UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of JANUARY, 2009.
Commission File Number: 0-30390
ROCHESTER RESOURCES LTD
- --------------------------------------------------------------------------------
(Translation of registrant's name into English)
#1305 - 1090 West Georgia Street, Vancouver, British Columbia, V6E 3V7, Canada
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F: FORM 20-F [X] FORM 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _______
Indicate by check mark whether the registrant by furnishing the information
contained in this Form, is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
YES [ ] NO [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3- 2(b): 82-_____________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
ROCHESTER RESOURCES LTD
Date: January 29, 2008 /s/ Nick DeMare
----------------------------- -------------------------------------
Nick DeMare,
Chairman
ROCHESTER RESOURCES LTD.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
MANAGEMENT'S COMMENTS ON UNAUDITED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements of
Rochester Resources Ltd. for the six months ended November 30, 2008, have been
prepared by and are the responsibility of the Company's management. These
statements have not been reviewed by the Company's external auditors.
ROCHESTER RESOURCES LTD.
INTERIM CONSOLIDATED BALANCE SHEETS
(UNAUDITED - PREPARED BY MANAGEMENT)
NOVEMBER 30, MAY 31,
2008 2008
$ $
ASSETS
CURRENT ASSETS
Cash 48,312 948,093
Amounts receivable (Note 3) 1,464,864 1,905,596
Prepaid expenses and deposits 154,279 198,352
Inventories (Note 4) 581,836 873,902
------------ ------------
2,249,291 3,925,943
IVA TAX RECEIVABLE - 579,774
MINERAL PROPERTY INTERESTS (NOTE 5) 21,949,881 26,204,499
PROPERTY, PLANT AND EQUIPMENT (NOTE 6) 6,163,358 5,018,199
------------ ------------
30,362,530 35,728,415
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 3,716,798 2,200,022
Current portion of long-term debt (Note 7) 901,223 1,115,457
------------ ------------
4,618,021 3,315,479
DEPOSIT (NOTE 5) 300,000 -
LONG-TERM DEBT (NOTE 7) 1,614,397 693,429
ASSET RETIREMENT OBLIGATION (NOTE 15) 669,389 640,006
FUTURE INCOME TAX LIABILITIES 2,000,000 4,098,760
------------ ------------
9,201,807 8,747,674
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (NOTE 8) 31,100,671 30,281,745
CONTRIBUTED SURPLUS (NOTE 10) 4,326,335 4,207,560
DEFICIT (14,266,283) (7,508,564)
------------ ------------
21,160,723 26,980,741
------------ ------------
30,362,530 35,728,415
============ ============
NATURE OF OPERATIONS AND GOING CONCERN (NOTE 1)
SUBSEQUENT EVENTS (NOTE 17)
APPROVED BY THE BOARD
/s/ EDUARDO LUNA , Director
- ------------------
/s/ NICK DEMARE , Director
- ------------------
The accompanying notes are an integral part of these
interim consolidated financial statements.
ROCHESTER RESOURCES LTD.
INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(UNAUDITED - PREPARED BY MANAGEMENT)
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
---------------------------- ----------------------------
2008 2007 2008 2007
$ $ $ $
REVENUE 739,123 2,987,744 2,447,440 4,754,527
COST OF OPERATIONS (1,548,315) (1,920,735) (3,747,189) (3,236,573)
DEPLETION AND AMORTIZATION (108,405) (261,933) (387,415) (499,340)
------------ ------------ ------------ ------------
OPERATING PROFIT (LOSS) (917,597) 805,076 (1,687,164) 1,018,614
------------ ------------ ------------ ------------
EXPENSES
General and administration 581,862 433,655 1,012,722 827,853
Accretion of reclamation obligation 20,749 11,769 29,383 24,323
Interest expense on long-term debt 40,057 28,322 58,191 62,868
Stock-based compensation (Note 9) 588 855,625 79,655 1,362,410
------------ ------------ ------------ ------------
643,256 1,329,371 1,179,951 2,277,454
------------ ------------ ------------ ------------
LOSS BEFORE OTHER ITEMS (1,560,853) (524,295) (2,867,115) (1,258,840)
------------ ------------ ------------ ------------
OTHER ITEMS
Write-down of mineral property
interests (Note 5(a)) (6,000,000) - (6,000,000) -
Interest and other income 9,094 10,274 22,317 14,442
Foreign exchange gain (loss) 56,856 40,311 (11,681) 9,161
------------ ------------ ------------ ------------
(5,934,050) 50,585 (5,989,364) 23,603
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (7,494,903) (473,710) (8,856,479) (1,235,237)
FUTURE INCOME TAX RECOVERY 2,060,729 - 2,098,760 -
------------ ------------ ------------ ------------
NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD (5,434,174) (473,710) (6,757,719) (1,235,237)
============ ============ ============ ============
BASIC AND DILUTED LOSS PER SHARE $(0.16) $(0.02) $(0.20) $(0.04)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 34,601,022 30,894,046 33,716,542 30,307,517
============ ============ ============ ============
The accompanying notes are an integral part of these
interim consolidated financial statements.
ROCHESTER RESOURCES LTD.
INTERIM CONSOLIDATED STATEMENTS OF DEFICIT
(UNAUDITED - PREPARED BY MANAGEMENT)
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
---------------------------- ----------------------------
2008 2007 2008 2007
$ $ $ $
DEFICIT - BEGINNING OF PERIOD (8,832,109) (76,176,971) (7,508,564) (75,415,444)
ELIMINATION OF DEFICIT (Note 8(a)) - 71,000,128 - 71,000,128
------------ ------------ ------------ ------------
(8,832,109) (5,176,843) (7,508,564) (4,415,316)
NET LOSS FOR THE PERIOD (5,434,174) (473,710) (6,757,719) (1,235,237)
------------ ------------ ------------ ------------
DEFICIT - END OF PERIOD (14,266,283) (5,650,553) (14,266,283) (5,650,553)
============ ============ ============ ============
The accompanying notes are an integral part of these
interim consolidated financial statements.
ROCHESTER RESOURCES LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - PREPARED BY MANAGEMENT)
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
---------------------------- ----------------------------
2008 2007 2008 2007
$ $ $ $
CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net loss for the period (5,434,174) (473,710) (6,757,719) (1,235,237)
Adjustment for items not involving cash
Depletion and amortization 108,405 261,933 387,415 499,340
Accretion of reclamation obligation 20,749 11,770 29,383 24,323
Stock-based compensation 588 855,625 79,655 1,362,410
Interest expense (1,570) (1,053) 1,117 8,500
Foreign exchange (67,804) (71,088) 51,866 (91,663)
Write-down of mineral property interests 6,000,000 - 6,000,000 -
Future income tax recovery (2,060,729) - (2,098,760) -
------------ ------------ ------------ ------------
(1,434,535) 583,477 (2,307,043) 567,673
Decrease (increase) in amounts receivable 471,952 (1,138,997) 783,269 (1,548,342)
(Increase) decrease in prepaid expenses
and deposits (18,841) 19,164 44,073 31,877
Decrease in inventories 121,401 426,607 292,066 414,672
Decrease (increase) in IVA tax receivable 166,037 (170,067) 237,237 (312,469)
Increase (decrease) in accounts payable
and accrued liabilities (100,407) (29,917) 605,535 47,714
------------ ------------ ------------ ------------
(794,393) (309,733) (344,863) (798,875)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of common shares 1,000,350 4,314,274 1,000,350 4,474,699
Share issue costs (142,304) (121,221) (142,304) (121,221)
Proceeds from long-term debt 578,318 - 1,162,968 -
Payment on long-term debt (133,448) (222,592) (508,100) (460,620)
Deposit received 300,000 - 300,000 -
------------ ------------ ------------ ------------
1,602,916 3,970,461 1,812,914 3,892,858
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (780,520) (68,908) (1,247,525) (171,123)
Additions to mineral property interests (89,453) (636,718) (1,120,307) (1,272,174)
------------ ------------ ------------ ------------
(869,973) (705,626) (2,367,832) (1,443,297)
------------ ------------ ------------ ------------
(DECREASE) INCREASE IN CASH FOR THE PERIOD (61,450) 2,955,102 (899,781) 1,650,686
CASH - BEGINNING OF PERIOD 109,762 376,337 948,093 1,680,753
------------ ------------ ------------ ------------
CASH - END OF PERIOD 48,312 3,331,439 48,312 3,331,439
============ ============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION (Note 14)
The accompanying notes are an integral part of these
interim consolidated financial statements.
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
1. NATURE OF OPERATIONS AND GOING CONCERN
Rochester Resources Ltd. (the "Company") is engaged in the exploration,
development and operation of its Mina Real Mine and the exploration of
its Santa Fe Property, all located in Mexico.
The amounts shown as mineral property interests represent net costs to
date, less amounts depleted and do not necessarily represent present or
future values. The recoverability of these amounts and any additional
amounts required to place these properties into commercial production
are dependent upon certain factors. These factors include the existence
of ore deposits sufficient for commercial production and the Company's
ability to obtain the required additional financing necessary to
develop its mineral property interests.
During the six months ended November 30, 2008 the Company incurred a
net loss of $6,757,719 and, as at November 30, 2008, the Company had an
accumulated deficit of $14,266,283 and a working capital deficit of
$2,368,730. In addition, operations at the Mina Real Mine have been
intermittent during the quarter ended November 30, 2008 while the
Company focuses on the development of its mineral property interests to
provide sufficient mill feed to maintain mill operations at a steady
rate of production. The Company requires additional funding to maintain
its ongoing exploration programs and property commitments, operations
and administration, as well as meeting it debt obligations as they come
due. The Company is continuing in its efforts to generate sufficient
cash from its operations or raise funds to meet its ongoing liabilities
as they fall due. However, there can be no assurance that the Company
will be successful in its efforts, in which case the Company may be
unable to meet its obligations. Should the Company be unable to realize
on its assets and discharge its liabilities in the normal course of
business, the net realizable value of its assets may be materially less
than the amounts recorded on the balance sheet. These consolidated
financial statements do not include any adjustments to the amount and
classification of recorded assets and liabilities that night be
necessary should the Company be unable to meet its obligations or
continue operations.
Subsequent to November 30, 2008, the Company entered into agreements to
raise $1,050,000 from the issuance of common shares and $2,950,000 from
the sale of a 20% equity interest in the Company's 100% owned
subsidiary, Mina Real Mexico S.A. de C.V. ("Mina Real"), as described
in Note 17. This financing addressed the Company's immediate needs but
does not provide all the financing necessary to fully implement the
Company's operating plans.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
interim consolidated financial statements and accompanying notes.
Actual results could differ from those estimates. The interim
consolidated financial statements have, in management's opinion, been
properly prepared using careful judgement with reasonable limits of
materiality. These interim consolidated financial statements should be
read in conjunction with the most recent annual consolidated financial
statements. The significant accounting policies follow that of the most
recently reported annual financial statements.
ADOPTION OF NEW ACCOUNTING STANDARDS
Effective June 1, 2007, the Company adopted the new recommendations of
the Canadian Institute of Chartered Accountants ("CICA") under, Section
3862, FINANCIAL INSTRUMENTS DISCLOSURES, Section 3863, FINANCIAL
INSTRUMENT - PRESENTATION, and Section 1535, CAPITAL DISCLOSURES.
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FINANCIAL INSTRUMENTS
Section 3862 requires entities to provide disclosures in their
financial statements that enable users to evaluate (a) the significance
of financial instruments for the entity's financial position and
performance; and (b) the nature and extent of risks arising from
financial instruments to which the entity is exposed during the period
and at the balance sheet date, and how the entity manages those risks.
The principles in this section complement the principles for
recognizing, measuring and presenting financial assets and financial
liabilities in Section 3855, FINANCIAL INSTRUMENTS - RECOGNITION AND
MEASUREMENT, Section 3863, and Section 3865, HEDGES.
Section 3863 is to enhance financial statement users' understanding of
the significance of financial instruments to an entity's financial
position, performance and cash flows. This section establishes
standards for presentation of financial instruments and non-financial
derivatives. It deals with the classification of financial instruments,
from the perspective of the issuer, between liabilities and equity, the
classification of related interest, dividends, losses and gains, and
the circumstances in which financial assets and financial liabilities
are offset.
The adoption of Sections 3862 and 3863 had no impact on the Company's
consolidated financial statements.
CAPITAL DISCLOSURES
Section 1535 establishes standards for disclosing information about an
entity's capital and how it is managed. The Company has included the
required disclosure in Note 16.
NEW ACCOUNTING PRONOUNCEMENTS
ASSESSING GOING CONCERN
The Accounting Standards Board ("AcSB") amended Section 1400, GENERAL
STANDARDS OF FINANCIAL STATEMENT PRESENTATION, to include requirements
for management to assess and disclose an entity's ability to continue
as a going concern. This section applies to interim and annual
financial statements relating to fiscal years beginning on or after
January 1, 2008.
GOODWILL AND INTANGIBLE ASSETS
The AcSB issued Section 3064, GOODWILL AND INTANGIBLE ASSETS, which
replaces Section 3062, GOODWILL AND OTHER INTANGIBLE ASSETS, and
Section 3450, RESEARCH AND DEVELOPMENT COSTS. This new section
establishes standards for the recognition, measurement, presentation
and disclosure of goodwill subsequent to its initial recognition and of
intangible assets. Standards concerning goodwill remain unchanged from
the standards included in the previous Section 3062. This section
applies to interim and annual financial statements relating to fiscal
years beginning on or after October 1, 2008.
The Company is currently assessing the impact of the above new
accounting standards on the Company's financial position and results of
operations.
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
In 2006, the AcSB published a new strategic plan that will
significantly affect financial reporting requirements for Canadian
companies. The AcSB strategic plan outlines the convergence of Canadian
GAAP with IFRS over an expected five year transitional period. In
February 2008, the AcSB announced that 2011 is the changeover date for
publicly-listed companies to use IFRS, replacing Canada's own GAAP. The
date is for interim and annual financial statements relating to fiscal
years beginning on or after January 1, 2011. The transition date of
January 1, 2011, will require the restatement for comparative purposes
of amounts reported by the Company for the year ended May 31, 2011.
While the Company has begun assessing the adoption of IFRS for 2011,
the financial reporting impact of the transition to IFRS cannot be
reasonably estimated at this time.
3. AMOUNTS RECEIVABLE
NOVEMBER 30, MAY 31,
2008 2008
$ $
Production receivable - 785,227
IVA tax receivable 1,104,528 940,235
Other receivables 360,336 180,134
------------ ------------
1,464,864 1,905,596
============ ============
4. INVENTORIES
NOVEMBER 30, MAY 31,
2008 2008
$ $
Ore in process 184,789 344,714
Mine stores, supplies and other 397,047 529,188
------------ ------------
581,836 873,902
============ ============
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
5. MINERAL PROPERTY INTERESTS
NOVEMBER 30, MAY 31,
2008 2008
$ $
Producing
Mina Real Property
Acquisition and other 18,458,507 18,458,507
Deferred exploration and
development costs 7,747,799 7,747,799
Accumulated depletion and write-down (7,892,858) (1,571,159)
------------ ------------
18,313,448 24,635,147
------------ ------------
Non-Producing
Mina Real Property
Deferred exploration and
development costs 3,082,000 1,089,452
Santa Fe Property
Acquisition and other 288,916 223,229
Deferred exploration 265,517 256,671
------------ ------------
3,636,433 1,569,352
------------ ------------
21,949,881 26,204,499
============ ============
(a) Mina Real Property
(i) In January 2006 the Company entered into an option
agreement with ALB Holdings Ltd. ("ALB") to acquire
up to a 51% interest in the Mina Real Property
located in Tepic, Mexico. The Mina Real Property
comprises of six concessions covering approximately
7,358 hectares. Under the agreement the Company made
an option payment of US $110,000 and issued 250,000
common shares, at a fair value of $337,500. The
Company could then earn its interests, as follows:
o an initial 20% interest on funding the
initial US $750,000;
o a further 20% interest on funding a further
US $750,000; and
o a further 11% interest on payment of US
$900,000, at the minimum rate of US $75,000
per month, commencing July 1, 2006, with
each payment vesting at 0.9166% interest.
On October 20, 2006 the Company and ALB completed
negotiations and ALB agreed to waive the requirement
for any further payments and the Company was deemed
to have fully earned its 51% interest in the Mina
Real Property. On December 1, 2006 the Company
acquired the remaining 49% interest in the Mina Real
Property through the acquisition of ALB through the
issuance of 10,500,000 common shares of the Company
at a fair value of $10,500,000.
(ii) Pursuant to an agreement dated November 21, 2008, the
Company agreed to sell a 10% interest in Mina Real to
each of E-Energy Ventures Ltd. ("E-Energy") and
Cooper Minerals Ltd. ("Cooper") (collectively the
"Partners"). The Partners agreed to fund total work
commitments of $2,950,000 and to provide additional
financing of $1,050,000 by way of a private
placement. As at November 30, 2008 the Company had
received $300,000 as a deposit on the sale of the
interest in Mina Real.
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
5. MINERAL PROPERTY INTERESTS (continued)
Pursuant to the agreement, all net profit received
from the operations at the Mina Real Property shall
be divided on a 80% / 20% basis, between the Company
and the Partners, respectively with a fixed royalty
of $25,000 per month paid free and clear of any and
all cost or expense incurred in connection with the
operation of the Mina Real Property.
The Company has a back-in option to re-acquire in
whole and not in part the equity interest in Mina
Real. The back-in option shall have a term of three
years wherein:
o during the initial year the back-in option
shall not be exercisable;
o during the second year the back-in option
shall be exercisable by a cash payment of
$2,075,000; and
o during the third year the back-in option
shall be exercisable by a cash payment of
$2,000,000.
See also Note 17.
(iii) During the six months ended November 30, 2008 the
Company recorded a $6,000,000 write-down on the Mina
Real Property to reflect management's estimate of its
fair value.
(b) Santa Fe Property
On March 12, 2007 the Company entered into an option agreement
to acquire a 70% interest in the Santa Fe Property located in
Tepic, Mexico near the Mina Real Property. The agreement
comprises one concession covering approximately 3,823
hectares. Under the terms of the agreement, the Company has
agreed to implement a program of exploration to determine if
the Santa Fe Property can be economically exploited. In
addition, if the exploration work is successful, the Company
has agreed to provide the necessary capital to construct a
processing plant capable of processing a minimum of 200 tonnes
per day. The Company will pay a monthly fee of US $10,000
while it is conducting exploration and development on the
Santa Fe Property.
The Company has also staked an additional two concessions
covering approximately 13,164 hectares adjacent to the Santa
Fe Property.
6. PROPERTY, PLANT AND EQUIPMENT
NOVEMBER 30, 2008
--------------------------------------------
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
$ $ $
Motor vehicles 266,322 51,379 214,943
Office equipment 41,672 7,170 34,502
Mill and mine equipment 1,987,427 160,143 1,827,284
Buildings 1,932,317 23,986 1,908,331
Land 2,178,298 - 2,178,298
------------ ------------ ------------
6,406,036 242,678 6,163,358
============ ============ ============
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
6. PROPERTY, PLANT AND EQUIPMENT (continued)
MAY 31, 2008
--------------------------------------------
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
$ $ $
Motor vehicles 246,272 33,797 212,475
Office equipment 39,175 3,747 35,428
Mill and mine equipment 1,985,038 121,881 1,863,157
Buildings 791,023 17,537 773,486
Land 2,133,653 - 2,133,653
------------ ------------ ------------
5,195,161 176,962 5,018,199
============ ============ ============
7. LONG-TERM DEBT
NOVEMBER 30, MAY 31,
2008 2008
$ $
Amount due to Huajicari (a) 433,020 571,665
Amounts due on land and surface rights
purchases (b) 919,632 1,237,221
Debenture financing (c) 1,162,968 -
------------ ------------
2,515,620 1,808,886
Less: Current portion (901,223) (1,115,457)
------------ ------------
1,614,397 693,429
============ ============
(a) The US $350,000 (May 31, 2008 - US $575,000) amount due to
Compania Minera Huajicari ("Huajicari") is unsecured and
carries interest at a rate of 10% per annum, with repayment on
a monthly basis of US $75,000 plus accrued interest. Pursuant
to its agreement the Company may defer up to three principal
payments. During the six months ended November 30, 2008 the
Company elected to defer the three principal payments and
continued payment of interest.
(b) The Company has acquired land and surface rights to enable
access to the development of the Mina Real Property. The
Company has agreed to make monthly principal payments of
approximately $43,171 (pesos 470,801) plus interest,
calculated at a simple rate of 7.2% per annum.
During the six months ended November 30, 2008 the Company
capitalized interest totalling $42,665.
(c) In August 2008 the Company announced that it had agreed to
conduct a US $940,000 unsecured convertible debenture offering
(the "Offering") with the directors of the Company. Under the
initial proposed terms of the Offering the convertible
debentures were expected to bear interest at a rate of 12% per
annum and mature on December 31, 2010. The convertible
debentures would be convertible at the election of the holders
into units, at a conversion price of $0.75 per unit, with each
unit being comprised of one common share of the Company and
one-half of one common share purchase warrant. Each whole
warrant would entitle the holder to purchase one additional
common share of the Company at an exercise price of $0.75 per
share until December 31, 2010. The Company is currently
negotiating the terms of the conversion features under the
Offering. The submission for regulatory approval to close this
Offering is pending upon re-negotiation.
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
7. LONG-TERM DEBT (continued)
The Company has recorded interest expense at a rate of 12% per
annum on the funds received. During the six months ended
November 30, 2008 the Company recorded $40,567 interest
expense, which has been included in accounts payable and
accrued liabilities.
8. SHARE CAPITAL
Authorized: Unlimited common shares without par value
Issued: NOVEMBER 30, 2008 MAY 31, 2008
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
$ $
Balance, beginning of period 32,832,061 30,281,745 29,665,438 96,437,468
Reduction of capital - - - (71,000,128)
------------ ------------ ------------ ------------
32,832,061 30,281,745 29,665,438 25,437,340
------------ ------------ ------------ ------------
Issued during the period
For cash
Private placements 2,223,000 1,000,350 2,000,000 4,000,000
Exercise of warrants - - 532,510 509,374
Exercise of options - - 383,000 346,040
For corporate finance fee - - 125,000 250,000
For commission - - 126,113 252,226
Reallocation from contributed surplus
relating to the exercise of options - - - 256,322
Reallocation from contributed surplus
relating to the exercise of agent's
option and warrants - - - 33,035
------------ ------------ ------------ ------------
2,223,000 1,000,350 3,166,623 5,646,997
Less: share issue costs - (181,424) - (802,592)
------------ ------------ ------------ ------------
2,223,000 818,926 3,166,623 4,844,405
------------ ------------ ------------ ------------
Balance, end of period 35,055,061 31,100,671 32,832,061 30,281,745
============ ============ ============ ============
(a) On November 20, 2007 the shareholders of the Company passed a
special resolution to reduce the Company's capital by
$71,000,128, being an amount equal to the deficit of the
Company at May 31, 2005. This deficit arose as a result of
prior unsuccessful business activities previously carried out
by the Company under the direction of its former management
and board. The reduction of capital resulted in a
corresponding elimination of $71,000,128 of the deficit.
(b) During September 2008 the Company completed a brokered private
placement for 2,223,000 units, at a purchase price of $0.45
per unit, for gross proceeds of $1,000,350. Each unit
comprised one common share of the Company and one-half of one
common share purchase warrant. Each whole warrant entitles the
holder to purchase one additional common share of the Company
at an exercise price of $0.75 per share for a period of two
years. The Company also paid the agent a commission of $80,028
and issued 177,840 agent's warrants (the Agent's Warrants").
Each Agent's Warrant is exercisable at an exercise price of
$0.45 per share for a period of two years.
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
8. SHARE CAPITAL (continued)
The fair value of the Agent's Warrants have been estimated
using the Black-Scholes option pricing model. The assumptions
used were: dividend yield - 0%; expected volatility - 87%; a
risk-free interest rate of 2.68% - 2.92%; and an expected life
of two years. The value assigned to the Agent's Warrants was
$39,120. The Company also incurred $62,276 in legal and
filings fees associated with this private placement.
(c) On November 21, 2008 the Company announced a private placement
financing of 7,000,000 common shares at a price of $0.15 per
share. See also Note 17.
(d) A summary of the number of common shares reserved pursuant to
the Company's outstanding warrants at November 30, 2008 and
2007 and the changes for the six months ending on those dates
is as follows:
2008 2007
---------------------------- ----------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE
$ $
Balance, beginning of period 3,004,254 2.21 2,363,458 1.90
Issued 1,289,340 0.45 1,209,306 2.00
Exercised - - (258,967) 0.95
Expired (700,000) 2.75 - -
------------ ------------
Balance, end of period 3,593,594 1.56 3,313,798 2.09
============ ============
The following table summarizes information about the number of
common shares reserved pursuant to warrants outstanding at
November 30, 2008:
EXERCISE
NUMBER PRICE EXPIRY DATE
$
499,949 1.40 December 11, 2008
74,999 2.25 February 2, 2009
520,000 2.25 February 12, 2009
1,000,000 2.25 April 25, 2009
209,306 2.00 April 25, 2009
779,000 0.75 September 18, 2010
124,640 0.45 September 18, 2010
221,000 0.75 September 22, 2010
35,360 0.45 September 22, 2010
111,500 0.75 September 24, 2010
17,840 0.45 September 24, 2010
------------
3,593,594
============
(e) See also Notes 7(c) and 17.
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
9. STOCK OPTIONS AND STOCK-BASED COMPENSATION
The Company has established a rolling stock option plan (the "Plan"),
in which the maximum number of common shares which can be reserved for
issuance under the Plan is 10% of the issued and outstanding shares of
the Company. The minimum exercise price of the options is set at the
Company's closing share price on the day before the grant date, less
allowable discounts in accordance with the policies of the TSX Venture
Exchange. The options have a maximum term of five years.
During the six months ended November 30, 2008 the Company granted
200,000 (2007 - 1,254,000) stock options to the Company's directors,
employees and consultants and recorded compensation expense of $62,000
(2007 - $1,255,910) on these stock options and $17,655 (2007 -
$106,500) on stock options which vested during the period.
The fair value of stock options granted is estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions used for the grants made during the six months ended
November 30, 2008 and 2007:
2008 2007
Risk-free interest rate 2.86% - 3.31% 4.08% - 4.71%
Estimated volatility 78% - 87% 85% - 99%
Expected life 2 years - 2.3 years 2 years - 3 years
Expected dividend yield 0% 0%
The weighted average fair value of stock options granted during the six
months ended November 30, 2008 was $0.31 (2007 - $1.00) per share .
Option-pricing models require the use of estimates and assumptions
including the expected volatility. Changes in the underlying
assumptions can materially affect the fair value estimates and,
therefore, existing models do not necessarily provide reliable measure
of the fair value of the Company's stock options.
A summary of the Company's outstanding stock options at November 30,
2008 and 2007 and the changes for the six months ending on those dates
is as follows:
2008 2007
---------------------------- ----------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE
OUTSTANDING PRICE OUTSTANDING PRICE
$ $
Balance, beginning of period 2,953,000 1.69 2,582,000 1.57
Granted 200,000 0.50 1,254,000 1.94
Exercised - - (300,500) 0.76
Cancelled/Expired - - (330,000) 1.77
------------ ------------
Balance, end of period 3,153,000 1.68 3,205,500 1.70
============ ============
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
9. STOCK OPTIONS AND STOCK-BASED COMPENSATION (continued)
The following table summarizes information about the stock options
outstanding and exercisable at November 30, 2008:
NUMBER NUMBER EXERCISE
OUTSTANDING EXERCISABLE PRICE EXPIRY DATE
$
22,500 22,500 0.62 January 17, 2009
150,000 150,000 1.40 November 24, 2009
1,479,000 1,479,000 1.85 January 8, 2010
50,000 33,333 2.15 February 14, 2010
100,000 33,333 1.65 June 8, 2010
274,000 274,000 1.65 June 12, 2010
200,000 200,000 0.50 August 26, 2010
500,000 400,000 2.12 October 26, 2010
80,000 80,000 2.30 November 16, 2010
297,500 297,500 0.90 September 5, 2011
------------ ------------
3,153,000 2,969,666
============ ============
10. CONTRIBUTED SURPLUS
The Company's contributed surplus as November 30, 2008 and 2007 and the
changes for the six months ending on those dates is presented below:
2008 2007
$ $
Balance, beginning of period 4,207,560 2,891,157
Stock-based compensation on stock
options (Note 9) 79,655 1,362,410
Stock-based compensation on agent's
warrants (Note 8(b)) 39,120 179,145
Stock options exercised - (203,967)
Agent's warrants exercised - (11,823)
------------ ------------
Balance, end of period 4,326,335 4,216,922
============ ============
11. RELATED PARTY TRANSACTIONS
(a) During the six months ended November 30, 2008 and 2007 the
Company was charged for various services provided by companies
controlled by current and former directors and officers of the
Company, as follows:
2008 2007
$ $
Accounting and administration 63,240 52,590
Professional fees 55,193 67,425
------------ ------------
118,433 120,015
============ ============
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
11. RELATED PARTY TRANSACTIONS (continued)
These fees have been either expensed to operations or
capitalized to mineral property interest based on the nature
of the expenditures. As at November 30, 2008, accounts payable
and accrued liabilities include $62,693 (2007 - $26,978) due
to these related parties. These transactions were measured at
the exchanged amount which was the amount of consideration
established and agreed to by the related parties.
(b) See also Note 7(c).
12. SEGMENTED INFORMATION
The Company operates in one industry segment, the acquisition,
exploration and development of mineral interests. The Company's mineral
operations are located in Mexico and its corporate assets are located
in Canada.
NOVEMBER 30, 2008
--------------------------------------------
IDENTIFIABLE NET
ASSETS REVENUES LOSS
$ $ $
Mineral operations (Mexico) 30,303,113 2,447,440 (6,132,812)
Corporate (Canada) 59,417 22,317 (624,907)
------------ ------------ ------------
30,362,530 2,469,757 (6,757,719)
============ ============ ============
MAY 31, 2008
--------------------------------------------
IDENTIFIABLE NET
ASSETS REVENUES LOSS
$ $ $
Mineral operations (Mexico) 34,760,993 9,353,785 (389,827)
Corporate (Canada) 967,422 38,329 (2,703,421)
------------ ------------ ------------
35,728,415 9,392,114 (3,093,248)
============ ============ ============
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of financial instruments at November 30, 2008 were
estimated based on relevant market information and the nature and terms
of financial instruments. Management is not aware of any factors which
would significantly affect the estimated fair market amounts, however,
such amounts have not been comprehensively revalued for purposes of
these financial statements. Disclosure subsequent to the balance sheet
dates and estimates of fair value at dates subsequent to November 30,
2008 may differ significantly from that presented.
Fair value approximates the amounts reflected in the financial
statements for cash, amounts receivable and accounts payable and
accrued liabilities due to their relative short periods to maturity. In
addition, the fair value of long-term debt is approximated by their
carrying amount as the debt bears a fair market rate of interest.
The Company may be subject to currency risk due to the fluctuations of
exchange rates between the Canadian dollar and other foreign
currencies. However, the Company is not subject to significant interest
and credit risks arising from these instruments.
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
14. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash activities were conducted by the Company during the six months
ended November 30, 2008 and 2007 as follows:
2008 2007
$ $
Financing activities
Share issue costs (39,120) (681,371)
Issuance of common shares non-cash
consideration - 718,016
Contributed surplus 39,120 (36,645)
------------ ------------
- -
============ ============
Investing activities
Additions to property, plant and equipment (227,172) -
Additions to mineral property interests (1,160,938) (201,679)
------------ ------------
(1,388,110) (201,679)
============ ============
Operating activity
Increase in accounts payable and accrued
liabilities 1,388,110 201,679
============ =============
Other supplemental cash flow information:
2008 2007
$ $
Interest paid in cash 63,325 65,894
============ ============
Income taxes paid in cash - -
============ ============
15. ASSET RETIREMENT OBLIGATION
NOVEMBER 30, NOVEMBER 30,
2008 2007
$ $
Balance, beginning of period 640,006 590,894
Accretion 29,383 24,323
------------ ------------
Balance, end of period 669,389 615,217
============ ============
The total undiscounted amount of estimated cash flows required to
settle the Company's estimated obligation is $750,000 which has been
discounted using a credit adjusted risk free rate of 8.5% and inflation
rate of 4%. The reclamation obligation relates to the Mina Real
Property. The present value of the reclamation liability may be subject
to change based on management's current estimates, changes in
remediation technology or changes to the applicable laws and
regulations. Such changes will be recorded in the accounts of the
Company as they occur.
ROCHESTER RESOURCES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
(UNAUDITED - PREPARED BY MANAGEMENT)
16. MANAGEMENT OF CAPITAL
The Company manages its cash, common shares, stock options and warrants
as capital. The Company's objectives when managing capital are to
safeguard its ability to continue as a going concern, pursue the
development of mineral resource interests and to maintain a flexible
capital structure which optimizes the costs of capital at an acceptable
risk.
The Company manages its capital structure and makes adjustments to it
in light of changes in economic conditions and the risk characteristics
of underlying assets. To maintain or adjust the capital structure, the
Company may attempt to issue new shares, issue debt, acquire or dispose
of assets or adjust the amount of cash and cash equivalents.
In order to facilitate the management of its capital requirements, the
Company prepares expenditure budgets that are updated as necessary
depending on various factors, including successful capital deployment
and general industry conditions.
The Company does not expect its current capital resources will be
sufficient to meet all of its future exploration plans, operating
requirements and debt retirement obligations and is dependant upon
future equity or debt transactions to meet these obligations. See Notes
8 and 10.
17. SUBSEQUENT EVENTS
Subsequent to November 30, 2008 the Company completed the private
placement of 7,000,000 common shares, at a price of $0.15 per common
share, for total gross proceeds of $1,050,000. The Company paid a cash
finder's fee of $105,000 and also issued finder's warrants which are
exercisable to acquire 700,000 common shares of the Company, at an
exercise price of $0.17 per common share, for a period of one year. The
Company also received the remaining $2,650,000 balance of the funds
from the sale of the interest in Mina Real and paid a $191,750 cash
finder's fee and issued finder's warrants which are exercisable to
acquire 1,300,000 shares of the Company, at an exercise price of $0.17
per share, for a period of one year.
ROCHESTER RESOURCES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
The following Management's Discussion and Analysis ("MD&A") of Rochester
Resources Ltd. ("Rochester" or the "Company") is prepared as at January 26, 2009
and should be read in conjunction with the Company's unaudited interim
consolidated financial statements and accompanying notes for the six months
ended November 30, 2008 which are available along with further information on
the Company including any news releases and historical reports referred to in
this MD&A on the SEDAR website at www.sedar.com. Those financial statements have
been prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). Except as otherwise disclosed, all dollar figures
included therein and in the following management discussion and analysis
("MD&A") are quoted in Canadian dollars.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This MD&A contains certain forward looking statements that involve risks and
uncertainties such as statements of the Company's plans, objectives, strategies,
expectations, and intentions. The words "may", "would", "could", "will",
"intend", "plan", "believe", "estimate", "expect" and similar expressions, as
they relate to the Company, or its management, are intended to identify such
forward looking statements. Many factors could cause the Company's actual
results, performance or achievements to be materially different from any future
results, performance or achievements that may be expressed or implied by such
forward looking statements, including those factors discussed below and in
filings made with the Canadian securities regulatory authorities. Should one or
more of these risk factors or uncertainties materialize, or should assumptions
underlying the forward looking statements prove incorrect, actual results may
vary materially from those described herein as intended, planned, anticipated,
believed, estimated or expected. The Company does not intend, and does not
assume any obligation to update these forward looking statements.
COMPANY OVERVIEW
The Company is a junior gold/silver producer engaged in the production and the
continued exploration and development of its Mina Real and Santa Fe Properties
located in the State of Nayarit, Mexico. Nayarit is located in the Sierra Madre
Occidental range, the most productive epithermal precious metal region in the
world, which hosts the majority of Mexico's gold and silver deposits. The
Company substantially completed the construction of a cyanidation processing
plant at the end of December 2006. Initial milling operations commenced in
January 2007 with the commissioning process being completed by May 31, 2007. The
Company has, in a very compressed time frame, acquired, developed and brought
into production a gold property in Mexico.
The Company is a reporting issuer in British Columbia, Alberta and Saskatchewan.
The Company is also registered with the U.S. Securities and Exchange Commission
("SEC") as a foreign private issuer under the Securities Act of 1934. The
Company has not yet filed its Form 20F report for 2008. The Company intends to
file its Form 20F when operations return to a steady state. The Company trades
on the TSX Venture Exchange ("TSXV") under the symbol "RCT", the Frankfurt Stock
Exchange Open Market under the trading Symbol "R5I" and effective January 16,
2009, on the Pink OTC Markets ("Pink Sheets") under the symbol "RCTFF".
On November 21, 2008, the Company entered into agreements to raise $1,050,000
from the issuance of common shares and $2,950,000 from the sale of a 20% equity
interest in the Company's 100% owned Mina Real Property.
CORPORATE UPDATE
On January 19, 2009, Mr. Eduardo Luna was appointed President and CEO of the
Company. Dr. Alfredo Parra will assume the role of Chief Operating Officer and
will remain a director of the Company. This will allow Dr. Parra to focus
primarily on the mining and milling operations at the Mina Real Property.
Mr. Luna has been a director of Rochester since August 2007 and is currently
Chairman of Silver Wheaton and previously was President of Goldcorp's Mexican
mining operations. Mr. Luna brings extensive business experience
- 1 -
and knowledge of the mining industry and will help strengthen the development of
management's corporate strategy and relationships with the capital markets.
Mr. Luna holds a degree in Advanced Management from Harvard University, an MBA
from Instituto Tecnologico de Estudios Superiores de Monterrey and a Bachelor of
Science in Mining Engineering from Universidad de Guanajuato. He has held
various other executive positions such as Minera Autlan for seven years and
Industrias Penoles for five years. He is the former President of the Mexican
Mining Chamber and the former President of the Silver Institute. Mr. Luna serves
as Chairman of the Advisory Board of the Faculty of Mines at the University of
Guanajuato and of the Mineral Resources Council in Mexico.
PROPERTY UPDATE
OVERVIEW
The Company currently holds a 100% interest in Mina Real Mexico SA de CV ("Mina
Real Mexico") which holds a 100% interest in the Mina Real Property, a gold
silver property comprising 7,358 hectares located in the state of Nayarit,
Mexico, east of the capital city of Tepic. The Company has agreed to sell a 20%
interest in Mina Real Mexico.
The Company also has an option agreement to acquire a 70% interest in the Santa
Fe gold/silver property located immediately east of the Mina Real Property. The
Santa Fe Property comprises one concession covering approximately 3,823
hectares. Compania Minera Santa Fe SA de CV was established to hold the Santa Fe
concession and Mina Real Mexico holds a 70% interest in this entity. In addition
the Company added to its land position by staking directly an additional 13,164
hectares adjacent to the Santa Fe concession.
OPERATIONS
A summary of operating statistics for the six months ended November 30, 2008 is
as follows:
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
RESULTS NOVEMBER 30, 2008
- -------------------------------------------------------------------------------
Tonnes Processed 18,116 tonnes
- -------------------------------------------------------------------------------
Gold Grade 5.1 grams/tonne
- -------------------------------------------------------------------------------
Silver Grade 119.1 grams/tonne
- -------------------------------------------------------------------------------
Recovery Gold (%) 89.3%
- -------------------------------------------------------------------------------
Recovery Silver (%) 47.6%
- -------------------------------------------------------------------------------
Gold Produced 2,653 ounces
- -------------------------------------------------------------------------------
Payable Gold 2,613 ounces
- -------------------------------------------------------------------------------
Silver Produced 33,000 ounces
- -------------------------------------------------------------------------------
Payable Silver 32,010 ounces
- -------------------------------------------------------------------------------
Gold Equivalent Produced 3,202 ounces
- -------------------------------------------------------------------------------
Developed Metres 3,217 metres
- -------------------------------------------------------------------------------
Samples Taken 10,845 samples
- -------------------------------------------------------------------------------
Diamond Drilling Metres 334 metres
- -------------------------------------------------------------------------------
Access Road Kilometres 1.2 kilometres
- -------------------------------------------------------------------------------
Cost of Production Per Tonne CDN $206.89/tonne
- -------------------------------------------------------------------------------
Operating Costs per Equivalent Ounce Gold CDN $1,170.26/ounce
- -------------------------------------------------------------------------------
During the second fiscal quarter the Company processed 5,126 tonnes through the
mill as compared to 12,990 tonnes for the first quarter. Equivalent gold
production during the quarter was approximately 970 ounces. During the six
months ended November 30, 2008 a total of 18,116 tonnes were processed through
the mill. This throughput level is significantly below design production
capabilities of the mill.
In regards to the mill it can be stated that the facility, when operating, is
functioning in line with design parameters. The poor operating statistics are
not the result of the mill not being able to properly process the material which
is delivered but the issue has been having sufficient feed to run the mill at
design parameters on a steady state. As a result the mill operated on an
- 2 -
intermittent basis during the quarter and the mill was shut down all of December
2008. In early January 2009 the mill resumed operations but not at full 200
tonnes per day capacity. To January 25, 2009 3,520 tonnes had been processed
through the mill.
The Company has substantially completed the capital project to expand plant
capacity to 300 tonnes per day. Overall the physical work is approximately 80%
complete. The budgeted cost to complete the mill expansion project is in the
range of US $600,000. Further work on the plant expansion has been deferred so
that available resources can be directed towards having the mine produce
sufficient ore to feed the mill at 200 tonnes per day. After this is achieved
the mill capacity expansion work can be quickly completed.
Another capital project was the installation of the Falcon system to improve
silver recovery. The Falcons were installed this quarter however the lack of
steady production has made it difficult to assess whether this system will
substantially improve silver recoveries.
In the early stages of this project the Company had a model for the development
of the mine initially focussing on the Florida III veins. The issues impacting
the ability to deliver sufficient mill feed from the mine have been commented on
in prior reports with the most significant being the inability to drift through
the intrusive to reach zones of interest and the delay in concluding a surface
rights agreement to gain access to Florida 4. At this time the focus for current
mining has moved to the Tajos Cuates vein system where work is ongoing to
develop sufficient headings to feed the mill at its rated capacity. The decision
was made to temporarily suspend further development at Florida 4, even though it
is an area of potential, as development at Tajos Cuates can be done faster. The
Company's plan is to return to Florida 4 at a later date.
While not yet completed, progress has been made on implementing a recovery plan
to get production back to necessary levels. The biggest difficulty in
implementing the plan is having sufficient working capital at the appropriate
time to allow work to advance. With the downturn in the capital markets the
Company's ability to source capital on acceptable terms, and in line with the
Company's planned expenditures, has been difficult. Continued fixed overhead
costs have consumed portions of capital raised. The ongoing difficulties at the
mine resulted in a detailed review of available financing alternatives and a
decision was made that additional funds should be raised through the sale of an
ownership interest in the Company's subsidiary, Mina Real Mexico.
The ongoing difficulties resulted in a review and consideration of the carrying
value of the Mina Real Property and after due consideration a decision was made
to record a write-down in the carrying cost of the property of $6,000,000. This
write-down generated a future income tax recovery of approximately $2,060,000.
Management will continue to review and monitor the carrying value.
Management of the Company still retains a positive outlook with respect to the
Mina Real project.
In his 43-101 technical report on the Mina Real property, Mr. Victor Jaramillo,
M.Sc. (A), P. Geo, of Discover Geological Consultants Inc., commented on the
geological potential of the Florida 4 vein system which forms part of the Mina
Real property. In his report, Mr. Jaramillo estimated the geological potential
of Florida 4 from a lower end range of 562,500 tonnes with grades of 4 g/t gold
and 60 g/t silver to an upper end of 2,250,000 tonnes with grades of 8 g/t gold
and 100 g/t silver.
Particulars of this estimate, assumptions, and other details from the report are
as follows:
For the lower end range = 225m depth x 2,000m length x 0.50m wide x 2.5
s.g. = 562,500 TONNES with grades of 4.0 g/t gold and 60 g/t silver
For the upper end range = 450m depth x 2,000m length x 1.0m wide x 2.5
s.g. = 2,250,000 TONNES with grades of 8.0 g/t gold and 100 g/t silver
The range provided includes the following assumptions:
1. A very well mineralized mining horizon that ranges from 1350m to
900m elevation;
2. A vein width ranging between 0.5m and 1.5m (we will use 1.0m for
upper range);
3. A 2.0 kilometre strike length as defined from surface outcrop;
4. A specific gravity of 2.5
- 3 -
The above geological potential is for one vein only. The Mina Real
Property comprises approximately 20 veins that have been identified to
date.
CAUTIONARY STATEMENT: INVESTORS ARE CAUTIONED THAT THE POTENTIAL
QUANTITY INDICATED ABOVE IS CONCEPTUAL IN NATURE. AT THIS TIME, THERE
HAS BEEN INSUFFICIENT EXPLORATION TO DEFINE A MINERAL RESOURCE AND IT
IS UNCERTAIN IF FURTHER EXPLORATION WILL RESULT IN THE DISCOVERY OF
THESE MINERAL RESOURCES.
The author noted that at the Mina Real Project, the presence of high grade
gold-silver quartz-adularia veins and stockwork veinlets in the country rocks
bears many geological similarities to Sleeper, Nevada; McLaughlin, California;
Hishikari, Japan and Golden Cross and Martha Hill, New Zealand, all of which
were or are significant gold producers.
Mr. Jaramillo's report only commented on the geological potential of Florida 4,
but there are a significant number of other veins that have been identified but
little or no work has been done to develop these other areas of interest.
Management has developed a program to realize the full potential of the Mina
Real property. Initially, the Company needs to develop sufficient workings so
that the mill can process at least 200 tonnes per day with good grade control.
With the mill operating on a positive basis, at 200 tonnes per day and gradually
increasing to 300 tonnes per day, then the development of other areas of
interest with a diamond drilling and expanded drift development programs can
continue. The key to being able to implement this program is having sufficient
capital at the appropriate time.
COMPANIA MINERA SANTA FE
SANTA FE: Mina Real Mexico holds a 70% interest in Compania Minera Santa Fe
which holds the Santa Fe Property. Mina Real Mexico and has agreed to fund a
development program on the property. There are no annual work commitments
however a monthly property payment of US $10,000 per month is payable. The Santa
Fe Property covers 3,823 hectares and is located near the Mina Real Mine. At
Santa Fe there exist a number of low sulphidation epithermal veins carrying gold
and silver values in a geological environment very similar to the one currently
being developed in the Mina Real area.
The Santa Fe Property is seen as having significant geological potential. To
date, 17 veins have been located on the 50% of the property which has been
prospected and mapped. The Santa Fe area is seen as a potential source of future
production. At this time management's objective is to defer the exploration and
development at Santa Fe until development and cash flow from Mina Real provides
internal cash flow to fund costs.
The Company commissioned a 43-101 report on the Santa Fe Property but completion
is on hold for the current time as work focuses on the Mina Real Property.
SELECTED FINANCIAL DATA
The following selected financial information is derived from the unaudited
interim consolidated financial statements of the Company prepared in accordance
with Canadian GAAP.
----------------------- ------------------------------------------------- -----------------------
FISCAL 2009 FISCAL 2008 FISCAL 2007
----------------------- ------------------------------------------------- -----------------------
THREE MONTH PERIODS ENDING NOV 30/08 AUG 31/08 MAY 31/08 FEB 29/08 NOV 30/07 AUG 31/07 MAY 31/07 FEB 28/07
$ $ $ $ $ $ $ $
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OPERATIONS:
Revenues 739,123 1,708,317 2,091,771 2,507,487 2,987,744 1,766,783 Nil Nil
Cost of operations (1,548,315) (2,198,874) (2,642,333) (2,084,709) (1,920,735) (1,315,838) Nil Nil
Depletion and amortization (6,108,405) (279,010) (622,410) (248,301) (261,933) (237,407) Nil Nil
Expenses (643,256) (536,695) (616,150) (533,379) (1,329,371) (948,083) (732,976) (2,039,218)
Other items 65,950 (55,314) (4,437) 93,210 50,585 (26,982) 142,406 (263,722)
Future income tax recovery 2,060,729 38,031 201,240 Nil Nil Nil Nil Nil
Net loss (5,434,174) (1,323,545) (1,592,319) (265,692) (473,710) (761,527) (590,570) (2,302,940)
Basic and diluted loss per
share (0.16) (0.04) (0.05) (0.01) (0.02) (0.03) (0.04) (0.09)
Dividends per share Nil Nil Nil Nil Nil Nil Nil Nil
----------------------- ------------------------------------------------- -----------------------
- 4 -
----------------------- ------------------------------------------------- -----------------------
FISCAL 2009 FISCAL 2008 FISCAL 2007
----------------------- ------------------------------------------------- -----------------------
THREE MONTH PERIODS ENDING NOV 30/08 AUG 31/08 MAY 31/08 FEB 29/08 NOV 30/07 AUG 31/07 MAY 31/07 FEB 28/07
$ $ $ $ $ $ $ $
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE SHEET:
Working capital (deficit) (2,368,730) (1,096,519) 610,464 2,215,461 4,558,148 684,866 768,740 1,227,597
Total assets 30,362,530 35,776,363 35,728,415 35,555,850 34,657,344 30,539,200 30,770,564 23,019,599
Total long-term liabilities 1,614,397 1,182,922 693,429 Nil 125,100 368,740 615,193 936,000
Asset retirement obligation 669,389 648,640 640,006 627,387 615,217 603,447 590,894 Nil
Future income tax
liabilities 2,000,000 4,060,729 4,098,760 4,300,000 4,300,000 4,300,000 4,300,000 Nil
----------------------- ------------------------------------------------- -----------------------
RESULTS OF OPERATIONS
During the six months ended November 30, 2008 (the "2008 period") the Company
reported a net loss of $6,757,719, compared to a net loss of $1,235,237 for the
six months ended November 30, 2007 (the "2007 period"), an increase in loss of
$5,522,482. The increase is mainly attributed to the $6,000,000 write-down of
mineral interests which resulted in a future income tax recovery of $2,098,700,
along with a $2,705,778 deterioration in operating profits resulting from the
operating problems at Mina Real and partially offset by a $1,285,755 decrease in
stock-based compensation expense. .
The Company recognized net revenue during the 2008 period of $2,447,440
generated on the sale of 3,146 ounces of gold equivalent, for an average of $778
net revenue per ounce (net of royalty and treatment charges).
-------------------- -------------------- -------------------- -------------------- --------------------
THREE MONTHS ENDING NOVEMBER 30, 2008 AUGUST 31, 2008 MAY 31, 2008 FEBRUARY 29, 2008 NOVEMBER 30, 2007
-------------------- -------------------- -------------------- -------------------- --------------------
Ounces of gold
equivalent 928 oz 2,218 oz 2,416 oz 3,293 oz 3,744 oz
-------------------- -------------------- -------------------- -------------------- --------------------
PER PER PER PER PER
TOTAL OUNCE TOTAL OUNCE TOTAL OUNCE TOTAL OUNCE TOTAL OUNCE
$ $ $ $ $ $ $ $ $ $
Net revenue 739,123 796.47 1,708,317 770.21 2,091,771 865.80 2,507,487 761.46 2,987,744 798.01
-------------------- -------------------- -------------------- -------------------- --------------------
Cost of operations 1,548,315 1,668.45 2,198,874 991.38 2,642,333 1,093.68 2,084,709 633.07 1,920,735 513.02
-------------------- -------------------- -------------------- -------------------- --------------------
Depletion
and amortization 279,010 125.79 622,410 257.62 248,301 75.40 261,933 69.96 237,407 89.39
-------------------- -------------------- -------------------- -------------------- --------------------
Operating profit(loss) (917,597) (988.79) (769,567) (346.96) (1,172,972) (485.50) 174,477 52.99 805,076 215.03
-------------------- -------------------- -------------------- -------------------- --------------------
All production from the mill is shipped and sold to MetMex Penoles SA de CV
("Penoles"), a major Mexican mining and processing company, at their smelter in
Torreon, located approximately 1,000 kilometres from the mill. Pursuant to the
Company's sales contract with Penoles, the Company is paid for 98.5% of the gold
shipped and 97% of the silver shipped. The price paid by Penoles is based on the
average of the closing London final for the month production is shipped. The
Company initiated negotiations with an alternate buyer in order to obtain more
favourable terms however until production returns to a steady state the Company
has suspended any plans to change buyers.
The cost of operations for the six months ending November 30, 2008 and 2007
comprise the following:
2008 2007
$ $
Mine costs 1,369,523 1,186,057
Mill costs 1,259,922 1,244,590
Service department costs 1,117,744 805,926
------------ ------------
3,747,189 3,236,573
============ ============
The service department costs include activities which provide services to both
mine and mill departments.
General and administrative expenses for the six months ending November 30, 2008
and 2007 are as follows:
2008 2007
$ $
Accounting and administrative 63,240 52,590
Audit 74,019 54,821
- 5 -
2008 2007
$ $
Consulting 230,735 82,769
Corporate development 75,978 84,965
Insurance 10,500 15,418
Investor relations 60,000 40,000
Legal 38,298 15,091
Office 80,145 126,654
Regulatory fees 10,876 10,481
Rent - 9,047
Salaries and benefits 276,040 240,345
Shareholder costs 10,235 16,225
Transfer agent fees 5,148 9,443
Travel 77,508 70,004
------------ ------------
1,012,722 827,853
============ ============
General and administrative expenses of $1,012,722 were reported for the 2008
period, an increase of $184,869, from $827,853 in the 2007 period. Specific
expenses of note during the 2008 period as compared to the 2007 period are as
follows:
o accounting and administrative fees of $63,240 (2007 - $52,590) charged
by Chase Management Ltd. ("Chase") a private corporation owned by Mr.
Nick DeMare, a director of the Company;
o incurred audit fees of $74,019 for the audit of the Company's year-end
financial statements, an increase of $19,198 from $54,821 incurred in
2007. During the 2007 period the recorded audit fees were lower due to
the change in the basis for recording audit fees.
o consulting fees totalling $230,735 (2007 - $82,769) were paid, of which
$55,193 (2007 - $67,425) were paid mainly to current and former
directors and officers and $118,874 (2007 - $4,893) was paid for
consultants in Mexico;
o corporate development expenses of $75,978 (2007 - $84,965) for ongoing
market awareness and promotional campaigns in Canada and Europe;
o $60,000 (2007 - $40,000) was paid to Empire Communications inc.
("Empire") to provide investor relations services;
o travel expenses of $77,508 (2007 - $70,004) for ongoing mine site
visits to Mexico and participation in investment conferences;
o incurred $10,500 (2007 - $15,418) for director and officers' liability
insurance for fiscal 2009;
o office expenses of $80,145 (2007 - $126,654) were incurred, of which
$69,893 (2007 - $112,582) was for costs associated with the mining
office in Mexico; and
o during the 2008 period salaries and benefits expense of $276,040 (2007
- $240,345) was paid mainly for the administrative staff in Mexico.
During the 2008 period the Company recorded stock-based compensation expense of
$62,000 on the granting of 200,000 stock options and $17,655 from vesting of
prior grants. During the 2007 period the Company recorded stock-based
compensation expense of $1,255,910 on the granting of 1,254,000 stock options
and $106,500 from vesting of prior grants.
Interest income is generated from cash held with the Company's financial
institution. During the 2008 period, the Company reported interest and other
income of $22,317 as compared to $14,442 during the 2007 period.
During the 2008 period the Company recorded a total of $2,067,081 (2007 -
$241,222) for additions to mineral property interests, of which $74,533 (2007 -
$173,387) was attributed to acquisition and deferred exploration activities on
the Santa Fe Property and $1,992,548 (2007 - $67,835) for deferred exploration
and development activities on the Mina Real Project. During the 2008 period the
Company recognized a net $3,940,000 write-down ($6,000,000 write-down, offset by
$2,060,000 future income tax recovery) on the carrying cost of the Mina Real
Project. Exploration, development and production activities conducted in the
2008 period are described in "Exploration Projects" in this MD&A.
- 6 -
During the 2008 period, the Company recorded a total of $1,210,875 (2007 -
$171,123) for additions to property, plant and equipment of which $44,645 (2007
- - $nil) was for the purchase of land and $1,166,230 (2007 - $171,123) was for
the purchase of plant and equipment.
FINANCIAL CONDITION / CAPITAL RESOURCES
During the six months ended November 30, 2008 the Company incurred a net loss of
$6,757,719 and, as at November 30, 2008, the Company had an accumulated deficit
of $14,266,283 and a working capital deficit of $2,368,730. The Company requires
additional funding to maintain its ongoing exploration programs and property
commitments, operations and administration, as well as meeting it debt
obligations as they come due. The Company is continuing in its efforts to
generate sufficient cash from its operations or raise funds to meet its ongoing
liabilities as they fall due. The current global financial crisis and recession
has had a significant impact on the price received by the Company for its gold
and silver production and its ability to raise future equity capital. If
available, it is expected that future equity capital issues will result in
significant dilution to the Company's shareholders. There can be no assurance
that the Company will be successful in its efforts, in which case the Company
may be unable to meet its obligations. Should the Company be unable to realize
on its assets and discharge its liabilities in the normal course of business,
the net realizable value of its assets may be materially less than the amounts
recorded on the balance sheet. These consolidated financial statements do not
include any adjustments to the amount and classification of recorded assets and
liabilities that night be necessary should the Company be unable to meet its
obligations or continue operations.
Subsequent to November 30, 2008, the Company entered into agreements to raise
$1,050,000 from the issuance of common shares and $2,950,000 from the sale of a
20% equity interest in the Company's 100% owned Mina Real
Property. This financing has not provided the Company with all the necessary
funding it requires to fully implement its work plans. The Company is currently
working on further financings to ensure the funds needed for the business plan
are available.
CONTRACTUAL OBLIGATIONS
The following table summarizes the Company's contractual obligations as of
November 30, 2008
PAYMENTS DUE BY PERIOD
------------------------------------------------------------
LESS THAN GREATER THAN
1 YEAR 1 TO 2 YEARS 2 YEARS TOTAL
$ $ $ $
------------ ------------ ------------ ------------
Contractual Obligations
Long-term debt 901,223 1,614,397 - 2,515,620
============ ============ ============ ============
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
PROPOSED TRANSACTIONS
The Company has no proposed transactions.
CRITICAL ACCOUNTING ESTIMATES
A detailed summary of all the Company's significant accounting policies is
included in Note 2 to the May 31, 2008 audited consolidated financial
statements.
- 7 -
CHANGES IN ACCOUNTING POLICIES
NEW ACCOUNTING PRONOUNCEMENTS
ASSESSING GOING CONCERN
The Accounting Standards Board ("AcSB") amended CICA Handbook Section 1400, to
include requirements for management to assess and disclose an entity's ability
to continue as a going concern. This section applies to interim and annual
financial statements relating to fiscal years beginning on or after January 1,
2008. The adoption of this standard did not have an effect on the Company's
disclosure in the financial statements for the six months ended November 30,
2008.
FINANCIAL INSTRUMENTS
The AcSB issued CICA Handbook Section 3862, Financial Instruments - Disclosures,
which requires entities to provide disclosures in their financial statements
that enable users to evaluate (a) the significance of financial instruments for
the entity's financial position and performance; and (b) the nature and extent
of risks arising from financial instruments to which the entity is exposed
during the period and at the balance sheet date, and how the entity manages
those risks. The principles in this section complement the principles for
recognizing, measuring and presenting financial assets and financial liabilities
in Section 3855, Financial Instruments - Recognition and Measurement, Section
3863, Financial Instruments - Presentation, and Section 3865, Hedges. This
section applies to interim and annual financial statements relating to fiscal
years beginning on or after October 1, 2007.
The AcSB issued CICA Handbook Section 3863, Financial Instruments -
Presentation, which is to enhance financial statement users' understanding of
the significance of financial instruments to an entity's financial position,
performance and cash flows. This section establishes standards for presentation
of financial instruments and nonfinancial derivatives. It deals with the
classification of financial instruments, from the perspective of the issuer,
between liabilities and equity, the classification of related interest,
dividends, losses and gains, and the circumstances in which financial assets and
financial liabilities are offset. This section applies to interim and annual
financial statements relating to fiscal years beginning on or after October 1,
2007.
The adoption of these standards did not have an effect on the Company's
disclosure in the financial statements for the six months ended November 30,
2008.
CAPITAL DISCLOSURES
The AcSB issued CICA Handbook Section 1535, which establishes standards for
disclosing information about an entity's capital and how it is managed. This
section applies to interim and annual financial statements relating to fiscal
years beginning on or after October 1, 2007.
GOODWILL
In February 2008, the AcSB issued CICA Handbook Section 3064, Goodwill and
Intangible Assets, which replaces Section 3062, Goodwill and Other Intangible
Assets and Section 3450, Research and Development Costs. Section 3064
establishes standards for the recognition, measurement, presentation and
disclosure of goodwill subsequent to its initial recognition and the
recognition, measurement and presentation of intangible assets. Standards
concerning goodwill are unchanged from the standards included in the previous
Section 3062. This section applies to annual and interim financial statements
beginning on or after October 1, 2008.
The Company is currently assessing the impact of the above new accounting
standards on the Company's financial position and results of operations.
INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
In 2006, the AcSB published a new strategic plan that will significantly affect
financial reporting requirements for Canadian companies. The AcSB strategic plan
outlines the convergence of Canadian GAAP with IFRS over an expected five year
transitional period. In February 2008, the AcSB announced that 2011 is the
changeover date for publicly-listed companies to use IFRS, replacing Canada's
own GAAP. The date is for interim and annual financial statements relating to
fiscal years beginning on or after January 1, 2011. The transition date of
- 8 -
January 1, 2011, will require the restatement for comparative purposes of
amounts reported by the Company for the year ended May 31, 2010. While the
Company has begun assessing the adoption of IFRS for 2011, the financial
reporting impact of the transition to IFRS cannot be reasonably estimated at
this time.
TRANSACTIONS WITH RELATED PARTIES
(a) During the six months ended November 30, 2008 and 2007 the Company was
charged for various services provided by companies controlled by
current and former directors and officers of the Company, as follows:
2008 2007
$ $
Accounting and administration 63,240 52,590
Professional fees 55,193 67,425
---------- ----------
118,433 120,015
========== ==========
These fees have been either expensed to operations or capitalized to
mineral property interest based on the nature of the expenditures. As
at November 30, 2008, accounts payable and accrued liabilities include
$62,693 (2007 - $26,978) due to these related parties. These
transactions were measured at the exchanged amount which was the amount
of consideration established and agreed to by the related parties.
(b) In August 2008 the Company announced that it had agreed to conduct a US
$940,000 unsecured convertible debenture offering (the "Offering") with
the directors of the Company. Under the initial proposed terms of the
Offering the convertible debentures were expected to bear interest at a
rate of 12% per annum and mature on December 31, 2010. The convertible
debentures would be convertible at the election of the holders into
units, at a conversion price of $0.75 per unit, with each unit being
comprised of one common share of the Company and one-half of one common
share purchase warrant. Each whole warrant would entitle the holder to
purchase one additional common share of the Company at an exercise
price of $0.75 per share until December 31, 2010. The Company is
currently negotiating the terms of the conversion features under the
Offering. The submission for regulatory approval to close this Offering
is pending upon re-negotiation.
The Company has recorded interest expense at a rate of 12% per annum on
the funds received. During the six months ended November 30, 2008 the
Company recorded $40,567 interest expense, which has been included in
accounts payable and accrued liabilities.
RISKS AND UNCERTAINTIES
The Company competes with other mining companies, some of which have greater
financial resources and technical facilities, for the acquisition of mineral
concessions, claims and other interests, as well as for the recruitment and
retention of qualified employees.
The Company is in compliance in all material regulations applicable to its
exploration activities. Existing and possible future environmental legislation,
regulations and actions could cause additional expense, capital expenditures,
restrictions and delays in the activities of the Company, the extent of which
cannot be predicted. Before production can commence on any properties, the
Company must obtain regulatory and environmental approvals. There is no
assurance that such approvals can be obtained on a timely basis or at all. The
cost of compliance with changes in governmental regulations has the potential to
reduce the profitability of operations.
The Company's activities are conducted in Mexico. Consequently, the Company is
subject to certain risks, including currency fluctuations and possible political
or economic instability which may result in the impairment or loss of mining
title or other mineral rights, and mineral exploration and mining activities may
be affected in varying degrees by political stability and governmental
regulations relating to the mining industry.
- 9 -
INVESTOR RELATIONS ACTIVITIES
The Company has an arrangement with Empire to provide investor relations
services under which the Company is currently paying a monthly fee of $10,000.
The agreement may be terminated with written 30 days notice. During the 2008
period, the Company was charged a total of $60,000 (2007 - $40,000) by Empire.
OUTSTANDING SHARE DATA
The Company's authorized share capital is unlimited common shares without par
value. As at January 26, 2009, there were 35,055,061 issued and outstanding
common shares. In addition there were 3,130,500 stock options outstanding at
exercise prices ranging from $0.62 to $2.30 per share and 4,393,645 warrants
outstanding, with exercise prices ranging from $0.17 to $2.25 per share.
- 10 -
CERTIFICATION OF INTERIM FILINGS
VENTURE ISSUER BASIC CERTIFICATE
I, EDUARDO LUNA, CHIEF EXECUTIVE OFFICER OF ROCHESTER RESOURCES LTD., certify
the following:
1. REVIEW: I have reviewed the interim financial statements and interim
MD&A (together the interim filings) of Rochester Resources Ltd. (the
issuer) for the interim period ending November 30, 2008.
2. NO MISREPRESENTATIONS: Based on my knowledge, having exercised
reasonable diligence, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, for the period
covered by the interim filings.
3. FAIR PRESENTATION: Based on my knowledge, having exercised reasonable
diligence, the interim financial statements together with the other
financial information included in the interim filings fairly present in
all material respects the financial condition, results of operations
and cash flows of the issuer, as of the date of and for the periods
presented in the interim filings.
Date: January 28, 2009
/s/ EDUARDO LUNA
- -----------------------
Eduardo Luna
Chief Executive Officer
- --------------------------------------------------------------------------------
NOTE TO READER
In contrast to the certificate required under Multilateral Instrument 52-109
Certification of Disclosure in Issuers' Annual and Interim Filings (MI 52-109),
this Venture Issuer Basic Certificate does not include representations relating
to the establishment and maintenance of disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as defined in MI
52-109. In particular, the certifying officers filing this certificate are not
making any representations relating to the establishment and maintenance of:
i) controls and other procedures designed to provide reasonable assurance
that information required to be disclosed by the issuer in its annual
filings, interim filings or other reports filed or submitted under
securities legislation is recorded, processed, summarized and reported
within the time periods specified in securities legislation; and
ii) a process to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with the issuer's GAAP.
The issuer's certifying officers are responsible for ensuring that processes are
in place to provide them with sufficient knowledge to support the
representations they are making in this certificate.
Investors should be aware that inherent limitations on the ability of certifying
officers of a venture issuer to design and implement on a cost effective basis
DC&P and ICFR as defined in MI 52-109 may result in additional risks to the
quality, reliability, transparency and timeliness of interim and annual filings
and other reports provided under securities legislation.
- --------------------------------------------------------------------------------
CERTIFICATION OF INTERIM FILINGS
VENTURE ISSUER BASIC CERTIFICATE
I, JOSE MANUAL SILVA, CHIEF FINANCIAL OFFICER OF ROCHESTER RESOURCES LTD.,
certify the following:
1. REVIEW: I have reviewed the interim financial statements and interim
MD&A (together the interim filings) of Rochester Resources Ltd. (the
issuer) for the interim period ending November 30, 2008.
2. NO MISREPRESENTATIONS: Based on my knowledge, having exercised
reasonable diligence, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, for the period
covered by the interim filings.
3. FAIR PRESENTATION: Based on my knowledge, having exercised reasonable
diligence, the interim financial statements together with the other
financial information included in the interim filings fairly present in
all material respects the financial condition, results of operations
and cash flows of the issuer, as of the date of and for the periods
presented in the interim filings.
Date: January 28, 2009
/s/ JOSE MANUAL SILVA
- -----------------------
Jose Manual Silva
Chief Financial Officer
- --------------------------------------------------------------------------------
NOTE TO READER
In contrast to the certificate required under Multilateral Instrument 52-109
Certification of Disclosure in Issuers' Annual and Interim Filings (MI 52-109),
this Venture Issuer Basic Certificate does not include representations relating
to the establishment and maintenance of disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as defined in MI
52-109. In particular, the certifying officers filing this certificate are not
making any representations relating to the establishment and maintenance of:
i) controls and other procedures designed to provide reasonable assurance
that information required to be disclosed by the issuer in its annual
filings, interim filings or other reports filed or submitted under
securities legislation is recorded, processed, summarized and reported
within the time periods specified in securities legislation; and
ii) a process to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with the issuer's GAAP.
The issuer's certifying officers are responsible for ensuring that processes are
in place to provide them with sufficient knowledge to support the
representations they are making in this certificate.
Investors should be aware that inherent limitations on the ability of certifying
officers of a venture issuer to design and implement on a cost effective basis
DC&P and ICFR as defined in MI 52-109 may result in additional risks to the
quality, reliability, transparency and timeliness of interim and annual filings
and other reports provided under securities legislation.
- --------------------------------------------------------------------------------