ANGEL GOLD CORP. (formerly Caerus Resource Corporation) (An Exploration Stage Company)

Transcription

1 (An Exploration Stage Company) Condensed Consolidated Interim Financial Statements

2 These unaudited condensed consolidated interim financial statements of Angel Gold Corp. (formerly Caerus Resource Corporation) for the six months ended June 30, 2013 have been prepared by management and approved by the Board of Directors. These unaudited condensed consolidated interim financial statements have not been reviewed by the Company s external auditors. 1

3 Condensed Consolidated Interim Statements of Financial Position June 30, 2013 December 31, 2012 Assets (Audited) Current Cash and cash equivalents $ 828,209 $ 417,280 Taxes recoverable 31,931 13,935 Prepaid expenses 7,308 11, , ,738 Equipment (note 6) 101,344 93,338 Exploration and evaluation assets (note 7) 2,541,109 1,535,039 $ 3,509,901 $ 2,071,115 Liabilities Current Accounts payable and accrued liabilities (note 8) $ 216,384 $ 185,728 Shareholders equity Capital stock (note 9) 29,016,208 26,943,552 Reserves 3,392,201 3,277,043 Deficit (29,114,892) (28,335,208) 3,293,517 1,885,387 $ 3,509,901 $ 2,071,115 Approved on behalf of the Board: Blanca Stella Frias (signed) Director Blanca Stella Frias Allen V. Ambrose (signed) Director Allen V. Ambrose See notes to the condensed consolidated interim financial statements. 2

4 Condensed Consolidated Interim Statements of Loss and Comprehensive Loss Three Months Ended June 30, 2013 Three Months Ended June 30, 2012 Six Months Ended June 30, 2013 Six Months Ended June 30, 2012 Expenses Amortization $ 57 $ 2,507 $ 116 $ 5,014 Consulting and management fees (note 10) 72, , , ,376 Directors fees (note 10) 24,000 17,000 48,000 17,000 Investor relations 18,000-18,000 - Office and miscellaneous 1,407 16,155 5,969 26,422 Professional fees 1,500 7,437 12,324 28,541 Property investigation - 24,415-80,121 Shareholder communications 4,201 2,022 6,617 29,204 Stock-based compensation 47,056 35, ,144 35,972 Transfer agent and filing fees 3,823 13,069 24,106 28,328 Travel and related costs 9,040-22,643 - Loss from operations (181,984) (241,895) (402,295) (450,978) Other items Interest income 4,678-5,002 - Foreign exchange loss (1,469) (1,977) (6,597) (2,433) Write-off exploration and evaluation asset (note 7) (375,794) - (375,794) - (372,585) (1,997) (377,389) (2,443) Loss and comprehensive loss for the period $ (554,569) $ (243,872) $ (779,684) $ (453,411) Loss per share, basic and diluted $ (0.01) $ (0.01) $ (0.01) $ (0.02) Weighted average number of common shares outstanding 74,476,881 30,133,223 68,631,133 29,802,152 See notes to the condensed consolidated interim financial statements. 3

5 Condensed Consolidated Interim Statements of Changes in Shareholders Equity Note Common Shares Capital Stock Amount Deficit Subscriptions in advance Options Reserves Agent s Warrants Reserves Total Shareholders Equity Balance, December 31, ,328,223 $ 25,170,789 $ (27,499,617) $ - $ 2,606,767 $ 528,901 $ 806,840 Loss and comprehensive loss for the period - - (453,411) (453,411) Shares issued for exploration and evaluation assets 7 200,000 37, ,000 Shares issued for private placement 9 5,005, , ,375 Share issuance costs 9 - (36,592) ,054 - (22,538) Stock-based compensation ,972-35,972 Subscriptions received in advance , ,250 Balance, June 30, ,533,223 $ 25,546,572 $ (27,953,028) $ 34,250 $ 2,656,793 $ 528,901 $ 813,488 Balance, December 31, ,063,221 $ 26,943,552 $ (28,335,208) $ - $ 2,733,319 $ 543,724 $ 1,885,387 Loss and comprehensive loss for the period - - (779,684) (779,684) Private placement 9 20,000,000 2,000, ,000,000 Finders units issued 9 203, Share issuance costs 9 - (63,100) (63,100) Shares issued for exploration and evaluation assets 7 250,000 25, ,000 Stock-based compensation , ,144 Options exercised 9 15,000 2, (1,412) - 1,500 Warrants exercised 9 1,022, , (5,574) 102,270 Balance, June 30, ,554,321 $ 29,016,208 $ (29,114,892) $ - $ 2,854,051 $ 538,150 $ 3,293,517 See notes to the condensed consolidated interim financial statements. 4

6 Condensed Consolidated Interim Statements of Cash Flows For the Six Months Ended June 30, Operating Activities Loss for the period $ (779,684) $ (453,411) Items not involving cash: Amortization 116 5,014 Stock-based compensation 122,144 35,972 Write-off exploration and evaluation asset 375,794 - (281,630) (412,425) Changes in non-cash working capital: Taxes recoverable (17,996) (18,234) Prepaid expenses 4,215 (395) Accounts payable and accrued liabilities (37,662) 49,128 (51,443) 30,499 Cash used in Operating Activities (333,073) (381,926) Financing Activities Proceeds from shares issued in private placement, net of share issuance costs 1,936, ,837 Proceeds from shares issued on exercise of stock options 1,500 - Proceeds from shares issued on exercise of warrants 102,270 - Share subscriptions received in advance - 34,250 Cash provided by Financing Activities 2,040, ,087 Investing Activities Purchase of equipment (11,926) (716) Expenditures on exploration and evaluation assets (1,284,742) (261,289) Cash used in Investing Activities (1,296,668) (262,005) Change in Cash and Cash Equivalents 410,929 (256,793) Cash and Cash Equivalents, Beginning of Period 417, ,883 Cash and Cash Equivalents, End of Period $ 828,209 $ 24 Supplementary Cash Flow Information Income taxes paid $ - $ - Interest paid $ - $ - Non-cash items: Amortization expense capitalized to exploration and evaluation assets $ 3,804 $ - Reclassification on the exercise of stock options and warrants $ 6,986 $ - Net exploration and evaluation expenditures in accounts payable $ 68,318 $ - Shares issued for exploration and evaluation assets $ 25,000 $ 37,000 Value of finder s warrants issued $ - $ 14,054 See notes to the condensed consolidated interim financial statements. 5

7 1. NATURE AND CONTINUANCE OF OPERATIONS Angel Gold Corp. (the Company ), formerly Caerus Resource Corporation, was incorporated under the laws of British Columbia on August 8, The Company is engaged in the acquisition and exploration of mineral properties in Colombia. The Company s head office, principal address and registered records office is located at West Hastings Street, Vancouver, British Columbia, Canada. These unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which presumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. Several conditions cast doubt on the validity of this assumption. The Company incurred a net loss of $403,890 for the six months ended June 30, 2013 ( $453,411). As at June 30, 2013, the Company had an accumulated deficit of $29,114,892 (December 31, $28,335,208) and had working capital position of $651,064 (December 31, $257,010). The Company s cash balance of $828,209 is not sufficient for the Company to continue operations for the ensuing 12 month period. The ability of the Company to continue as a going concern and meet its commitments as they become due, including the acquisition, exploration and development of its exploration and evaluation assets, is dependent on the Company s ability to obtain the necessary financing. Management is planning to raise additional capital to finance operations and to acquire and explore its exploration and evaluation assets. The outcome of these matters cannot be predicted at this time. The business of mineral exploration involves a high degree of risk and there is no assurance that current exploration projects will result in future profitable mining operations. The Company has no source of revenue, and has significant cash requirements to meet its administrative overhead, pay its debts and liabilities, and maintain its exploration and evaluation assets. The recoverability of amounts shown for exploration and evaluation assets is dependent on several factors. These include the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to continue exploration of these properties, and future profitable production or proceeds from disposition. The carrying value of the Company s exploration and evaluation assets does not reflect current or future values. These unaudited condensed consolidated interim financial statements do not include any adjustments for the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Such adjustments could be material. 2. BASIS OF PREPARATION These unaudited condensed consolidated interim financial statements were authorized for issue on August 29, 2013 by the Board of Directors of the Company. Statement of compliance and conversion to International Financial Reporting Standards The unaudited condensed consolidated interim financial statements of the Company comply with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ) and interpretations of the International Financial Reporting Interpretations Committee ( IFRIC ). 6

8 2. BASIS OF PREPARATION (Cont d) Statement of compliance and conversion to International Financial Reporting Standards (Cont d) These unaudited condensed consolidated interim financial statements do not include all of the information required of a full annual financial report and is intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period. It is therefore recommended that this financial report be read in conjunction with the audited annual consolidated financial statements of the Company for the year ended December 31, ADOPTION OF NEW ACCOUNTING STANDARDS The following standards and amendments to existing standards have been adopted by the Company commencing January 1, 2013: IFRS 9 Financial Instruments This new standard is a partial replacement of IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The adoption of this standard had no impact on the Company s unaudited condensed consolidated interim financial statements. IFRS 10, Consolidated Financial Statements IFRS 10, Consolidated Financial Statements, provides a definition of control under IFRS such that the same criteria are applied to all entities. Control exists when an entity has power over the investee, exposure or rights to variable returns from its involvement with the investee and the ability to use its power to affect the investor s return. The adoption of this standard had no impact on the Company s unaudited condensed consolidated interim financial statements. IFRS 11, Joint Arrangements IFRS 11, Joint Arrangements, requires a venturer to classify its interest in a joint arrangement as a joint venture or a joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation, the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11 supersedes IAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entities - Non-monetary Contributions by Venturers. The adoption of this standard had no impact on the Company s unaudited condensed consolidated interim financial statements. 7

9 3. ADOPTION OF NEW ACCOUNTING STANDARDS (Cont d) IFRS 12, Disclosure of Interests in Other Entities IFRS 12, Disclosure of Interests in Other Entities, establishes disclosure requirements for interests in other entities, such as joint arrangements, associates, special purpose vehicles and off balance sheet vehicles. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity s interests in other entities. The requirements of IFRS 12 relate only to disclosures that are applicable for the first annual period after adoption; these disclosure requirements will be incorporated as necessary in the Company s audited annual consolidated financial statements for the year ending December 31, IFRS 13, Fair Value Measurement IFRS 13, Fair Value Measurement, is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and in many cases does not reflect a clear measurement basis or consistent disclosures. The full disclosure requirements of IFRS 13 are prospective and will be incorporated in the Company s audited annual consolidated financial statements for the year ending December 31, FINANCIAL INSTRUMENTS The Company has designated its cash and cash equivalents as fair value through profit or loss; and accounts payable and accrued liabilities as other financial liabilities. The carrying values of cash and cash equivalents, and accrued liabilities approximate their fair values due to the short term to maturity of the instruments. The Company s risk exposure and the impact on the Company s financial instruments are summarized below. (a) Credit risk Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. Concentration of credit risk exists with respect to the Company s cash and cash equivalents. The Company s cash and cash equivalents are substantially held with a single major Canadian financial institution and with a major Colombian financial institution. 8

10 4. FINANCIAL INSTRUMENTS (Cont d) (a) Credit risk (Cont d) The Company s concentration of credit risk and maximum exposure thereto is as follows: June 30, 2013 December 31, 2012 Bank accounts in Canada $ 35,323 $ 326,706 Cashable GIC in Canada 587,000 - Bank account in Colombia 195,886 90,574 $ 828,209 $ 417,280 Included in cash equivalents at June 30, 2013 are cashable GICs earning interest at 0.9% and maturing in December The credit risk associated with cash and cash equivalents is minimized substantially by ensuring that these financial assets are placed with major financial institutions with strong investment-grade ratings by a primary ratings agency. (b) Liquidity risk Liquidity risk is the risk the Company will be unable to meet its financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows required for operations and anticipated investing and financing activities. The Company s cash and cash equivalents at June 30, 2013 totalled $828,209 (December 31, $417,280). At June 30, 2013, the Company had accounts payable and accrued liabilities of $216,384 (December 31, $185,728). All of the Company's financial liabilities have contractual maturities of less than 30 days and are subject to normal trade terms. (c) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk consists of interest rate risk, foreign currency risk and other price risk. The Company is not exposed to other price risk. The market risks the Company is exposed to are as follows: (i) Interest rate risk Interest rate risk consists of two components: (a) (b) To the extent that payments made or received on the Company s monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk. To the extent that changes in prevailing market rates differ from the interest rate in the Company s monetary assets and liabilities, the Company is exposed to interest rate price risk. The Company s cash and cash equivalents consist of cash held in bank accounts and cashable GIC s with fixed interest rates. Accordingly, due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on estimated cash flows or fair values as of June 30,

11 4. FINANCIAL INSTRUMENTS (Cont d) (c) Market risk (Cont d) (ii) Foreign currency risk Foreign currency risk is the risk that the fair value of the Company s financial assets and liabilities will fluctuate due to changes in foreign exchange rates. The Company is exposed to foreign currency risk to the extent that monetary assets and liabilities held by the Company are not denominated in Canadian dollars. The Company operates in Canada and Colombia and a portion of its expenses are incurred in Colombian pesos and US dollars. A significant change in the exchange rate between the Canadian dollar relative to the Colombian peso and US dollar could have a material effect on the Company s results of operations, financial position and cash flows. The Company does not manage currency risk through hedging or other currency management tools. As at June 30, 2013 and December 31, 2012, the Company is exposed to currency risk through the following financial assets and liabilities denominated in Colombian pesos: June 30, 2013 December 31, 2012 Colombian pesos $ Colombian pesos $ Cash 349,796, , ,704,006 90,574 Accounts payable (130,677,000) (73,179) (2,135,744) (1,204) Net exposure 219,119, , ,568,262 89,370 Assuming all other variables remain constant, a 4% (December 31, %) weakening or strengthening of the Canadian dollar against the Colombian peso would result in a change of approximately $4,900 (December 31, $3,500) to profit or loss. As at June 30, 2013 and December 31, 2012, the Company is exposed to currency risk through the following financial assets and liabilities denominated in US dollars: June 30, 2013 December 31, 2012 US $ US $ $ $ Cash 1,051 1,106 5,715 5,695 Assuming all other variables remain constant, a 5% (December 31, %) weakening or strengthening of the Canadian dollar against the US dollar would result in a change of approximately $55 (December 31, $300) to the profit or loss. 10

12 5. CAPITAL MANAGEMENT The Company considers its capital under management to consist of shareholders equity. The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition and exploration of exploration and evaluation assets. The Board of Directors does not establish a quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business. The properties in which the Company currently has an interest are in the exploration stage; as such, the Company is dependent on external financing to fund its activities. In order to carry out the planned exploration and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so. Although the Company has been successful at raising funds in the past through obtaining equity financing, it is uncertain whether it can continue this financing. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company's approach to capital management during the six months ended June 30, The Company is not subject to externally imposed capital requirements. 6. EQUIPMENT Cost Balance, December 31, 2011 $ 44,868 Additions 76,817 Balance, December 31, ,685 Additions 11,926 Balance, June 30, 2013 $ 133,611 Accumulated Amortization Balance, December 31, 2011 $ 13,953 Additions 14,394 Balance, December 31, ,347 Additions 3,920 Balance, June 30, 2013 $ 32,267 Carrying Amount December 31, 2012 $ 93,338 June 30, 2013 $ 101,344 11

13 7. EXPLORATION AND EVALUATION ASSETS El Cafetal Buritica West Buritica North Total Balance, December 31, 2011 $ 226,856 $ 183,627 $ 30,000 $ 440,483 Acquisition costs: Property acquisition 327,119 97, , , ,627 30, ,602 Expenditures: Field and administration 12,687 1,410-14,097 Consulting 573,862 29, ,496 Travel costs 73,078 9,766-82,844 Expenditures for the year 659,627 40, ,437 Write-offs - - (30,000) (30,000) Balance, December 31, ,213, ,437-1,535,039 Acquisition costs: Property acquisition 50, ,193 1,263, ,437-1,585,232 Expenditures: Amortization 3, ,806 Field and administration 264,335 32, ,266 Geological consulting 73,844 3,616-77,460 Drilling 759, ,356 Mapping 19, ,493 Salaries and wages 112,935 12, ,483 Travel and related costs 43,926 4,881-48,807 Expenditures for the period 1,277,314 54,357-1,331,671 Write-offs - (375,794) - (375,794) Balance, June 30, 2013 $ 2,541,109 $ - $ - $ 2,541,109 El Cafetal, Colombia On March 26, 2010, the Company entered into a Letter of Intent with Inversiones Midas Ltda. ( Inversiones ) for the 100% acquisition of the El Cafetal mine, located in Valparaiso Municipality, Department of Antioquia, Colombia. On May 23, 2012, the Company entered into an Option Assignment Agreement on mining concession rights with Inversiones to acquire a 100% interest in the property. The agreement superseded the Letter of Intent. The terms of the Option Assignment Agreement are as follows: US $50,000 payment (paid) to Inversiones prior to signing of the Option Assignment Agreement; US $50,000 payment (paid) to Inversiones at the time of the signing of the agreement; US $100,000 (paid) on resolution of two title embargoes by the Company by payment directly into court; 12

14 7. EXPLORATION AND EVALUATION ASSETS (Cont d) El Cafetal, Colombia (Cont d) US $50,000 (paid) payment and issuance of 250,000 common shares (issued, valued at $25,000) to Inversiones within 10 working days of TSX-V Approval; US $25,000 payment (paid) and issuance of 250,000 common shares (issued valued at $25,000) to Inversiones within six months following the date in which the environmental licenses needed to commence drilling works in the mining concession area are obtained; US $100,000 payment and issuance of 250,000 common shares to Inversiones on October 26, 2013; US $200,000 payment to Inversiones on October 26, 2014; US $300,000 payment to Inversiones on October 26, 2015; US $775,000 payment to Inversiones on October 26, 2016; and A finder s fee is to be paid of not more than $26,796 in conjunction with the consideration paid in the first year of the option agreement. The balance of the fee payable over the four-year period will not exceed $88,704 in cash. Buritica West, Colombia On April 29, 2010, the Company entered into a Letter of Intent which had been updated as at November 1, 2011 ( superceded agreement ), which was then subsequently amended on March 1, 2013, with Nancy Moreno ( Moreno ) for the 100% acquisition of the Buritica Gold Project, located in the Department of Antioquia, Colombia. The terms of the Letter of Intent were as follows: US $50,000 non-refundable deposit (paid) and issuance of 100,000 common shares (issued, valued at $35,500) to Moreno being issued at the time of the signing of the Letter of Intent pending certification of legal title of the property; US $150,000 (of which US $60,000 has been paid) and issuance of 200,000 common shares (issued, valued at $37,000) of the Company to Moreno within 30 days of TSX Venture Exchange Approval; US $100,000 and issuance of 200,000 common shares to Moreno on July 6, 2013; US $150,000 payment to Nancy Moreno on July 6, 2014; US $200,000 payment to Nancy Moreno on July 6, 2015; and US $550,000 payment to Nancy Moreno on July 6, Subsequent to June 30, 2013, after completing a review of the project, management recommended, and the Company s board of directors approved, terminating the option agreement. As a result, $375,794 was written off to operations. Buritica North, Colombia On February 14, 2011, the Company announced it had entered into a Share Purchase with Latam Investments Ltd. ( Latam ) to earn-in up to an 80% interest in the Buritica North Project, located in the Municipality of Buritica, Department of Antioquia, Colombia. For consideration of US $15,000 paid to Latam, the Company was granted a 60 day exclusivity period to complete its due diligence examinations of the Buritica North Project. Upon completion of the due diligence period, the Company, at its option, could have elected to enter into a Share Purchase Joint Venture Option Agreement. 13

15 7. EXPLORATION AND EVALUATION ASSETS (Cont d) Buritica North, Colombia (Cont d) The Company could have chosen to exercise the initial option to acquire a 20% interest by paying to Latam US $35,000 (of which US $15,000 was been paid) and issuing to Latam 1,200,000 common shares and 600,000 common share purchase warrants. Each warrant would entitle the holder to acquire one common share of the Company at a price equal to 125% of the closing price on the last trading day prior to the date that the Company exercises the initial option. The warrants would expire two years from the initial option exercise date. During the year ended December 31, 2012, management decided to abandon the property and, accordingly, $30,000 was written off to operations. Realization of assets The investment in and expenditures on exploration and evaluation assets comprise a significant portion of the Company s assets. Realization of the Company s investment in exploration and evaluation assets is dependent upon the establishment of legal ownership, the attainment of successful production from the properties or from the proceeds of their disposal. Resource exploration and development is highly speculative and involves inherent risks. While the rewards if an ore body is discovered can be substantial, few properties that are explored are ultimately developed into producing mines. There can be no assurance that current exploration programs will result in the discovery of economically viable quantities of ore. The amounts shown for acquisition costs and deferred exploration expenditures represent costs incurred to date and do not necessarily reflect present or future values. Title to exploration and evaluation assets Although the Company has taken steps to verify the title to exploration and evaluation assets 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. Environmental The Company is subject to the laws and regulations relating to environmental matters in all jurisdictions in which it operates, including provisions relating to property reclamation, discharge of hazardous material and other matters. The Company may also be held liable should environmental problems be discovered that were caused by former owners and operators of its properties and properties in which it has previously had an interest. The Company conducts its mineral exploration activities in compliance with applicable environmental protection legislation. The Company is not aware of any existing environmental problems related to any of its current or former properties that may result in material liability to the Company. Environmental legislation is becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new and future environmental legislation on the Company s operations may cause additional expenses and restrictions. If the restrictions adversely affect the scope of exploration and development on the mineral properties, the potential for production on the properties may be diminished or negated. 14

16 8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES June 30, 2013 December 31,2012 Trade payables $ 138,384 $ 120,728 Accrued liabilities - 35,000 Due to related parties (Note 10) 78,000 30,000 $ 216,384 $ 185, CAPITAL STOCK (a) Authorized Unlimited number of common shares without par value Unlimited number of preferred shares with a par value of $1 each (b) Issued During the six months ended June 30, 2013, the Company entered into the following capital stock transactions: (i) (ii) (iii) (iv) On February 27, 2013, the Company closed a $2,000,000 private placement. Under the terms of the placement, the Company issued 20,000,000 units; each unit is comprised of one common share and one half non-transferable share purchase warrants. Each whole share purchase warrant entitles the holder to acquire one additional common share for a period of two years at a price of $0.15. A finder s fee of 203,400 units was paid on the same terms as the private placement. Total cash share issuance costs were $63,100. Issued 250,000 common shares with a value of $0.10 per share pursuant to the El Cafetal property agreement (shares are valued at the market price on the date of issuance). Issued 1,022,700 common shares for total proceeds of $102,270 pursuant to the exercise of warrants. Issued 15,000 common shares for total proceeds of $1,500 pursuant to the exercise of stock options. A fair value reversal of $1,412 was made out of stock option reserves and into share capital as a result of the exercise. 15

17 9. CAPITAL STOCK (Cont d) (b) Issued (Cont d) During the year ended December 31, 2012, the Company had entered into the following capital stock transactions: (i) (ii) (iii) (iv) (v) (vi) Issued 200,000 common shares at a price of $0.185 per share pursuant to the Buritica West property agreement (note 7(c)) (shares are valued at the market price on the date of issuance). On June 19, 2012, the Company closed a $375,375 private placement. Under the placement, the Company issued 5,005,000 units; each unit is comprised of one common share and one non-transferable share purchase warrant. Each share purchase warrant entitles the holder to acquire one additional common share for a period of two years at a price of $0.10. A finder s fee of $22,539 was paid. Non-cash share issue costs of 300,500 agent warrants, having the same terms as the unit warrants, have been fair valued at $14,053 using the Black-Scholes option pricing model. The assumptions used for the Black-Scholes valuation of the broker warrants were as follows: exercise price of $0.10, share price on date of issuance of $0.10, a risk-free interest rate of 0.96%, an expected life of two years, a dividend rate of 0% and an annualized volatility of 87%. Expected volatility was determined based on the historical movements in the closing price of the Company s stocks for a length of time to the expected life of the warrant. On July 5, 2012, the Company closed a $88,500 private placement. Under the placement, the Company issued 1,180,000 units at $0.075 per unit; each unit is comprised of one common share and one share purchase warrant. Each share purchase warrant entitles the holder to acquire one additional common share for a period of two years at a price of $0.10. A finder s fee of $750 was paid. Non-cash share issue costs of 10,000 agent warrants, having the same terms as the unit warrants, have been fair valued at $770 using the Black-Scholes option pricing model. The assumptions used for the Black-Scholes valuation of the broker warrants were as follows: exercise price of $0.10, share price on date of issuance of $0.10, a risk-free interest rate of 1.39%, an expected life of two years, a dividend rate of 0% and an annualized volatility of 107%. Expected volatility was determined based on the historical movements in the closing price of the Company s stocks for a length of time to the expected life of the warrant. On September 13, 2012, the Company closed a $1,275,000 private placement. Under the placement, the Company issued 16,999,998 units; each unit is comprised of one common share and one non-transferable share purchase warrant. Each share purchase warrant entitles the holder to acquire one additional common share for a period of two years at a price of $0.10. Issued 250,000 common shares at a price of $0.10 per share pursuant to the El Cafetal property agreement (note 7(a)) (shares are valued at the market price on the date of issuance). Issued 100,000 common shares for total proceeds of $10,000 upon the exercise of warrants. 16

18 9. CAPITAL STOCK (Cont d) (b) Issued (Cont d) A total of 4,462 shares issued are held in escrow (December 31, ,462 shares), the release of which is subject to the direction of the regulatory authorities having jurisdiction. (c) Warrants outstanding Share purchase warrants outstanding and exercisable are as follows: Number of Warrants Weighted Average Exercise Price Outstanding, December 31, ,677,424 $ 0.38 Expired (2,535,200) 0.49 Exercised (100,000) 0.10 Issued 23,495, Outstanding, December 31, ,537, Expired (5,132,000) 0.27 Exercised (1,022,700) 0.10 Issued 10,101, Outstanding, June 30, ,484,722 $ 0.14 Share purchase warrants outstanding and exercisable are as follows: Expiry Date Exercise Price Number of Warrants June 30, December 31, February 24, 2013 $ ,235,000 June 24, ,000 August 12, 2013 (1) , ,224 November 24, ,052,000 2,052,000 June 18, ,282,800 5,205,500 July 4, ,090,000 1,190,000 September 12, ,999,998 16,999,998 February 18, ,671,700 - February 26, ,000 - Outstanding, end of period 35,484,722 31,537,722 Weighted average remaining life of warrants 1.22 years 0.88 years Weighted di average share price on date of exercise of warrants $0.14 $0.44 (1) These warrants expired unexercised subsequent to June 30,

19 9. CAPITAL STOCK (Cont d) (d) Stock options The Company has a rolling stock option plan, which allows the board of directors to grant options to directors and officers, employees and consultants. Under the terms of the option plan, options may be granted to a maximum of 10% of the issued common shares, subject to TSX-V approval. As at June 30, 2013, the Company has 3,740,432 (December 31, ,322) stock options available for issuance. As at June 30, 2013 and December 31, 2012, the following director, employee and consultant stock options were outstanding: Expiry Date Exercise Price Number of Options Exercisable June 30, December , 2012 Number of Options Outstanding June 30, December , 2012 November 30, 2014 $ , , , ,000 March 4, , , , ,000 March 10, , ,000 50, ,000 November 25, , , , ,000 June 27, , , , ,000 September 27, , , , ,000 April 13, , , , ,000 August 9, , ,000 1,266,000 November 19, , , ,000 December 6, , , ,000 Outstanding, end of period 2,614,500 1,978,000 3,715,000 4,354,000 Weighted average remaining contractual life of options 3.51 years 3.95 years Weighted average share price on date of exercise of options $0.15 $

20 9. CAPITAL STOCK (Cont d) (d) Stock options (Cont d) A summary of the status of the Company s outstanding stock options as at June 30, 2013 and December 31, 2012 and changes during the respective periods are as follows: Number of Options Weighted Average Exercise Price Outstanding, December 31, ,569,000 $ 0.35 Forfeited (941,000) $ 0.35 Granted 2,726,000 $ 0.10 Outstanding, December 31, ,354,000 $ 0.22 Forfeited (624,000) $ 0.26 Exercised (15,000) $ 0.10 Outstanding, June 30, ,715,000 $ 0.21 During the six months ended June 30, 2013, 625,000 exercisable stock options were forfeited by various option holders, and 15,000 options were exercised for proceeds of $1,500. During the six months ended June 30, 2013, the Company granted a total of Nil ( ,000) stock options to directors, offices, employees and consultants. Stock-based compensation expense of $122,144 ( $35,972) relating to options that vested during the current period has been recognized in the accounts of the Company. All options granted by the Company vest on the following terms: Grant date; or Vest over 12 months, with one-half vesting six months from the grant date and the remaining half on the 12 month anniversary of the grant date; or Options granted to consultants for investor relations vest over 12 months with no more than one-quarter of the options vesting in any three-month period. A total of 1,100,500 options remain to be vested as at June 30, Option pricing models require the use of highly subjective estimates and assumptions including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates. The Company applies the fair value method using the Black-Scholes option pricing model to account for options granted to employees, directors and non-employees. 19

21 10. RELATED PARTY TRANSACTIONS (a) Compensation of key management personnel: Short-term employee benefits $ 121,376 $ 159,500 Stock-based compensation $ 66,878 $ - (i) Included in short-term employee benefits are management fees of $73,376 ( $142,500) paid to key management personnel. (ii) Included in short-term employee benefits are directors fees of $48,000 (2012 $17,000) paid to a director of the Company. (iii) Stock-based compensation are the fair value of options granted to key management personnel during the respective periods. (b) Included in accounts payable and accrued liabilities is $78,000 (December 31, $30,000) due to directors of the Company. The amount due to the related parties has no specific terms of repayment, is unsecured and non-interest-bearing. 11. SEGMENTED INFORMATION The Company has one operating segment, mineral exploration in Colombia. The following geographic data includes assets based on their physical location. Geographic segmentation of the Company s assets are as follows: June 30, 2013 Colombia Canada Total Exploration and evaluation assets $ 2,541,109 $ - $ 2,541,109 Equipment 100,271 1, ,344 $ 2,641,380 $ 1,073 $ 2,642,453 December 31, 2012 Colombia Canada Total Exploration and evaluation assets $ 1,535,039 $ - $ 1,535,039 Equipment 92,149 1,189 93,338 $ 1,627,188 $ 1,189 $ 1,628,377 20