FANCAMP EXPLORATION LTD. ANNUAL FINANCIAL STATEMENTS APRIL 30, 2015 AND 2014

Transcription

1 ANNUAL FINANCIAL STATEMENTS (Expressed in Canadian Dollars)

2 Management s Responsibility for Financial Reporting To the shareholders of Fancamp Exploration Ltd. Management is responsible for the preparation and presentation of the accompanying financial statements, including responsibility for significant accounting judgments and estimates in accordance with International Financial Reporting Standards. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required. In discharging its responsibilities for the integrity and fairness of the financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information included in the annual report. The Board fulfils these responsibilities by reviewing the financial information prepared by management and discussing relevant matters with management and external auditors. The Audit Committee has the responsibility of meeting with management and external auditors to discuss the internal controls over the financial reporting process, auditing matters and financial reporting issues. The Committee is also responsible for recommending the appointment of the Company's external auditors. MNP LLP is appointed by the shareholders to audit the financial statements and report directly to them; their report follows. The external auditors have full and free access to, and meet periodically and separately with, both the Committee and management to discuss their audit findings. August 27, 2015 (signed) Peter H. Smith President and CEO (signed) Debra Chapman CFO

3 Independent Auditors' Report To the Shareholders of Fancamp Exploration Ltd.: We have audited the accompanying financial statements of Fancamp Exploration Ltd. (the Company ), which comprise the statements of financial position as at April 30, 2015 and 2014 and the statements of operations and comprehensive loss, changes in equity and cash flows for the years then ended, and notes comprising a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Fancamp Exploration Ltd. as at April 30, 2015 and 2014, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards. Emphasis of Matter Without qualifying our opinion, we draw attention to Note 1 in the financial statements which discloses matters and conditions that indicate the existence of a material uncertainty that may cast significant doubt about the Company s ability to continue as a going concern. Vancouver, Canada August 27, 2015 Chartered Accountants ACCOUNTING CONSULTING TAX 2300, 1055 DUNSMUIR STREET, BOX 49148, VANCOUVER, BC V7X 1J P: F: mnp.ca

4 STATEMENTS OF FINANCIAL POSITION April 30 April Assets Current Assets Cash and Cash Equivalents $ 84,601 $ 1,233,292 Marketable Securities (Note 5) 3,240,054 4,540,959 Due from Related Parties - 9,891 Other Receivable 43, ,584 Sales Taxes Refundable 30,262 54,076 ITC's Receivable 192,588 - Accrued Mining Duty Receivable 108,650 40,064 Prepaid Expenses 25,446 42,192 3,724,815 6,111,058 Non-Current Assets Marketable Securities (Note 5) 975,333 3,850,000 Investments in Associates (Note 6) 3,455,438 6,606,911 Advance to The Magpie Mines Inc. (Notes 4 and 9) 972, ,602 Equipment - 3,997 Exploration and Evaluation Assets (Note 7) 13,207,750 13,948,504 Total Assets $ 22,335,858 $ 31,348,072 Liabilities Current Liabilities Accounts Payable and Accrued Liabilities $ 309,110 $ 325,082 Due to Directors (Note 9) 54,331 29,427 Flow -Through Share Premium Obligation - 58, , ,419 Deferred Tax Liabilities (Note 12) 2,126,800 3,038,729 Deferred Quebec Mining Duties 289, ,293 Total Liabilities 2,780,120 3,673,441 Equity Share Capital (Note 8) 37,970,280 38,033,218 Contributed Surplus 12,316,144 12,148,207 Accumulated Other Comprehensive Income 817,997 (7,919,821) Deficit (31,548,683) (14,586,973) Total Equity 19,555,738 27,674,631 Total Liabilities and Equity $ 22,335,858 $ 31,348,072 On behalf of the Board, approved on August 27, 2015: "Mel de Quadros" Director "Peter H. Smith" Director (The accompanying notes are an intregal part of these financial statements)

5 STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Year Ended Year Ended April 30, 2015 April 30, 2014 Re ve nue Mineral Property Royalties $ 170,000 $ 220,000 Other Income 2,322 2, , ,158 Expe ns e s Accounting and Audit 148, ,990 Amortization 3,997 - Commissions Directors Fees (Note 9) 84,000 78,000 Field Administration 93,120 84,043 Insurance 21,606 21,454 Interest Expenses and Bank Charges Investor Relations 43,000 61,500 Legal Fees 96, ,284 Licences and Permits - 4,300 Management and Consulting 48, ,750 Mineral Property Sundry Expenses 15,466 31,486 Office Rent, Supplies and Services 119, ,696 Royalty Payments 100,000 50,000 Share Transfer, Listing and Filing Fees 28,951 42,922 Stock-based Compensation 190, ,065 Telephone, Fax, Internet 11,615 10,740 Travel and Accomodations 29,258 50,524 Total Expenses 1,035,048 1,620,999 Net Income (Loss) Before the Following: (862,726) (1,398,841) Mineral Properties Written Dow n (91,234) (1,608,419) Mineral Properties Written Off (971,617) (754,092) Gain (Loss) from Debt Settlement (20,000) - Equipment Written Off - (70,803) Gain (Loss) on Marketable Securities 187,160 2,088,320 Write-dow n of Marketable Securities (12,963,228) - Write-dow n of Investment in Associate (2,864,000) - Sale of Mineral Property Interests 571,951 - Gain (Loss) From Equity Pick-up (287,473) (40,249) Net Loss Before Taxes (17,301,167) (1,784,084) Deferred Tax Recovery (Expense) (Note 12) Net Income (Loss) for the Year 339, ,167 (16,961,710) (1,203,917) Net Gain (Loss) on Available For Sale Financial Assets Income Tax Effect Comprehensive Loss for the Year 8,106,435 (3,275,191) 631, ,507 (8,223,892) (4,053,601) Net Income (Loss) Per Share - Basic and Diliuted $ (0.12) $ (0.01) Weighted Average Number of Shares Outstanding - Basic 139,302, ,862,034 Weighted Average Number of Shares Outstanding - Diluted 139,302, ,863,034 (The accompanying notes are an intregal part of these financial statements)

6 STATEMENTS OF CHANGES IN EQUITY Accumulated Other Number of Capital Contributed Income Comprehensive Shares Stock Surplus (Deficit) Income Total $ $ $ $ $ Balance, April 30, ,405,820 37,058,752 11,837,738 (13,383,056) (5,070,137) 30,443,297 Shares issued pursuant to mining property option agreement (Note7) 100,000 5, ,500 Shares issued for ROFR waiver on Lac Lamelee Property 4,000, , ,000 Shares issued for cash (Note 8) 16,683, , ,000 Shares issued for exercise of warrants (Note 8(a)) 1,000, , ,000 7,378 (7,378) Share issue costs - (154,207) (154,207) Fair value of warrants issued (Note 8) - (75,855) 75, Fair value of agents warrants issued (Note 8) , ,927 Stock-based compensation , ,065 Flow Through share premium - (98,350) (98,350) Other comprehensive income (loss) (2,849,684) (2,849,684) Net loss for the period (1,203,917) (1,203,917) Balance, April 30, ,189,153 38,033,218 12,148,207 (14,586,973) (7,919,821) 27,674,631 Shares issued for exercise of warrants (Note 8(a)) 515,083 30, ,905 Share issue costs Fair value of warrants issued (Note 8) - 17,827 (17,827) Fair value of agents warrants issued (Note 8) Stock-based compensation , ,252 Flow Through share premium Shares repurchased for cancellation (1,795,000) (111,670) (4,488) (116,158) Other comprehensive income (loss) ,737,818 8,737,818 Net loss for the period (16,961,710) - (16,961,710) Balance, April 30, ,909,236 37,970,280 12,316,144 (31,548,683) 817,997 19,555,738 (The accompanying notes are an integral part of these financial statements)

7 STATEMENTS OF CASH FLOWS Year Ended Year Ended April 30, 2015 April 30, 2014 Operating Activities Net Income (Loss) for the Period $ (16,961,710) $ (1,203,917) Items Not Affecting Cash in the Period (Gain) Loss from Equity Pick-up 287,473 40,249 (Gain) Loss on Marketable Securities (187,160) - Write-dow n of Marketable Securities 12,963,228 (Gain) Loss on Disposition of Mineral Properties (571,951) (2,088,320) Loss on Debt Settlement 20,000 - Mineral Properties Interests Written Off/Dow n 1,062,851 2,362,511 Equipment Written Off - 70,803 Amortization 3,997 - Write-dow n of Investment in Associate 2,864,000 Deferred Tax (Recovery) Expenses (339,457) (580,167) Stock-based Compensation 190, ,065 (668,477) (1,195,776) Changes in Non-Cash Working Capital Items Other receivable 126,440 (170,000) Sales tax refundable 23,814 10,432 Prepaid Expenses 16,746 (11,567) Accounts Payable and Accrued Liabilities (15,972) (227,155) Due to Directors 24,904 (272) (492,545) (1,594,338) Investing Activities Equipment - (41,163) Advance to The Magpie Mines Inc. (135,029) (379,391) Exploration and Evaluation Assets (1,356,748) (1,779,674) Total Investing Activities (1,491,777) (2,200,228) Financing Activities Proceeds from Sale of Marketable Securities 920,884 3,235,266 Quebec ITC's - 136,760 Share Repurchase (116,158) - Shares Issued for Cash, net of share issuance costs 30, ,720 Total Financing Activities 835,631 4,346,746 (Decrease) Increase in Cash and Cash Equivalents (1,148,691) 552,180 Cash and Cash Equivalents, Beginning of Period 1,233, ,112 Cash and Cash Equivalents, End of Period $ 84,601 $ 1,233,292 Supplementary Disclosure of Non-Cash Financing and Investing Activities Shares Issued on Mineral Property Acquisition Option - 5,500 Shares Issued on Right of First Refusal Waiver 200,000 Shares Received on Option or Sale of Mineral Property Interests 44,000,000 4,800,000 Supplementary Disclosure of Statements of Cash Flow Information Interest Income (expenses) $ 2,322 $ - Income Taxes $ - $ - (The accompanying notes are an intregal part of these financial statements)

8 NOTE 1 NATURE AND CONTINUANCE OF OPERATIONS Fancamp Exploration Ltd. ( Fancamp ) was incorporated under the laws of the Province of British Columbia. The Company owns interests in mineral properties in the Provinces of Ontario, Quebec and New Brunswick, Canada and a metals mining lease in the state of Maine, USA. Fancamp is an exploration stage enterprise in the business of mineral exploration. It is in the process of exploring its mineral properties interests and has not yet determined whether these properties contain ore reserves that are economically recoverable. The address of its head and registered office is 7290 Gray Avenue, Burnaby, BC, V5J 3Z2. The Company s financial year end is April 30. The Company s audited financial statements were approved by the Board of Directors on August 27, The recoverability of amounts shown for mineral properties interests and related deferred costs is dependent upon the discovery of economically recoverable reserves, confirmation of the Company s legal interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete development, and future profitable production or proceeds from the disposition of its mineral properties interests. For those properties in which it has a joint venture interest, it is required to contribute its proportionate share of costs or accept dilution of its interest. The Company has working capital as at April 30, 2015 of $3,361,374 ( $5,697,639) and an accumulated deficit of $31,548,683 ( $14,586,973). The Company incurred a net loss of $16,961,710 for the year ended April 30, 2015 (2014 $1,203,917). The Company emphasizes that attention should be drawn to matters and conditions that indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. Other uncertainties include the fact that the Company is currently at the exploration stage for its interests in mineral properties, the economic viability of which have not been assessed. The Company has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability of the amounts shown for resources properties is dependent upon the existence of economically recoverable reserves, securing and maintaining title and beneficial interest in the property, and upon future profitable production or proceeds from disposition of the mineral properties. The Company s ability to maintain its existence is dependent upon the continuing support of its creditors and its success in obtaining new equity financing for its ongoing operations. Financing options available to the Company include public equity financings, sales of marketable securities, loans and tax credit refunds. Realization values may be substantially different from carrying values, as shown in these financial statements, should the Company be unable to continue as a going concern. These financial statements have been prepared under the assumptions of a going-concern, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. NOTE 2 BASIS OF PRESENTATION Statement of Compliance These financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ( IFRS ), as issued by the International Accounting Standards Board ( ISAB ). The financial statements were authorized for issue by the Board of Directors on August 27, Basis of Measurement These financial statements have been prepared on the historical cost basis

9 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Functional and Presentation Currency These financial statements are presented in Canadian dollars, which is the Company s functional currency. Significant Accounting Judgments, Estimates and Assumptions The preparation of financial statements in conformity with IFRS requires management to make judgment, estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements and the reported amount of expenses during the period. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods. Significant estimates used in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows: (i) Rehabilitation and restoration Rehabilitation provisions have been created based on the Company s internal estimates. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates take into account any material changes to the assumptions that occur when reviewed regularly by management. Estimates are reviewed annually and are based on current regulatory requirements. Significant changes in estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period. Actual rehabilitation costs will ultimately depend on future market prices for the rehabilitation costs which will reflect the market condition at the time the rehabilitation costs are actually incurred. The final cost of the currently recognized rehabilitation provisions may be higher or lower than currently provided for. (ii) Share based payments The Company has an equity-settled share-based compensation plan for directors, officers, and consultants. Services received, and the corresponding increase in equity, are measured by reference to the fair value of the equity instruments at the date of grant, excluding the impact of any non-market vesting conditions. The fair value of share options are estimated by using the Black-Scholes model on the date of grant based on certain assumptions. Those assumptions are described in Note 8 and include, among others, expected volatility, expected life of the options and number of options expected to vest

10 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Significant Accounting Judgments, Estimates and Assumptions - Continued (iii) Recoverability of asset carrying values for equipment The declining balance depreciation method used reflects the pattern in which management expects the asset s future economic benefits to be consumed by the Company. The Company assesses its equipment for possible impairment if there are events or changes in circumstances that indicate that carrying values of the assets may not be recoverable, or at least, at every reporting period. Such indicators include changes in the Company s business plans and evidence of physical damage. Management must also make significant judgments or assessments as to how financial assets and liabilities are categorized. Significant judgments used in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows: (i) Tax interpretations, regulations, and legislation in the various jurisdictions operates are subject to change The determination of income tax expense and the composition of deferred tax and mining tax assets and liabilities involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretations of laws in the countries in which the Company operates. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these estimates may materially affect the final amount of deferred taxes or the timing of tax payments. (ii) Title to mineral property interests Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects. (iii) Impairment of non-financial assets The Company reviews and assesses the carrying amount of exploration and evaluation assets and of its investment in associates for impairment when facts or circumstances suggest that the carrying amount is not recoverable. If impairment is indicated, the amount by which the carrying value of the assets exceeds the estimated fair value is charged to the statement of operations and comprehensive loss. Assessing the recoverability of these amounts requires considerable professional technical judgment, and is made with reference to the timing of exploration work, work programs proposed, exploration results achieved by the Company and by others in the related area of interest; determining whether future economic benefits from future exploitation, sale or otherwise are likely. Evaluation may be more complex where activities have not reached a stage which permits a reasonable assessment of the existence of reserves or resources. Management must make certain estimates and assumptions about future events or circumstances including, but not limited to, the interpretation of geological, geophysical and seismic data, the Company s financial ability to continue exploration and evaluation activities and the impact of the current and expected future metal process to potential reserves

11 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Significant Accounting Judgments, Estimates and Assumptions - Continued (iv) Impairment of available-for-sale financial assets Management determines when an available-for-sale financial asset is impaired in accordance with IAS 39 Financial Instruments: Recognition and Measurement. This determination requires significant judgement. Management evaluates the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow. When the fair value declines, management makes assumptions about the decline in value to determine if it is an impairment to be recognized in profit or loss. At April 30, 2015, $12,963,228 impairment losses have been recognized for available-for-sale assets ( $Nil). The carrying amount of available-forsale assets is $4,215,387 ( $8,390,959). (v) Going concern The Company s ability to execute its strategy by funding future working capital requirements requires judgment. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, such as expectations of future events that are believed to be reasonable under the circumstances. Financial Instruments Non-derivative financial assets The Company initially recognizes loans and receivables on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognized initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument. The Company classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets. Financial assets at fair value through profit or loss ( FVTPL ) A financial asset is classified at fair value through profit or loss if it is classified as held for trading uor is designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company s documented risk management or investment strategy. Attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. The Company has classified cash and cash equivalents as fair value through profit or loss

12 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Financial Instruments - Continued Held-to-maturity financial assets If the Company has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. Held-to-maturity financial assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets are measured at amortized cost using the effective interest method, less any impairment losses. Any sale or reclassification of a more than insignificant amount of heldto-maturity investments not close to their maturity would result in the reclassification of all held-tomaturity investments as available-for-sale, and prevent the Company from classifying investment securities as held-to-maturity for the current and the following two financial years. The Company has not classified any financial asset as held-to-maturity. Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. The Company has classified other receivable and due from The Magpie Mines Inc. as loans and receivables. Available-for-sale financial assets ( AFS ) Available-for-sale financial assets are non-derivation financial assets that are designated as available for sale or are not classified in any of the above categories of financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale debt instruments, are recognized in other comprehensive income and presented in the fair value reserve equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss. The Company has classified its marketable securities as available-for-sale. De-recognition of financial assets The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Non-derivative financial liabilities The Company initially recognizes debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognized initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire

13 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Financial Instruments Continued De-recognition of financial assets - Continued Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. The Company classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. The Company has classified accounts payable and accrued liabilities, and due to directors as other financial liabilities. Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each period end. Financial assets are impaired when there is objective evidence that, as an objective evidence of impairment could include the following: Significant financial difficulty of the issuer or counterparty; or Default or delinquency in interest or principal payments; or It becoming probable that the borrower will enter bankruptcy or financial reorganization. For marketable securities classified as AFS, a significant or prolonged decline in the fair value of the securities below their cost is considered to be objective evidence of impairment. For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset s carrying amount and the present value of the estimated future cash flows, discounted at the financial asset s original effective interest rate. The carrying amount of financial assets is reduced by the impairment loss directly for all financial assets with the exception of accounts receivable, where the carrying amount is reduced through the use of an allowance account. When an account receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. In respect of AFS equity securities, impairment losses previously recognized through profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized directly in equity. When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period

14 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Cash and Cash Equivalents Cash and cash equivalents consist of cash in the bank, short-term deposits and highly liquid investments with a maturity of three months or less. There were cash equivalents consisting of money market funds of $Nil (2014: $855,656). Prepaid Expenses Prepaid expenses include prepaid business insurance premium, TSX sustaining fee, and other prepaid expenses which are based on the invoiced amount and amortized over the term of the related payment. Equipment Equipment is recorded at cost and is depreciated on the declining balance basis using a rate of 20% per annum. Estimates of residual values and useful lives are assessed annually and any change in estimate is taken into account in the determination of depreciation. Exploration and Evaluation Assets The Company has elected under IFRS 1 to adopt the provisions of IFRS 6, which allow the Company to continue with the current accounting policies followed under Canadian GAAP regarding the accounting for exploration and evaluation assets. The Company capitalizes all costs relating to the acquisition (including the cash consideration and the fair value of shares issued on the date the property is acquired), exploration and evaluation of mineral resource properties. Proceeds from options granted on properties and mining tax credits are credited to the cost of the related property. Pre-exploration costs are generally expenses unless it is considered probable that future economic benefits can be identified. Exploration and evaluation assets represent property acquisition costs and are deferred costs to be charged against operations in the future and do not necessarily reflect the present or future values of the particular projects. Recoverability of the carrying amount of exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective project. Once the technical feasibility and commercial viability of the extraction of mineral resources on an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to property, plant and equipment. Impairment of Non-financial Assets Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility and commercial viability, and facts and circumstances suggest that the carrying amount exceeds the recoverable amount. The recoverable amount of a cash generating unit is the greater of its value in use and its fair value less costs to sell. Value in use is generally the present value of the future cash flows expected to be generated from production of proved and probable reserves determined by reference to the reserve report. The estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset

15 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Impairment of Non-financial Assets - Continued Fair value less cost to sell is determined as the amount that would be obtained from the sale of a cash generating unit in an arm s length transaction between knowledgeable and willing parties. When indicators of impairment are present, the Company will measure any resulting impairment loss on an asset by asset basis. Exploration and evaluation assets must also be tested for impairment once technical feasibility and commercial viability can be demonstrated before reclassification to property and equipment. Decommissioning, restoration and similar liabilities ( Asset retirement obligation ) The Company records the present value of estimated costs of legal and constructive obligations required to restore the site in the period in which the obligation is incurred. The nature of these restoration activities include dismantling and removing structures, rehabilitating mines and tailings dam, dismantling facilities, closure of plant and waste sites and restoration, reclamation and re-vegetation of affected areas. The future obligations for recovery activities are estimated by the Company using recovery plans or other similar studies which outline the requirements that will be carried out to meet the obligations. Since the obligations are dependent on the laws and regulations of the countries in which the mines operate, the requirements could change as a result of amendments in the laws and regulations relating to environmental protection and other legislation affecting resource companies. As the estimate of the obligations is based on future expectations, a number of assumptions and judgments are made by Management in the determination of closure provisions. The closure provisions are more uncertain into the future the closure activities are to be carried out. The present value of decommissioning and site restoration provision is recorded as a long term liability as incurred and records an increase in the carrying value of the related asset by a corresponding amount. The provision is discounted using a nominal, risk free pre-tax discount rate. Charges for accretion and restoration expenditures are recorded as operating activities. The related decommissioning provision is recorded as part of the mineral property and depreciated accordingly. In subsequent periods, the carrying amount of the liability is accreted by a charge to the statement of comprehensive loss to reflect the passage of time and the liability is adjusted to reflect any changes in the timing of the underlying future cash flows. Changes to the obligation resulting from any revisions to the timing or amount of the original estimate of undiscounted cash flows are recognized as an increase or decrease in the decommissioning provision, and a corresponding change in the carrying amount of the related long lived asset. Where rehabilitation is conducted systematically over the life of the operation, rather than at the time of closure, or provision is made for the estimated outstanding continuous rehabilitation work at each statement of financial position date and the cost is charged to the statement of comprehensive loss. The Company has no asset retirement obligations recognized as of April 30, 2015 and Share Capital Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects

16 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Flow-through Shares Flow-through shares entitle a company that incurs certain resource expenditures in Canada to renounce them for tax purposes allowing the expenditures to be deducted for tax purposes by the investors who purchased the shares. While IFRS contains no specific guidance on accounting for flowthrough shares, the Company has chosen to adopt the following accounting policy: At the time of closing a financing involving flow-through shares, the Company allocates the gross proceeds received (i.e. the flow-through commitment ) as follows: Share capital the fair market price at the date of the issue; Flow-through share premium recorded as a liability and equal to the estimated premium, if any, investors pay for the flow-through feature, i.e. the portion in excess of the market value of the shares without the flow-through features at the time of issue; and Fair value of warrants if warrants are being issued, based on the valuation derived using the residual method In the case that the Company doesn t issue non flow-through units together with the flow-through units, the flow-through share premium is determined by using the residual method, whereby the fair value of warrants will be valued based on the Black-Scholes option-pricing model, and the flow-through share premium equal to any residual balance after the fair market price of the common shares and fair value of warrants. Thereafter, as qualifying resource expenditures are incurred, these costs are capitalized to exploration and evaluation assets. At the end of each reporting period, the Company reviews its tax position and records an adjustment to its deferred tax expense/liability accounts for taxable temporary differences, including those arising from the transfer of tax benefits to investors through flow-through shares. For this adjustment, The Company considers the tax benefits (of qualifying resource expenditures already incurred) to have been effectively transferred, if it has formally renounced those expenditures at any time (before or after the end of the reporting period). Additionally, the Company reverses the liability for the flow-through share premium to income, on a proportionate basis, as an offset to deferred tax expense. Provisions A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost

17 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Deferred Quebec Mining Duties The Company qualifies under the Mining Duties Act (Quebec) for a refundable credit on qualifying exploration and evaluation expenditures incurred in Quebec. Qualifying expenditures claimed for the purposes of receiving payment of this refund on a current basis will not be deductible in the calculation of duties from mineral production in future years. Accordingly, the full amount of such assistance has been recorded as deferred Quebec mining duties. On commencement of earnings from mineral production, the Company intends to amortize this amount as a reduction of mining duties then payable over the estimated productive life of its properties. Exploration Tax Credits The Company accounts for accrued tax credits on eligible exploration expenditures as a deduction from its mineral properties interests, on a property by property basis, and will be charged to operations on the same basis as the deferred acquisition and exploration and evaluation expenditures. The exploration tax credits are accrued in the year when the exploration and evaluation expenditures are incurred, provided there is reasonable assurance that the tax credits will be realized. Revenue Recognition Royalty revenue is recognized based upon amounts contractually due pursuant to the underlying royalty agreement. Specifically, revenue is recognized in accordance with the terms of the underlying royalty agreement subject to the following: (1) the pervasive evidence of the existence of the arrangement; (2) the risks and rewards having been transferred; (3) the royalty being fixed or determinable; and (4) the collectability of the royalty being reasonably assured. Income Tax Income tax expense comprises current and deferred tax. Income tax is recognized in the statement of operations and comprehensive income (loss) except to the extent it relates to items recognized in other comprehensive income or directly in equity. Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates that were enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred taxes are expected to be payable or recoverable between the carrying amounts of assets in the consolidated statement of financial position and their corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences between the carrying amounts of assets and their corresponding tax bases. Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized

18 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Income Tax - Continued Deferred tax liabilities: are generally recognized for all taxable temporary differences; are recognized for all temporary differences arising on investments in subsidiaries except where the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future; and are not recognized on temporary differences that arise from goodwill which is not deductible for tax purposes. Deferred tax assets: are recognized to the extent it is probable that taxable profits will be available against which the deductible temporary differences can be utilized; and are reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of an asset to be recovered. Foreign Currency Transactions and Translation The Company s functional currency is Canadian dollars. Transactions in other currencies are recorded in Canadian dollars at the rates of exchange prevailing when the transactions occur. Monetary assets and liabilities denominated in other currencies are translated into Canadian dollars at rates of exchange in effect at the balance sheet dates. Exchange gains and losses are recorded in the statements of operations. Share Based Payments The Company s Stock Option Plan allows directors, officers and consultants to acquire shares of the Company in exchange for the options exercised. The fair value of share options granted to employees is recognized as an expense over the vesting period using the graded vesting method with a corresponding increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee, including directors of the Company. The fair value is measured at the grant date and recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option-pricing model, taking into account the terms and conditions upon which the options were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest based on estimate of forfeiture rate. Investment in Associates An associate is an entity over which the Company has significant influence and which is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. Significant influence is presumed to exist when the Company holds between 20% and 50% of the voting power of another entity, but can also arise where the Company holds less than 20% if it has the power to be actively involved and influential in policy decision affecting the entity

19 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Investment in Associates - Continued An investment in associate is accounted for using the equity method. Under the equity method, investments in associates are carried in the statement of financial position at cost adjusted for postacquisition changes in the Company's share of net assets of the associate, less any impairment losses. Losses in an associate in excess of the Company's interest in that associate are recognized only to the extent that the Company has incurred a legal or constructive obligation to make payments on behalf of the associate. Unrealized profits or losses on transactions between the Company and an associate are eliminated to the extent of the Company's interest therein. At the end of each reporting period, the Company assesses whether there is any evidence that an investment in associate is impaired. This assessment is generally made with reference to the timing of exploration work, work programs proposed, exploration results achieved, and an assessment of the likely results to be achieved from performance of further exploration by the associate. When there is evidence that an investment in associate is impaired, the carrying amount of such investment is compared to its recoverable amount. If the recoverable amount of an investment in associate is less than its carrying amount, the carrying amount is reduced to its recoverable amount and an impairment loss, being the excess of carrying amount over the recoverable amount, is recognized in the period of impairment. When an impairment loss reverses in a subsequent period, the carrying amount of the investment in associate is increased to the revised estimate of recoverable amount to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had an impairment loss not been previously recognized. A reversal of an impairment loss is recognized in net earnings in the period the reversal occurs. For the year-ended April 30, 2015, a $2,864,000 loss has been recorded due to a significant drop in investment in associate s market price. Please see Note 6. Related Party Transactions Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Comprehensive Income Comprehensive income represents the change in shareholders equity from transactions and other events from non-owner sources. Other comprehensive income refers to items that are recognized in comprehensive income but excluded from net income calculated in accordance with generally accepted accounting principles until such time as it is considered appropriate to recognize them in net income

20 NOTE 3 SIGNIFICANT ACCOUNTING POLICIES Continued Income (Loss) Per Share Basic income (loss) per share is calculated by dividing the income (loss) for the period by the weighted average number of shares outstanding in the year. Diluted income (loss) per share is calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares using the treasury method. Treasury method assumes that proceeds received from the exercise of stock options and warrants are used to repurchase common shares at the prevailing market rate. Recently Adopted and Future Accounting Pronouncements Effective May 1, 2013, the Company has adopted the following new and revised standards, along with any consequential amendments: IFRS 7 Financial instruments: disclosures and IAS 32 Financial instruments: presentation - Financial assets and financial liabilities may be offset, with the net amount presented in the statement of financial position, only when there is a legally enforceable right to set off and when there is either an intention to settle on a net basis or to realize the asset and settle the liability simultaneously. The revised IFRS 7 had no impact on the Company s financial results. IFRS 10 Consolidated Financial Statements effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. The adoption of IFRS 10 did not have an impact on the measurement of the Company s assets and liabilities. IFRS 11 Joint Arrangements effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. The adoption of IFRS 11 did not have an impact on the measurement of the Company s assets and liabilities. IFRS 12 Disclosure of Interests in Other Entities effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, requires the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. The adoption of IFRS 12 did not have an impact on the measurement of the Company s assets and liabilities. IFRS 13 Fair Value Measurement effective for annual periods beginning on or after January 1, 2013, with early adoption permitted, provides the guidance on the measurement of fair value and related disclosures through a fair value hierarchy. The adoption of IFRS 13 did not have an impact on the measurement of the Company s assets and liabilities. IAS 27 Separate Financial Statements as a result of the issue of the new consolidation suite of standards, IAS 27 Separate Financial Statements has been reissued, as the consolidation guidance will now be included in IFRS 10. IAS 27 will now only prescribe the accounting and disclosure requirements in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. The revised IAS 27 had no impact on the Company s financial results