Orosur Mining Inc. Condensed Interim Consolidated Financial Statements For the quarter ended August 31, 2012

Transcription

1 Condensed Interim Consolidated Financial Statements For the quarter ended August 31, 2012 Notice to the reader The accompanying unaudited condensed interim financial statements of the Company have been prepared by and are the responsibility of management. The unaudited condensed interim financial statements have not been reviewed by the Company's auditors. Contents Page Condensed Interim Consolidated Statements of Financial Position 4 Condensed Interim Consolidated Statements of Income and Comprehensive Income 5 Condensed Interim Consolidated Statements of Cash Flows 6 Condensed Interim Consolidated Statements of Changes in Equity 7 Selected explanatory notes The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

2 Condensed Interim Consolidated Statements of Financial Position As at August 31, 2012($) As at May 31, 2012($) Assets Notes Cash and cash equivalents 7,192 11,461 Accounts receivable and other assets 3 5,487 4,734 Inventories 4 16,814 17,110 Total current assets 29,493 33,305 Property, plant and equipment and development costs 5 60,578 58,737 Exploration and evaluation costs 6 29,359 26,872 Deferred income tax assets 11 4,287 3,642 Restricted cash Total non-current assets 94,447 89,482 Total Assets 123, ,787 Liabilities and Shareholders Equity Trade payables and other accrued liabilities 3 16,625 18,868 Financial debt 16 1,407 3,418 Derivative financial instruments Total current liabilities 18,504 22,327 Financial debt 16 5,544 2,805 Environmental rehabilitation provisions 7 4,984 5,091 Total non-current liabilities 10,528 7,896 Total liabilities 29,032 30,223 Capital stock 8 55,099 55,074 Warrants Contributed surplus 5,452 5,424 Retained earnings 34,081 31,790 Total shareholders equity 94,908 92,564 Total liabilities and shareholders equity 123, ,787 Approved on behalf of the Board: Tony Shearer Director Julio Porteiro Director 2 The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

3 Condensed Interim Consolidated Statements of Income and Comprehensive Income (Thousands of United States Dollars except for earnings per share amounts) Note August 31, 2012 ($) Three months ended August 31,2011 ($) Sales 26,334 21,026 Cost of sales 18 (21,736) (14,962) Gross profit 4,598 6,064 Corporate and administrative expense (1,296) (1,181) Exploration expenses 6 (329) (436) Other income Finance cost 17 (81) (25) Finance income Derivative loss 13 (431) 0 Net foreign exchange gain 5 43 Profit before income tax 2,502 4,530 Provision for income taxes 11 (211) (118) Total income and comprehensive income for the year 2,291 4,412 Earnings per common share Basic Diluted The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

4 Condensed Interim Consolidated Statements of Cash Flows For the periods ended Note August 31, 2012 ($) Net inflow (outflow) of cash related to the following activities Three months ended August 31, 2011 ($) Cash flow from Operating activities Net income for the period 2,291 4,412 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation 5 2,930 2,000 Fair value of derivatives Accretion of asset retirement obligation Deferred income tax assets 11 (645) (974) Stock based compensation Gain on sale of property, plant and equipment (33) 0 Others 8 (5) Subtotal 5,038 5,572 Changes in operating assets and liabilities Accounts receivable and other assets (753) 706 Inventories Trade payables and other accrued liabilities (2,243) (2,374) Net cash generated from operating activities 2,338 4,126 Cash flow from financing activities Proceeds from the exercise of share options Proceeds from the issue of shares in a private placement 0 12,360 Loans received ,845 Loans payments (11) (12) Net cash from financing activities ,209 Cash flow from investing activities Purchase of property, plant and equipment and development costs 14 (4,712) (8,911) Loans granted 0 (1,000) Proceeds from the sale of fixed assets 33 0 Exploration and evaluation expenditure assets 6 (2,672) (4,316) Net cash used in investing activities (7,351) (14,227) Increase (decrease) in cash and cash equivalents (4,269) 6,108 Cash and cash equivalents at the beginning of period 11,461 14,178 Cash and cash equivalents at the end of period 7,192 20,286 4 The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

5 Condensed Interim Consolidated Statements of Changes in Shareholders Equity Three months ended Note August 31, 2012 ($) August 31, 2011 ($) Capital stock Balance at beginning of year 55,074 42,692 Private placement net of share issuance costs ,360 Exercise of stock options Transfer from contributed surplus 9 0 Balance at end of year 55,099 55,068 Broker warrants Balance at beginning of year Commission on private placement Balance at end of year Contributed surplus Balance at beginning of year 5,424 5,138 Employee stock based compensation recognized Transfer to Capital stock (9) 0 Balance at end of year 5,452 5,264 Retained earnings Balance at beginning of year 31,790 30,593 Net income for the year 2,291 4,412 Balance at end of year 34,081 35,005 Shareholders equity at end of year 94,908 95,337 5 The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

6 1. Nature of Operations Orosur Mining Inc. ( Orosur or the Company ) is a gold producer and exploration company focused on identifying and developing mineral opportunities either directly or through earn-in agreements. Orosur was incorporated and is domiciled in Canada and is governed by the corporate laws of the Yukon Territory, Canada. The Company s shares are listed on the Toronto Stock Exchange (TSX) Exchange in Canada and the Alternative Investment Market (AIM) of the London Stock Exchange in the United Kingdom. The Company s corporate office is located at Avenida Cerro Colorado 5240, suite 602, Torres Las Condes, Santiago de Chile, Chile, and the address of its registered office is 36 Toronto Street, Suite1000,Toronto,Ontario M5C 2C5. Orosur operates in Uruguay and Chile. In Uruguay the Company operates the San Gregorio gold operations, has land holdings with active near mine and regional exploration programs and has entered into contractual arrangements with third parties to develop iron ore, base metals and diamond projects on its mining tenements. Gold is produced in the form of doré, which is shipped to refineries for final processing. In Chile the Company has optioned exploration properties from third parties. 2. Basis of preparation These unaudited interim consolidated financial statements were prepared in accordance with International Financial Reporting Standards ( IFRS ), as issued by the International Accounting Standards Board ( IASB ), applicable to the preparation of unaudited interim consolidated financial statements, including International Accounting Standard ( IAS ) 34, Interim Financial Reporting. These unaudited interim consolidated financial statements do not include all disclosures required by IFRS for an annual consolidated financial statement and accordingly should be read in conjunction with the Company s annual financial statements for the year ended May 31, 2012, which have been prepared in accordance with IFRS. The accounting policies followed in these unaudited interim consolidated financial statements are those applied in the Company s annual financial statements for the year ended May 31, 2012, Note 3. The preparation of these interim financial statements requires the use of certain significant accounting estimates and judgment by management in applying the Company s accounting policies. The areas involving significant judgment and estimates have been set out in Note 4 of the Company s annual audited consolidated financial statements for the year ended May 31, These unaudited interim consolidated financial statements were prepared on a going concern basis under the historical cost method except for certain financial assets and liabilities which are measured at fair value, and were approved by the Board of Directors for issue on October 12, 2012.

7 3. Accounts receivable and other assets, trade payables and other accrued liabilities (i) Accounts receivable and other assets August 31, 2012 ($) May 31, 2012 ($) Tax receivables (a) 2,646 2,162 Loans granted (b) Asset sales receivables (c) Prepaid expenses Marketable securities Miscellaneous receivable (d) Total accounts receivable 5,487 4,734 (a) Tax receivables consist of refunds to be collected for Uruguayan Value Added Tax and Canadian HST. (b) In July 2011, the Company loaned to an unrelated exploration Company incorporated in England and Wales, a $900 loan facility to be on-loan to its Brazilian subsidiary to fund working capital needs in its gold project. The loan facility has been secured in a debenture and bears interest at the rate of 6% per annum to be capitalized on a monthly basis. During the quarter the Company agreed to extend the settlement date to October (c) Asset sales receivable includes an outstanding balance to collect from the sale of the Company s drill fleet and associated spare parts and consumables. (d) Miscellaneous receivable consist of expenses to be reimbursed by farm-out partners and suppliers and mining services provided to third parties. (ii) Trade payables and other accrued liabilities August 31, 2012 ($) May 31, 2011 ($) Commercial suppliers 11,313 11,823 Salaries, labour benefits and social security contributions 3,652 3,510 Mining royalties, income tax and other taxes 1,660 3,535 Total trade payables and other accrued liabilities 16,625 18,868 7

8 4. Inventories August 31, 2012 ($) May 31, 2012 ($) Ore in stockpiles (i) 2,643 2,606 Gold in circuit 1,578 1,677 Finished metals 1,055 1,390 Mine operating supplies 11,538 11,437 Total inventories 16,814 17,110 (i) Ore in stockpiles includes material that the Company processes within its normal operation cycle. Realization of ore in stockpiles within the next twelve months is subject to the Company s discretion as such ore is usually blended with ore mined and transported directly to the processing plant to optimize production. The Company does not carry stockpiles to be processed in the long term. Ore in stockpiles is carried at its net realizable value of $2,643 (May 31, $2,606) which is lower than its accumulated average production cost of $6,330 (May 31, $4,031). 5. Property, Plant and Equipment and development costs Development costs Tangible fixed assets (1) Environmental rehabilitation provision Tangible Underground development costs (2) E&E subject to depreciation (3) E&E not subject to depreciation (4) Total Cost Balance May 31, 2011 $ 44,669 3,850 2,271 36,590 8,145 95,525 Additions $ 19,360 2,504 11, ,385 Reclassification from E&E $ ,205 (6,205) 0 Disposals $ (1,176) (1,176) Balance May 31, 2012 $ 62,853 6,354 14,019 47,065 4, ,743 Additions $ 1, , ,586 Reclassification from E&E $ Disposals $ (91) (91) Balance August 31,2012 $ 64,312 6,354 17,055 47,185 4, ,423 8

9 Accumulated depreciation Tangible fixed assets (1) Environmental rehabilitation provision Tangible Underground development costs (2) Development costs E&E subject to depreciation (3) E&E not subject to depreciation (4) Balance May 31, 2011 $ 29,905 2, , ,689 Depreciation $ 5,186 1, , ,650 Disposals $ (333) (333) Balance May 31, 2011 $ 34,758 4, , ,006 Depreciation $ 1, ,930 Disposals $ (91) (91) Balance May 31,2012 $ 36,266 4,580 1,033 36, ,845 Total Carrying amount As at August 31, 2012 $ 28,046 1,774 16,022 10,219 4,517 60,578 As at May 31, 2011 $ 28,095 1,808 13,487 10,895 4,452 58,737 (1) Includes land, buildings, processing facilities, mobile and stationery equipment, furniture and other office equipment. The plant is located on leased land. The lease expires in No further payments are due on the lease. (2) Includes the ramp and gallery access to ore for Arenal Deeps Underground operation, ventilation shafts and other tangible development to access the ore body. (3) Includes exploration and evaluation costs for properties under production, including resource definition work. (4) Includes exploration and evaluation costs for properties for which commercial production has not begun. 6. Exploration and evaluation costs August 31, 2012 ($) May 31, 2012 ($) Balance at beginning of year 26,872 23,888 Cash payments for exploration expenditure 2,672 13,823 Cash payments to acquire rights to explore 0 3,729 Committed payments to acquire rights to explore Exploration payments with shares Reclassification to development costs (185) (6,009) Exploration expenses written off 0 (9,435) Balance at the end of the year 29,359 26,872 9

10 As at August 31, 2012 ($) As at August 31, 2011 ($) Expenses incurred during the year (i) Capitalized expenses written off 0 0 Total exploration expenses (i) Includes expenses incurred prior to obtaining legal rights to explore an area (including expenses related to the evaluation of properties that can be acquired by the Company) and expenses in areas that have been considered impaired in the past but the Company legally maintains for strategically reasons and, in some cases, continues to explore. It also includes depreciation of property, plant and equipment affected to exploration activities. Exploration farm in agreements, acquisitions and farm out agreements are those disclosed in the Company s annual audited financial statements for the year ended May 31, 2012, Note 8. No changes occurred during the quarter regarding the status reported in each project as of May 31, The Uruguay mining legislation requires all mining titles to be supported by guarantees to cover the cost of any environmental rehabilitation requirements resulting from exploration activities. The Company has facility agreements with Uruguayan local insurance companies and banks to support the required guarantees. The total guarantees provided at August 31, 2012 to support exploration activities on tenements granted were approximately $ 2,471 (May 31, $2,887). 7. Environmental rehabilitation provision The Company s environmental rehabilitation provision relates to the retirement and remediation of the San Gregorio Operation in Uruguay. The environmental rehabilitation obligations have been recorded as a liability at estimated fair value determined by calculating the net present value of estimated future costs, assuming a risk free bond rate of 1.5% (May 31, %) and an inflation factor of 2.0% (May 31, %). The following table summarizes the movements in the environmental rehabilitation provision for the periods ended August 31, 2012: August 31, 2011 ($) May 31, 2012 ($) Balance at beginning of period 5,091 3,474 Changes in cash flow estimates 0 2,504 Expenditure incurred in rehabilitation (126) (939) Accretion expense Balance at end of period 4,984 5,091 The Company has a legal and constructive obligation to restore the San Gregorio s operation when mining operations cease. This estimate is revised annually according to a mine plan. The Company advances rehabilitation work previous to the closure date at its discretion and in accordance with the Uruguayan Environmental Agency. 10

11 Uruguayan mining and environmental legislation requires environmental obligations to be supported by guarantees. As a result, a rehabilitation guarantee letter of credit of $2,000 (May 31, $2,000) has been provided by HSBC Bank (Uruguay) S.A. 8. Capital stock The Company has an authorized capital of unlimited number of common shares of no par value. As of August 31, 2012 the Company has a total of 78,063,143 issued shares outstanding (May 31, ,021,475). Movements in capital for the period are shown hereinafter: Number of shares (000 s) ($) Balance as of May 31, ,240 42,692 Shares issued on exercise of stock options 0 16 Shares issued on private placement 12,501 13,091 Broker commission and other issue expenses of private 0 (731) placement Balance as of August 31, ,741 55,068 Shares issued on exercise of stock options Talca acquisition finder s fee Broker commission and other issue expenses of private placement 0 (275) Balance as of May 31, ,021 55,074 Shares issued on exercise of stock options Balance as of August 31, ,063 55, Stock-based compensation The Company has an option Plan for the officers, directors, employees and consultants of the Company and its subsidiaries. Options under the plan are typically granted in such numbers as reflects the responsibility of the particular optionee and his or her contribution to the business and activities of the Company. Options granted under the plan have a term of up to 5 years. Except in specified circumstances, options are not assignable and terminate on the optionee ceasing to be employed by or associated with the Company. The terms of the Plan further provide that the price at which shares may be issued under the Plan cannot be less than the market price (net of permissible discounts) of the shares when the relevant options were granted. Options vest lineally over a three year period starting at the time they are granted. The following table summarizes information regarding the Company s outstanding options at August 31, 2012: 11

12 Number of Shares (000 s) Option Price per Share Range CDN $ Weighted Average Exercise Price CDN $ Balance at May 31, ,823 $ $4.77 $1.29 Forfeited (305) $ $4.77 $2.22 Balance at August 31, ,518 $ $3.90 $1.21 Exercised (49) $ $0.60 $0.43 Forfeited (282) $ $3.90 $3.01 Balance at May 31, ,187 $ $3.30 $0.97 Exercised (42) $0.395 $0.395 Forfeited (125) $0.75-$1.20 $0.79 Balance at August 31, ,020 $0.40-$3.30 $0.98 Range of option price CDN $ Outstanding Weighted average Exercise Price CDN $ Weighted average remaining contractual life Years Exercisable Weighted average Exercise Price CDN $ Options Options (000s) (000s) , , , , For the quarter ended August 31, 2012 no options were granted (August 31, 2011 nil) and $37 of compensation expense was recorded (August 31, $126). At August 31, 2012 the aggregate unamortized fair value of unvested stock options granted amounted to $22 (August 31, $232). At August 31, 2012 there were 3,020,202 options outstanding, of which 2,415,201 are exercisable (May 31, ,186,870 and 2,498,535; August 31, ,517,886 and 2,106,874). The weighted average exercise price of the options outstanding at August 31, 2012 is CDN$ 0.98 (May 31, 2012 CDN$ 0.97; August 31, 2011 CDN$ 1.21). 12

13 10. Related parties (a) Subsidiaries: The consolidated financial statements include the financial statements of Orosur Mining Inc. (Parent) and the following subsidiaries (together referred as the Company ): Name of subsidiary Country of incorporation Equity interest as of August 2012 Equity interest as of May 2012 International Mining Holdings Limited Barbados 100% 100% Loryser S.A Uruguay 100% 100% Minera San Gregorio S.A. Uruguay 100% 100% Cinco Ríos S.A Uruguay 100% 100% Nafypel S.A. Uruguay 100% 100% Triselco S.A. Uruguay 100% 100% Kevelux S.A Uruguay 100% 100% Glendora S.A. Uruguay 100% 100% Dalván S.A Uruguay 100% 100% Bolir S.A. Uruguay 100% 100% Brimol S.A. Uruguay 100% 100% Montemura S.A. Uruguay 100% 100% Fortune Valley Resources Inc. Canada 100% 100% Fortune Valley Resources Inc. BVI BVI 100% 100% Fortune Valley Resources Chile S.A Chile 100% 100% All intercompany transactions and balances are eliminated on consolidation. 11. Income Taxes (a) Current and deferred income tax composition: August 31, 2012 ($) August 31, 2011 ($) Current income tax expense for the period 856 1,092 Deferred income tax recovery (645) (974) Total income tax expense for the period (b) Changes and composition of the deferred income tax asset: August 31, 2012 ($) May 31, 2012 ($) Balance beginning of period 3,642 5,148 Recognized future tax income (loss) 645 (1,506) Balance end of period 4,287 3,642 13

14 August 31, 2012 ($) May 31, 2012 ($) Property plant and equipment and development costs 3,574 3,396 Inventories Exploration and evaluation costs (66) (66) Derivatives Deferred income tax asset 4,287 3,642 Changes in the value of the deferred income tax asset have been recognized in the statement of income. The deferred tax asset represents rights for future tax deduction in Uruguay tax jurisdiction. The Company has no deferred tax asset in any other jurisdiction it operates. 12. Segment Information The Company is a gold producer, develops its own exploration programs and evaluates mining assets acquisitions throughout Latin America. Accordingly, the Company identifies the following three operating segments that management reviews regularly in order to evaluate their performance and make decisions about resources to be allocated: i) Production segment: The Company has one only producing asset, the San Gregorio gold operations in the north of Uruguay (UY) and minor satellite pits, the only producing gold mine in the country that generates the whole of the Company s ordinary revenues. The Company sold all its metal to one customer. ii) Exploration segment: The Company carries on exploration programs on its mineral portfolio in Uruguay and in Chile (CH) with the objective of adding reserves to its production profile and/or generating other kind of joint ventures and farm out agreements. The segment additionally includes the evaluation of mining assets acquisitions throughout Latin America. iii) Corporate segment: The corporate segment seeks for the Company strategy and is also responsible of raising funds when needed to finance exploration programs, acquisition of assets and the development of mine operations. 14

15 Production (UY) Exploration (UY) Exploration (CH) Exploration (acquisitions) Corporate Total For the quarter ended August 31, 2012 Sales 26, ,334 Cost of sales (21,736) (21,736) Exploration expenses and write off 0 (77) (87) (165) 0 (329) Corporate costs (1,296) (1,296) Other income Total segment income (loss) 4,998 (77) (87) (165) (1,296) 3,006 Investment in exploration and evaluation , ,672 Investment in PP&E and development costs 4, ,712 As at August 31, 2012 Property, plant and equipment and development costs 60, ,578 Exploration and evaluation costs 0 4,610 24, ,359 Total assets 85,858 4,771 24, , ,940 Production (UY) Exploration (UY) Exploration (CH) Exploration (acquisitions) Corporate Total For the quarter ended August 31, 2011 Sales 21, ,026 Cost of sales (14,962) (14,962) Exploration expenses and write off 0 (229) 0 (207) 0 (436) Corporate costs (1,181) (1,181) Other income Total segment income (loss) 6,120 (229) 0 (207) (1,181) 4,503 Investment in exploration and evaluation 0 1,394 2, ,316 Investment in PP&E and development costs 8, ,911 As at May 31, 2012 Property, plant and equipment and development costs 58, ,737 Exploration and evaluation costs 0 4,376 22, ,872 Total assets 83,206 4,578 22, , ,787 Reconciliation of segment income to net income for the year is as follows: Three months ended August 31, 2012 ($) August 31, 2011 ($) Segment income 3,006 4,503 Net finance cost (78) (16) Derivatives loss (431) 0 Net foreign exchange gain 5 43 Income tax (211) (118) Total income and comprehensive income for the year 2,291 4,412 15

16 13. Financial risk management and capital management The Company is exposed to a variety of financial risks that are disclosed in the Company s audited annual financial statements for the year ended May 31, 2012, Note 16. In May 2012 the Company entered into a gold collar option to hedge from gold price risk. The collar option combines a call and a put option and protects the Company against the gold falling below $1,500 per ounce (put option), though restricting any benefit from gold sold over $1,625 per ounce (call option). As of August 31, 2012 an outstanding amount of 3,000 ounces must be delivered into the contract in September 2012 and an amount of 3,000 ounces must be delivered into the contract in October As of August 31, 2012, the fair value of the derivative contract has been estimated in $472 (May 31, 2012 $41) with the corresponding loss recognized in the statement of income and comprehensive income. 14. Cash flow Additional information Cash is comprehensive of cash at bank and on hand. Cash flow from operating activities includes interest and income tax cash payments as detailed below: August 31, 2012 ($) August 31, 2011 ($) Income tax paid 0 0 Interest paid Cash flow from investing activities in property, plant and equipment and development costs is detailed below: August 31, 2012 ($) August 31, 2011 ($) Tangible fixed assets as defined in Note 5. 1,550 5,300 Mine development costs 3,036 3,397 Environmental work rehabilitation as in Note Total invested 4,712 8,911 16

17 15. Basic and diluted earnings per share Basic earnings per share is calculated by dividing the profit of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding during the year to assume conversion of all dilutive potential ordinary shares. A calculation is done to determine the number of shares that could have been acquired at fair value (determined at the average market share price of the Company s share for the corresponding period) based on the monetary value of all dilutive share options to acquire shares of the Company. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options to determine diluted earnings per share (treasury stock method). Details of such calculation are as follows: Three months ended August August 31, , 2011 Basic Weighted average shares outstanding number 78,063,143 77,740,988 Potential net incremental of dilutive shares number 906,868 2,883,220 Potential proceeds from dilutive share options $ 539 2,022 Average quoted market share price for the period CDN cents per share Potential shares to be repurchased number 837,877 1,763,374 Potential net incremental of shares after repurchase number 68,991 1,119,846 Diluted Weighted average shares outstanding number 78,132,134 78,860,834 Net income attributable to equity holders $ 2,291 4,412 Basic earnings per share US cents per share Diluted earnings per share US cents per share Debt August 31,2012 ($) May 31, 2012 ($) 17 HSBC loan (i) 5,500 5,500 Santander loan (ii) Talca acquisition Finance lease ,951 6,223 Less current portion (1,407) (3,418) Non-current portion 5,544 2,805

18 (i) In March 2011, Loryser S.A., a Uruguayan subsidiary of the Company, entered into a Line of Credit Facility with HSBC Bank (Uruguay) S.A. for $5,500. As of August 31, 2012, the Company has withdrawn the full amount of the facility. Amounts withdrawn bear an interest of LIBOR plus 3.25%, with a minimum 4.50% rate payable by semester. In August 2012 the credit facility was amended to extend the dates capital should be settled. Capital will start to be settled in four bi-annual installments, the first one due September 15, As security for the use of the HSBC credit facility, the Company has pledged certain equipment. (ii) During the quarter, Loryser S.A., a Uruguayan subsidiary of the Company, signed two promissory notes with Banco Santander (Uruguay) S.A.to finance prepayments for the acquisition of a haul mobile fleet committed, for a total amount of $739. Promissory notes act like a bridge loan to a credit facility to finance the full value of the mobile fleet, to be signed upon receipt of the units. 17. Finance income and finance cost Finance income August 31, 2012 ($) August 31, 2011 ($) Interest on loan granted 14 0 Interest on bank deposits 1 9 Fair value of marketable securities (12) 0 Finance income 3 9 Finance costs August 31, 2012 ($) August 31, 2011 ($) Environmental rehabilitation accretion Interest expense on bank borrowings Cost of sales The Company s costs of sales are comprised of the following: 18

19 August 31, 2012 ($) August 31, 2011 ($) Mining and transportations costs 11,431 5,082 Processing costs 4,451 4,487 Mine site administration costs 1,236 1,305 Change in stockpiles, gold in circuit and finished goods 397 1,154 Refinery charges Depreciation 2,746 1,965 Mining royalties and other production tax 1, Other Total cost of sales 21,736 14,962 19