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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of May 2006
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Commission File Number 001-32748
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CORRIENTE RESOURCES INC.
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(Translation of registrant's name into English)
520 - 800 West Pender Street, Vancouver, British Columbia, CANADA V6C 2V6
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F _____________ Form 40-F ______X_______
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 by furnishing the information contained in
this Form, the registrant 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-_______________
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DOCUMENTS INCLUDED AS PART OF THIS REPORT
Document
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1. Management's discussion and analysis of financial condition
and results of operations for the quarter ended March 31, 2006.
2. Interim consolidated financial statements for the quarter
ended March 31, 2006.
3. Certification of Interim Filings - CEO
4. Certification of Interim Filings - CFO
5. News release, dated May 16, 2006, relating to the requested
changes to the Mirador technical report.
DOCUMENT 1
MANAGEMENT'S DISCUSSION & ANALYSIS
(Expressed in Canadian dollars unless otherwise noted)
May 11, 2006
Management's Discussion and Analysis supplements, but does not form part of, the
unaudited consolidated financial statements of the company and the notes thereto
for the fiscal period ended March 31, 2006. Consequently, the following
discussion and analysis of the financial condition and results of operations for
Corriente Resources Inc. should be read in conjunction with the audited
consolidated financial statements for the periods ended March 31, 2006 and 2005
and related notes therein, which have been prepared in accordance with Canadian
generally accepted accounting principles, consistently applied.
Additional information regarding the company, including its Annual Information
Form, can be found on SEDAR at www.sedar.com.
Forward-Looking Statements
Certain statements contained in the following Management's Discussion and
Analysis (MD&A) and elsewhere constitute forward-looking statements. Such
forward-looking statements involve a number of known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
of achievements of the company to materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date the statements were
made, and readers are advised to consider such forward-looking statements in
light of the risks set forth below.
Corporate Governance
Management of the company is responsible for the preparation and presentation of
the annual consolidated financial statements and notes thereto, MD&A and other
information contained in this annual report. Additionally, it is Management's
responsibility to ensure the company complies with the laws and regulations
applicable to its activities.
The company's Management is accountable to the Board of Directors (Directors),
each member of which is elected annually by the shareholders of the company. The
Directors are responsible for reviewing and approving the annual audited
consolidated financial statements and the MD&A. Responsibility for the review
and approval of the company's quarterly unaudited interim consolidated financial
statements and MD&A is delegated by the Directors to the Audit Committee, which
is comprised of three directors, all of whom are independent of Management.
Additionally, the Audit Committee pre-approves audit and non-audit services
provided by the company's auditors.
The auditors are appointed annually by the shareholders to conduct an audit of
the consolidated financial statements in accordance with generally accepted
auditing standards. The external auditors have complete access to the Audit
Committee to discuss audit, financial reporting and related matters resulting
from the annual audit as well as assist the members of the Audit Committee in
discharging their corporate governance responsibilities.
The disclosure of Corriente's corporate governance policies is contained in the
company's Information Circular prepared for the May 2006 Annual General Meeting
and which is available for review at www.sedar.com. The disclosure statement has
been prepared by the company's Corporate Governance Committee and approved by
the Board of Directors.
Page 1 of 12
Disclosure Controls
Corriente has daily, weekly, monthly and annual processes that, when considered
in the aggregate and in conjunction with current internal controls, are
considered to be effective disclosure controls. In addition, Corriente has
created a Corporate Disclosure Committee, comprised of the Chief Executive
Officer, Senior Vice-President, and Chief Financial Officer. This Committee
supplements these periodic processes.
Disclosure Controls and Procedures have been developed to ensure that material
information relating to Corriente and its subsidiaries is made known to us by
others within those entities, particularly within a period in which a disclosure
report is being prepared. These involve:
o identification of all continuous disclosure requirements under
securities laws, rules and policies applicable to Corriente.
o identification of the individuals responsible for preparing reportable
information and individuals, whether internal or external, responsible
for reviewing reports or portions of reports to verify disclosure made
with respect to their areas of responsibility or expertise.
o establishment of timetables for the preparation and adequate review of
reportable information.
o procedures for obtaining "sign-off" on disclosure of reportable
information and receipt of written consents from all experts whose
reports are included or referred to in any disclosure.
o procedures for the identification and timely reporting to the Committee
of information which may constitute material information or which may
constitute a material change to previously disclosed material
information, including the identification of individuals who are likely
to learn first about events outside the control of Corriente that may
give rise to material information.
o procedures for the identification and reporting to the Audit Committee
of the Board of Directors of any fraud, whether or not material, that
involves management or other employees who have a significant role in
Corriente's internal controls.
o ensuring the procedures are followed with respect to the release of
each disclosure made in writing and for the review of any disclosure
made orally.
o ongoing evaluation of Corriente's disclosure controls and procedures.
Corriente and its subsidiaries are relatively small in size and operate in a
very integrated management environment. That is, senior management is in
constant contact with many of Corriente's staff, suppliers, regulators and the
like on an ongoing and detailed basis. This allows one or more of senior
management to be in a position where they are more likely to be aware (than not)
of material events or information. While senior management may not be aware of
all things at all times, it believes that the probability of a material event or
material information being missed or not disclosed on a timely basis is very
small.
Page 2 of 12
As new Canadian accounting standards are released, the Chief Financial Officer
undertakes a review and evaluation to determine if it is applicable. If there is
any uncertainty in its applicability, Corriente solicits the input of the
external auditor. If the new standard is applicable to Corriente, it is then
analyzed and summarized in a manner that effectively documents and evaluates the
impact on Corriente, and to determine the immediate action, if any, Corriente
would need to undertake in order to comply with the new standard. Quarterly, the
documented standards are reviewed, and updated as required, to ensure that a
standard is still applicable, and that Corriente remains in compliance.
Through implementation of the above, senior management believes that the
company's disclosure controls are sufficient while being practical for a company
of its size.
General
Corriente is a Canadian-based junior resource exploration company engaged in the
exploration and development of copper-gold resource properties located primarily
in the Corriente Copper Belt in Ecuador. Under various agreements signed with
certain subsidiaries of BHP Billiton LLC ("BHP Billiton"), the company has
earned a 100% interest in certain of BHP Billiton's resource properties located
in the Rio Zamora copper porphyry district (Corriente Copper Belt), in Ecuador.
This required the issue of shares to BHP Billiton and the expenditure of
exploration funds under the terms of these agreements. Additionally, these
concessions are subject to a 2% Net Smelter Royalty ("NSR") payable to BHP
Billiton, though the company has the right to reduce the NSR to 1% for the
Mirador, Panantza and San Carlos resource properties upon the payment of US$2
million for each property.
As a result, Corriente controls a 100% interest in over 50,000 hectares located
within the Corriente Copper Belt. The Belt extends over a 20 x 80 kilometre area
in southeast Ecuador. The Belt currently contains three copper and copper-gold
porphyry deposits, Mirador, Panantza and San Carlos. Six additional copper and
copper-gold exploration targets have been identified in the Corriente Copper
Belt to date.
The company's executive office is located in Vancouver, Canada while its Ecuador
operations are run from its subsidiary office located in Quito, Ecuador. With
the exception of short-term operational requirements for the subsidiaries, funds
have been maintained and controlled in Vancouver, both in Canadian and U.S.
dollars. In addition to its core staff, the company engages consultants as
necessary, to provide geological, mine development and pre-construction
consulting, design and other services. Overhead costs and efficiencies in
Ecuador continue to compare favourably with other South American exploration
areas.
Listing on the American Stock Exchange
The company's shares began trading on the American Stock Exchange on Thursday,
April 6, 2006. The listing on the American Stock Exchange is expected to provide
U.S. investors with much more direct access to the company's copper growth
story. As well, it should allow the company to expand its shareholder base in
the largest capital market in the world.
Page 3 of 12
Appointment to the Board of Directors
The company appointed David G. Unruh to its Board of Directors in January 2006.
Mr. Unruh is a Director of Westcoast Energy Inc. and Union Gas Limited, both
Duke Energy companies. Mr. Unruh is also a director of Catalyst Paper Inc.,
Ontario Power Generation Inc., Pacific Northern Gas Ltd., Canada Line Rapid
Transit Inc., The Wawanesa Mutual Insurance Company, The Wawanesa Life Insurance
Company and The Wawanesa General Insurance Company and is a member of the
Manitoba Bar Association and the Canadian Bar Association.
Mr. Unruh joined Westcoast Energy Inc. as Senior Vice President, Law and
Corporate Secretary in 1993 and continued in that role until March 14, 2002.
From March 15, 2002 until his retirement on April 1, 2003, he was Senior Vice
President and General Counsel for Duke Energy Gas Transmission's North American
operations following which from April 1, 2003 to June 30, 2005 he became a
non-executive Vice Chair of both Westcoast Energy Inc. and Union Gas Limited.
Prior to his move to British Columbia to join Westcoast Energy, Mr. Unruh
practiced business law in Winnipeg, Manitoba most recently as a partner of
Aikins, MacAulay & Thorvaldson, Barristers and Solicitors.
Amendment to Stock Option Plan
During the period ended March 31, 2006, the company granted options to purchase
25,000 shares to a new director and 400,000 to senior management. These options
have a five-year expiry from date of grant. As the latter grant exceeds the
option room available under the company's Stock Option Plan (Option Plan), they
are subject to shareholder approval in accordance with the policies of the
Toronto Stock Exchange. The company is seeking approval at its May 25, 2006
Annual General Meeting to amend the Option Plan to increase the number of shares
that may be reserved for issue under it from 6,524,830 to a rolling maximum of
10% of the number of common shares actually outstanding immediately prior to the
grant of any particular option.
Mirador Project
Corriente is moving towards construction of a starter operation at its Mirador
copper-gold operation. Mirador is one of the few new, sizeable copper projects
available for near-term production.
Environmental Impact Assessment
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Corriente announced on May 4, 2006 that the Mirador copper project Environmental
Impact Assessment (EIA) met all the legal requirements of the Ecuadorian
Ministry of Energy and Mining (MEM) and approval was granted on the EIA.
The Sub-Secretary of the MEM, Mr. Carlos Muirriagi, was quoted as stating
"Ecuador is extremely pleased about the EIA approval and our commitment is to
help mining companies like Corriente that are making it possible in the near
future for Ecuador to become a metal mining country".
The EIA covered both the environmental aspects of proposed mining operations in
Mirador and community and social plans associated with the same project. During
the lengthy preparation of the EIA, the company worked closely with the MEM to
ensure that the report met all required government guidelines and regulations.
The Mirador EIA is one of the most comprehensive documents on social and
environmental issues ever submitted to the Mines Ministry in Ecuador. The
submission of the EIA and subsequent approval followed an extensive consultation
process with local communities, that was carried out in late November and early
December 2005.
Page 4 of 12
Engineering and Procurement
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In March 2006, the company's wholly owned subsidiary, Ecuacorriente S.A. signed
a Letter of Award with SNC-Lavalin Chile S.A., a member of the SNC-Lavalin Group
of Companies of Canada, for full Engineering and Procurement Services for the
start-up and expansion of the Mirador mine. SNC-Lavalin Chile's experienced
engineering group has extensive mine design and construction experience in South
America, while overall, SNC-Lavalin is one of the leading groups of engineering
and construction companies in the world.
Power
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In March 2006, the company announced that it signed a Letter of Intent (LOI)
with Hidroabanico S.A. to supply the 28.5 MW power needs of proposed mining
operations at the Mirador copper-gold project. The terms outlined in the LOI
propose a 10 year Power Purchase Agreement (PPA) with a proposed rate of
$0.05/kWh. The Hidroabanico facility has already been completed to a 15 MW stage
and an expansion is under way to the final size of 37.5 MW, with completion
slated for December 2006. The Hidroabanico facility is a run-of-river design and
provides "green" energy that qualifies for the carbon credit program. The energy
will be delivered through a dedicated line to the mine, which will cost in the
order of $US10 Million to construct and will be included in the capital cost
estimate for Mirador. As part of the LOI, Hidroabanico will have the first right
of opportunity to provide energy needs for the planned 25,000 tpd to 50,000 tpd
expansion at Mirador. A due diligence review is presently underway at the site,
which will be followed by final negotiation of the PPA.
Since 1999, Ecuador has had a competitive wholesale electrical market operated
by Centro Nacional de Control de Energia (CENACE). The country's energy needs
are currently supplied by a combination of hydro and thermal suppliers, but most
new energy sources in Ecuador are hydro (such as the 230 MW San Francisco
Project currently under construction south of Quito). As part of the government
plan to grow energy supplies in Ecuador, a total of 146 new hydro projects over
1 MW have been identified which will provide potential new capacity of over
20,000 MW to the Ecuador energy market.
As a PPA with Hidroabanico will meet the energy needs at Mirador, Corriente is
planning no further development work at the Sabanilla run-of-river project.
Options for moving the Sabanilla project forward with local operators as a spot
power producer are under review.
Exploration
Exploration efforts continued during the first quarter with a significant
drilling program at Mirador Norte, which is located only 3 km to the northwest
of the company's Mirador project. Drilling was completed on 39 holes totaling
6800 metres of core for this phase of exploration work, and the related assay
results should be available in the second quarter. An in-house resource estimate
for Mirador Norte is expected to be completed in the second half of 2006, which
will add to the overall Mirador area resource estimate.
Page 5 of 12
Financial Results of Operations
All of the financial information referenced below has been prepared in
accordance with Canadian generally accepted accounting principles, applied on a
consistent basis.
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| Financial Data for Last |
| Eight Quarters |
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Three months ended Mar-06 Dec-05 Sep-05 Jun-05 Mar-05 Dec-04 Sep-04 Jun-04
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Total revenues (000's) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
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(Earnings) loss before $ 188 $3,272 $1,404 $ 378 $(1,710) $ (429) $ 425 $ 343
extraordinary items (000's)
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Net (earnings) loss (000's) $ 188 $3,272 $1,404 $ 378 $(1,710) $ (429) $ 425 $ 343
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(Earnings) loss per share $ 0.00 $ 0.07 $ 0.03 $0.01 $ (0.04) $(0.01) $ 0.01 $0.01
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The company's operations during the period ended March 31, 2006 produced a net
loss of $187,674 or $0.00 per share compared to net earnings of $1,709,676 or
$0.04 per share in the first quarter of 2005. As the company has not owned any
revenue-producing resource properties, no mining revenues have been recorded to
date. The net earnings in the first quarter of 2005 were due to the receipt and
sale of marketable securities received on the sale of assets previously written
off.
Deferred mineral property development expenditures made on the company's target
projects within the Corriente Copper Belt for the period totalled $2,842,303
versus $2,323,136 during the same quarter in 2005, reflecting the company's
significant activities in furthering development of the Mirador starter mine.
These activities included costs incurred towards hiring engineering and
construction personnel for the continuing development of the Mirador project
infrastructure.
Deferred power project expenditures made by the company pursuant to its JV
contributions for development of the Sabanilla Power Project totalled $Nil in
the first quarter of 2006 (2005 - $475,936). As disclosed above, the company is
proceeding towards agreement on a PPA with Hidroabanico, and consequently, has
written the costs of Sabanilla down to $Nil and is exploring its options for
Sabanilla.
Administration expenses increased in the first quarter of 2006 to $457,863 from
$335,064 in 2005. The increase from 2005 is primarily due to an increase in
management fees, wages and benefits to $216,195 (2005 - $103,191), regulatory
fees to $59,665 (2005 - $34,245), and printing and shareholder information costs
increased to $12,474 (2005 - $3,977). The higher administrative costs reflected
the addition of mining resource development management and increased directors'
fees, increased sustaining fees based on the company's higher market
capitalization and increased printing costs. Decreased costs during the quarter
included stock-based compensation decreasing from $67,054 for the first quarter
of 2005 to $52,582 in the same period for 2006. Also, investor relations and
promotion costs decreased slightly to $30,408 from $38,570.
Stock-compensation expenses were $52,582 in the first quarter of 2006 versus
$67,054 for the first quarter of 2005, reflecting the fair value of stock
options granted during the periods as calculated using the Black-Scholes Option
Pricing Model.
Due to the company's higher average cash balance on hand during the first
quarter of 2006, interest income increased to $267,280 from $71,080 for 2005.
General exploration increased to $19,222 in the first quarter of 2006 from $109
in the first quarter of 2005.
Page 6 of 12
As the company has not had any revenue-producing resource properties, no mining
revenues have been recorded to date. The significant net income generated in the
first quarter of 2005 was due to marketable securities sold, which had been
received from the sale of the company's Argentine and Bolivian assets written
off in prior years. Excluding such proceeds, the company's net losses for the
last 8 quarters generally reflect the impact and timing of the recording of
stock-compensation expenses attributable to the Black Scholes Option Pricing
Model calculation of the fair value of stock options granted within the period,
offset by interest income earned from cash on hand.
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Financial Data for Last Three Fiscal Years
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Fiscal year ended Dec 31-05 Dec 31-04 Dec 31-03
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Total revenues (000's) $ 0 $ 0 $ 0
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Loss before extraordinary items (000's) $ 3,344 $ 714 $ 682
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Net loss (000's) $ 3,344 $ 714 $ 682
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Basic and diluted loss per share $ 0.07 $ 0.02 $ 0.02
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Cash and cash equivalents (000's) $ 32,441 $ 12,603 $ 18,688
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Total assets (000's) $ 67,100 $ 40,502 $ 35,948
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Total long-term financial liabilities (000's) $ 0 $ 0 $ 0
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Total shareholders' equity (000's) $ 66,124 $ 39,755 $ 35,527
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Cash dividends declared per share $ 0.00 $ 0.00 $ 0.00
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Related Party Transactions
Included in management fees, wages and benefits and in mineral properties and
investor relations are expenditures of $Nil during the first quarter of 2006
(2005 - $19,863) in respect of administrative services provided by a company
affiliated with an employed officer. At March 31, 2006, $Nil (2005 - $9,339) was
due to this company affiliated with an employed officer.
Critical Accounting Policies
The details of the company's significant accounting policies are presented in
note 2 of the company's audited consolidated financial statements which can be
found at www.sedar.com. The following policies are considered by management to
be essential to understanding the processes and reasoning that go into the
preparation of the company's financial statements and the uncertainties that
could have a bearing on its financial results.
Resource Properties
The Company capitalizes all costs related to investments in mineral property
interests on a property-by-property basis. Such costs include mineral property
acquisition costs and exploration expenditures, including interest on any
required guarantee. Costs are deferred until such time as the extent of
mineralization has been determined and mineral property interests are either
developed, the property sold or the Company's mineral rights allowed to lapse.
All deferred mineral property expenditures are reviewed, on a
property-by-property basis, to consider whether there are any conditions that
may indicate impairment. When the carrying value of a property exceeds its net
recoverable amount that may be estimated by quantifiable evidence of an economic
geological resource or reserve or the Company's assessment of its ability to
sell the property for an amount less than the deferred costs, provision is made
for the impairment in value and the property is written down to the estimated
fair value.
The amounts shown for acquisition costs and deferred exploration expenditures
represent costs incurred to date and do not necessarily reflect present or
future values. These costs are depleted over the useful lives of the properties
upon commencement of commercial production or written off if the properties are
abandoned, become impaired or the claims allowed to lapse.
Page 7 of 12
Stock-based Compensation
Management is required to make significant estimates about future volatility and
the period in which stock options will be exercised. The selection of the
estimated volatility figure, and the estimate of the period in which an option
will be exercised will have a significant impact on the costs recognized for
stock based compensation. The estimates concerning volatility are made with
reference to historical volatility, which is not necessarily an accurate
indicator of volatility which will be experienced in the future. Management
assumes that stock options will remain unexercised until near their expiry date
because historical experience supports this assumption. However, the exercise of
options may occur at times different than those estimated, or options may expire
unexercised. For options which vest over future periods, management makes an
estimate of the percentage of options which are expected to be forfeited prior
to vesting based on historical experience, which may not be an accurate
indicator of future results. No adjustment is made for actual experience, except
for options which vest at specific dates over time, where management updates its
estimate of the number of unexercised options which are expected to vest in the
future. Such fair value is estimated using the Black-Scholes Option Pricing
Model, the assumptions of which can be found in Note 5 c) of the company's
consolidated financial statements for the period ended March 31, 2006.
Liquidity and Capital Resources
Working capital as at March 31, 2006 was $29,380,350, compared to $11,535,662 at
March 31, 2005. The increase is primarily due to the completion of a short-form
prospectus offering on December 29, 2005 that raised net proceeds of
$27,853,364. The main uses of cash during the first quarter of 2006 were
expenditures associated with the development of the planned Mirador mine of
$2,842,303 (2005 - $2,323,136).
As at March 31, 2006, the company had 54,441,393 (fully diluted - 56,631,393)
common shares issued and outstanding versus 45,421,393 (fully diluted -
49,055,141) for 2005. There were no public offerings in the first quarters of
2006 and 2005, though the proceeds from the exercise of 690,000 stock options of
$789,000 (2005 - $ Nil) contributed positively to the company's working capital.
A further 865,000 stock options were exercised subsequent to March 31, 2006, for
proceeds to the company of $1,202,300.
Subsequent to the end of the quarter, on May 8, 2006, the company announced that
it entered into an underwriting agreement with a syndicate of underwriters to
sell 19,231,000 common shares at a price of $6.50 per share to raise gross
proceeds of $125,001,500 pursuant to a short form prospectus. This financing is
expected to close on or about May 26, 2006.
Historically, the company's capital requirements have been met by equity
subscriptions. While the company's current working capital is considered
sufficient to meet the company's administrative overhead for the next several
years, substantial capital is required to complete the company's mine. Actual
funding requirements may vary from those planned due to a number of factors,
including the progress of exploration and project development activity and
foreign exchange fluctuations.
Page 8 of 12
Risk Factors
Companies operating in the mining industry face many and varied kinds of risks.
While risk management cannot eliminate the impact of all potential risks, the
company strives to manage such risks to the extent possible and practical.
Following are the risk factors which the company's management believes are most
important in the context of the company's business. It should be noted that this
list is not exhaustive and that other risk factors may apply. An investment in
the company may not be suitable for all investors.
Foreign Country and Political Risk
The resource properties on which the company is actively pursuing its
exploration and development activities are all located in Ecuador, South
America. As a result, the company is subject to certain risks, including
currency fluctuations and possible political or economic instability in Ecuador,
which may result in the impairment or loss of mineral concessions or other
mineral rights. Also, mineral exploration and mining activities may be affected
in varying degrees by political instability and government regulations relating
to the mining industry. Any changes in regulations or shifts in political
attitudes are beyond the control of the company and may adversely affect its
business. Exploration may be affected in varying degrees by government
regulations with respect to restrictions on future exploitation and production,
price controls, export controls, foreign exchange controls, income taxes,
expropriation of property, environmental legislation and mine and/or site
safety. While Management believes that the current political climate in Ecuador
is stable, there can be no certainty that this will continue going forward. To
alleviate such risk, the company funds its Ecuador operations on an as-needed
basis and works closely with federal and territorial governments and community
groups. The company does not presently maintain political risk insurance for its
foreign exploration and development projects.
Exploration and Mining Risks
The business of exploring for minerals and mining involves a high degree of
risk. Due in some cases to factors that cannot be foreseen, only a small
proportion of the properties that are explored are ultimately developed into
producing mines. At present, only the company's Mirador project property has
proven or probable reserves while any planned exploration programs for the
company's other properties are an exploratory search for proven or probable
reserves. The mining areas presently being assessed by the company may not
contain economically recoverable volumes of minerals or metals. The operations
of the company may be disrupted by a variety of risks and hazards which are
beyond the control of the company, including labour disruptions, the inability
to obtain suitable or adequate machinery, equipment or labour and other risks
involved in the conduct of exploration programs. Once economically recoverable
volumes of minerals are found, substantial expenditures are required to
establish reserves through drilling, to develop metallurgical processes, to
develop the mining and processing facilities and infrastructure at any site
chosen for mining. Although substantial benefits may be derived from the
discovery of a major mineralised deposit, no assurance can be given that
minerals will be discovered in sufficient quantities or having sufficient
grade to justify commercial operations or that funds required for development
can be obtained on a timely basis. The economics of developing copper, gold
and other mineral properties is affected by many factors including the cost of
operations, variations of the grade of ore mined, fluctuations in the price of
minerals produced, costs of processing equipment and such other factors as
government regulations, including regulations relating to environmental
protection. In addition, the grade of mineralization ultimately mined may
differ from that indicated by drilling results and such differences could be
material. Depending on the price of copper or other minerals
Page 9 of 12
produced, which have fluctuated widely in the past, the company may determine
that it is impractical to commence or continue commercial production.
Financing Risks
The company has limited financial resources, has no source of operating cash
flow and has no assurance that additional funding will be available to it for
further exploration and development of its projects. Further exploration and
development of one or more of the company's properties will be dependent upon
the company's ability to obtain financing through joint venturing, equity or
debt financing or other means, and although the company has been successful in
the past in obtaining financing through the sale of equity securities, there can
be no assurance that the company will be able to obtain adequate financing in
the future or that the terms of such financing will be favourable. Failure to
obtain such additional financing could result in delay or indefinite
postponement of further exploration and development of its projects.
Limited Experience with Development-Stage Mining Operations
The company has no previous experience in placing resource properties into
production and its ability to do so will be dependent upon using the services of
appropriately experienced personnel or entering into agreements with other major
resource companies that can provide such expertise. There can be no assurance
that the company will have available to it the necessary expertise when and if
it places its resource properties into production.
Estimates of Mineral Resources and Production Risks
The Mineral Resource estimates disclosed by the company are estimates only, and
no assurance can be given that any proven or probable reserves will be
discovered or that any particular level of recovery of minerals will in fact be
realized or that an identified reserve or resource will ever qualify as a
commercially mineable (or viable) deposit which can be legally and economically
exploited. In addition, the grade of mineralization which may ultimately be
mined may differ from that indicated by drilling results and such differences
could be material. Production can be affected by such factors as permitting
regulations and requirements, weather, environmental factors, unforeseen
technical difficulties, unusual or unexpected geological formations and work
interruptions. Consequently, the company's estimated Mineral Resources should
not be interpreted as assurances or evidence of commercial viability or
potential or of the profitability of any future operations.
Base Metals Prices
The principal activity of the company is the exploration and development of
copper-gold resource properties. The mineral exploration and development
industry in general is intensely competitive and there is no assurance that,
even if commercial quantities of proven and probable reserves are discovered, a
profitable market may exist for the sale of the same. Factors beyond the control
of the company may affect the marketability of any substances discovered. Base
metals prices have fluctuated widely, particularly in recent years. The feasible
development of such properties is highly dependent upon the price of copper and,
to a lesser extent, gold. A sustained and substantial decline in commodity
copper prices could result in the write-down, termination of exploration and
development work or loss of its interests in identified resource properties.
Page 10 of 12
Competition
The company competes with many companies that have substantially greater
financial and technical resources than the company for the acquisition of
mineral properties as well as for the recruitment and retention of qualified
employees.
Environmental and other Regulatory Requirements
The activities of the company are subject to environmental regulations
promulgated by government agencies from time to time. Environmental legislation
generally provides for restrictions and prohibitions on spills, releases or
emissions of various substances produced in association with certain mining
industry operations, such as seepage from tailings disposal areas, which would
result in environmental pollution. A breach of such legislation may result in
imposition of fines and penalties. In addition, certain types of operations
require the submission and approval of environmental impact assessments.
Environmental legislation is evolving in a manner which means stricter
standards, and enforcement, fines and penalties for non-compliance are more
stringent. Environmental assessments of proposed projects carry a heightened
degree of responsibility for companies and directors, officers and employees.
The cost of compliance with changes in governmental regulations has a potential
to reduce the profitability of operations.
Companies engaged in exploration activities generally experience increased costs
and delays as a result of the need to comply with applicable laws, regulations
and permits. There can be no assurance that all permits which the company may
require for exploration and development of its properties will be obtainable on
reasonable terms or on a timely basis, or that such laws and regulations would
not have an adverse effect on any project that the company may undertake.
The company believes it is in substantial compliance with all material laws and
regulations which currently apply to its activities. However, there may be
unforeseen environmental liabilities resulting from exploration and/or mining
activities and these may be costly to remedy. Failure to comply with applicable
laws, regulations, and permitting requirements may result in enforcement actions
thereunder, including orders issued by regulatory or judicial authorities
causing operations to cease or be curtailed, and may include corrective measures
requiring capital expenditures, installation of additional equipment, or
remedial actions. Parties engaged in exploration operations may be required to
compensate those suffering loss or damage by reason of the exploration
activities and may have civil or criminal fines or penalties imposed for
violations of applicable laws or regulations and, in particular, environmental
laws.
Amendments to current laws, regulations and permits governing operations and
activities of exploration companies, or more stringent implementation thereof,
could have a material adverse impact on the company and cause increases in
expenditures and costs or require abandonment or delays in developing new mining
properties.
Corriente's policy is to abide by the regulations and requirements of Ecuador,
Canada and the World Bank.
Title Matters
Title to and the area of mining concessions may be disputed. Although the
company has taken steps to verify the title to mineral properties in which it
has an interest in accordance with industry standards for the current stage of
exploration of such properties, these procedures do not guarantee the company's
title. Property title may be subject to unregistered prior agreements or
transfers and title may be affected by undetected defects.
Page 11 of 12
Repatriation of Earnings
Currently there are no restrictions on the repatriation from Ecuador of earnings
to foreign entities. However, there can be no assurance that restrictions on
repatriation of earnings from Ecuador will not be imposed in the future.
Dependence On Key Personnel
The company's development to date has largely depended on, and in the future
will continue to depend on, the efforts of key management. Loss of any of these
people could have a material adverse effect on the company and its business. The
company has not obtained and does not intend to obtain key-person insurance in
respect of any directors or other of its employees.
Share Price Fluctuations
In recent years, the securities markets have experienced a high level of price
and volume volatility, and the market price of securities of many companies,
particularly those considered development-stage companies such as the company,
have experienced wide fluctuations in price which have not necessarily been
related to the underlying asset values or prospects of such companies. Price
fluctuations will continue to occur in the future.
No Dividends
Investors cannot expect to receive a dividend on their investment in the company
in the foreseeable future, if ever. Investors should not expect to receive any
return on their investment in the company's securities other than possible
capital gains.
Outlook
The company fully intends to continue with the development and pre-construction
work necessary to build and commission an initial 25,000 tonnes/day mine on its
Mirador property in the second half of 2008. This starter mine is expected to
serve as the base for the phased development of the company's resource
properties located in the Corriente Copper Belt in southern Ecuador. Financing
for the Mirador project is expected to come from a combination of equity, bank,
off-taker and/or supplier financing sources. Discussions are underway with
representatives from all such potential sources.
The recent approval of the Mirador project's EIA by the government of Ecuador
and the company's recently-announced equity financing are major steps towards
the development and commissioning of the Mirador copper project. The company
continues to make progress on remaining key components of the Mirador project.
With the completion of the Mirador Norte drilling program, exploration drilling
for the remainder of 2006 will be focused on the company's Panantza project.
Additional prospecting in and around the Panantza and San Carlos projects will
also take place.
Corriente controls a 100% interest in over 50,000 hectares located within the
Corriente Copper Belt in Ecuador. This includes three copper and copper-gold
porphyry deposits, called Mirador, Panantza and San Carlos. Measured and
indicated copper resources at a 0.40% cutoff at Mirador is 438 million tonnes at
0.61%Cu and 0.19g/t Au, while inferred resources at Panantza, San Carlos and
Mirador (excluding Mirador Norte) at a 0.40% cutoff are 395 million tonnes at
0.67% Cu and 0.08 g/t Au, 657 million tonnes at 0.61% Cu, and 235 million tonnes
at 0.52% Cu and 0.17 g/t Au, respectively.
Page 12 of 12
DOCUMENT 2
Corriente Resources Inc.
(A Development Stage Enterprise)
Interim Consolidated Financial Statements
March 31, 2006
(Unaudited)
[CORRIENTE RESOURCES INC. GRAPHIC OMITTED]
May 11, 2006
Message to Shareholders
The first quarter of 2006 was focused on development of the key aspects of the
Mirador project which are required to allow a construction decision to take
place in the second half of 2006. These aspects include approval of the
Environmental Impact Assessment (EIA) which was submitted in December, 2005, a
decision on the energy supply, and the engineering studies being carried out by
SNC Lavalin regarding the potential expansion of the starter project's capacity
to 50,000 tonnes/day in the fifth year following startup.
As announced earlier, the Company has received approval of the Mirador EIA and
on March 22, 2006 a Letter of Intent was signed which outlined a plan to supply
28.5 MW of energy to Mirador from the nearby Abanico run-of-river hydro project.
Preliminary engineering studies are underway on the transmission line right of
way.
The SNC Lavalin engineering team has been working on the 25,000 to 50,000
tonne/day expansion scenario for several months and this work will lead to the
completion of a definitive feasibility study for the Mirador project. Although
the 25,000 tonnes per day starter project will not change in scope
significantly, the Company wants to be able to utilize this phase of engineering
work to maximize the return to shareholders by pre-planning for a potential
expansion.
On April 6, 2006 the Company's shares commenced trading on the American Stock
Exchange as part of our continuing effort to expand our investor base. Early
indications are that the listing has been well received among U.S. institutions.
As a result of the AMEX listing, the Company's investors and shareholders in
Canada, U.S. and Germany now have access to local stock exchanges on which to
trade Corriente's shares.
Exploration efforts continued during the first quarter with a significant
drilling program at Mirador Norte, which is located only 3 km to the northwest
of the Company's Mirador project. Drilling was completed on 39 holes totaling
6800 metres of core for this phase of exploration work, and the related assay
results should be available in the second quarter. An in-house resource estimate
for Mirador Norte is expected to be completed in the second half of this year,
which will add to the overall Mirador area resource estimate.
On May 8, 2006, the Company announced its largest equity financing ever, raising
$125 million through an offering of 19,231,000 common shares at a price of $6.50
per share. Management believes that this equity financing, together with the
December 2005 financing, will provide sufficient equity capital to realize our
50:50 debt to equity financing goal for the Mirador project. The debt financing
is expected to come from traditional resource banking and concentrate off-taker
sources.
On behalf of the Board,
Kenneth R. Shannon
Chief Executive Officer
Corriente Resources Inc.
(a development stage enterprise)
Consolidated Balance Sheets
- --------------------------------------------------------------------------------------------------------------------
(expressed in Canadian dollars)
March 31, 2006 December 31, 2005
(Unaudited) (Audited)
-------------------------------------------------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 29,842,987 $ 32,440,690
Accounts receivable and prepaid expenses 223,656 187,746
-------------------------------------------------------------------------------------------------------------------
30,066,643 32,628,436
Mineral properties (note 3) 37,066,399 34,205,955
Property, plant and equipment (note 4) 330,923 265,617
-------------------------------------------------------------------------------------------------------------------
$ 67,463,965 $ 67,100,008
===================================================================================================================
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 6) $ 686,293 $ 976,244
-------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
Share capital (note 5 (b)) 113,547,034 112,367,655
Options (note 5 (c)) 2,284,451 2,622,248
Contributed surplus 930,660 930,660
Deficit accumulated during the exploration stage (49,984,473) (49,796,799)
-------------------------------------------------------------------------------------------------------------------
66,777,672 66,123,764
-------------------------------------------------------------------------------------------------------------------
$ 67,463,965 $ 67,100,008
===================================================================================================================
Approved by the Board of Directors
"David G. Unruh" Director "Richard P. Clark" Director
- ---------------- ------------------
The accompanying notes are an integral part of these
consolidated financial statements.
Corriente Resources Inc.
(a development stage enterprise)
Consolidated Statements of Changes in Shareholders' Equity
For the three months ended March 31, 2006 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
(expressed in Canadian dollars)
Common Shares Estimated Fair Value
---------------------- ----------------------
Deficit
accumulated
Share during the Total
Share Purchase Contributed exploration Shareholders'
Number Capital Options Warrants Surplus stage Equity
- ---------------------------------------------------------------------------------------------------------------------------------
Since inception:
Common shares issued for cash, net
of issue costs 24,169,872 52,994,066 $ - $ - $ - $ - $ 52,994,066
Common shares issued for mineral
properties and settlement of debt 6,621,477 6,554,554 - - - - 6,554,554
Net fair value of warrants issued - - - 501,051 676,407 - 1,177,458
Stock based compensation expense
on unexercised vested options - - 644,665 - - - 644,665
Net losses since inception - - - - - (45,056,506) (45,056,506)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002 30,791,349 59,548,620 644,665 501,051 676,407 (45,056,506) 16,314,237
- ---------------------------------------------------------------------------------------------------------------------------------
Common shares issued for cash
pursuant to private placements,
net of issue costs 7,750,000 15,959,370 - - - - 15,959,370
Common shares issued for cash
pursuant to exercise of warrants 2,239,946 2,380,513 - - - - 2,380,513
Common shares issued for cash
pursuant to exercise of options 575,000 463,250 - - - - 463,250
Common shares issued for mineral
property interests 250,000 232,500 - - - - 232,500
Fair value of warrants issued
(note 5 (d)) - - - 96,455 - - 96,455
Fair value of options exercised
(note 5 (c)) - 286,608 (286,608) - - - -
Fair value of warrants exercised
(note 5 (d)) - 170,326 - (170,326) - - -
Fair value of warrants expired
(note 5 (d)) - - - (254,253) 254,253 - -
Stock based compensation expense
on unexercised vested options - - 762,558 - - - 762,558
Net loss for the year ended
December 31, 2003 - - - - - (682,092) (682,092)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003 41,606,295 79,041,187 1,120,614 172,927 930,660 (45,738,598) 35,526,790
- ---------------------------------------------------------------------------------------------------------------------------------
Common shares issued for cash
pursuant to exercise of warrants 3,500,098 3,928,512 - - - - 3,928,512
Common shares issued for cash
pursuant to exercise of options 315,000 304,350 - - - - 304,350
Fair value of options exercised - 174,876 (174,876) - - - -
(note 5 (c))
Fair value of warrants exercised - 76,472 - (76,472) - - -
(note 5 (d))
Stock based compensation expense
on unexercised vested options - - 709,424 - - - 709,424
Net loss for the year ended
December 31, 2004 - - - - - (714,062) (714,062)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2004 45,421,393 83,525,397 1,655,163 96,455 930,660 (46,452,660) 39,755,015
- ---------------------------------------------------------------------------------------------------------------------------------
Corriente Resources Inc.
(a development stage enterprise)
Consolidated Statements of Changes in Shareholders' Equity
For the three months ended March 31, 2006 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
(expressed in Canadian dollars)
Common Shares Estimated Fair Value
---------------------- ----------------------
Deficit
accumulated
Share during the Total
Share Purchase Contributed exploration Shareholders'
Number Capital Options Warrants Surplus stage Equity
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2004 45,421,393 83,525,397 1,655,163 96,455 930,660 (46,452,660) 39,755,015
- ---------------------------------------------------------------------------------------------------------------------------------
Common shares issued for cash
pursuant to private placements, 7,605,000 27,853,364 - - - - 27,853,364
net of issue costs
Common shares issued for cash
pursuant to exercise of options 475,000 435,250 - - - - 435,250
Common shares issued for cash
pursuant to exercise of warrants 250,000 200,000 - - - - 200,000
Fair value of options exercised - 257,189 (257,189) - - - -
(note 5 (c))
Fair value of warrants exercised - 96,455 - (96,455) - - -
(note 5 (d))
Stock based compensation expense
on unexercised vested options - - 1,224,274 - - - 1,224,274
(note 5 ( c))
Net loss for the year ended
December 31, 2005 - - - - - (3,344,139) (3,344,139)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2005 53,751,393 112,367,655 2,622,248 - 930,660 (49,796,799) 66,123,764
- ---------------------------------------------------------------------------------------------------------------------------------
Common shares issued for cash
pursuant to exercise of options 690,000 789,000 - - - - 789,000
Fair value of options exercised - 390,379 (390,379) - - - -
(note 5 (c))
Stock based compensation expense
on unexercised vested options - - 52,582 - - - 52,582
(note 5 ( c))
Net loss for the period ended - - - - - (187,674) (187,674)
March 31, 2006
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 2006 54,441,393 113,547,034 $ 2,284,451 $ - $ 930,660 $ (49,984,473) $ 66,777,672
=================================================================================================================================
Corriente Resources Inc.
(a development stage enterprise)
Consolidated Statements of Loss and Deficit
For the three months ended March 31, 2006 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------
(expressed in Canadian dollars)
For the period from
March 31, March 31, inception (February 16,
2006 2005 1983 to March 31, 2006)
-----------------------------------------------------------------------------------------------------------------------
Administration
Management fees, wages and benefits 216,195 $ 103,191 $ 4,057,751
Regulatory fees 59,665 34,245 422,215
Stock-based compensation (note 5 (c)) 52,582 67,054 3,393,503
Investor relations and promotion 30,408 38,570 1,452,453
Rent and utilities 19,479 17,521 1,180,582
Insurance 17,047 16,839 375,846
Travel 16,849 20,235 763,244
Legal and accounting 16,409 22,662 1,832,528
Printing and shareholder information 12,747 3,977 583,602
Office and miscellaneous 9,363 6,447 964,572
Transfer agent fees 3,672 1,128 177,732
Depreciation 3,447 3,195 244,222
Loss on disposal of capital assets 52,968
-----------------------------------------------------------------------------------------------------------------------
457,863 335,064 15,501,218
-----------------------------------------------------------------------------------------------------------------------
Other
Interest income (267,280) (71,080) (3,664,446)
Foreign exchange (gain) (22,131) (2,451) 13,246
General exploration 19,222 109 4,204,521
Gain on sale of assets (1,882,000) (4,081,031)
Gain on sale of marketable securities (note 9) (265,318) (1,125,312)
Write-down of marketable securities 176,000 374,838
Write-down of mineral properties 33,387,725
Write-down of capital assets 3,080,392
Write-down of deferred power project costs 2,739,111
Gain on sale of subsidiary (335,900)
Rental income (71,546)
Gain on settlement of debt (26,792)
Gain on disposal of assets (11,551)
-----------------------------------------------------------------------------------------------------------------------
(270,189) (2,044,740) 34,483,255
-----------------------------------------------------------------------------------------------------------------------
Loss (earnings) for the period 187,674 (1,709,676) 49,984,473
Deficit - beginning of period 49,796,799 46,452,660 -
-----------------------------------------------------------------------------------------------------------------------
Deficit - end of period 49,984,473 $ 44,742,984 $ 49,984,473
=======================================================================================================================
Basic and diluted loss (earnings) per share $ 0.00 $ (0.04)
==========================================================================================
Weighted average number of shares outstanding 53,923,337 45,421,393
==========================================================================================
The accompanying notes are an integral part of these
consolidated financial statements.
Corriente Resources Inc.
(an development stage enterprise)
Consolidated Statements of Cash Flows
For the three months ended March 31, 2006 (unaudited)
- ------------------------------------------------------------------------------------------------------------------------
(expressed in Canadian dollars)
For the period from
March 31, March 31, inception (February 16,
2006 2005 1983 to March 31, 2006)
-----------------------------------------------------------------------------------------------------------------------
Earnings (loss) for the period (187,674) 1,709,676 $ (49,984,473)
Items not affecting cash
Stock-based compensation 52,582 67,054 3,393,503
Depreciation 3,447 3,195 244,221
Shares received on sale of assets - (1,882,000) (3,254,486)
Loss (gain) on sale of marketable securities - (265,318) (1,125,312)
Write-down of marketable securities - 176,000 374,838
Write-down of mineral properties - - 33,387,725
Write-down of capital assets - - 3,080,392
Write-down of deferred power project - - 2,739,111
Gain on sale of subsidiary - - (65,000)
Foreign exchange loss on deposit - - 50,528
Loss on disposal of capital assets - - 41,417
General exploration - - 40,550
Changes in non-cash working capital
Accounts receivable and advances (35,910) (123,400) (151,855)
Accounts payable and accrued liabilities (289,951) (101,920) (904,248)
------------------------------------------------------------------------------------------------------------------
(457,506) (416,713) (12,133,089)
------------------------------------------------------------------------------------------------------------------
Investing activities
Mineral property costs (2,842,303) (2,323,136) (62,152,338)
Payments to acquire property, plant and equipment (86,894) (8,583) (2,129,247)
Proceeds from sale of marketable securities - 819,318 4,242,198
Deferred power project costs - (475,936) (2,739,111)
Refund of deposit - - 222,634
------------------------------------------------------------------------------------------------------------------
(2,929,197) (1,988,337) (62,555,864)
------------------------------------------------------------------------------------------------------------------
Financing activities
Proceeds from issuance of share capital, net of
issue costs 789,000 - 106,489,688
Repayment of long-term debt - - (1,684,586)
Deposit - - (273,162)
------------------------------------------------------------------------------------------------------------------
789,000 104,531,940
------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (2,597,703) (2,405,050) 29,842,987
Cash and cash equivalents - beginning of period 32,440,690 12,602,827
------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period 29,842,987 10,197,777 $ 29,842,987
==================================================================================================================
Supplemental cash flow information (note 8)
The accompanying notes are an integral part of
these consolidated financial statements.
Corriente Resources Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
(expressed in Canadian dollars)
1 Nature of operations
Corriente Resources Inc. and its subsidiaries (collectively, "Corriente"
or "the company") are engaged in the exploration and development of
mineral properties primarily in Ecuador, South America. The company
considers itself to be an exploration and development stage company.
The business of mining and exploring for minerals involves a high degree
of risk and there can be no assurance that current exploration and
development programs will result in profitable mining operations. The
recoverability of amounts shown for mineral properties is dependent upon
the discovery of economically recoverable reserves, the ability of the
company to obtain financing to complete their development and future
profitable operations or sale of the properties.
2 Significant accounting policies
Basis of presentation
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in Canada which as described
in note 10, differ in certain respects from accounting principles
generally accepted in the United States of America. They do not include
all of the information and disclosures required by Canadian GAAP for
annual audited financial statements. In the opinion of management, all
adjustments considered necessary for fair presentation have been included
in these financial statements. The interim consolidated financial
statements should be read in conjunction with the company's audited
consolidated financial statements including the notes thereto for the year
ended December 31, 2005.
3 Mineral properties
Corriente Copper Belt, Ecuador
Under various agreements signed with certain Ecuadorian subsidiaries of
BHP Billiton LLC ("BHP Billiton"), the company has earned a 100% interest
in BHP Billiton's resource properties located in the Rio Zamora copper
porphyry district (Corriente Copper Belt), in Ecuador. This required the
issue of shares to BHP Billiton and the expenditure of exploration funds
under the terms of these agreements. Additionally, these resource
properties are subject to a 2% Net Smelter Royalty ("NSR") payable to BHP
Billiton, though the company has options to reduce the NSR to 1% for the
Mirador/Mirador Norte, Panantza and San Carlos resource properties upon
the payment of US$2 million for each option exercised to BHP Billiton.
1
Corriente Resources Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
(expressed in Canadian dollars)
Following is a summary of the company's deferred mineral property
expenditures.
Corriente Copper Belt Mirador/ Panantza / San Other Total
Mirador Norte Carlos (1)
- --------------------------------------------------------------------------------------------------------- -----------------
Balance December 31, 2005 $28,683,887 $ 3,704,723 $ 1,817,345 $ 34,205,955
Option / acquisition payments 687,505 - - 687,505
Deferred exploration and development costs 2,044,726 117,485 10,728 2,172,939
- --------------------------------------------------------------------------------------------------------- -----------------
Balance March 31, 2006 $ 31,416,118 $ 3,822,208 $ 1,828,073 $ 37,066,399
===========================================================================================================================
(1) - comprised of the La Florida, San Luis, San Marcos, San Miguel, Sutzu
and Trinidad copper and copper-gold exploration targets in the Corriente
Copper Belt
4 Property, plant and equipment
Accumulated
Cost Depreciation Net
--------------------------------------------------------------------------------------------------------------------
Computer equipment $ 247,384 $ 165,492 $ 81,892
Vehicles 201,965 61,282 140,683
Office furniture and equipment 127,174 59,244 67,930
Field equipment 57,326 25,164 32,162
Communications equipment 18,284 10,028 8,256
--------------------------------------------------------------------------------------------------------------------
$ 652,133 $ 321,210 $ 330,923
====================================================================================================================
5 Share capital
a) Authorized
100,000,000 common shares without par value
b) Issued
See Consolidated Statement of Changes in Shareholders' Equity. On May
8, 2006, the company announced that it entered into an underwriting
agreement with a syndicate of underwriters to sell 19,231,000 common
shares at a price of $6.50 per share to raise gross proceeds of
$125,001,500 pursuant to a short form prospectus. This financing is
expected to close on or about May 26, 2006.
2
Corriente Resources Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
(expressed in Canadian dollars)
c) Stock options
The Company has in place an incentive stock option plan dated
November 1996, as amended (the "Option Plan") for directors,
officers, employees, and consultants to the Company and its
subsidiaries. The Option Plan provides that the directors of the
Company may resolve to grant options to purchase common shares on
terms that the directors may determine, within the limitations of the
Option Plan. The maximum aggregate number of common shares available
for the grant of options under the Option Plan and all other share
compensation arrangements of the Company is set at 6,524,830, which
is approximately 12% of the Company's current outstanding share
capital. As at March 31, 2006, taking into account outstanding
options to purchase a total of 2,190,000 shares and prior exercises
of options to purchase a total of 4,236,000 shares since the Option
Plan's inception in 1996, the Company had 98,830 shares available for
the grant of options.
On January 23, 2006 the Company granted options to purchase 25,000
shares at a price of $4.50 per share, expiring January 23, 2009, to a
new director who joined the Board in January 2006. On February 3,
2006 the company granted options to purchase a total of 400,000
shares (pending shareholder approval of an amendment to the Option
Plan) to senior management. These options expire on February 3, 2011
and vest on the basis of 1/20th of the total each month (from grant
date), with such vesting being accelerated based on the attainment of
clearly identified milestones.
As the February 3, 2006 option grants exceed the option room
available under the Option Plan, they are subject to shareholder
approval in accordance with the policies of the Toronto Stock
Exchange. The Company is seeking approval at its May 25, 2006 Annual
General Meeting to amend the Option Plan to increase the number of
shares that may be reserved for issue under it from 6,524,830 to a
rolling maximum of 10% of the number of common shares actually
outstanding immediately prior to the grant of any particular option.
During the period ended March 31, 2006, the company recorded the
estimated fair value of the 25,000 (2005 - Nil) options granted and
vested as stock-based compensation expense of $52,582 (2005 -
$67,054). This fair value is estimated using the Black-Scholes Option
Pricing Model with the following assumptions:
Risk-free interest rate 3.87%
Expected dividend yield -
Expected stock price volatility 66%
Expected option life in years 3
Option pricing models require the input of highly subjective
assumptions including the expected price volatility. Changes in the
subjective input assumptions can materially affect the fair value
estimate, and therefore the existing models do not necessarily
provide a reliable measure of the fair value of the company's stock
options. The fair value assigned to the stock options exercised is
credited to share capital.
Subsequent to March 31, 2006, 865,000 stock options were exercised,
raising proceeds of $1,202,300.
3
Corriente Resources Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
(expressed in Canadian dollars)
Assigned Weighted
Exercise Fair Average
Number of Price Value Price
options $ Expiry dates $ $
--------------- ----------- ---------------------- ---------------- -------------
Options outstanding and
exercisable - December
31, 2005 2,855,000 2,622,248 1.89
--------------- ---------------- -------------
Exercised (25,000) March 15, 2006 (15,903)
Exercised (305,000) May 28, 2006 (134,039)
Exercised (240,000) July 28, 2006 (112,401)
Exercised (120,000) July 25, 2008 (128,036)
Granted 25,000 January 23, 2009 52,582
--------------- ----------------
(665,000) (337,797)
--------------- ----------------
Options outstanding and
exercisable - March 31,
2006 2,190,000 2,284,451 2.16
--------------- ---------------- -------------
Granted but unexercisable 400,000 5.25 February 3, 2011 988,846 5.25
----------------- ------------------------------
Options outstanding - March
31, 2006 2,590,000 3,273,397 2.64
=================================================================================
The following table summarizes information about stock options outstanding and
exercisable at March 31, 2006:
Exercise Options Remaining Options Remaining
prices outstanding and contractual life outstanding at contractual life
exercisable at (years) March 31, 2006 (years)
March 31, 2006
-------------------------------------------------------------------------------------------------------------
$ 5.25 - - 400,000 4.9
4.50 25,000 2.8 25,000 2.8
3.55 100,000 1.3 100,000 1.3
3.32 275,000 0.9 275,000 0.9
3.25 40,000 1.5 40,000 1.5
3.16 100,000 1.2 100,000 1.2
2.99 300,000 2.4 300,000 2.4
2.27 400,000 2.3 400,000 2.3
2.15 100,000 2.2 100,000 2.2
1.28 310,000 0.5 310,000 0.5
0.90 300,000 0.2 300,000 0.3
0.89 240,000 0.3 240,000 4.8
-------------------------------------------------------------------------------------------------------------
2,190,000 1.3 2,590,000 1.8
=============================================================================================================
4
Corriente Resources Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
(expressed in Canadian dollars)
6 Related party transactions and balances
Included in management fees, wages and benefits are expenditures of $Nil
(2005 - $19,863) for the period ended March 31, 2006 in respect of
administrative and technical services provided by a company affiliated
with an employed officer. At March 31, 2006 $Nil (2005 - $9,339) was due
to this company affiliated with an employed officer.
7 Segmented information
The company operates within a single operating segment, which is mineral
exploration and development. The company's mineral property interests are
in South America, as set out in note 3. Geographic segmentation of mineral
properties, property, plant and equipment as at March 31, 2006 is as
follows:
2006 2005
-------------------------------------------------------------------------------------------------------------
Property, Property, Deferred
Mineral plant and Mineral plant and power project
properties equipment properties equipment costs
Canada $ - $ 45,901 $ - $42,145 $ -
Ecuador 37,066,399 285,022 27,553,713 219,627 2,180,598
-------------------------------------------------------------------------------------------------------------
$ 37,066,399 $ 330,923 $ 27,553,713 $ 261,772 $ 2,180,598
=============================================================================================================
8 Supplemental cash flow information
Cash and cash equivalents at March 31, 2006 comprise the following:
2006 2005
------------------- -------------------
Cash on hand and balances with banks $ 1,171,839 $ (219,579)
Short-term investments 28,671,148 10,417,356
----------------------------------------
$ 29,842,987 $ 10,197,777
========================================
During the periods ended March 31, 2006 and 2005, the company conducted
non-cash operating, investing and financing activities as follows:
2006 2005
------------------- -------------------
Mineral properties - non-cash deferred exploration $ (16,611) $ (35,630)
------------------- -------------------
Marketable securities received from sale of subsidiary company $ - $ 1,882,000
------------------- -------------------
5
Corriente Resources Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2006 (Unaudited)
- --------------------------------------------------------------------------------
(expressed in Canadian dollars)
9 Financial instruments
The company does not use any derivative financial instruments.
At March 31, 2006 the carrying value of cash and cash equivalents,
short-term investments, accounts receivable, accounts payable and accrued
liabilities approximate their fair values based on the short-term nature
of the instruments.
As at March 31, 2006, the company held no marketable securities (2005
$1,706,000).
10 Reconciliation to United States Generally Accepted Accounting Principles
("GAAP")
The consolidated financial statements have been prepared in accordance
with Canadian GAAP which differs in certain respects from those principles
that the Company would have followed had its consolidated financial
statements been prepared in accordance with United States GAAP.
Significant measurement differences that materially affect these
consolidated financial statements are as follows:
o As described in Note 2 of the company's December 31, 2005 audited
financial statements, Canadian GAAP allows for the deferral of
exploration expenditures. Under United States GAAP, the Company
expenses, as incurred, exploration costs relating to unproven
mineral properties. When proven and probable reserves are
determined for a property and a feasibility study has been
prepared, subsequent development costs of the property would be
capitalized.
o Under U.S. GAAP, marketable securities are classified as trading
or available-for-sale. Gains and losses on trading securities are
recognized currently, whether or not realized. Securities are
carried on the balance sheet at their fair value and unrealized
gains and losses on available-for-sale securities are excluded
from earnings and recorded as a separate component of
shareholders' equity. Carrying values of available-for-sale
securities which are considered impaired are written down and the
charge is recognized currently.
Had the Company followed United States GAAP, certain items in the
financial statements would have been reported as follows:
Statements of Loss and Deficit
Period Ended March 31,
-----------------------------------------
2006 2005
----------------------------------------------------------------------------------------------------------
Net loss (earnings) under Canadian GAAP $ 187,674 $ (1,709,676)
Mineral exploration costs expensed under U.S. GAAP 2,172,939 2,270,191
----------------------------------------------------------------------------------------------------------
Net loss under U.S. GAAP 2,360,613 560,515
Change in unrealized gain on available-for-sale securities 41,000
----------------------------------------------------------------------------------------------------------
Comprehensive loss under U.S. GAAP $ 2,360,613 $ 601,515
==========================================================================================================
Basic and diluted loss per share, per U.S. GAAP $ 0.04 $ 0.01
==========================================================================================================
Weighted average number of shares outstanding 53,923,337 45,421,393
==========================================================================================================
6
Balance Sheets
March 31, 2006 December 31, 2005
------------------------------------------------------------------------------------------------------------------------------
Total assets under Canadian GAAP $ 67,463,965 $ 67,100,008
Adjustment to reconcile U.S. GAAP
Mineral exploration costs expensed under U.S. GAAP (24,470,381) (22,297,442)
------------------------------------------------------------------------------------------------------------------------------
Total assets under U.S. GAAP $ 42,993,584 $ 44,802,566
==============================================================================================================================
Shareholders' equity under Canadian GAAP $ 66,777,672 $ 66,123,764
Adjustment to reconcile U.S. GAAP
Mineral exploration costs expensed under U.S. GAAP (24,470,381) (22,297,442)
------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity under U.S. GAAP $ 42,307,291 $ 43,826,322
==============================================================================================================================
Statements of Cash Flows
Period Ended March 31,
2006 2005
----------------------------------------------
Cash applied to operating activities under Canadian GAAP $ (457,506) $ (416,713)
Mineral exploration costs incurred in the year (2,172,939) (2,270,191)
------------------------------------------------------------------------------------------------------------------------------
Cash applied to operating activities under U.S. GAAP $ (2,630,445) $ (2,686,904)
==============================================================================================================================
Cash applied to investing activities under Canadian GAAP $ (2,929,197) $ (1,988,337)
Mineral exploration costs incurred in the year 2,172,939 2,270,191
------------------------------------------------------------------------------------------------------------------------------
Cash applied to investing activities under U.S. GAAP $ (756,258) $ 281,854
==============================================================================================================================
7
DOCUMENT 3
FORM 52-109FT2 - CERTIFICATION OF INTERIM FILINGS
I, Kenneth R. Shannon, Chief Executive Officer of Corriente Resources Inc.,
certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of Corriente Resources Inc. (the "Issuer")
for the period ending March 31, 2006;
2. Based on my knowledge, 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, with respect to the
period covered by the interim filings; and
3. Based on my knowledge, 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 and for the
periods presented in the interim filings;
4. The Issuer's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures for the
Issuer, and we have:
(a) designed such disclosure controls and procedures, or caused them
to be designed under our supervision, to provide reasonable
assurance that material information relating to the Issuer,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which the interim filings are being prepared; and
(b) evaluated the effectiveness of the Issuer's disclosure controls
and procedures as of the end of the period covered by the interim
filings and have caused the Issuer to disclose in the interim MD&A
our conclusions about the effectiveness of the disclosure controls
and procedures as of the end of the period covered by the interim
filings based on such evaluation.
Date: May 12, 2006
"Kenneth R. Shannon"
- ----------------------------------
Kenneth R. Shannon
Chief Executive Officer
DOCUMENT 4
FORM 52-109FT2 - CERTIFICATION OF INTERIM FILINGS
I, Darryl F. Jones, Chief Financial Officer of Corriente Resources Inc.,
certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of Corriente Resources Inc. (the "Issuer")
for the period ending March 31, 2006;
2. Based on my knowledge, 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, with respect to the
period covered by the interim filings; and
3. Based on my knowledge, 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 and for the
periods presented in the interim filings;
4. The Issuer's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures for the
Issuer, and we have:
(a) designed such disclosure controls and procedures, or caused them
to be designed under our supervision, to provide reasonable
assurance that material information relating to the Issuer,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which the interim filings are being prepared; and
(b) evaluated the effectiveness of the Issuer's disclosure controls
and procedures as of the end of the period covered by the interim
filings and have caused the Issuer to disclose in the interim MD&A
our conclusions about the effectiveness of the disclosure controls
and procedures as of the end of the period covered by the interim
filings based on such evaluation.
Date: May 12, 2006
"Darryl F. Jones"
- ---------------------------
Darryl F. Jones
Chief Financial Officer
DOCUMENT 5
CORRIENTE
RESOURCES INC.
{logo graphic omitted]
-----------------------------------
| Disclosure statements as required |
| by National Instrument 43-101 are |
| available at our website |
| www.corriente.com |
-----------------------------------
"NEWS RELEASE"
For Immediate Release May 16, 2006
- ---------------------
TSX: CTQ, AMEX: ETQ
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES
OR FOR DISSEMINATION IN THE UNITED STATES
REQUESTED CHANGES TO TECHNICAL REPORT TO BE COMPLETED
Following a review of our recently announced prospectus financing by the B.C.
Securities Commission (BCSC), Corriente has requested Mine Development
Associates (MDA) to make a change in its Technical Report on Corriente's
Mirador project, which was filed on SEDAR on February 13, 2006. The Technical
Report upgraded some of the resources at Mirador to reserves based on
information from an independent feasibility study filed on Sedar May 13, 2005.
The MDA report differs from the disclosure in Corriente's November 17, 2005
press release entitled "Mirador Mine Life Extended To 38 Years With New
Optimization Results For Starter Copper Project" and its Annual Information
Form dated March 24, 2006. The amended Technical Report, to be issued later
this week by MDA, will reclassify the stated mineral reserves back to
resources to match our other disclosure, and will include supporting
information for the economic analyses announced in our November 17, 2005
release.
Corriente is moving towards construction of a starter operation at its Mirador
copper-gold operation. Mirador is one of the few new, sizeable copper projects
available for near-term production. Corriente controls a 100% interest in over
50,000 hectares located within the Corriente Copper Belt, Ecuador. The Belt
currently contains three copper and copper-gold porphyry deposits, Mirador,
Panantza and San Carlos, as well as the newly discovered Mirador Norte
prospect. Additional exploration activities will be ongoing, as six additional
copper and copper-gold exploration targets have been identified in the
Corriente Copper Belt to date.
"Ken Shannon"
Kenneth R. Shannon
Chief Executive Officer
The Toronto Stock Exchange has neither approved nor disapproved of the
information contained herein.
For further information please contact Mr. Dan Carriere, Senior Vice-President
at (604) 687-0449 or see our web site at www.corriente.com
Certain statements contained in this News Release constitute forward-looking
statements. Such forward-looking statements involve a number of known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the company's plans to materially
differ from any future results, performance or achievements expressed or
implied by such forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date the statements were made, and readers are advised to consider such
forward-looking statements in light of the risks set forth in the company's
continuous disclosure filings as found at www.sedar.com .
-------------
This press release shall not constitute an offer to sell or a solicitation of
an offer to buy any securities in the United States. The securities have not
been registered under the U.S. Securities Act of 1933 and may not be offered
or sold in the United States absent registration or an exemption from the
registration requirements of the U.S. Securities Act of 1933.
520 - 800 West Pender Street, Vancouver, B.C. V6C 2V6
T (604) 687-0449 F (604) 687-0827 Email copper@corriente.com
--------------------------
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 by the
undersigned, thereunto duly authorized.
CORRIENTE RESOURCES INC.
------------------------------------------------
(Registrant)
Date: May 16, 2006 By: /S/ DARRYL F. JONES
-------------- ----------------------------------------
Name: Darryl F. Jones
Title: Chief Financial Officer