FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
As at March 31, 2003
CIK Number 0001164771
NORTHERN DYNASTY MINERALS LTD.
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1020 - 800 West Pender Street, Vancouver, Canada V6C 2V6
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(1): [ ]
Note: Regulation S-T Rule 101(b)(1) only permits the
submission in paper of a Form 6-K if submitted solely to provide an
attached annual report to security holders.
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(7): [ ]
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the
registrant foreign private issuer must furnish and make public under the laws
of the jurisdiction in which the registrant is incorporated, domiciled or
legally organized (the registrant's "home country"), or under the rules of the
home country exchange on which the registrant's securities are traded,
as long as the report or other document is not a press release, is not
required to be and has not been distributed to the registrant's security
holders, and, if discussing a material event, has already been the
subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in
this Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-________
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
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(Registrant)
/s/ Jeffrey R. Mason
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Jeffrey R. Mason
Director, Chief Financial Officer and Secretary
Date: May 31, 2003
* Print the name and title of the signing officer under his signature.
NORTHERN DYNASTY MINERALS LTD.
QUARTERLY REPORT
MARCH 31, 2003
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MANAGEMENT DISCUSSION and ANALYSIS
Northern Dynasty is a mineral exploration company focussed on the Pebble
Project, located 380 km southwest of Anchorage, Alaska.
Northern Dynasty acquired the Pebble Project through two options from Teck
Cominco American Incorporated ("Teck Cominco") through an assignment agreement
with Hunter Dickinson Group Inc. ("HDG"), a non-arms-length party, in October
2001. Northern Dynasty was assigned an 80% interest, with the right to acquire a
100% interest, in the two Teck Cominco options. The first option enables
Northern Dynasty to purchase the 36 claims covering the Pebble deposit (the
"Resource Lands") by paying Teck Cominco US$10 million in cash or shares with
the same cash equivalency prior to November 30, 2004, and purchasing the 20% HDG
interest in shares at its independently appraised value. Northern Dynasty also
has the right under a second option to earn a 50% interest in the surrounding
"Exploration Lands" by purchasing the Resource Lands under the first option and
completing 60,000 feet of drilling (36,353 feet has been completed to date) on
the Exploration Lands before November 30, 2004. When the required drilling is
completed, Teck Cominco can either elect to match the Company's future
expenditures by forming a 50:50 joint venture or sell its 50% interest in the
Exploration Lands to Northern Dynasty for US$4 million and a 5% net profits
interest.
Exploration at Pebble has identified a large, northeast-trending mineralized
system that is defined by an 89 square km Induced Polarization ("IP")
chargeability anomaly associated with a multi-phase intrusive complex. In the
northeast segment of this system, Teck Cominco discovered the billion tonne
Pebble porphyry copper-gold deposit over a 1.7 square kilometre area.
In May through August 2002, Northern Dynasty completed a Phase One drilling
program on the property, involving 68 holes totalling 11,306 m (37,093 feet), to
commence testing of the many targets within the large hydrothermal system. All
but one of these holes was drilled on the Exploration Lands. The program was
highly successful and resulted in the discovery of a new porphyry
copper-gold-molybdenum deposit, a porphyry copper zone, a gold-copper skarn and
several high-grade gold veins.
In August 2002, Northern Dynasty re-logged 104 holes previously drilled at the
Pebble deposit and developed a geological model for the deposit. The modeling
revealed several priority areas within and adjacent to the deposit that have
high potential to host substantial volumes of additional good-grade
mineralization. These include two newly identified granodiorite porphyry stocks
where good-grade gold-copper stockworks have been encountered in limited
previous drilling. Further opportunities to increase the currently outlined
mineral resource (both in terms of grade and tonnage) for the deposit include
drilling angle holes across the northeast trending deposit; closer spaced holes
(current hole spacing ranges from 100 to 250 m throughout much of the deposit,
increasing up to 300 m near the margins of the area drilled); deeper holes
(current hole depths in the deposit are variable, generally extending only to
depths of 125 - 250 m, many of which bottomed in mineralization); and step out
holes (the deposit is open ended to the northeast and southwest).
In early 2003, Northern Dynasty commissioned an independent mineral resource
estimate of the Pebble deposit by engineering firm Snowden Mining Industry
Consultants Inc. ("Snowden") of West Perth, Australia. Inferred Mineral
Resources estimated by Snowden for the deposit are 1.0 billion tonnes grading
0.61% copper-equivalent (0.40 g Au/t, 0.30% Cu, and 0.015% Mo above a cut-off
grade of 0.30% Cu-equivalent)1. Snowden also estimated that the Pebble deposit
contains significant amounts of higher-grade mineralization: 141 million tonnes
of 0.97% copper-equivalent (0.67 g Au/t, 0.48% Cu and 0.019% Cu at a cut-off
grade of 0.80% Cu-equivalent). The independent qualified person for the resource
estimate was Paul Blackney, B.Sc. (Hons.), MAusIMM, MAIG, of Snowden. Details
are provided in a May 2003 technical report filed on www.sedar.com.
The Company is currently formulating plans for Phase Two drilling. The program
is being designed to expand and delineate the good-grade gold-copper-molybdenum
portions within the Pebble porphyry deposit, as well as the significant new
porphyry, skarn and vein discoveries made by Northern Dynasty during its Phase
One program. Additional drilling is also being planned to expand and delineate
test new high-grade and bulk tonnage, gold-only targets, and to assess the
potential for additional porphyry deposits within several untested, large-scale
IP chargeability anomalies on the property.
Market Trends
The price of gold increased significantly in 2002, averaging about US$309/oz.
Gold prices, although volatile, have continued to improve in 2003, averaging
about US$346/oz for the year to date.
Copper is currently trading at about US$0.74/lb. Prices are projected to
increase to about US$0.90/lb by 2004.
Financial review
On January 14, 2003, Northern Dynasty completed a private placement by issuing
1,300,000 flow-through units and 400,000 non flow-through units at $0.50 each.
Each flow-through unit was comprised of one flow-through common share and one
two-year non flow-through share purchase warrant. Each warrant entitles the
investor to purchase one common share at a price of $0.60 for two years until
January 14, 2005. The non flow-through units were comprised of one common share
and one two-year share purchase warrant with the same warrant terms. Net
proceeds were $812,065.
At the end of the first fiscal quarter of 2003, Northern Dynasty had working
capital of $438,155, as compared to $496,048 at the end of fiscal 2002 year.
Management is targeting additional sources of equity financing to provide
adequate working capital for ongoing operations and proposed exploration
programs for 2003. Northern Dynasty had 17,229,223 common shares issued and
outstanding at March 31, 2003.
Results of Operations
Expenses in the first quarter of fiscal decreased to $236,848 as compared to
$999,986 spent in the prior quarter and $818,437 spent in the first quarter of
2002. The decrease is due mainly to lower exploration expenditures in the first
quarter of fiscal 2003; exploration costs were higher in the prior quarter and
in the first quarter of fiscal 2002 when option payments were made. The main
exploration expenditure in the current quarter was for engineering, largely
related to a payment of $16,650 to Snowden for the independent resource estimate
and report on the Pebble deposit. The cost of salaries and benefits decreased
from the prior quarter when the years' stock option compensation was applied,
but is higher than in the same quarter in 2002 due to routine wage increases for
administrative staff.
Related Party Transactions
Hunter Dickinson Inc. ("HDI") of Vancouver, British Columbia is a private
company with certain directors in common with the Company that carries out
geological, corporate development, shareholder communications, administration
and other management activities for, and incurs third party costs on behalf of,
the Company. HDI is reimbursed on a full cost-recovery basis. In the quarter
ending March 31, 2003, Northern Dynasty paid $110,856 to HDI as compared to
$313,048 in the previous quarter.
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1 Copper and gold equivalent calculations use metal prices of US$0.80/lb for
copper, US$350/oz for gold, and US$4.50/lb for molybdenum. The contained gold,
copper, and gold-equivalent represent estimated contained metal in the ground
and have not been adjusted for metallurgical recoveries of gold and copper.
Molybdenum recovery was assumed to be 60%.
NORTHERN DYNASTY MINERALS LTD.
CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2003
(Expressed in Canadian Dollars)
(Unaudited)
NORTHERN DYNASTY MINERALS LTD.
Consolidated Balance Sheets
(Expressed in Canadian Dollars)
March December
31, 2003 31, 2002
(unaudited) (audited)
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Assets
Current assets
Cash and equivalents ...................................................................... $ 299,995 $ 424,152
Amounts receivable and prepaids ........................................................... 152,268 178,834
Balances receivable from related parties (note 8) ......................................... 16,752 79,350
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469,015 682,336
Equipment (note 4) ........................................................................... 2,670 2,813
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$ 471,685 $ 685,149
============ ============
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities .................................................. $ 27,436 $ 174,559
Balances payable to related parties (note 8) .............................................. 3,424 11,729
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30,860 186,288
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Shareholders' equity
Share capital (note 7) .................................................................... 11,853,882 11,035,977
Subscriptions received .................................................................... -- 650,000
Contributed surplus (note 7(e)) ........................................................... 18,456 13,271
Deficit ................................................................................... (11,431,513) (11,200,387)
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440,825 498,861
Nature of operations (note 1)
Commitments (note 11)
Subsequent events (note 7(c), 7(d), and 12)
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$ 471,685 $ 685,149
============ ============
The accompanying notes are an integral part of these consolidated financial statements
Approved by the Board of Directors
/s/ Ronald W. Thiessen /s/ Jeffrey R. Mason
Ronald W. Thiessen Jeffrey R. Mason
Director Director
NORTHERN DYNASTY MINERALS LTD.
Consolidated Statements of Operations
(Expressed in Canadian Dollars)
Three months ended March 31
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2003 2002
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Expenses
Conference and travel ................................................. $ 6,450 $ 8,202
Depreciation .......................................................... 143 180
Exploration (note 6) .................................................. 137,960 711,313
Legal, accounting and audit ........................................... 610 26,383
Office and administration (note 7(d)) ................................. 55,941 39,066
Shareholder communication ............................................. 28,167 21,942
Trust and filing ...................................................... 7,577 11,351
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236,848 818,437
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Other items
Foreign exchange gain (loss) .......................................... 3,576 (2,314)
Interest income ....................................................... 2,146 7,950
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5,722 5,636
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Loss for the period ...................................................... $ (231,126) $ (812,801)
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Weighted average number of
common shares outstanding ............................................. 16,978,445 9,428,765
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Basic and diluted loss per share ......................................... $ (0.01) $ (0.09)
============ =============
Consolidated Statements of Deficit
(Expressed in Canadian Dollars)
(Unaudited)
Three months ended March 31
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2003 2002
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Deficit, beginning of period ........................................... $(11,200,387) $ (6,087,894)
Loss for the period .................................................... (231,126) (812,801)
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Deficit, end of period ................................................. $(11,431,513) $ (6,900,695)
============ ============
The accompanying notes are an integral part of these consolidated financial statements
NORTHERN DYNASTY MINERALS LTD.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Three months ended March 31
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Cash provided by (applied to): 2003 2002
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Operating activities
Loss for the period ............................................................ $ (231,126) $ (812,801)
Item not involving cash
Depreciation ................................................................. 143 180
Stock-based compensation ..................................................... 5,185 --
Changes in non-cash working capital items
Amounts receivable and prepaids .............................................. 26,566 (9,988)
Accounts payable and accrued liabilities ..................................... (147,123) (151,516)
Balances receivable from and payable to related parties ...................... 54,293 (426,605)
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(292,062) (1,400,730)
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Financing activities
Common shares issued for cash, net of issue costs ............................. 817,905 974,467
Subscriptions received ........................................................ (650,000) 270,000
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167,905 1,244,467
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Decrease in cash and equivalents ................................................. (124,157) (156,263)
Cash and equivalents, beginning of period ........................................ 424,152 2,044,956
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Cash and equivalents, end of period .............................................. $ 299,995 $ 1,888,693
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
NORTHERN DYNASTY MINERALS LTD.
Notes to Consolidated Financial Statements
For the period ended March 31, 2003
(Expressed in Canadian Dollars)
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1. CONTINUING OPERATIONS
Northern Dynasty Minerals Ltd. (the "Company") is incorporated under the
laws of the Province of British Columbia, and its principal business
activity is the exploration of mineral properties. Its principal mineral
property interests are located in Alaska, USA.
These consolidated financial statements have been prepared using Canadian
generally accepted accounting principles assuming a going concern. The
Company has incurred losses since inception and the ability of the Company
to continue as a going concern depends upon its ability to develop
profitable operations and to continue to raise adequate financing. These
financial statements do not reflect adjustments, which could be material,
to the carrying values of assets and liabilities which may be required
should the Company be unable to continue as a going concern.
2. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles.
In October, 2001, the Company incorporated a subsidiary, Northern Dynasty
Mines Inc., under the laws of the State of Alaska, USA. These consolidated
financial statements include the accounts of the Company and its
wholly-owned subsidiary. All material intercompany balances and
transactions have been eliminated.
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and equivalents
Cash and equivalents consist of cash and highly liquid investments, having
maturity dates of three months or less from the date of purchase, that are
readily convertible to known amounts of cash.
(b) Equipment
Equipment is recorded at cost and is depreciated over its estimated useful
life using the declining balance method at various rates ranging from 20%
to 30% per annum.
(c) Mineral property interests
The acquisition costs of mineral properties are deferred until the
properties are placed into production, sold or abandoned. These deferred
costs are amortized on a unit-of-production basis over the estimated useful
life of the related properties following the commencement of production, or
written off if the properties are allowed to lapse or are abandoned. If the
deferred mineral property costs are determined not to be recoverable over
the estimated useful life or are less than estimated fair market value, the
unrecoverable portion is charged to earnings in that period.
Mineral property acquisition costs include the cash consideration and the
fair market value of common shares, based on the trading price of the
shares, on the date of issue or as otherwise provided under the agreement
terms for the mineral property interest. Costs for properties for which the
Company does not possess unrestricted ownership and exploration rights,
such as option agreements, are expensed in the period incurred or until a
feasibility study has determined that the property is capable of commercial
production. Exploration costs and option payments are expensed in the
period incurred.
Administrative expenditures are expensed in the period incurred.
(d) Share capital
Common shares issued for mineral property interests are recorded at the
fair market value based upon the trading price of the shares on the TSX
Venture Exchange on the date of issue or as otherwise provided under the
agreement terms to issue the shares.
The proceeds from common shares issued pursuant to flow-through share
financing agreements are credited to share capital, and the tax benefits of
the exploration expenditures incurred pursuant to these agreements are
transferred to the purchaser of the flow-through shares.
Share issue costs are deducted from share capital.
(e) Stock-based compensation plan
The Company has a stock-based compensation plan, as described in note 7(d).
Effective January 1, 2002, the Company has adopted the new accounting
standard of the Canadian Institute of Chartered Accountants ("CICA") for
accounting for stock-based compensation.
The Company has adopted the fair market value method of accounting for all
stock options granted. Under this method, stock-based compensation on
options granted to employees, directors, and consultants is recorded as an
expense over the period the options are vested, based on the estimated fair
value at the measurement date using a fair value pricing model.
(f) Foreign currency translation
All of the Company's foreign subsidiaries are considered integrated.
Monetary assets and liabilities of the Company's integrated foreign
operations are translated into Canadian dollars at exchange rates in effect
at the balance sheet date. Non-monetary assets and liabilities are
translated at historical estimated exchange rates unless such items are
carried at market, in which case they are translated at the exchange rates
in effect on the balance sheet date. Revenues and expenses, except
depreciation, are translated at average exchange rates for the period.
Depreciation is translated at the same exchange rates as the assets to
which it relates.
Foreign exchange gains or losses are expensed.
(g) Income taxes
The Company uses the asset and liability method of accounting for income
taxes. Under this method, future income tax assets and liabilities are
computed based on differences between the carrying amount of assets and
liabilities on the balance sheet and their corresponding tax values,
generally using the enacted or substantively enacted income tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Future income tax
assets also result from unused loss carryforwards and other deductions.
Future tax assets are recognized to the extent that they are considered
more likely than not to be realized. The valuation of future income tax
assets is adjusted, if necessary, by the use of a valuation allowance to
reflect the estimated realizable amount.
The Company's accounting policy for future income taxes currently has no
effect on the financial statements of any of the periods presented.
(h) Loss per share
Basic loss per share is calculated by dividing the loss for the period by
the weighted average number of common shares outstanding during the period.
Diluted loss per share is calculated using the treasury stock method. Under
the treasury stock method, the weighted average number of common shares
outstanding used for the calculation of diluted loss per share assumes that
the proceeds to be received on the exercise of dilutive stock options and
warrants are used to repurchase common shares at the average market price
during the period.
Diluted loss per share has not been presented as the effect of the
outstanding options and warrants would be anti-dilutive.
(i) Fair value of financial instruments
The carrying values of cash and equivalents, amounts receivable, and
accounts payable and accrued liabilities approximate their fair value due
to their short term nature. The Company is not exposed to significant
credit risk or interest rate risk.
(j) Change in Accounting Policy - Stock-Based Compensation
Effective January 1, 2002, the Company adopted the new Recommendations of
the Canadian Institute of Chartered Accountants relating to the accounting
for stock-based compensation and other stock-based payments. Under the new
standard, payments to non-employees, and to employees awards that are
direct awards of stock, that call for settlement in cash or other assets,
or that are stock appreciation rights which call for settlement by the
issuance of equity instruments, are accounted for using the fair value
method and is included in operations, with an offset to contributed
surplus. No compensation expense is recorded for all other non-cash
stock-based employee compensation awards; however pro-forma disclosure of
net income and earnings per share, had the Company used the fair value
method, is presented if applicable.
Prior to the adoption of the new standard, no compensation expense was
recorded for the Company's stock-based incentive plans when the options
were granted. Any consideration paid by those exercising stock options was
credited to share capital upon receipt.
The new Recommendations were applied prospectively. The adoption of this
new standard resulted in no changes to amounts previously reported.
(k) Use of estimates
The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and the disclosure of contingent assets and liabilities as at
the balance sheet date, and the reported amounts of revenues and expenses
during the reporting period. Significant areas requiring the use of
management estimates include the determination of potential impairments of
asset values, the rates for the depreciation of equipment, and the
assumptions used in determining stock-based compensation. Actual results
could differ from those estimates.
(l) Comparative figures
Certain of the prior periods' comparative figures have been reclassified to
conform to the financial statement presentation adopted for the current
period.
4. EQUIPMENT
Accumulated Net Book
Cost Depreciation Value
------- ------------- --------
March 31, 2003
Site equipment ...................... $15,387 $14,697 $ 690
Vehicles ............................ 4,335 4,246 89
Computer equipment .................. 2,488 597 1,891
------- ------- -------
$22,210 $19,540 $ 2,670
======= ======= =======
December 31, 2002
Site equipment ...................... $15,387 $14,660 $ 727
Vehicles ............................ 4,335 4,239 96
Computer equipment .................. 2,488 498 1,990
------- ------- -------
$22,210 $19,397 $ 2,813
======= ======= =======
5. MINERAL PROPERTY INTERESTS
(a) Pebble Property
On November 1, 2001, the Company acquired the rights to two options granted
by Teck Cominco American Incorporated ("Teck Cominco") respecting its
Pebble property in southwestern Alaska.
The two options granted by Teck Cominco were acquired by the Company
through an agreement with Hunter Dickinson Group Inc. ("HDGI"), a private
company which is related by virtue of certain directors in common. The
Company has been assigned, at HDGI's cost, an 80% interest, with the right
to acquire a 100% interest, in the two Teck Cominco options. HDGI's costs
($584,655) include the staking of 134 claims to expand the property along
with 30 km of induced polarization surveying over the new claims.
The first option enables the Company to explore the Pebble property for
more than 2 years prior to electing to purchase a 100% interest in the
Pebble deposit, free from any underlying royalty. This option was extended
by one year in an agreement dated December 19, 2002 whereby the Company
issued Teck Cominco 200,000 shares for the one year deferral. The Company
can elect to (a) purchase the 36 claims covering the Pebble deposit by
paying Teck Cominco US$10 million, in cash or shares with the same cash
equivalency, prior to November 30, 2004, and (b) to purchase the 20% HDGI
interest in shares at its independently appraised value. If the Company
elects to issue shares to Teck Cominco in lieu of cash, the Company will
manage the sale of any shares that Teck Cominco wishes to sell. Any excess
of Teck Cominco's resale proceeds will be credited against future option
requirements and any share resale shortfall must be made up by the Company
to maintain the option. Interim payments to Teck Cominco were also
required, including US$250,000, in cash or stock with the same cash
equivalency, prior to December 31, 2001 (which was paid), plus 500,000
two-year share purchase warrants exercisable at $0.75 (which were issued on
December 31, 2001) and a cumulative total of 1,000,000 shares (500,000 were
issued on March 27, 2002 and 500,000 were issued on December 19, 2002) and
750,000 warrants (500,000 were issued on March 27, 2002 exercisable at
$1.15 and 250,000 were issued on December 31, 2002 exercisable at $0.60) in
two tranches before December 31, 2002. If the Company purchases the
Resource Lands under the first option, it also has the right under the
second option to earn a 50% interest in the adjacent Exploration Lands by
completing 60,000 feet (to date 37,093 feet has been completed) of drilling
before November 30, 2004, with two one-year extensions available for
100,000 shares each. Upon the Company completing the drilling, Teck Cominco
can either match the Company's future expenditures by forming a 50:50 joint
venture, or sell its 50% interest in the Exploration Lands to the Company
for US$4 million and a 5% net profits interest.
(b) Pickle Lake Joint Venture
The Company holds a 37.5% participating joint venture interest, subject to
a 2.5% Net Profits Interest ("NPI") held by the original owners, in mineral
properties in northwestern Ontario under the Pickle Lake Joint Venture. The
Company is searching for additional joint venture partners to fund further
exploration on these properties. The Company continues to maintain these
claims in good standing.
(c) Little Bald Mountain
The Company holds an 8.1% NPI interest in the Little Bald Mountain ("LBM")
property in Nevada, USA, which may be acquired by Placer Dome U.S. Inc. by
annual election for an option payment of $1,500,000 before December 1995,
escalating by $500,000 for each successive year thereafter. The option
expires on December 31, 2003.
6. EXPLORATION EXPENSES
Three months ended March 31
---------------------------
Pebble Property 2003 2002
---------- ----------
Assay and analysis ..................... $ 8,897 $ 18,797
Drilling ............................... -- 4,389
Engineering ............................ 31,713 1,265
Environmental and land fees ............ 43,017 10,044
Geological ............................. 35,223 75,648
Graphics ............................... 7,731 20,066
Option payments ........................ -- 575,000
Site activities ........................ 11,379 6,104
---------- ----------
Incurred during the period
(to statement of operations).......... 137,960 711,313
Cumulative exploration expenses,
beginning of period ................ 5,498,330 1,168,394
---------- ----------
Cumulative exploration expenses,
end of period ...................... $5,636,290 $1,879,707
========== ==========
7. SHARE CAPITAL
(a) Authorized share capital
The Company's authorized share capital consists of 100,000,000 common
shares, without par value.
(b) Issued and outstanding common shares
Number
Common shares issued: of Shares Amount
---------- ----------
Balance, December 31, 2001 ................ 9,292,455 $ 7,907,717
Private placement (net of issue costs) 1,176,470 391,317
Private placement (net of issue costs) 2,000,000 890,700
Private placement (net of issue costs) 197,548 189,793
Share purchase options exercised ..... 214,018 87,557
Property option payments (note 5(a)) . 1,200,000 995,000
Share purchase warrants exercised .... 1,325,000 530,000
Share purchase options exercised ..... 109,732 43,893
---------- ----------
Balance, December 31, 2002 ................ 15,515,223 11,035,977
Share purchase options exercised
(note 7(d)) ........................ 14,000 5,840
Private placement January 2003,
net of issue costs (i) ............. 1,700,000 812,065
---------- ----------
Balance, March 31, 2003 ................... 17,229,223 11,853,882
========== ==========
(i) On January 14, 2003, the Company completed a private placement by
issuing 1,300,000 flow-through units and 400,000 non flow-through
units at $0.50 each. Each flow-through unit was comprised of a
flow-through common share and a two-year non-flow-through share
purchase warrant. Each warrant entitles the holder to purchase one
common share at a price of $0.60 until January 14, 2005. The non
flow-through units were comprised of one common share and one two-year
share purchase warrant with the same warrant terms. As at December 31,
2002, the Company had received $650,000 for the entire flow-through
portion of the private placement (note 11).
(c) Share purchase warrants
The continuity of share purchase warrants (each warrant exercisable into
one common share) for the period ended March 31, 2003 is:
Exercise Dec. 31 Expired/ March 31,
Expiry date Price 2002 Issued Exercised Cancelled 2003
----------- --------- ---------- ---------- ------- --------- ----------
July 16, 2003 ..................... $ 0.40 775,000 -- -- -- 775,000
December 27, 2003 ................. $ 1.15 197,548 -- -- -- 197,548
December 31, 2003 ................. $ 0.75 500,000 -- -- -- 500,000
February 20, 2004(i) .............. $ 0.45 1,176,470 -- -- -- 1,176,470
March 27, 2004 .................... $ 1.15 500,000 -- -- -- 500,000
April 19, 2004(i) ................. $ 0.62 2,000,000 -- -- -- 2,000,000
December 31, 2004 ................. $ 0.60 250,000 -- -- -- 250,000
January 14, 2005 .................. $ 0.60 -- 1,700,000 -- -- 1,700,000
---------- ---------- ------- -------- ----------
5,399,018 1,700,000 -- -- 7,099,018
Weighted average exercise price $ 0.63 $ 0.60 $ -- $ -- $ 0.62
========== ========== ======= ======== ==========
(i) Subsequent to March 31, 2003, 147,000 share purchase warrants were
exercised at $0.45, 100,000 share purchase warrants were exercised at
$0.62, and 575,000 share purchase warrants were exercised at $0.40.
(d) Share purchase option compensation plan
The Company has a share purchase option compensation plan approved by the
shareholders that allows it to grant up to 2,600,000 share purchase
options, vesting over up to two years, subject to regulatory terms and
approval, to its employees, officers, directors and consultants. The
exercise price of each option can be set equal to or greater than the
closing market price of the common shares on the TSX on the day prior to
the date of the grant of the option, less any allowable discounts. Options
have a maximum term of five years and terminate 30 days following the
termination of the optionee's employment, except in the case of retirement
or death. In the case of retirement, they terminate 30 to 90 days after the
date of retirement, at management's discretion and in the case of death;
they terminate at the earlier of one year after the date of death or the
expiry date of the options.
The continuity of share purchase options for the period ended March 31,
2003 is:
8
Exercise Dec. 31 Expired / March 31,
Expiry date Price 2002 Granted Exercised Cancelled 2003
----------- -------- --------- --------- --------- --------- ---------
February 12, 2003 ........................... $ 0.43 8,000 -- (8,000) -- --
May 15, 2004(i) ............................. $ 0.40 1,070,250 -- (6,000) -- 1,064,250
December 20, 2004 ........................... $ 0.50 119,000 -- -- -- 119,000
--------- --------- --------- ---------- ---------
1,197,250 -- (14,000) -- 1,183,250
Weighted average exercise price ............. $ 0.42 $ -- $ 0.42 $ -- $ 0.42
========= ======== ========= ========== =========
(i) Subsequent to March 31, 2003, 7,500 share purchase options were
exercised at $0.40.
The exercise prices of all share purchase options granted during 2002 were
equal to the market price at the grant date. The estimated fair value of
all options granted to non-employees during 2002 have been reflected in the
statement of operations as follows:
Office and administration ....................................... $5,185
------
Total stock-based compensation cost recognized in operations, .. $5,185
credited to contributed surplus ======
The weighted-average assumptions used to estimate the fair value of options
granted during 2002 were:
Risk-free interest rate ......................... 3%
Expected option life ............................ 2 years
Vesting period .................................. 0-6 months
Expected price volatility ....................... 40%
Expected dividend yield ......................... nil
Option pricing models require the input of highly subjective assumptions
including the expected price volatility. Changes in the subjective input
assumptions can materially affect the fair value estimate, and therefore
the existing models do not necessarily provide a reliable measure of the
fair value of the Company's stock options.
The Company did not issue any stock-based compensation to directors,
officers or employees during the period. Accordingly, there is no pro forma
disclosure required.
(e) Contributed surplus
Balance, December 31, 2001 and 2000 ................. $ --
Changes during 2002:
Non-cash stock-based compensation to non-employees 13,271
-------
Contributed surplus, December 31, 2002 .............. $13,271
Changes during 2003:
Non-cash stock-based compensation to non-employees 5,185
-------
Contributed surplus, March 31, 2003 ................. $18,456
=======
8. RELATED PARTY TRANSACTIONS AND BALANCES
Three Year
months ended ended
March 31, December 31,
Transactions 2003 2002
------------ ------------ ------------
Services rendered and expenses reimbursed
Hunter Dickinson Inc. (a) ........................... $ 110,856 $1,227,425
Hunter Dickinson Group Inc. (b) ..................... 3,200 28,698
========== ==========
March December
Balances receivable (payable) 31, 2003 31, 2002
---------------------------- ---------- ----------
Hunter Dickinson Inc. (a) ........................... $ 16,752 $ 79,350
Hunter Dickinson Group Inc. (b) ..................... (3,424) (11,729)
========== ==========
(a) Hunter Dickinson Inc. ("HDI") is a private company with certain
directors in common that provides geological, corporate development,
administrative and management services to, and incurs third party
costs on behalf of, the Company on a full cost-recovery basis pursuant
to an agreement dated December 31, 1996. The balance receivable from
HDI has resulted from advances by the Company for such services to be
rendered.
(b) Hunter Dickinson Group Inc. ("HDGI") is a private company with certain
directors in common that provides consulting services at market rates
to the Company. The balances payable to HDGI have resulted from the
services rendered to, but not yet paid for by, the Company.
9. INCOME TAXES
As at December 31, 2002, the Canadian parent company had the following
amounts available to reduce future taxable income, the future tax benefits
of which have not been reflected in the accounts, as it cannot be
considered likely that these amounts will be utilized. The following
non-capital and capital losses, approximately, are available to reduce
future taxable income:
Expiry Date
-----------
2003 $ 64,000
2004 53,000
2005 54,000
2006 --
2007 --
2008 25,000
2009 306,000
2010 799,000
----------
Total non-capital losses 1,301,000
Capital loss carried forward 2,091,500
Excess of aggregate tax cost of equipment over net book value --
----------
Total losses and excess equipment tax costs available $3,392,500
==========
10. SEGMENTED INFORMATION
The Company operates in a single reportable operating and geographic
segment, the exploration and development of mineral properties in Alaska,
USA.
11. COMMITMENTS
At March 31, 2003, the Company is committed to incur prior to December 31,
2003, on a best-efforts basis, a total of $650,000 in qualifying Canadian
exploration expenditures pursuant to a private placement for which
flow-through proceeds were received on December 31, 2002 (note 7(b)), and
renounced to subscribers on that date.
12. SUBSEQUENT EVENTS
Subsequent to March 31, 2003, the Company:
(a) issued 822,000 common shares pursuant to the exercise of warrants
(note 7(c)), and
(b) issued 7,500 common shares pursuant to the exercise of share purchase
options (note 7(d)).