CADILLAC VENTURES INC. MANAGEMENT S DISCUSSION AND ANALYSIS

Transcription

1 CADILLAC VENTURES INC. MANAGEMENT S DISCUSSION AND ANALYSIS Second Quarter ended November 30, 2007 Introduction This is the management discussion and analysis ( MD&A ) of the operating and financial results of Cadillac Ventures Inc. ( Cadillac or the Company ) (formerly Blue Power Energy Corporation) for the second quarter ended November 30, This MD&A supplements, but does not form part of the consolidated financial statements for the Company, and should be read in conjunction with Cadillac s consolidated financial statements and related notes for the fiscal years 2007 and The Company prepares and files its consolidated financial statements in accordance with Canadian generally accepted accounting principles ( GAAP ). The currency referred to in this document is the Canadian Dollar. Overview of Second Quarter Cadillac Ventures Inc. reported during the second quarter that Mr. Norman Brewster had been appointed President and CEO and elected to the Board of Cadillac. Mr. Brewster brings his extensive experience in the management of public and private mineral exploration and exploitation companies, in addition to his vast experience as a professional geologist, to the Company. During the second quarter Cadillac issued 2,500,000 common shares to Noront Resources Inc. under the terms of the amended Burnt Hill option agreement whereby Noront undertook to fund $1,500,000 in exploration spending on the project prior to December 31, Cadillac also reported that in conjunction with Noront it had signed a License Agreement with J.D. Irving Limited in connection with land usage during the exploration phase of the Burnt Hill Project and will remain in force until June 30, The Company anticipates that $1,500,000 will have been expended on Burnt Hill prior to December 31, The Company also commenced an exploration drilling program on its 100% owned New Alger project and expended $602,916 on New Alger during the quarter. The Company announced two proposed private placement financings during the quarter. These proposed financings would be by way of both flow through funding of up to $1,500,000 and non flow-through funding of up to $3,000,000. As a subsequent event the Company reported on January 3, 2008 that it had raised a total of $540,000 in flowthrough funds which would be utilized to fund future exploration. Additional Information Additional information relating to the Corporation is available on the Internet at the SEDAR website at Date of MD&A This MD&A was prepared on January 25, 2008.

2 1.2 Overall Performance Cadillac Ventures Inc. incurred a net loss in the second quarter of $201,888 compared to a net loss of $104,562 for the three months ended November 30, The increase in the net loss of $97,326 for the second quarter of 2007 over the same period a year ago resulted mainly from increased stock-option compensation costs. The expenses incurred by the Company are detailed under Operations in Section The Company has experienced an increase in quarterly operating expenses over a number of quarters at the same time as the Company has been expanding its activities. The Company expects that ongoing expenses will continue at these levels, and/or increase as the project activity level of the Company increases. The Company intends to continue to raise equity funds in order to meet these expenses. Should the Company be unable to raise these funds on an ongoing basis its ability to continue its business could be affected. The Company incurred a net loss of $263,790 for the six months ended November 30, 2007 which compares with a net loss of $150,558 for the corresponding period of The increase in the net loss for the six months ended November 30, 2007 over the corresponding period of 2006 is mainly as a result of increased stock-option compensation costs. 1.3 Selected Annual Information Not applicable to quarterly MD&A 1.4 Results of Operations First Quarter Financing Activities The Company announced two proposed private placement financings during the quarter. These proposed financings would be by way of both flow through funding of up to $1,500,000 and non flow-through funding of up to $3,000,000. As a subsequent event the Company reported on January 3, 2008 that it had raised a total of $540,000 in flowthrough funds which would be utilized to fund future exploration. First Quarter Project Activity Summary Cadillac continued its exploration programs for both the Burnt Hill joint venture project with Noront and its 100% New Alger project which included drill programs to both test historically reported results and carry out exploration programs on each property. The Company issued 2,500,000 common shares to Noront during the quarter under the terms of the Burnt Hill amended option agreement whereby Noront undertook to fund $1,500,000 in exploration spending on the project prior to December 31, The Company anticipates that $1,500,000 will have been expended on Burnt Hill prior to December 31, Cadillac also reported that in conjunction with Noront it had signed a License Agreement with J.D. Irving Limited in connection with road usage during the exploration phase of the Burnt Hill Project and will remain in force until June 30, The Company also commenced an exploration drilling program on its 100% owned New Alger project and expended $ 602,916 on New Alger during the quarter. The expenditures incurred by the Company are detailed under Note 4(c) in the November 30, 2007 Financial Statements.

3 Subsequent to the period end the Company announced that it had completed the fall exploration program at both projects and were awaiting the results of drilling samples sent for processing. On receipt of the results the Company will then plan the 2008 programs at both properties. 1.5 Summary of Quarterly Results Second First Fourth Third Quarter Quarter Quarter Quarter 30-Nov Aug May Feb-07 Interest and other income Income or Loss (Before Discontinued Operations and Extraordinary Items) (201,888) (61,902) (388,060) 115,190 Income or Loss\per Share Basic (Note 1) (0.01) 0.00 (0.02) 0.01 Income or Loss\per Share Diluted (Note 1) (0.01) 0.00 (0.02) 0.01 Income or Loss (Total) (201,888) (61,902) (388,060) 115,190 Income or Loss\per Share Basic (Note 1) (0.01) 0.00 (0.02) (0.01) Income or Loss\per Share Diluted (Note 1) (0.01) 0.00 (0.02) (0.01) Note 1 - Earnings per share reflects a 1 for 5 common share consolidation that occurred during the year ended May 31, Second First Fourth Third Quarter Quarter Quarter Quarter 30-Nov Aug May Feb-06 Interest and other income Income or Loss (Before Discontinued Operations and Extraordinary Items) (104,562) (45,996) (48,432) 43,303 Income or Loss\per Share Basic (Note 1) (0.01) Income or Loss\per Share Diluted (Note 1) (0.01) Income or Loss (Total) (104,562) (45,996) (48,432) 43,303 Income or Loss\per Share Basic (Note 1) (0.01) Income or Loss\per Share Diluted (Note 1) (0.01) Note 1 - Earnings per share reflects a 1 for 5 common share consolidation that occurred during the year ended May 31, Comparative earnings per share for Feb 28, 2006 have been restated accordingly. There was a loss of $201,888 during the quarter ended November 30, 2007 which, allowing for the Stock-option compensation cost of $99,956 incurred during the quarter and with the exception of quarters three and four of the year ending May 31, 2007, was broadly in line with the trend of increasing losses incurred in earlier quarters.

4 During the fourth quarter of fiscal 2007 there was a loss of $388,060. This increase being mainly attributable to stock based compensation totaling $268,500 and increased professional fees during the quarter. In the third quarter of 2007 there was net income to the Company of $115,190 as a result of the accounting for the future income tax recovery of $287,244 in conjunction with the renouncement of flow through exploration charges. The timing of this renouncement is approximately February of each year. Renouncements occur each year there is flow through money raised and renounced to investors in order to create a flow through tax credit for flow through investors. Excluding this income tax recovery there was an increased loss in the quarter due mainly to an increase in management fees of $42,500 and an increase in stock-based compensation of $85,000. The increasing activity level of the Company together with it s listing on the CNQ will result in increased operating costs going forward. 1.6 Liquidity Cadillac Ventures Inc. reported a working capital of $ 374,489 at November 30,2007 compared with a working capital of $ I,314,460 as at May 31,2007 and $ 318,107 at November 30,2006.The Company had a cash balance of $643,286 as at November 30, 2007, compared with a cash balance of $1,305,811 as at May 31, 2007 and $310,535 at November 30, At November 30, 2007 the Company also held mineral property assets with a cost value of $ 2,892,693 compared with $ 616,556 at May 31, 2007 and $ 342,772 at August 31, These are included in total assets of $ 3,545,221 at November 30, 2007 compared to $ 2,024,066 at May 31, 2007 and $ 725,789 at November 30, These amounts are a direct reflection of the financing activities undertaken by the Company together with both the acquisition of the Company s wholly owned subsidiary which holds the New Alger Property and the joint venture with Noront Resources Inc. whereby Cadillac can earn an initial 51% and ultimately up to a 65% interest in the Burnt Hill project through a combination of works and payments to Noront. Against this positive cash balance and asset base the Company has liabilities which total $278,039 at November 30, 2007, compared to $ 93,050 at May 31, 2007 and $ 64,910 at November 30, These are comprised of mineral property expenditures, various professional fees and costs associated with the re-organization, consolidation and requisite filings incurred in conjunction with the newly active status of the Company. As a subsequent event the Company announced on January 3, 2008 that it had raised a total of $540,000 in flow through funds to fund future exploration through the nonbrokered placement of 675,000 shares at a price of $0.80 per share. The Company is continuing its efforts to raise funds for future developments and operations and to meet its ongoing obligations as they arise. There is however, no assurance that the Company will be successful in its efforts, in which case, the Company may not be able to meet its obligations. The consolidated financial statements have been prepared on a going concern basis as discussed in Note 1 of the November 30, 2007 consolidated financial statements. Should the Company be unable to realize on its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded on the consolidated balance sheet.

5 1.6 Capital Resources At November 30, 2007 the Company had the following capital requirements under existing arrangements. a) Accounts payable in the normal course of business. 1.8 Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements 1.9 Transactions with Related Parties The Company has engaged Billiken Management Services Inc. ( Billiken ) to manage the New Alger Property. Billiken charges a fee for this service. The former President/CEO, currently the corporate secretary and a director of the Company holds a 15% interest in Billiken through a private company. For the three and six months ended November 30, 2007, the fees paid to Billiken totalled $38,837 and $40,523 (three and six months ended November 30, $3,089). As at November 30, 2007, there was a balance owing of $173,521 to Billiken from the Company (As of May 31, 2007, $11,439 was due to the Company from Billiken). During the three and six months ended November 30, 2007, consulting fees paid/payable to the former President/CEO, currently the corporate secretary and a director of the Company amounted to $4,000 and $20,000 (three and six months ended November, $19,000). For the three and six months ended November 30, 2007, consulting fees of $5,000 were paid to a company controlled by the current President and CEO of the Company (three and six months ended November 30, $15,000). As at November 30, 2006, pursuant to a financing disclosed in Note 6(a)(vi) of the May 31, 2007 audited consolidated financial statements, the following related parties of the Company participated in the private placement by purchasing offered units: Nominex Ltd. (of which Neil Novak, a director of the Company, is the President) 62,500 units; Nicole Brewster, the former Secretary and a former director of the Company 62,500 units: Jim Voisin, the former President/CEO, corporate secretary and a director of the Company 62,500 units: and Norm Brewster, the President/CEO of the Company 250,000 units. These units purchased under the same terms and conditions as other participants in the financing. These transactions have been measured at the exchange amount Fourth Quarter Not applicable to interim MD&A Proposed Transactions

6 The Company presently has no planned or proposed business or asset acquisitions or dispositions Critical Accounting Estimates Cadillac did not rely on any critical accounting estimates in the most recent quarter Changes in Accounting Policies Including Initial Adoption There have been no changes in accounting policies during the period Financial Instruments and Other Instruments The Company s current financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities. The carrying values approximate the fair values of these financial instruments due to the short-term maturity of these items Control Disclosures Management accepts responsibility for the reliability and timeliness of the information disclosed and has ensured that there are disclosure controls and procedures in place which provide reasonable assurance that material information relating to Cadillac is disclosed on a timely basis, particularly information relevant to the period in which annual and interim filings are being prepared Other MD&A Requirements Additional Disclosure for Venture Issuers without Significant Revenue Exploration

7 Capitalized Costs - Mineral Properties Cumulative Since Balance Balance Balance Inception of the At At At Development Stage New Alger Propery - Quebec 30-Nov Nov May-07 (April 28, 2006) Acquisition cost 75,000 75,000 75,000 75,000 Assays 3, ,559 Claim maintenance 33,675 13,724 23,842 33,675 Drilling 542, ,621 IP Surveys 139,561 25, , ,561 Geological 136, , ,847 Consulting 16, ,658 16,905 Line Cutting 30,690 30,690 30,690 30,690 Goodwill 183, , , ,419 Management fees 6,181 3,089 3,089 6,181 Travel and related costs 16, ,984 Other 34,687 14,084 14,370 34, ,220, , ,992 1,220,129 Less Quebec refundable tax credits and mining duty refunds. -2,436-2,436-2,436-2, Total New Alger Property 1,217, , ,556 1,217, Burnt Hill Property - New Brunswick Acquisition cost 1,675, ,000 1,675, ,675, ,000 1,675, Total Mineral Property Costs 2,892, , ,556 2,892,693 ============= ============= ============= =============== Operations 3 Months 3 Months 6 Months 6 Months 30-Nov Nov Nov Nov-06 Expenses Accounting and Corporate Services 8,220 11,466 16,420 14,323 Consulting fees 25,500 15,000 49,500 15,000 Legal and audit 26,581 26,803 26,581 50,992 Management fees 0 30, ,100 Stock based compensation 99, ,956 0 Office and general 4,814 2,799 11,637 5,568 Shareholder relations 36,817 17,894 59,696 30, Net loss before the following 201, , , ,558 Less: future income tax recovery (Income) or loss for the period 201, , , ,558 ========= ========= ========= =========

8 Disclosure of Outstanding Share Data Cadillac is traded on the CNQ under the symbol CDEX. On November 30, 2007 there were 25,601,489 shares issued, 2,400,000 stock options outstanding expiring from December 2011 to October 2012, and 5,946,545 warrants outstanding expiring from June to December RISKS AND UNCERTAINTIES Additional Funding Requirements The Company is reliant upon additional equity financing in order to continue its business and operations, as the Company is in the business of mineral exploration and at present does not derive any income from any of it s mineral assets. There is no guarantee that future sources of funding will be available to the Company. If the Company is not able to raise additional equity funding in the future the Company will be unable to carry out its business in the future. Commodity Price Volatility The price of various commodities which the Company is exploring for can fluctuate drastically, and is beyond the Company s control. The Company is concerned with the prices of Gold, Tungsten and Molybdenum, commodities which fluctuate daily. While the Company would benefit from an increase in the value of this metal, the Company could be adversely affected by a decrease in the value of this metal. Title to Mineral Properties Acquisition of title to mineral properties is a very detailed and time-consuming process. Title to, and the area of, mineral properties may be disputed or impugned. Although the Company has investigated its title to the mineral properties for which it holds concessions or mineral leases or licenses, there can be no assurance that the Company has valid title to such mineral properties or that its title thereto will not be challenged or impugned. For example, mineral properties sometimes contain claims or transfer histories that examiners cannot verify; and transfers under foreign law often are complex. The Company does not carry title insurance with respect to its mineral properties. A successful claim that the Company does not have title to a mineral property could cause the Company to lose its rights to mine that property, perhaps without compensation for its prior expenditures relating to the property. Mineral Exploration Mineral exploration involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, explosions, tailings impoundment failures, cave-ins, landslides and the inability to obtain adequate machinery, equipment or labour are some of the risks involved in mineral exploration and exploitation activities. The Company has relied on and may continue to rely on consultants and others for mineral exploration and exploitation expertise. Substantial expenditures are required to establish mineral reserves and resources through drilling, to

9 develop metallurgical processes to extract the metal from the ore and, in the case of some properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining, or to upgrade existing infrastructure. There can be no assurance that the funds required to exploit any mineral reserves and resources discovered by the Company will be obtained on a timely basis or at all. The economics of exploiting mineral reserves and resources discovered by the Company are affected by many factors, many outside the control of the Company, including the cost of operations, variations in the grade of ore mined and metals recovered, price fluctuations in the metal markets, costs of processing equipment, and other factors such as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. There can be no assurance that the Company s mineral exploration and exploitation activities will be successful. Country Risk The Company could be at risk regarding any political developments in the Country in which it operates. At present the Company is active in the Provinces of Quebec and New Brunswick, Canada. Uninsurable Risks Mineral exploration activities involve numerous risks, including unexpected or unusual geological operating conditions, rock bursts, cave-ins, fires, floods, earthquakes and other environmental occurrences and political and social instability. It is not always possible to obtain insurance against all such risks and the Company may decide not to insure against certain risks as a result of high premiums or other reasons. Should such liabilities arise, they could negatively affect the Company s profitability and financial position and the value of the common shares of the Company. The Company does not maintain insurance against environmental risks. Environmental Regulation and Liability The Company s activities are subject to laws and regulations controlling not only mineral exploration and exploitation activities themselves but also the possible effects of such activities upon the environment. Environmental legislation may change and make the mining and processing of ore uneconomic or result in significant environmental or reclamation costs. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mineral exploitation activities, such as seepage from tailings disposal areas that could result in environmental pollution. A breach of environmental legislation may result in the imposition of fines and penalties or the suspension or closure of operations. In addition, certain types of operations require the submission of environmental impact statements and approval thereof by government authorities. Environmental legislation is evolving in a manner which may mean stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their directors, officers and employees. Permits from a variety of regulatory authorities are required for many aspects of mineral exploitation activities, including closure and reclamation. Future environmental legislation could cause additional expense, capital expenditures, restrictions, liabilities and delays in the

10 development of the Company s properties, the extent of which cannot be predicted. In the context of environmental permits, including the approval of closure and reclamation plans, the Company must comply with standards and laws and regulations which may entail costs and delays depending on the nature of the activity to be permitted and how stringently the regulations are implemented by the permitting authority. The Company does not maintain environmental liability insurance. Regulations and Permits The Company s activities are subject to wide variety of laws and regulations governing health and worker safety, employment standards, waste disposal, protection of the environment, protection of historic and archaeological sites, mine development and protection of endangered and protected species and other matters. The Company is required to have a wide variety of permits from governmental and regulatory authorities to carry out its activities. These permits relate to virtually every aspect of the Company s exploration and exploitation activities. Changes in these laws and regulations or changes in their enforcement or interpretation could result in changes in legal requirements or in the terms of the Company s permits that could have a significant adverse impact on the Company s existing or future operations or projects. Obtaining permits can be a complex, time-consuming process. There can be no assurance that the Company will be able to obtain the necessary permits on acceptable terms, in a timely manner or at all. The costs and delays associated with obtaining permits and complying with these permits and applicable laws and regulations could stop or materially delay or restrict the Company from continuing or proceeding with existing or future operations or projects. Any failure to comply with permits and applicable laws and regulations, even if inadvertent, could result in the interruption or closure of operations or material fines, penalties or other liabilities. Potential Dilution The issue of common shares of the Company upon the exercise of the options and warrants will dilute the ownership interest of the Company s current shareholders. The Company may also issue additional option and warrants or additional common shares from time to time in the future. If it does so, the ownership interest of the Company s then current shareholders could also be diluted. FORWARD LOOKING STATEMENTS: This MD&A contains certain forward-looking statements and forward-looking information under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as plan, except, project, intend, believe, anticipate, estimate, and other similar words, or statements that certain events or conditions may or will occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Assumptions upon which such forwardlooking statements are based included that transactions will be completed, that all required third party regulatory and governmental approvals will be obtained. Many of these assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results

11 anticipated by such forward-looking statements include changes in market conditions and other risk factors discussed or referred to in the annual Management s Discussion and Analysis for Cadillac filed with the applicable securities regulatory authorities and available at Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management s estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.