1,143,555) (7,381,185) -
----------------------------------------------------------------------------------------------------
Loss on investment in Metorex before
exchange loss realized on disposals (4,232,051) (8,036,773) 3,540,665
Foreign exchange loss realized on disposals (1,216,709) (774,725) -
----------------------------------------------------------------------------------------------------
Loss on investment in Metorex (5,448,760) (8,811,498) 3,540,665
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
</Table>
A11
<Page>
5. INVESTMENT IN METOREX LIMITED (CONTINUED)
(i) the equity earnings for the year ended June 30, 2003, represent
the Company's proportionate share of Metorex's net earnings from
July 1, 2002 to October 22, 2002 at 41%. and from October 22,
2002 to June 15, 2003 at 21%. The equity earnings for the year
ended June 30, 2002 represent the Company's proportionate share
of Metorex's net earnings from May 1, 2002 to June 30, 2002 at
41%. The equity earnings for the year ended June 30, 2001
represents the Company's proportionate share of Metorex's net
earnings from July 1, 2000 to November 24, 2000.
(ii) In a private placement completed on April 24, 2002, Metorex
issued 18,100,000 shares to other shareholders for proceeds of
$8,515,978. This transaction reduced the Company's interest in
Metorex from 53% to 46% and resulted in the Company incurring a
loss on dilution of its investment of $1,133,928.
(iii) In three separate transactions during the year ended June 30,
2003, the Company sold a total of 48,208,412 shares of Metorex
for cash proceeds of $21,333,405, resulting in total losses on
disposal of $4,140,463 and a reduction in the Company's interest
in Metorex from 21% to 5.34%.
On April 26, 2002, the Company disposed of 6,500,000 shares of
Metorex for cash proceeds of $2,969,040 resulting in a loss on
disposal of $1,071,479.
(iv) As at June 30, 2003, the investment in Metorex was held as a
short-term investment. At June 30, 2003, the market value of the
investment in Metorex Limited was $1,143,555 less than the
carrying value, accordingly, the Company has provided for this
decline in value.
As at June 30, 2002 the investment in Metorex was held as a
long-term investment and management determined that this
investment had experienced a permanent decline in value and that
this decline related to the assets and operations of Metorex. As
a result the Company recorded a provision for impairment of
$7,381,185.
(d) The acquisition of Metorex on November 24, 2000 was accounted using
the purchase method of accounting. The total consideration paid was
allocated based on the estimated fair value of the assets acquired and
the liabilities assumed at the dates of acquisition as follows:
<Table>
ASSETS ACQUIRED
Current assets (including cash of $13,643,225) $ 43,731,919
Mining properties, plant and equipment 82,524,795
126,256,714
---------------------------------------------------------------------------------------------------
LIABILITIES ACQUIRED
Current liabilities 33,225,636
Long-term obligations 19,142,893
Non-controlling interest in subsidiaries of Metorex 3,178,394
55,546,923
---------------------------------------------------------------------------------------------------
NET ASSETS 70,709,791
Non-controlling interest in Metorex 30,071,040
Crew's investment in Metorex 40,638,751
Crew's existing investment in Metorex immediately prior to
the date of acquisition 30,714,464
---------------------------------------------------------------------------------------------------
Cash consideration $ 9,924,287
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</Table>
A12
<Page>
6. INVESTMENT IN ASIA PACIFIC RESOURCES
At June 30, 2003, the Company holds approximately 6.22% (2002 - 7%) of Asia
Pacific Resources Ltd. ("Asia Pacific") with a carrying value of $1,730,760
(2002 - $4,950,000). During the year ended June 30, 2003, management
determined that this investment would not be held as a long-term investment
and accordingly the investment has been reclassified as a short-term
investment. At June 30, 2003, the market value of the investment in Asia
Pacific was $2,887,350 less than its carrying value and accordingly, the
Company has recorded a provision for this decline in value. During the year
ended June 30, 2003, the Company disposed of 4,154,000 shares for cash
proceeds of $303,777, resulting in a loss on disposal of $28,133.
During the year ended June 30, 2002, Asia Pacific completed a financial
restructuring which included the conversion of all of its outstanding
debentures into common shares and the issuance of additional common shares
through private placements. The Company invested an additional $5 million
into Asia Pacific as part of the restructuring during 2002. Due to the
dilution of its interest as a result of the debenture conversion during
2002 and the prolonged period in which there had been a substantial decline
in value of Asia Pacific shares, the Company determined that an indication
of impairment had occurred and recorded a provision for loss in value of
the investment of $19,593,056.
7. OTHER MINERAL PROPERTY INTERESTS
The carrying value of other mineral property interests includes acquisition
costs and deferred exploration expenditures relating to properties in which
mining of an ore reserve has not commenced. Details are as follows:
<Table>
<Caption>
2003 2002
-------------- -------------
Other mineral property interests, beginning of year $ 5,858,894 $ 8,227,052
Expenditures incurred during the year 491,923 2,717,587
Provision for impairment in value of Roros Project (f) - (4,688,918)
Provision for impairment of other properties - (320,960)
Provision for impairment of geothermal asset (g) (2,897,355) -
Other - (75,867)
------------------------------------------------------------------------------------------------------------
Other mineral property interests, end of year $ 3,453,462 $ 5,858,894
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</Table>
Consisting of:
<Table>
<Caption>
2003 2002
------------- --------------
Hwini-Butre Gold Project (Ghana) (a) 3,213,200 3,181,803
Sequinner Olivine (Greenland) (b) 84,064 63,493
Nanortalik IS (Greenland) (c) 144,182 -
Ringvassoy (Norway) (d) 12,013 -
Mindoro Nickel Project (Philippines) (e) 1 1
Roros Project (Norway) (f) 1 1
Geothermal Project (g) 1 2,613,596
------------------------------------------------------------------------------------------------------------
3,453,462 5,858,894
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</Table>
(a) HWINI-BUTRE GOLD PROJECT
Through a wholly-owned subsidiary, the Company owns 51% of the
Hwini-Butre gold concession located in Ghana, Africa (Note 13).
A13
<Page>
7. OTHER MINERAL PROPERTY INTERESTS (CONTINUED)
(b) SEQUINNER OLIVINE
During the year ended June 30, 2003, the Company exercised an option
to acquire 100% of mineral rights to the Sequinner Olivine property in
Southern Greenland.
Subsequent to the year ended June 30, 2003, the Company entered into
an agreement with Minelco AB, a subsidiary of iron ore producer LKAB
of Sweden, to develop a Bankable Feasibility Study ("BFS") for the
Olivine project. The Company will be responsible for the management of
further drilling and for the preparation of the BFS, whereas Minelco
will cover all related costs. If the BFS is successfully completed,
Minelco will have an option to acquire 51% of the Sequinner project
for nominal consideration. Minelco would then be responsible for
funding all capital expenditures related to the development of a
mining operation as defined by the BFS.
(c) NANORTALIK IS
In connection with the ownership restructuring of the Nalunaq assets
and the formation of Nalunaq Gold Mine A/S, the remaining concessions
formerly held by Nalunaq I/S were transferred to Nanortalik I/S during
the year ended June 30, 2003. Nanortalik I/S is a joint venture
between the Company (67% interest) and NunaMinerals A/S (33%
interest).
The joint venture holds an exploration license which expires in July
2004 and requires a total work commitment of DKK 4.0 million
(approximately $835,000) during 2002 and 2003. Failure to meet this
minimum work commitment will allow BMP to request payment of 50% of
the remaining amount in cash after the expiration of the license.
During the year ended June 30, 2003 the joint venture incurred
$231,673 (DKK 1,086,492) in exploration costs. Subsequent to year-end,
the Company funded an additional $452,395 (DKK 2,058,240).
NunaMinerals was unable to participate in this capital call and as a
consequence, will suffer a dilution resulting in an increase in the
Company's interest from 67% to 72%. It is expected that the Company
will fund all of the remaining exploration commitment for the current
program, resulting in a further increase in its joint venture
interest. Should the interest of NunaMinerals be reduced below 10% due
to continued dilution, NunaMinerals would have the option of
converting its interest into a net royalty smelter agreement ("NSR").
The NSR percentage would be determined based on a sliding scale as
defined in the joint venture agreement.
These financial statements include the following assets, liabilities,
results of operations and cash flows related to the proportionate
consolidation of Nanortalik:
<Table>
<Caption>
2003
------------
Assets $ 153,151
----------------------------------------------------------------------------
Liabilities $ 122,955
----------------------------------------------------------------------------
Expenses and net loss $ 75,904
----------------------------------------------------------------------------
Cash flows from operating activities $ 46,818
Cash flows from investing activities (141,658)
Cash flows from financing activities 106,100
</Table>
(d) RINGVASSOY GOLD PROJECT
The Ringvassoy gold project is found in a Archean Greenstone belt, in
Northern Norway. The Company has entered into a 50% earn in agreement
with Northern Shield Resources Inc, a private Canadian junior
exploration company, for completing exploration work amounting to
$750,000 over two years.
A14
<Page>
7. OTHER MINERAL PROPERTY INTERESTS (CONTINUED)
(e) MINDORO NICKEL PROJECT
During July 2001, the Company received from the Department of
Environment and Natural Resources ("DENR") in the Philippines a notice
of cancellation of the Mineral Production Agreement ("MPSA") for a
significant section of its Mindoro nickel laterite project, which had
been issued by the previous administration.
While the Company believes that it shall ultimately re-establish its
rights under the MPSA, if necessary through legal action, there can be
no absolute assurance that it will be successful. Therefore, at June
30, 2001 the Company recorded an impairment provision of $34,024,132
against its investment in the project to reduce the carrying value to
a nominal amount of $1.
During the year ended June 30, 2002, the Company expensed further
costs of $1,572,585 related to the Mindoro Nickel Project. The
majority of these costs relate to technical field costs and were
incurred prior to management's decision in September 2001 to withdraw
from all field activities relating to the project, pending the
reinstatement of the Mineral Production Agreement ("MPSA") which was
cancelled in July 2001. Effective April 2002, the Company withdrew all
activities and temporarily placed the Mindoro Nickel Project on care
and maintenance. The feasibility of future operations is dependent on
the favourable resolution of the Company's appeal to reinstate the
MPSA.
(f) ROROS PROJECT
Title to the Roros Project is secured through 55 mineral claims in
seven different municipalities in Central Norway. Due to depressed
zinc and copper prices the Company decided to suspend further
exploration activities and therefore has written down the value of
this project during the year ended June 30, 2002.
(g) GEOTHERMAL PROJECT
Effective November 22, 2001, North Pacific GeoPower Corp. ("NPGP")
acquired all of the issued and outstanding common shares of Meager
Creek Development Corporation ("MCDC") from the Company in exchange
for 97,378,558 common shares (or 82%) of NPGP's common shares. MCDC
held a licence of occupation granted by the British Columbia Ministry
of Lands and Parks, giving surface tenure to property at a geothermal
site, and a geothermal lease granted by the British Columbia Ministry
of Energy, Mines and Petroleum Resources relating to the geothermal
site.
This business combination was accounted for as a reverse takeover
using the purchase method of accounting with the Company identified as
the acquirer and NPGP being the acquiree. The results of operations
and financial position of NPGP have been consolidated from November
22, 2001, being the date that the Company obtained control. The fair
value of the net liabilities of NPGP assumed by the Company at
November 22, 2001 of $170,402 was recorded as a charge to deficit.
Concurrent with the reverse takeover, the Company acquired 10,030,823
shares of NPGP from the son of the former chairman of the Company for
cash consideration of $1,203,699. The net effect of the reverse
takeover and concurrent acquisition of 10,030,823 shares of NPGP was
the acquisition of NPGP and the dilution of the Company's interest in
the Meager Creek property. The Company subsequently participated in a
private placement for 16,700,000 shares of NPGP for cash consideration
of $2,004,000 which had the effect of further increasing its interest
to 91%. As a result of these transactions, the Company recorded a loss
on dilution of geothermal asset of $1,503,055 during the year ended
June 30, 2002, which included the $1,203,699 of cash paid to the
related party.
A15
<Page>
7. OTHER MINERAL PROPERTY INTERESTS (CONTINUED)
The Company then issued a dividend of approximately 6,400,000 shares
of NPGP, being one share of NPGP for each 20 shares held of Crew. The
accounting value of the dividend of $228,284 was determined based on
the carrying value of the NPGP shares at that time and included the
amount of the dividend withholding taxes which the Company paid on
behalf of foreign shareholders. At June 30, 2002, the Company owned
86.8% of NPGP's common shares.
During the year ended June 30, 2003, the Company granted 800,000 of
its shares in NPGP to the former Chairman, as part of a settlement
agreement.
Due to the difficulties faced by NPGP in raising necessary financing
for the geothermal project, the Company wrote down its investment in
the geothermal project $1, resulting in a provision for impairment of
$2,897,355 during the year ended June 30, 2003.
Pursuant to an agreement dated September 3, 2003, which is still
subject to regulatory approval, the Company has agreed to sell all of
its shares in NPGP to an officer, and former director, of NPGP (see
Note 18).
8. RESTRUCTURING COSTS
In order to centralize the Company's executive management, key operational
and administrative functions in one location, the Company closed its office
in Norway and relocated its head office from Vancouver to London during the
year ended June 30, 2003.
This restructuring resulted in the following costs and accrued liabilities
at June 30, 2003:
<Table>
<Caption>
Accrued
Restructuring Cash Restructuring
Costs Payments Costs at June30, 2003
------------------ ------------------- ----------------------
Workforce reduction costs $ $131,558 $ 131,558 $ -
Lease exit costs 285,315 - 285,315
Other costs 176,254 133,884 42,370
------------------------------------------------------------------------------------------------------------
$ $593,127 $ $265,442 $ $327,685
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</Table>
The workforce reduction costs of $131,558 relate to severance for five
employees who were terminated in connection with the closure of the
Vancouver and Norway offices. In addition, lease exit costs of $285,315
were incurred based on remaining committed lease payments for the Vancouver
office space, net of expected future sublease revenue. The remaining
accrued lease exit costs will be paid monthly until the lease expires in
February 2006.
A16
<Page>
9. INCOME TAXES
Future income tax assets and liabilities arise at June 30 from the
following:
<Table>
<Caption>
2003 2002
----------------- ----------------
Future income tax assets
Investments $ 1,073,716 $ 4,969,756
Mineral property interests 11,097,074 10,447,295
Property, plant and equipment 530,079 273,880
Loss carry-forwards 13,575,903 16,183,218
Share issue costs 29,000 1,030,328
Other 87,017 -
-------------------------------------------------------------------------------------------------
26,392,789 32,904,477
Valuation allowance (26,392,789) (32,904,477)
Future income tax assets - -
Future income tax liabilities
Nalunaq mineral property interest (3,156,681) (3,156,681)
Other mineral property interest (181,803) (181,803)
-------------------------------------------------------------------------------------------------
Future income tax liabilities (3,338,484) (3,338,484)
-------------------------------------------------------------------------------------------------
Future income tax liabilities, net $ (3,338,484) $ (3,338,484)
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
</Table>
A reconciliation of the provision for (recovery of) income taxes is as
follows:
<Table>
<Caption>
2003 2002 2001
-------------- ---------------- --------------
Recovery of income taxes based on
Canadian statutory tax rate of 39%
(2002 - 42%; 2001 - 45%) $ (7,368,068) $ (16,218,546) $ (12,387,479)
Add (deduct) Lower foreign tax rates 184,919 (384,139) 4,002,121
Tax effect of losses not recognized 7,056,598 19,429,203 3,273,289
Reassessment of Metorex's prior year taxes - (736,490) -
Other 126,551 (1,443,893) 764,123
------------------------------------------------------------------------------------------------------------
Provision for income taxes $ - $ 646,135 $ (4,347,946)
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</Table>
As at June 30, 2003, the Company and its subsidiaries have estimated
non-capital losses carried forward for Canadian income tax purposes of
approximately $21,900,000 (2002 - $23,100,000), which can be applied to
reduce future Canadian income taxes payable and will expire in 2004 to
2010. As at June 30, 2003 the Company's subsidiaries also have estimated
non-capital losses carried forward for Greenland, Norwegian and Philippine
income tax purposes of approximately $8.8 million, $9.4 million and $1.1
million, respectively. The loss carry-forwards in Greenland can be applied
to reduce future income taxes payable and do not expire. The other loss
carryforwards will expire in 2011 and 2012 for Norway and 2004 to 2006 for
the Philippines. The potential tax benefits of these loss carry-forwards
have been offset by recognition OF A VALUATION ALLOWANCE IN THESE FINANCIAL
STATEMENTS.
10. SHARE CAPITAL
(a) The authorized share capital at June 30, 2003 is 250,000,000 common
shares without par value (2002 - 250,000,000 common shares without par
value).
A17
<Page>
10. SHARE CAPITAL (CONTINUED)
(b) Details of changes in the issued share capital since June 30, 2001 are
as follows:
<Table>
<Caption>
NUMBER
OF SHARES AMOUNT
----------------- -------------
Balance, June 30, 2000 87,613,060 113,830,010
Issued for cash on exercise of warrants (c) 1,600,000 1,597,896
Issued for cash on private placement ((d) and (e)) 39,173,134 41,202,996
Issued for cash on exercise of stock options 120,000 120,000
---------------------------------------------------------------------------------------------------
Balance, June 30, 2001 128,506,194 156,750,902
Issued for cash on private placement (f) 10,158,101 3,364,032
---------------------------------------------------------------------------------------------------
Balance, June 30, 2002 and 2003 138,664,295 160,114,934
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</Table>
(c) During the year ended June 30, 2000, the Company issued 3,200,000
units for proceeds of $3,780,789 (net of issue costs of $219,211).
Each unit consisted of one common share and one share purchase warrant
of the Company. Each whole share purchase warrant entitles the holder
to purchase one additional common share at $1.50 per share from the
date of issue until February 17, 2001. During the year ended June 30,
2001, these share purchase warrants were repriced to $1.00 per share
and 1,600,000 share purchase warrants were exercised for aggregate
proceeds of $1,597,896 (net of issue costs of $2,104). The balance of
1,600,000 warrants expired unexercised.
(d) During the year ended June 30, 2001, the Company issued 13,800,000
common shares for proceeds of $14,499,878 (net of issue costs of
$1,094,122).
(e) During the year ended June 30, 2001, the Company issued 25,373,134
units for proceeds of $26,703,118 (net of issue costs of $1,974,941).
Each unit consisted of one common share and one-half of a share
purchase warrant of the Company. Each whole share purchase warrant
entitles the holder to purchase one additional common share at $1.47
per share from the date of issue until May 21, 2002. During the year
ended June 30, 2002, all of these share purchase warrants were
repriced to $0.43 per share and then expired unexercised.
(f) During the year ended June 30, 2002, the Company issued 10,158,101
units for proceeds of $3,364,032 (net of issue costs of $394,465).
Each unit is convertible into one common share of the Company for no
additional consideration.
(g) During the year ended June 30, 2002, the Company issued 3,750,000
warrants to purchase 3,750,000 shares of the Company at an exercise
price of $0.42 per share. Of these warrants, 1,750,000 were issued to
the Chairman and 2,000,000 were issued to the President and CEO of the
Company in exchange for total cash consideration of $275,250. On May
1, 2003, these warrants expired without being exercised and the
carrying value of these warrants, in the amount of $275,250, was
classified as contributed surplus.
(h) During the year ended June 30, 2003, the Company issued 3,750,000
warrants to purchase 3,750,000 shares of the Company at an exercise
price $0.42 per share. Of these warrants, 1,750,000 were issued to the
Chairman and 2,000,000 were issued to the President and CEO of the
Company in exchange for total cash consideration of $21,430.
(i) The Company has a Share Option Plan which authorizes the Board of
Directors of the Company to grant up to 15,000,000 options to
directors, officers and employees of Crew and any of its subsidiaries,
to acquire common shares of the Company at a price which is greater
than or equal to the fair market value of each common share on the
date the option is granted. The options are generally exercisable for
up to five years from the date of grant. At June 30, 2003, there were
2,733,500 options available for grant.
A18
<Page>
10. SHARE CAPITAL (CONTINUED)
The following table summarizes share option activity since June 30, 2001:
<Table>
<Caption>
Options outstanding
-----------------------
Weighted
Number of average
shares exercise price
--------------------------------
Balance, June 30, 2000 6,160,000 $ 1.22
Cancelled (580,000) 1.24
Exercised (120,000) 1.00
---------------------------------------------------------------------------------------------------
Balance, June 30, 2001 5,460,000 1.22
Granted 8,000,000 0.41
Cancelled (3,310,000) 1.19
---------------------------------------------------------------------------------------------------
Balance, June 30, 2002 10,150,000 0.59
Granted 5,900,000 0.39
Cancelled (4,680,000) 0.58
---------------------------------------------------------------------------------------------------
Balance, June 30, 2003 11,370,000 $ 0.49
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</Table>
The following table summarizes outstanding and exercisable share
options at June 30, 2003:
<Table>
<Caption>
Number of Weighted
Share Options Expiry Average
Outstanding Date Exercise Price
------------------ ---------------------- ------------------
20,000 October 21, 2003 $ 1.00
300,000 March 4, 2004 1.14
3,750,000 May 2, 2004 0.42
900,000 June 26, 2005 1.33
3,750,000 March 6, 2007 0.40
500,000 May 2, 2007 0.41
1,250,000 November 1, 2007 0.33
250,000 November 2, 2007 0.33
150,000 February 4, 2008 0.49
500,000 January 17, 2008 0.36
---------------------------------------------------------------------------------------------------
11,370,000 $ 0.49
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</Table>
11. CUMULATIVE TRANSLATION ADJUSTMENT
The cumulative translation adjustment comprises:
<Table>
<Caption>
2003 2002
-------------- --------------
Cumulative effect of unrealized losses on foreign
exchange translation in prior periods $ (2,769,497) $ (6,770,759)
Reduction for portion of translation adjustment related to
disposals and dilution of interest in Metorex (Note 5) 1,216,709 774,725
Decrease (increase) in unrealized loss on translation of
net assets (Note 5) 1,330,822 3,226,537
-------------------------------------------------------------------------------------------------------------
Cumulative unrealized losses on foreign exchange
translation at end of year (221,966) (2,769,497)
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</Table>
This balance represents the net unrealized foreign currency translation
losses on the Company's net investment in Metorex.
A19
<Page>
12. COMMITMENTS
The Company is committed to minimum annual non-cancellable future operating
lease payments as follows:
<Table>
<Caption>
2003 2002
-------------- ---------------
Within one year $ 542,578 $ 173,227
Years two to five 278,320 445,311
------------------------------------------------------------------------------------------------------------
$ 820,898 $ 618,538
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</Table>
Pursuant to a consulting agreement between NPGP and the former
Chairman, NPGP is committed to pay $100,000 in consulting fees in the
year ended June 30, 2004.
Since the balance sheet date the Company has approved capital
commitments totalling $7,696,721 to be incurred in relation to the
Nalunaq Gold project, its gold deposit in Greenland. This expenditure
has initiated the infrastructure required to mine and ship the ore from
Greenland. The largest single commitment has been the delivery of a
turnkey camp for seventy people. This commitment encompassed
mobilization, construction and earthworks, water and power supply and
wastewater treatment. In addition an upgrade of the access roads to the
mine was approved.
The other major commitment was the construction and preparation of the
anchor systems for the barge and bulk carrier and to mobilize and
install the 300 foot barge used as a support for the ship loader
facility. These facilities are expected to be fully operational by
October 2003.
The Company has exercised an option agreement with Altai Philippines
Mining Corporation ("APMC") in order to acquire Mineral Property
Sharing Agreements and exploration permits for the Negros sulphur
concessions. If the Company wishes to retain these rights, it must pay
to APMC an amount of US$50,000 per year for each of the next three
years, and then $125,000 per year for each year thereafter until the
project produces a minimum of 50,000 tons of ore mineral per month. If
and when this production milestone is reached, the Company will then be
obligated to pay a 25% royalty on net profits from the mining
operations. The Company has the option, at any time, of purchasing this
royalty interest from APMC for US$750,000, prior to February 4, 2007,
or for US$1,000,000 if exercised after February 4, 2007. The Company is
able to terminate this agreement at any time, in which case the
exploration rights would be forfeited and any unpaid amounts would not
be payable.
13. CONTINGENCIES
As a condition for obtaining the exploitation license for Nalunaq Gold
Mine A/S, the Company issued a guarantee to the Government of Greenland
on June 2, 2003. The guarantee covers all present and future
liabilities, such as environmental liabilities, which may be imposed on
Nalunaq Gold Mine A/S under both present and future laws of Greenland,
including future amendments which may be made to the exploitation
license. The Company has unlimited liability under the terms of this
guarantee.
A subsidiary of the Company has been named as a defendant in an action
brought by a third party claiming that the Hwine-Butre mineral
concessions in Ghana, with a book value of $3.2 million, were not
properly transferred to the Company. The Company is confident that it
has proper title to the concession and is vigorously defending its
title; however, the ultimate outcome of this action is currently not
determinable.
A20
<Page>
14. CASH FLOW STATEMENT INFORMATION
(a) CHANGE IN NON-CASH OPERATING WORKING CAPITAL ITEMS
<Table>
<Caption>
2003 2002 2001
-------------- --------------- -----------------
(Decrease) increase in
Accounts receivable $ (160,335) $ 1,419,210 $ (5,661,015)
Inventories - (1,594,979) 2,138,770
Prepaid expenses (93,871) (67,528) (144,874)
Mining assets held for sale - - 209,795
Due from associated companies - (1,722,266) -
(Decrease) increase in
Accounts payable and accrued liabilities 209,848 (6,749,043) 1,845,203
Accrued restructuring costs 327,685 - -
Due to associated companies - (86,453) 3,114
Promissory notes due to related parties 379,152 - -
---------------------------------------------------------------------------------------------------------------
$ 662,479 $ (8,801,059) $ (1,609,007)
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
</Table>
(b) NON-CASH INVESTING ACTIVITIES
During 2003 the Company recorded a non-cash addition in the amount of
$1,892,695 to its Nalunaq property interest as described in Note 3.
(c) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<Table>
<Caption>
2003 2002 2001
---------- ---------- ----------
Cash payments for interest $ 20,728 $1,531,359 $ 471,032
Cash payments for income taxes 54,109 4,620,470 1,744,801
</Table>
15. RELATED PARTY TRANSACTIONS
Related party transactions, not disclosed elsewhere in these financial
statements, comprise:
Promissory notes due to related parties of $379,152 include amounts
payable to two former directors of North Pacific GeoPower, a subsidiary
of the Company. The notes bear interest at a rate of 8% per annum and
are due on demand.
The Company also paid management fees during the year ended June 30,
2003 of $501,900 (2002 - $253,591; 2001 - $Nil) and a bonus of $Nil
(2002 - $280,513; 2001 - $Nil) to a company controlled by a new
director and President and CEO of the Company.
During the year ended June 30, 2003, law firms of which directors of
the Company were partners received total legal fees of $469,942 from
the Company (2002 - $462,024; 2001 - $Nil).
The Company paid management fees during the year ended June 30, 2003 of
$Nil (2002 -$215,433; 2001 - $443,805) and termination fees of $Nil
(2002 - $632,000; 2001- $Nil) to a company controlled by the former CEO
and Chairman of the Company.
A21
<Page>
16. SEGMENTED INFORMATION
(a) OPERATING SEGMENTS
The Company manages its commercial mining operations by the type of
commodity produced. As a result of the loss of control of the
investment in Metorex, management considers that the Company commenced
operating in one operating segment as of July 1, 2002, being the
exploration and development of mineral properties.
(b) SEGMENT INFORMATION FOR THE YEAR ENDED JUNE 30, 2002
<Table>
<Caption>
Exploration
Fluorospar and Unallocated
Antimony/ and other development corporate
Gold Coal Zinc Copper minerals activities items Total
---- ---- ---- ------ -------- ---------- ----- -----
Mineral sales $ 16,011,005 $15,734,815 $18,339,827 $44,520,523 $17,124,531 $ - $ - $111,730,701
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income 39,612 - 184,753 423,522 196,808 187,301 831,545 1,863,541
Amortization of
capital assets (566,306) (1,016,452) (1,830,930) - (694,902) (155,895) (86,630) (4,351,115)
Provisions for asset
impairments - - - (8,450,857) - (24,602,934) - (33,053,791)
Loss on investment in
Metorex Limited - - - - - - (8,036,773) (8,036,773)
Loss on dilution of
interest in
geothermal asset - - - - - - (1,503,055) (1,503,055)
Costs related to
Mindoro Nickel
Project - - - - - (1,572,585) - (1,572,585)
Interest expense - (282,609) (51,198) (1,089,101) (107,877) - (178) (1,530,963)
Other income
(expenses) (14,832,347) (16,058,602) (15,068,611) (36,758,408) (10,319,745) (2,150,176) (6,863,641) (102,051,530)
Non-controlling
interest - - - - (1,195,569) 84,372 (487,787) (1,598,984)
Income taxes 162,338 - (468,771) (1,179,822) (1,782,597) 1,109,085 1,513,632 (646,135)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 814,302 $ (1,622,848) $ 1,105,070 $ (2,534,143) $ 3,220,649 $(27,100,832) $(14,632,887) $(40,750,689)
- ------------------------------------------------------------------------------------------------------------------------------------
Additions to capital
assets $ 132,771 $ 1,966,989 $ 215,440 $ 10,246,254 $ 1,598,267 $ 8,733,637 $ 404,083 $ 23,297,441
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets at
June 30, 2002 $ - $ - $ - $ - $ - $ 46,659,056 $ 35,426,878 $ 82,085,934
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
(c) SEGMENT INFORMATION FOR THE YEAR ENDED JUNE 30, 2001
<Table>
<Caption>
Exploration
Fluorospar and Unallocated
Antimony/ and other development corporate
Gold Coal Zinc Copper minerals activities items Total
---- ---- ---- ------ -------- ---------- ----- -----
Mineral sales $10,897,227 $13,742,753 $12,977,637 $33,222,423 $8,862,098 $ - $ - $ 79,702,138
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income 61,994 972 144,200 327,851 256,140 15,253 543,606 1,350,016
Amortization of
capital assets (382,655) (1,041,468) (1,351,246) (350,006) (489,931) (48,479) (404,697) (4,068,482)
Provision for
decline in
value of Mindoro
nickel project - (34,024,132) (34,024,132)
Equity earnings
from
investment in
Metorex - 3,540,665 3,540,665
Interest expense - (231,265) (1,166) (336,597) (48,390) (20,017) 3,161 (634,274)
Other income -
(expenses) (10,318,288) (13,531,506) (11,070,772) (25,398,683) (6,322,463) (2,175,300) (4,576,650) (73,393,662)
Non-controlling
interest - 122,046 (242,731) - (2,983,067) (3,103,752)
Income taxes - (589,628) (1,876,158) (685,437) 7,499,169 4,347,946
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 258,278 $(1,060,514) $ 109,025 $ 5,710,876 $ 1,329,286 $(28,753,506) $(3,876,982) $(26,283,537)
- ------------------------------------------------------------------------------------------------------------------------------------
Additions to
capital
assets $ 551,500 $ 1,736,699 $ 267,517 $13,372,861 $ 2,257,526 $ 12,377,822 $ 71,856 $ 30,635,781
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets at
June 30,2001 $10,969,780 $13,552,649 $11,190,362 $77,250,797 $31,872,231 $ 53,142,782 $27,176,685 $225,155,286
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
(d) GEOGRAPHIC SEGMENTS
All of the Company's mineral sales revenues are derived from
the African geographic segment.
A22
<Page>
16. SEGMENTED INFORMATION (CONTINUED)
Capital assets consist of property, plant and equipment, geothermal
project and mineral property interests in the following locations:
<Table>
<Caption>
2003 2002
---- ----
Greenland $45,363,428 $34,460,247
Africa 3,213,200 3,351,122
Europe 90,550 143,405
Philippines 88,716 175,365
Canada 5,217 3,080,349
----------- -----------
$48,761,111 $41,210,488
----------- -----------
----------- -----------
</Table>
In addition, the Company had short-term investments in associated
companies in Africa with a carrying value of $ 3,716,398 at June 30,
2003 ($28,809,532 at June 30, 2002).
17. FINANCIAL INSTRUMENTS
(a) CREDIT RISK
The Company's credit risk is primarily attributable to
receivables. The amounts presented in the balance sheet are
net of allowances for doubtful receivables, estimated by the
Company's management based on the current economic
environment.
The credit risk on liquid funds is limited because the
counter-parties are banks with high credit ratings.
(b) FOREIGN CURRENCY RISK
The Company has foreign currency investments and liabilities
and, as a result, the Company is subject to foreign exchange
risk from fluctuations in foreign exchange rates. The Company
does not currently use derivative instruments to manage this
risk.
(c) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of the Company's financial instruments,
which include cash, accounts receivable due from Metorex
Limited, accounts payable and accrued liabilities and
promissory notes, approximate their respective fair values.
18. SUBSEQUENT EVENTS
Subsequent events not disclosed elsewhere in these financial statements
consist of the following:
(a) SALE OF NORTH PACIFIC GEOPOWER CORP.
On September 3, 2003 the Company entered into an agreement to
sell its 86.1% shareholding in North Pacific GeoPower Corp.
("NPGP") to Kenneth McLeod, an officer and former director of
NPGP. The transaction is subject to regulatory approval.
In consideration for the sale of this subsidiary, the Company
will receive cash consideration of $232,312, will forgive
amounts of $562,091 which were payable by NPGP to the Company
and will be entitled to receive the balance owing by NPGP to
the Company of $833,078 prior to December 31, 2011. The NPGP
outstanding debt of $569,254 will be assumed by the purchaser.
This transaction will result in an accounting gain of
approximately $1.3 million for the Company to be recorded in
the year ended June 30, 2004.
A23
<Page>
18. SUBSEQUENT EVENTS (CONTINUED)
(b) CONVERTIBLE BOND ISSUE
On August 28, 2003, the Company announced that it placed a NOK
120 million (approximately $22.1 million) three-year senior
unsecured convertible bond with three major international
institutions based in London. The bond bears a 9% coupon,
payable semi-annually in arrears, and the principal portion of
the bond is convertible, at the option of the holder, into
common shares of the Company at a conversion price of NOK 3.60
($0.66) per share. The maximum number of shares that may be
issued upon conversion of the bond is 33.3 million shares. The
closing date for the bond issue will be September 8, 2003 and
the principal portion is fully repayable on September 8, 2006.
An application for the listing of the bond including the
prospectus will be submitted to the Oslo Stock Exchange.
19. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in
accordance with Canadian GAAP which, in the case of the Company, differ
in some respects from U.S. GAAP. The differences between Canadian and
U.S. GAAP and their effect on the Company's consolidated financial
statements are summarized below:
Consolidated Balance Sheets
<Table>
<Caption>
2003 2002
---------------------- ---------------------
Total assets under Canadian GAAP $ 68,393,404 $ 82,085,934
Decrease in Nalunaq mineral property interest due to expensing
of exploration costs (b) (23,800,122) (21,259,848)
Decrease in other mineral property interests due to expensing
of exploration costs (b) (271,656) (2,493,361)
Effect of application of foreign exchange translation (d)
Increase (decrease) in carrying value of
Nalunaq mineral property interest 765,387 452,393
Other assets (20,912) 7,644
-----------------------------------------------------------------------------------------------------------------
Total assets under U.S. GAAP $ 45,066,101 $ 58,792,762
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Total liabilities under Canadian GAAP $ 10,911,711 $ 8,311,845
Reduction of future tax liability related to expensing of
exploration costs (b) (3,156,681) (3,156,681)
Reduction of non-controlling interest due to expensing of
exploration costs (b) (3,525,284) (1,743,861)
-----------------------------------------------------------------------------------------------------------------
Total liabilities under U.S. GAAP $ 4,229,746 $ 3,411,303
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Total shareholders' equity under Canadian GAAP $ 57,481,693 $ 73,774,089
Cumulative adjustment to mineral property interests, net of
future income taxes and non-controlling interest (b) (17,389,813) (18,852,667)
Effect of different treatment of the available-for-sale
investments in Metorex Limited and Asia Pacific Resources
on: (c), (e)
Cumulative other comprehensive income 4,030,905 -
Deficit (4,030,905) -
Effect of different treatment of the Metorex consolidation of
interests on: (c)
Cumulative other comprehensive income (161,079) (1,236,750)
Deficit 161,079 1,236,750
Effect of application of foreign exchange translation on: (d)
Cumulative other comprehensive income 1,068,541 784,073
Deficit (324,066) (324,066)
-----------------------------------------------------------------------------------------------------------------
Total shareholders' equity under U.S. GAAP $ 40,836,355 $ 55,381,429
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
</Table>
A24
<Page>
19. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
Consolidated Statements of Income
<Table>
<Caption>
2003 2002 2001
------------- ------------- -------------
Net (loss) income under Canadian GAAP $ (18,861,357) $ (40,750,689) $ (26,283,537)
Write-off of additional US GAAP carrying value of
impaired assets due to different purchase price
allocation in prior year acquisitions (a) (3,311,657) (10,849,060)
Release of future income tax liability related to
write-off of excess purchase price allocated to
Mindex ASA (a) 4,715,834
Mining exploration expenditures expensed in current
period (b) 1,591,517 (10,033,368) (7,701,184)
Future income tax recovery (expense) related to
expensing of exploration costs (b) (100,685) 3,257,366
Non-controlling interest related to expensing of
exploration costs (b) (128,663)
Effect of different treatment of the Metorex
consolidation of interests on: (c)
(Loss) gain on investment in Metorex Limited (1,075,671) 2,882,811
Amortization 632,470
Provision for future income taxes -- (189,741)
Loss on investment in Metorex Limited (c) 1,143,555
Provision for impairment of investment in Asia Pacific
Resources (e) 2,887,350 14,272,054 (14,272,054)
Effect of application of foreign exchange translation
on: (d)
Amortization -- 4,283
Provision for impairment of other mineral
property interests and Mindoro Nickel Project (177,789) 672,779
Foreign exchange (543,961)
Effect of unrealized gain on derivatives on: (f)
Interest and other income (343,099) 343,099
Provision for future income taxes 102,930 (102,930)
Non-controlling interest -- 112,880 (112,880)
------------- ------------- -------------
Net loss under U.S. GAAP $ (14,443,269) $ (37,346,612) $ (50,429,516)
------------- ------------- -------------
------------- ------------- -------------
Fair value of the re-priced warrants (j) $ (1,035,907) $ (456,556)
------------- ------------- -------------
------------- ------------- -------------
Net loss for the period attributable to common
shareholders under U.S. GAAP $ (14,443,269) $ (38,382,519) $ (50,886,072)
------------- ------------- -------------
------------- ------------- -------------
Net loss per share under U.S. GAAP $ (0.10) $ (0.29) $ (0.50)
------------- ------------- -------------
------------- ------------- -------------
Diluted net loss per share under U.S. GAAP $ (0.10) $ (0.29) $ (0.50)
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of shares outstanding under
U.S. GAAP 138,664,295 131,790,183 101,708,357
------------- ------------- -------------
------------- ------------- -------------
</Table>
A25
<Page>
19. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
Consolidated Statements of Cash Flows
<Table>
<Caption>
2003 2002 2001
--------------------- --------------------- ------------------
Cash flows from operating activities under
Canadian GAAP $ (6,580,105) $ (7,049,425) $ 3,901,361
Reclassification of exploration
expenditures (b) (901,844) (11,183,482) (7,701,184)
-------------------------------------------------------------------------------------------------------------
Cash flows from operating activities under
U.S. GAAP $ $(7,481,949) $ (18,232,907) $ (3,799,823)
-------------------------------------------------------------------------------------------------------------
Cash flows from financing activities under
Canadian GAAP $ $2,434,481 $ 7,679,075 $ 52,972,455
Reclassification of bank indebtedness (i) 1,361,120
-------------------------------------------------------------------------------------------------------------
Cash flows from financing activities under
U.S. GAAP $ $2,434,481 $ 7,679,075 $ 54,333,575
-------------------------------------------------------------------------------------------------------------
Cash flows from investing activities under
Canadian GAAP $ $6,339,690 $ (35,048,982) $ (29,882,471)
Reclassification of exploration
expenditures (b) (901,844) 11,183,482 7,701,184
-------------------------------------------------------------------------------------------------------------
Cash flows from investing activities under
U.S. GAAP $ $5,437,846 $ (23,865,500) $ (22,181,287)
-------------------------------------------------------------------------------------------------------------
</Table>
(a) ACQUISITION OF SUBSIDIARIES
During the year ended June 30, 1999, the Company issued common
shares to acquire 100% of the issued and outstanding shares of
Mindex ASA and Botswana Diamondfields Inc.
Under U.S. GAAP, the fair value of the share consideration
paid in an acquisition is determined as of the date the terms
are agreed to and announced based on an evaluation of the
trading prices of the Company's shares and other relevant
market conditions for a reasonable period of time before and
after the announcement date. In accordance with Canadian GAAP
at the time of these acquisitions, the fair value of the share
consideration paid was determined as of the date that assets
were received and consideration given unless control was
effectively transferred at an earlier date. As a result, the
consideration paid for and allocated to the net assets in the
Mindex ASA and Botswana Diamondfields Inc. acquisitions
increased by $10,021,146 and $4,553,528, respectively, under
U.S. GAAP at the dates of acquisition.
During the year ended June 30, 2001, the additional
consideration allocated to Mindex ASA under U.S. GAAP was
written off due to the decline in value of the Mindoro Nickel
Project (Note 7 (e)). During the year ended June 30, 2002, the
additional consideration allocated to Botswana Diamondfields
Inc. was written off due to the impairment of its investment
in Asia Pacific Resources (Note 6).
(b) DEFERRED EXPLORATION COSTS
Under U.S. GAAP, exploration costs related to mineral
properties are expensed until there is substantial evidence
that a commercial body of ore has been located and can be
exploited by the Company.
A26
<Page>
19. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
In March 2000, the Accounting Standards Board of the Canadian
Institute of Chartered Accountants ("CICA") issued Accounting
Guideline No. 11 entitled ENTERPRISES IN THE DEVELOPMENT STAGE
- ("AcG 11"). The guideline addresses three distinct issues
including (i) capitalization of costs/expenditures, (ii)
impairment and (iii) disclosure. Prior to its issuance,
development stage entities were exempt from certain aspects of
Canadian GAAP.
In March 2002, the Emerging Issues Committee issued Abstract
126, ACCOUNTING BY MINING ENTERPRISES FOR EXPLORATION COSTS,
which provided further guidance on AcG 11. Abstract 126
concluded that a mining enterprise that has not commenced
operations or objectively established mineral reserves is not
precluded from considering exploration costs to have the
characteristics of property, plant and equipment. In
accordance with this guidance, under Canadian GAAP the Company
capitalizes all costs related to the acquisition and
exploration of mineral properties until either commercial
production is established or a property is abandoned.
During 2003, the adjustment relates principally to the
reversal of the loss on geothermal asset which was recognized
under US GAAP in prior years, net of exploration expenses
incurred in 2003. Effective September 1, 2002, Nalunaq Gold
Mine A/S commenced capitalizing development costs as a result
of the completion of the bankable feasibility study.
(c) CARRYING VALUE OF THE INVESTMENT IN METOREX LIMITED
In 2000, under U.S. GAAP, the Company accounted for the
consolidation of interests held by Metorex Limited as
described in Note 5 in accordance with the principles outlined
in EITF 98-7, ACCOUNTING FOR EXCHANGES OF SIMILAR EQUITY
METHOD INVESTMENTS, which resulted in no dilution gain being
recognized on the transaction. Under Canadian GAAP, the
transaction was measured at fair value as it represented a
substantive change in ownership and the culmination of the
earnings process, which resulted in the recognition of a
dilution gain.
In 2001 when the Company began to consolidate its investment
in Metorex, the purchase consideration under U.S. GAAP was
lower than under Canadian GAAP. As a result, the excess
purchase price allocated to property, plant and equipment was
lower under U.S. GAAP than Canadian GAAP, with a related
adjustment necessary to reduce amortization expense and future
income tax liabilities. However, in 2002 when the Company
recorded a loss on the investment in Metorex, the amount of
the loss was lower under U.S. GAAP than Canadian GAAP. As a
result, the carrying value of the Company's investment in
Metorex at June 30, 2002 is the same under U.S. GAAP and
Canadian GAAP and no further adjustment is required.
The different carrying values for Metorex, as a result of the
different treatment of the consolidation of interests in 2000,
have also resulted in a different cumulative translation
adjustment, or other comprehensive income, under US GAAP.
During the year ended June 30, 2003, $1,075,671 of this
difference was recognized as a component of net loss under US
GAAP as an additional foreign exchange loss realized on the
disposal of Metorex. The remaining balance of additional
cumulative translation adjustment of $161,079 will be
recognized in the US GAAP income statement when the remaining
Metorex investment is disposed.
In the year ended June 30, 2003 the Company began accounting
for the investment in Metorex as a short-term investment,
which are carried at the lower of cost or market value under
Canadian GAAP. Under US GAAP, the investment in Metorex is now
accounted for as an available-for-sale investment in
accordance with SFAS No. 115, ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES. As a result, the
unrealized loss at June 30, 2003 of $1,143,555 is recognized
on the income statement under Canadian GAAP, but is included
as a separate component of shareholders' equity under US GAAP.
A27
<Page>
19. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
(d) FOREIGN EXCHANGE
Under U.S. GAAP, the Company is required to account for
foreign exchange gains and losses arising from translation of
its foreign subsidiaries' financial statements in accordance
with the provisions of SFAS No. 52, FOREIGN CURRENCY
TRANSLATION. Accordingly, all assets and liabilities on the
foreign financial statements are translated using the current
exchange rate with gains and losses resulting from the
translation being recorded as a separate component of
shareholders' equity. Under Canadian GAAP, Crew Norway AS and
Nalunaq Gold Mine A/S are considered integrated subsidiaries
and accordingly, the temporal method of foreign currency
translation is used whereby non-monetary assets and
liabilities are translated using the exchange rates prevailing
on the respective dates of the transactions.
(e) INVESTMENT IN ASIA PACIFIC RESOURCES
Under U.S. GAAP, the Company is required to account for its
investment in Asia Pacific Resources in accordance with the
provisions of SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS
IN DEBT AND EQUITY SECURITIES. In accordance with this
standard, this investment is classified as available-for-sale
and is carried at its market value with the unrealized loss
being included as a separate component of shareholders' equity
unless there is an other-than-temporary decline in fair value
as determined by reference to recent SEC guidance, in which
case the investment is written down to fair value through the
statement of income. This writedown was recorded under U.S.
GAAP during the year ended June 30, 2001. Under Canadian GAAP,
this investment is carried at cost less any provision for
other than temporary decline in value as determined by
reference to the criteria for determining impairment under
Canadian GAAP. As at June 30, 2002 the carrying value of the
Company's investment in Asia Pacific Resources was the same
under Canadian and U.S. GAAP.
In the year ended June 30, 2003 the Company began accounting
for the investment in Asia Pacific as a short-term investment,
which is carried at the lower of cost or market value under
Canadian GAAP. Under US GAAP, this investment continues to be
classified as an available for sale investment. Therefore, the
unrealized loss of $2,887,350 is recognized on the income
statement under Canadian GAAP, but is included in a separate
component of shareholders' equity under US GAAP.
(f) FINANCIAL INSTRUMENTS
In accordance with SFAS 133, Accounting for Derivative
Instruments and Hedging Activities, which was subsequently
amended by SFAS 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, the Company
recognizes the fair value of derivatives, which do not meet
the definition of hedges under SFAS 133, on the balance sheet
as assets or liabilities. The gain or loss that results from
revaluing derivatives, which do not meet the definition of
hedges under SFAS 133, each period is credited or charged to
the statement of income. Under Canadian GAAP, the Company's
derivatives, which were all held by Metorex Limited, were
designated as hedges on future copper and gold revenues,
therefore no financial statement recognition was required.
A28
<Page>
19. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
(g) COMPREHENSIVE INCOME
SFAS No. 130, REPORTING COMPREHENSIVE INCOME, established
standards for the reporting and display of comprehensive
income and its components. The impact of SFAS No. 130 on the
Company's financial statements is as follows:
<Table>
<Caption>
2003 2002 2001
----------------- ----------------- ----------------
Net loss under U.S. GAAP $ (14,443,269) $ (38,382,519) $ (50,886,072)
Other comprehensive income
Effect of application of
foreign exchange translation (3,907,669) 7,430,288 (5,632,104)
Adjustment of unrealized losses
on available-for-sale
investments (4,030,905) - 11,456,235
----------------- ----------------- ----------------
Comprehensive net loss under
U.S. GAAP $ (22,381,843) $ (30,952,231) $ (45,061,941)
----------------- ----------------- ----------------
----------------- ----------------- ----------------
Comprehensive loss per share
under U.S. GAAP $ (0.16) $ (0.23) $ (0.44)
----------------- ----------------- ----------------
----------------- ----------------- ----------------
</Table>
(h) STOCK-BASED COMPENSATION
The Company previously adopted, for U.S. GAAP purposes, the
accounting for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board ("APB")
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES.
Accordingly, since stock options are granted at the quoted
market value of the Company's common shares at the date of the
grant, there is no compensation cost to be recognized by the
Company.
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
requires the use of the fair value based method of accounting
for stock options. Under this method, compensation cost is
measured at the grant date based on the fair value of the
options granted and is recognized over the vesting period.
SFAS No. 123, however allows the Company to continue to
measure the compensation cost of employees in accordance with
APB No. 25. The Company has adopted the disclosure-only
provisions of SFAS No. 123.
Under Canadian GAAP, the Company adopted substantially similar
requirements effective July 1, 2002 on a prospective basis for
stock options issued in the current and future years as
described in Note 2 (j). The US GAAP difference in the
calculation of the additional stock-based compensation cost in
2003 relates to the impact of stock options issued in prior
years which vested in 2003 and are therefore included in the
pro forma calculation for US GAAP purposes.
A29
<Page>
19. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
The following pro forma financial information presents the net loss and
the loss per share had the Company adopted SFAS 123 for all stock
options issued to directors, officers and employees in the years ended
June 30,
<Table>
<Caption>
2003 2002 2001
------------------ ------------------ ----------------
Net loss for the year under
U.S. GAAP $ (14,443,269) $ (38,382,519) $ (50,886,072)
Additional stock based
compensation cost (888,342) (678,675) (941,362)
------------------ ------------------ ----------------
Pro forma net loss $ (15,331,611) $ (39,061,194) $ (51,827,434)
------------------ ------------------ ----------------
Pro forma basic and diluted
loss per share $ (0.11) $ (0.30) $ (0.51)
------------------ ------------------ ----------------
</Table>
The additional stock-based compensation costs in the above table were
determined using a Black-Scholes option pricing model assuming no
dividends are to be paid and the following weighted-average
assumptions:
<Table>
<Caption>
2003 2002 2001
----------- ----------- -----------
Expected life (years) 2.5 3.1 N/A
Expected volatility 66% 63% N/A
Risk-free interest rate 3.9% 4.4% N/A
</Table>
(i) STATEMENT OF CASH FLOWS
Under U.S. GAAP, the change in bank indebtedness would be
classified as a financing activity rather than as a component
of the cash position at the beginning and end of the period.
The effect of this difference would be to increase cash from
financing activities and net cash inflow by $Nil for the year
ended June 30, 2003 (2002 - $Nil; 2001 - $1,361,120).
(j) WARRANTS
Under U.S. GAAP, the share purchase warrants described in Note
10 (c) which were re-priced to $1.00 per share and had their
term extended to March 17, 2001, are treated as an issue of
new warrants and recorded as a distribution to shareholders in
the amount of $456,556, based on the fair value of the revised
warrants on date of re-pricing.
The re-pricing of share purchase warrants in the year ended
June 30, 2002, as described in Note 10 (e), was recorded as a
distribution to shareholders in the amount of $1,035,907,
based on the incremental fair value granted to warrant holders
on the date of re-pricing. Under Canadian GAAP there is no
specific requirement to record the effect of these
re-pricings.
(k) RECENTLY ISSUED ACCOUNTING STANDARDS
In January 2003, the FASB issued Interpretation No. 46 (FIN
46), CONSOLIDATION OF VARIABLE INTEREST ENTITIES, an
Interpretation of ARB No. 51. FIN 46 requires certain variable
interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the
entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk
for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or
acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or
annual period beginning after December 15, 2003. The Company
is currently assessing the impact of FIN 46 but does not
expect that it will have a material impact on the Company's
results of operations and financial condition.
A30
<Page>
19. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CONTINUED)
In November 2002, the FASB issued FASB Interpretation No. 45
("FIN 45"), GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS
FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS
OF OTHERS. FIN 45 requires that upon issuance of a guarantee,
a guarantor must recognize a liability for the fair value of
an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and
annual financial statements about the obligations associated
with guarantees issued. The recognition provisions of FIN 45
became effective for any guarantees issued or modified after
December 31, 2002. The Company has adopted the requirements of
FIN 45, which have not had a material impact on the Company's
results of operations or financial position.
In April 2003, the FASB issued Statement No. 149 ("SFAS No.
149"), AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES. SFAS No. 149 is intended to result in
more consistent reporting of contracts as either freestanding
derivative instruments subject to Statement 133 in its
entirety, or as hybrid instruments with debt host contracts
and embedded derivative features. In addition, SFAS No. 149
clarifies the definition of a derivative by providing guidance
on the meaning of initial net investments related to
derivatives. SFAS No. 149 is effective for contracts entered
into or modified after June 30, 2003. The Company does not
believe the adoption of SFAS No. 149 will have a material
effect on its consolidated financial position, results of
operations or cash flows.
In May 2003, the FASB issued Statement No. 150 ("SFAS No.
150"), ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH
CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS No. 150
establishes standards for classifying and measuring as
liabilities certain financial instruments that embody
obligations of the issuer and have characteristics of both
liabilities and equity. SFAS No. 150 represents a significant
change in practice in the accounting for a number of financial
instruments, including mandatorily redeemable equity
instruments and certain equity derivatives. SFAS No. 150 is
effective for all financial instruments created or modified
after May 31, 2003, and to other instruments as of September
1, 2003. The Company will adopt the provisions of SFAS No. 150
on July 1, 2003. The Company does not expect that the adoption
of this Statement will have a material impact on its results
of operations and financial position.
A31