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ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.)
CONSOLIDATED FINANCIAL STATEMENTS (Expressed in US dollars)
DECEMBER 31, 2011 AND 2010
Index
Auditor’s Report Consolidated Statements of Financial Position
Consolidated Statements of Operations and Comprehensive Loss Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Equity Notes to Consolidated Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Altan Rio Minerals Limited (formerly AMN Capital Corp.) We have audited the accompanying consolidated financial statements of Altan Rio Minerals Limited (formerly AMN Capital Corp.), which comprise the consolidated statements of financial position as at December 31, 2011 and 2010, and the consolidated statements of operations and comprehensive loss, cash flows, and changes in equity for the years then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated 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 consolidated 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Altan Rio Minerals Limited (formerly AMN Capital Corp.)as at December 31, 2011 and 2010 and their financial performance and their 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 consolidated financial statements which describes conditions and matters that indicate the existence of a material uncertainty that may cast significant doubt about Altan Rio Minerals Limited’s (formerly AMN Capital Corp.) ability to continue as a going concern.
“DAVIDSON & COMPANY LLP” Vancouver, Canada Chartered Accountants April 30, 2012
4
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT DECEMBER 31 (Expressed in US Dollars)
2011
2010
ASSETS Current Cash and cash equivalents (Note 4) $ 1,705,145 $ 2,847,104 Receivables (Note 5) 54,451 9,521 Prepaid expenses (Note 6) 44,079 20,257 1,803,675 2,876,882 Due from related parties (Note 9) 73,892 3,763,368 Equipment (Note 7) 60,899 28,105 Exploration and evaluation assets (Note 8) 6,527,417 3,820,233 $ 8,465,883 $ 10,488,588 LIABILITIES AND EQUITY Current Accounts payable and accrued liabilities $ 185,078 $ 321,116 Due to related parties (Note 9) 35,251 802,856 220,329 1,123,972 Equity
Capital stock (Note 12) 12,095,906 8,710,456 Share subscription received in advance (Note 12) - 2,895,847 Reserves (Note 12) 87,673 4,061 Deficit (3,506,710) (2,326,766) Accumulated other comprehensive loss (431,315) 81,018 8,245,554 9,364,616 $ 8,465,883 $ 10,488,588
Nature and continuance of operations (Note 1) Subsequent events (Note 18) Approved and authorized by the Board on April 27, 2012.
”Paul O’Brien” Director “Kelly Cluer” Director Paul O’Brien Kelly Cluer
The accompanying notes are an integral part of these financial statements.
5
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Expressed in US Dollars)
Year Ended
December 31, 2011
Year Ended
December 31, 2010
EXPENSES Computer expenses $ 3,914 $ 1,394 Consulting fees 193,787 180,075 Depreciation 5,874 1,251 Dues and subscriptions 3,195 2,573 Insurance 3,498 55 Investor relations 33,776 4,415 Office expenses 43,201 20,262 Professional fees 381,579 83,448 Project investigation 18,089 27,890 Project write-off 417,212 - Rent 21,519 22,752 Telecommunications 8,855 12,483 Transfer agent & filing fees 8,145 585 Travel & entertainment 55,369 64,940 Wages & benefits 56,174 47,767 (1,254,187) (469,890) OTHER INCOME / (EXPENSES) Interest income 11,490 632 Foreign exchange gain (loss) 62,753 (31,476) 74,243 (30,844) Net loss for the year (1,179,944) (500,734) Cumulative translation adjustments (512,333) 304,266 Comprehensive loss for the year $ (1,692,277) $ (196,468) Basic and diluted loss per common share $ (0.03) $ (0.01) Weighted average number of common shares outstanding – basic and diluted
41,884,602
41,803,506
The accompanying notes are an integral part of these financial statements.
6
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in US Dollars)
Year Ended
December 31, 2011
Year Ended
December 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES Loss for the year $ (1,179,944) $ (500,734) Items not involving cash: Depreciation 5,874 1,251 Project write-off 378,670 - Change in non-cash working capital item: Receivables (47,047) (7,821) Prepaid expenses 13,747 35,654 Accounts payable and accrued liabilities 166,133 12,817 Due to related parties 7,032 (188,193) Net cash (used in) provided by operating activities (655,535) (647,026) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of equipment (59,378) (7,387) Exploration and evaluation assets acquisition (7,477,575) (1,344,247) Cash acquired from acquisition 207,539 - Net cash used in investing activities (7,329,414) (1,351,634) CASH FLOWS FROM FINANCING ACTIVITIES Capital stock issued for cash, net of share issuance costs 7,352,460 1,852,837 Subscriptions received in advance - 2,895,847 Transfer to Altan Rio (US) Inc. (3,095,453) - Due to related parties 3,070,500 - Net cash provided from financing activities 7,327,507 4,748,684 Effect of foreign exchange on cash and cash equivalents (484,507) (66,506) Change in cash and cash equivalents for the year (1,141,959) 2,683,518 Cash and cash equivalents, beginning of year 2,847,104 163,586 Cash and cash equivalents, end of year $ 1,705,145 $ 2,847,104 Cash (paid) received during the year for interest $ - $ - Cash (paid) received during the year for income taxes $ - $ - Cash and cash equivalents consists of: Cash $ 1,639,385 $ 2,780,709 Liquid short-term deposits 65,760 66,395 $ 1,705,145 $ 2,847,104
Supplemental disclosures with respect to cash flows (Note 15)
The accompanying notes are an integral part of these financial statements.
7
AL
TA
N R
IO M
INE
RA
LS
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D
(for
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ly A
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Cap
ital C
orp.
) C
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alan
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f acc
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(6,5
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Alta
n R
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(432
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tired
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41,8
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ash
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(30,
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are
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r
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reig
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chan
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-
(512
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alan
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t Dec
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(431
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Th
e ac
com
pany
ing
note
s are
an
inte
gral
par
t of t
hese
fina
ncia
l sta
tem
ents
.
8
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 1. NATURE AND CONTINUANCE OF OPERATIONS
Altan Rio Minerals Limited (formerly AMN Capital Corp.) (the “Company”) is a mineral exploration company listed on the TSX Venture Exchange under the symbol “AMO” and engaged in the acquisition and exploration of exploration and evaluation assets in the Mongolia. The Company’s head office and registered and records office address is 1110 – 1111 West Georgia Street, Vancouver, British Columbia, Canada V6E 4M3. The consolidated financial statements of the Company are presented in US dollars. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. The consolidated financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.
The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and
to commence profitable operations in the future. Management is actively targeting sources of additional financing through alliances with financial, development and resource entities, or other business and financial transactions which would assure continuation of the Company’s operations and exploration and evaluation programs. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing.
These material uncertainties cast significant doubt as to the ability of the Company to meet its obligations as they
come due and accordingly, the appropriateness of the use of accounting principles applicable to a going concern. There can be no assurance that the Company will be able to continue to raise funds in which case the Company may
be unable to meet its obligations. Should the Company be unable to realize on its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded on the statements of financial position. The financial statements do not include any adjustments relating to the recoverability and classification of asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
2. BASIS OF PRESENTATION
These financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). The financial statements have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value through profit and loss, which are stated at their fair value. All dollar amounts presented are in US dollars unless otherwise specified. In addition, the consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.
9
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 3. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Altan Rio Holdings Canada Limited, Altan Rio Holdings Limited, Altan Rio Limited, and Altan Rio Mongolia LLC. All inter-company transactions and balances have been eliminated upon consolidation.
Accordingly, the accounts of the Company, Altan Rio Holdings Canada Limited, and Altan Rio Mongolia LLC are translated into US dollars as follows: � all of the assets and liabilities are translated at the rate of exchange in effect on the date of the statement of
financial position; � revenue and expenses are translated at the exchange rate approximating those in effect on the date of the
transactions; and � exchange gains and losses arising from translation are included in accumulated other comprehensive
income/loss.
Foreign currency translation
The functional currency of an entity is the currency of the primary economic environment in which the entity operates. The functional currency of the Company and Altan Rio Holdings Canada Limited is the Canadian dollar. The functional currency of Altan Rio Holdings Limited and Altan Rio Limited is the US dollar and the Mongolian Tugrik for Altan Rio Mongolia LLC.
Transactions in currencies other than the US dollar for the companies with a functional currency of the US dollar, are recorded at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the period end exchange rate while non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in comprehensive loss.
Use of estimates
The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Significant areas requiring the use of estimates, judgments and assumptions, include, but are not limited to, the valuation of equipment and exploration and evaluation assets, the inputs used in calculating the valuation of share-based compensation, agent’s warrants and the recognition of deferred tax assets and liabilities. Actual results could differ from these estimates. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value
10
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 3. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Equipment Equipment is carried at cost less accumulated depreciation and accumulated impairment losses. Depreciation is calculated using the declining balance method at the following annual rates:
Computer hardware 55% Computer software 100% Exploration equipment 20%
Furniture & fixtures 20% Vehicles 20%
In the year of acquisition, depreciation is recorded at one-half the normal rate. Equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss in the statement of operations and comprehensive income or loss. Where an item of equipment comprises major components with different useful lives, the components are accounted for as separate items of equipment. Expenditures incurred to replace a component of an item of equipment that is accounted for separately, including major inspection and overhaul expenditures are capitalized. Exploration and evaluation assets Before legal rights to explore a property have been acquired, costs are expensed as incurred. The Company records exploration and evaluation asset interests, which consist of the right to explore for mineral deposits, at cost. The Company records deferred exploration costs, which consist of costs attributable to the exploration of exploration and evaluation asset interests, at cost. All direct and indirect costs relating to the acquisition and exploration of these exploration and evaluation asset interests are capitalized on the basis of specific claim blocks until the exploration and evaluation asset interests to which they relate are placed into production, the exploration and evaluation asset interests are disposed of through sale or where management has determined there to be an impairment. If an exploration and evaluation asset interest is abandoned, the exploration and evaluation asset interests and deferred exploration costs will be written off to operations in the period of abandonment. On an ongoing basis, the capitalized costs are reviewed on a property-by-property basis to consider if there is any impairment on the subject property. Management’s determination for impairment is based on: 1) whether the Company’s exploration programs on the exploration and evaluation asset interests have significantly changed, such that previously identified resource targets are no longer being pursued; 2) whether exploration results to date are promising and whether additional exploration work is being planned in the foreseeable future; or 3) whether remaining lease terms are insufficient to conduct necessary studies or exploration work. The recorded cost of exploration and evaluation asset interests is based on cash paid and the assigned value of share consideration issued (where shares are issued) for exploration and evaluation asset interest acquisitions and exploration costs incurred. The recorded amount may not reflect recoverable value, as this will be dependent on future development programs, the nature of the mineral deposit, commodity prices, adequate funding and the ability of the Company to bring its projects into production.
11
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 3. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Financial instruments
All financial instruments are initially recognized at fair value on the statement of financial position. The Company has classified each financial instrument into one of the following categories: (1) financial assets or liabilities at fair value through profit or loss (“FVTPL”), (2) loans and receivables, (3) financial assets available-for-sale, (4) financial assets held-to-maturity, and (5) other financial liabilities. Subsequent measurement of financial instruments is based on their classification.
Financial assets and liabilities at FVTPL are subsequently measured at fair value with changes in those fair values
recognized in the statement of operations. Financial assets “available-for-sale” are subsequently measured at fair value with changes in fair value recognized in other comprehensive income (loss), net of tax.
Financial assets “held-to-maturity”, “loans and receivables”, and “other financial liabilities” are subsequently
measured at amortized cost using the effective interest method. The Company’s financial assets and liabilities are recorded and measured as follows: Asset or Liability Category Measurement Cash and cash equivalents FVTPL Fair value Receivables Loans and receivables Amortized cost Accounts payables and accrued liabilities. Other liabilities Amortized cost Due to/from related parties Other liabilities Amortized cost The Company classifies the fair value of financial instruments according to the following hierarchy based on the
reliability of observable inputs used to value the instrument. Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date.
Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are
either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.
Level 3 – Valuations in this level are those with inputs for the asset or liability that are not based on observable
market data. The carrying value of receivables, accounts payable and accrued liabilities, and due to/from related parties,
approximate their fair values due to their short terms to maturity. Cash and cash equivalents have been measured at fair value using Level 1 inputs. Available-for-sale - Non-derivative financial assets not included in the above categories are classified as available-for- sale. They are carried at fair value with changes in fair value recognized directly in equity. Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognized in the statement of operations.
12
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 3. SIGNIFICANT ACCOUNTING POLICIES (cont’d…) Impairment of long-lived assets
At the end of each reporting period, the Company’s assets are reviewed to determine whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit or loss for the period. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
Income taxes
Income tax expense comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity. Current tax expense is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years. Deferred tax is recorded using the liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for relating to goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable loss, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Loss per share The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the year. Basic loss per share is calculated using the weighted-average number of shares outstanding during the year.
13
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 3. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Share-based compensation The fair value of stock options granted is determined using the Black-Scholes option pricing model and is recorded as share-based compensation over the vesting period of the stock options. Upon the exercise of the stock options, the related fair value of the stock options is reallocated from reserves to capital stock.
Provision for environmental rehabilitation
The Company recognizes liabilities for legal or constructive obligations associated with the retirement of the Company’s Exploration and evaluation assets and equipment. The net present value of future rehabilitation costs is capitalized to the related asset along with a corresponding increase in the rehabilitation provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value.
The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to the related assets with a corresponding entry to the rehabilitation provision.
The increase in the provision due to the passage of time is recognized as interest expense.
The Company currently does not have any significant provisions for environmental rehabilitation. New standards yet adopted Financial Instruments IFRS 9, “Financial Instruments” (“IFRS 9”) was issued by the IASB on November 12, 2009 and will replace IAS 39. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple classification options in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2013.
Amendments to IFRS 7, Financial Instruments: Disclosures are effective for annual periods beginning on or after July 1, 2011 and introduce enhanced disclosure around transfer of financial assets and associated risks. These amendments are not anticipated to impact the disclosures made by the Company.
Amendments to IAS 1, Presentation of Financial Statements (effective for annual periods beginning on or after July 1, 2012) require that elements of other comprehensive income that may subsequently be reclassified through profit and loss be differentiated from those items that will not be reclassified.
IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, and consequential revisions to IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures (all effective January 1, 2013) provide revised guidance on the accounting treatment and associated disclosure requirements for joint arrangements and associates, and a revised definition of ‘control’ for identifying entities which are to be consolidated.
14
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 3. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
New standards yet adopted (cont’d…)
IFRS 13 Fair Value Measurement (effective January 1, 2013) provides new guidance on fair value measurement and disclosure requirements.
In May 2011, the IASB issued IFRS 10, Consolidated Financial Statements (“IFRS 10”), which builds on existing
principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of a parent company. IFRS 10 also provides additional guidance to assist in the determination of control where this is difficult to assess. IFRS 10 applies to financial statements for annual periods beginning on or after January 1, 2013, with early adoption permitted.
In May 2011, the IASB issued IFRS 12, Disclosure of Interests in Other Entities (“IFRS 12”), which is a
comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off-balance sheet vehicles. IFRS 12 applies to financial statements for annual periods beginning on or after January 1, 2013, with early adoption permitted.
The Company is currently evaluating the impact of these new and amended standards on its financial statements
4. CASH AND CASH EQUIVALENTS
December 31, 2011
December 31,
2010 Cash on deposit $ 1,639,385 $ 2,780,709 Liquid short term deposit 65,760 66,395 Total $ 1,705,145 $ 2,847,104
5. RECEIVABLES The Company’s receivables are broken down as follows:
December 31, 2011
December 31,
2010 Trade receivables $ 2,364 $ 1,602 HST receivable 52,087 7,919 Total $ 54,451 $ 9,521
15
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 6. PREPAID EXPENSES
The prepaid expenses for the Company are broken down as follows:
December 31,
2011
December 31,
2010 Services deposit $ 23,610 $ 11,389 Rent deposit 10,888 8,868 Insurance 9,581 - Total $ 44,079 $ 20,257
16
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ance
at D
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(25,
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( (4
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( (4
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$ 7
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6 $
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31, 2
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3,45
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3 -
$-
18,6
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1 8,
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$ 8
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$
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60,7
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-
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2,75
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1,29
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4,98
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$
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$
6,
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$
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-
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982,
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-$
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6,84
9$
792,
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$
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0 C
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-
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-
-
655,
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D
epre
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4,75
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1,
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1,20
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2,
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9,40
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s4,
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1,40
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0
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7,
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xpen
ses
196,
753
48
,888
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54
,886
31
9,37
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al30
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113
8,11
4
25
,621
65
,613
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rvey
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2,
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45,0
83
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,171
3,
761
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64
138,
126
Pr
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ees
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ranc
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64
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2
536
1,
002
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l Fee
s1,
617
262
2,
100
1,80
0
5,
779
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l cos
ts in
curr
ed d
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g th
e ye
ar1,
094,
095
168,
681
61
,761
21
7,21
4
1,54
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1
O
peni
ng B
alan
ce1,
269,
158
196,
249
16
4,98
4
235,
593
1,
865,
984
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ign
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Mov
emen
ts28
5,56
3
39,1
20
31,8
48
55,9
67
412,
498
En
ding
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ance
2,64
8,81
6$
40
4,05
0$
258,
593
$
50
8,77
4$
3,82
0,23
3$
Cum
ulat
ive
Cost
s:Ac
quis
ition
Cos
ts20
6,80
5$
111,
263
$
54
,441
$
93
,621
$
46
6,13
0$
Expl
orat
ion
Cost
s
2,1
48,1
20
243
,378
1
61,3
70
354
,156
2,
907,
024
Prof
essi
onal
Fee
s8,
328
10,2
89
10,9
34
5,03
0
34
,581
Fo
reig
n Ex
chan
ge M
ovem
ents
285,
563
39
,120
31
,848
55
,967
41
2,49
8
2,64
8,81
6$
40
4,05
0$
258,
593
$
50
8,77
4$
3,82
0,23
3$
19
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 8. EXPLORATION AND EVALUATION ASSETS (cont’d…)
Title to exploration and evaluation assets involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral claims. The Company has investigated title to all of its exploration and evaluation assets and, to the best of its knowledge, title to all of its interests are in good standing. The exploration and evaluation assets in which the Company has committed to earn an interest are located in Mongolia. The terms and commitments of the Company with respect to its exploration and evaluation assets are subject to change if and when the Company and its partners mutually agree to new terms and conditions.
(a) Chandman and Nurag Uul projects, Mongolia On November 26, 2007, the Company entered into an option agreement with a private company to acquire 80% of its shares. As a result, the Company can earn an 80% interest in the Projects owned by the private company’s wholly owned subsidiary. The option agreement has the following terms: i. Payment of $50,000 in cash on signing (Paid). ii. Incur $3,000,000 of cumulative exploration expenditure on the properties over a four year period as follows:
- Minimum of $200,000 on or before the first anniversary of the agreement (Incurred); - Minimum of $1,000,000 (cumulative) on or before the second anniversary of the agreement (Incurred); and - Minimum of $3,000,000 (cumulative) on or before the fourth anniversary of the agreement (Incurred).
iii. Payment of $600,000 in cash over a four year period as follows: - $100,000 on or before the second anniversary of the agreement (Paid); and - An additional $500,000 on or before the fourth anniversary of the agreement (Paid).
On August 16, 2011, the Company elected to drop Nurag Uul property and all associated expenditures were written off to operation.
During the quarter ended December 31, 2011, the Company earned its 100% interest in Chandman property by converting the remaining 20% interest into a 2.5% NSR royalty.
(b) Onon, Mongolia
On November 13, 2008, the Company entered into an agreement with a private company in order to acquire a 90% beneficial interest in the Onon gold project. The agreement was subsequently amended on May 19, 2009 and on October 20, 2010 and now includes the following terms: i. Payment of $160,000 over a four year period as follows:
- $10,000 on signing (Paid); - An additional $20,000 on or before May 25, 2009 (Paid); - An additional $70,000 on or before May 25, 2011 (Paid); and - An additional $60,000 on or before September 26, 2011.
ii. Incur $900,000 in aggregate exploration expenditures over a four year period as follows: - Minimum of $200,000 on or before October 1, 2011 (Incurred); and - Minimum of $900,000 (cumulative) on or before October 1, 2012.
20
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 8. EXPLORATION AND EVALUATION ASSETS (cont’d…)
(c) Yol, Mongolia Licenses were issued to Altan Rio Mongolia LLC on April 17, 2009 and April 24, 2009.
(d) Khavchuu, Mongolia On May 3, 2011 the Company entered into an agreement to acquire a 100% interest in the Khavchuu project from Khavchuu Land Mongolia LLC (KLM) subject to certain payments and production royalty schedules. The agreement has the following payment terms: i. $50,000 on or before May 3, 2011, of which $47,500 may be satisfied by way of the issuance of ordinary fully
paid shares in the Company (Paid and issued); ii. $200,000 on or before November 3, 2012, of which $190,000 may be satisfied by way of the issuance of
ordinary fully paid shares in the Company; and iii. $300,000 on or before November 3, 2013, of which $285,000 may be satisfied by way of the issuance of
ordinary fully paid shares in the Company.
After commercial production commences, the project is also subject to a 2.105% NSR royalty. 9. RELATED PARTY TRANSACTIONS
The financial statements include the financial statements of Altan Rio Minerals Limited and its subsidiaries listed in the following table:
Name of Subsidiary
Country of Incorporation
Proportion of Ownership Interest
Principal Activity
Altan Rio Holdings Canada Limited Canada 100% Holding company Altan Rio Holdings Limited British Virgin Islands 100% Holding company Altan Rio Limited British Virgin Islands 100% Holding company Altan Rio Mongolia LLC Mongolia 100% Project exploration
The Company entered into the following transactions with related parties: a) Paid or accrued management and consulting fees of $79,273 (2010 - $55,188) to Evan Jones, President, CEO
and director of the Company. At December 31, 2011, the amount payable to him was $10,568 (2010 - $19,978).
b) Paid or accrued management and consulting fees of $105,953 (2010 - $126,155) to Kelly Cluer, director of the Company. At December 31, 2011, the amount payable to him was $15,130 (2010 - $16,000).
21
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 9. RELATED PARTY TRANSACTIONS (cont’d...)
c) Paid or accrued accounting and administration services of $38,108 (2010 - $17,073) and office rent of $15,885 (2010 - $8,999) to Corex Management Inc. (“Corex”), a management company controlled by a director and an officer of the Company. At December 31, 2011, $2,002 (2010 - $2,002) of the amount advanced to Corex for accounting and administration services and $5,433 (2010 - $6,935) for office rent have been included in prepaid expenses. The amount payable to Corex was $Nil (2010 - $Nil).
d) At December 31, 2011, an amount of $69,987 (2010 - $3,762,490) was due from Altan Nevada Minerals Ltd., a company with directors and officers in common. As at December 31, 2011 there was also an amount payable of $Nil (2010 - $286,042).
e) At December 31, 2011, an amount of $3,905 (2010 - $878) was due from John Jones, a director of the
Company. The Company also had an amount owing to him of $2,592 (2010 - $87,430). f) At December 31, 2011, an amount of $1,961 (2010 - $393,406) was due to the Bonito Trust, controlled by a
director of the Company. g) At December 31, 2011, and amount of $5,000 (2010 - $Nil) was due to 0809979 B.C. Ltd., a company with a
common director. These transactions were incurred in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the parties. The remuneration of directors and officers of key management personnel during the year ended December 31, 2011 and 2010 are as follows:
2011
2010
Management and consulting fees $ 185,226(1) $ 181,343(2)
(1) Of this amount, $79,273 is included in evaluation and exploration assets.
(2) Of this amount, $55,188 is included in exploration and evaluation assets.
10. PLAN OF ARRANGEMENT
On May 31, 2011, a company consisting of Altan Rio Holdings Ltd. (BVI), and Altan Rio (US) Inc., (collectively, “Altan Rio”), entered into a plan of arrangement to reorganize its exploration and evaluation assets in an effort to maximize shareholder value. Under the terms of the plan of arrangement, Altan Rio spun out its subsidiary, Altan Rio (US) Inc. to a new company incorporated under the name Altan Nevada Minerals Ltd. (“Altan Nevada”). Shareholders of Altan Rio received one new Altan Rio common share for each Altan Rio share held, and one Altan Nevada common share for every two Altan Rio common shares held. Following the plan of arrangement, the Company acquired 100% of the common shares of Altan Rio (Note 11). The Company’s consolidated statement of operations and comprehensive loss for the years ended December 31, 2011 and 2010 are the result of a “carve-out” of an allocation of general and administrative expenses for the period to Altan Nevada. The allocation of the Company’s general and administrative expenses was calculated on the basis of each company’s share of the expenditures on a line-by-line basis.
22
ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 10. PLAN OF ARRANGEMENT (cont’d…)
The aggregate value of the assets transferred from Altan Rio to Altan Nevada is as follows:
Asset (liability)
Cash and cash equivalents $3,095,453 Prepaid expenses 5,827 Equipment 16,539 Exploration and evaluation assets 3,516,090 Accounts payable and accrued liabilities (52,793) Total $6,581,116
11. ACQUISITION
Effective December 23, 2011, the Company acquired all of the issued and outstanding capital stock of Altan Rio
Holdings Canada Limited, Altan Rio Holdings, Altan Rio Holdings Limited, Altaon Rio Limited, and Altan Rio Mongolia LLC (collectively, “Altan Rio”) (the “Acquisition”). As consideration, the Company issued 41,803,506 common shares. The Company also issued 0.4196 share purchase warrants for each Altan Rio share purchase warrant outstanding immediately prior to the date of Acquisition. As a result, the Company issued 41,803,506 common shares and 13,237,063 share purchase warrants.
Legally, the Company is the parent of Altan Rio, however, as a result of the share exchange described above, control
of the combined companies passed to the former shareholders of Altan Rio. This type of share exchange, referred to as a "reverse takeover", deems Altan Rio to be the acquirer for accounting purposes. Accordingly, the net assets of Altan Rio are included in the statement of financial position at book values and the Acquisition of the Company is accounted for whereby the net assets of the Company are recorded at fair market value at the date of Acquisition. The expenses and assets and liabilities subsequent to the date of acquisition include accounts of the Company. The net assets of the Company totalled $233,895 at the date of acquisition and have been allocated below.
The total purchase price of $233,895 was allocated as follows:
Cash $ 207,539 Prepaid expenses 37,268 Receivables 10,712 Accounts payable and accrued liabilities (21,624) $ 233,895
12. EQUITY Authorized share capital
There is unlimited number of common and preferred voting shares without nominal or par value.
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ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 12. EQUITY (cont’d...) Issued share capital During the year ended December 31, 2011 the following capital stock transactions occurred:
i. On January 10, 2011, the Company issued 11,293,758 units at C$0.30 per unit, for gross proceeds of $3,413,877. Each unit consisted of one common share and one-half share purchase warrant. Each whole warrant entitles the holder to purchase one common share exercisable at a price of C$0.50 per share until January 8, 2012. Of the above proceeds, $2,895,847 was received as of December 31, 2010. The warrants issued in this transaction were exchanged on the basis of one pre-acquisition warrant for each 0.4196 post-acquisition warrant.
ii. On February 9, 2011, the Company issued 2,785,167 units at C$0.30 per unit, for gross proceeds of $839,979.
Each unit consisted of one common share and one-half share purchase warrant. Each whole warrant entitles the holder to purchase one common share exercisable at a price of C$0.50 per share by January 8, 2012. In connection with this placement, the Company issued 200,000 finder’s warrants valued at $14,040, with an exercise price of C$0.50 until January 8, 2012. The warrants issued in this transaction were exchanged on the basis of one pre-acquisition warrant for each 0.4196 post-acquisition warrant.
iii. On May 17, 2011, the Company issued 5,945,354 units at C$0.30 per unit for gross proceeds of $1,838,185.
Each unit consisted of one common share and one-half share purchase warrant. Each whole warrant entitles the holder to purchase one common share exercisable at a price of C$0.50 per share by January 8, 2012. In connection with this placement, the Company issued 100,250 finder’s warrants valued at $4,865, with an exercise price of C$0.50 until January 8, 2012. The warrants issued in this transaction were exchanged on the basis of one pre-acquisition warrant for each 0.4196 post-acquisition warrant.
iv. On July 6, 2011, the Company issued 19,407,637 units at C$0.18 per unit for gross proceeds of $3,492,000.
Each unit consisted of one common share and one-half share purchase warrant. Each whole warrant entitles the holder to purchase one common share exercisable at a price of C$0.29 per share by January 6, 2013. In connection with this placement, the Company issued 533,710 finder’s warrants valued at $32,817, with an exercise price of C$0.29 until January 6, 2013. The warrants issued in this transaction were exchanged on the basis of one pre-acquisition warrant for each 0.4196 post-acquisition warrant.
v. On December 23, 2011, in conjunction with the acquisition (Note 11), the Company completed a private
placement consisting of 2,000,000 units at a price of C$0.50 per unit for gross proceeds of C$1,000,000 (US$983,300). Each unit consisted of one common share and one-half common share purchase warrant, where each warrant entitles the holder to purchase one common share of the Company exercisable at a price of C$0.65 for a period of 2 years. As part of the financing, the Company issued 20,000 additional common shares as a corporate finance fee, and issued 135,000 agent’s warrants as a finder’s fee, valued at $30,552. The agent warrants are exercisable at a price of C$0.65 until December 23, 2013.
During the year ended December 31, 2010 the following capital stock transactions occurred:
i. The Company completed a non-brokered private placement consisting of 6,437,322 units at a price of C$0.30 per unit for gross proceeds of $1,865,270 (C$1,931,197). As part of the financing the Company incurred cash costs of $5,957 (C$6,000), and issued 20,000 full warrants as a finder’s fee. The warrants were valued at $1,220, and are exercisable at C$0.50 until January 8, 2012.
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ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 12. EQUITY (cont’d...) Issued share capital (cont’d...)
ii. The Company issued 229,051 units at a price of C$0.30 per unit in connection with a debt settlement. Each unit consisted of one common share and one-half share purchase warrant. Each whole warrant entitles the holder to purchase one common share exercisable at a price of C$0.50 per share until January 8, 2012.
iii. On January 10, 2011, the Company issued 11,293,758 units for gross proceeds of $3,413,877. On February 9,
2011, the Company issued 2,785,166 units for gross proceeds of $839,979. Each unit consisted of one common share and one-half share purchase warrant. Each whole warrant entitles the holder to purchase one common share exercisable at a price of C$0.50 per share by January 8, 2012. Of the above proceeds, $2,895,847 was received as of December 31, 2010.
Share purchase and agents warrants
Number ofWarrants
Weighted Average Exercise Price
- $0.00Issued 14,462,063 $0.68
14,462,063 $0.68
Outstanding warrants, December 31, 2010
Outstanding warrants, December 31, 2011
As at December 31, 2011, the following share purchase warrants were outstanding and exercisable:
Expiry DateWeighted Average
Exercise PriceNumber ofWarrants
Weighted Average Remaining Life in Years
June 29, 2013 C$0.33 90,000 1.48December 23, 2013 C$0.69 13,237,063 1.98December 23, 2013 C$0.65 1,135,000 1.98
C$0.68 14,462,063 1.98
The fair value of the agent’s warrants being issued as part of the finder’s fees in the fiscal 2011 private placement, were estimated using the Black-Scholes Pricing Model with the following assumptions:
Estimated risk-free rate 0.93 Expected volatility 100 % Estimated annual dividend yield 0.00 % Expected life of warrants 1.38 years Fair value per warrant granted C$0.09
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ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 12. EQUITY (cont’d…) Stock options
The Company has established a stock option plan (the “Plan”) for directors, employees, and consultants of the Company. From time to time, shares may be reserved by the Board, in its discretion, for options under the Plan, provided that at the time of the grant, the total number of shares so reserved for issuance by the Board shall not exceed the greater of 10% of the issued and outstanding listed shares (on a non-diluted basis) as at the date of grant. Options are non-assignable and may be granted for a term not exceeding that permitted by the Exchange, currently ten years. All stock options issued are subject to vesting terms. Options issued to directors vest in the amount of 33% every six months from the date of grant; and options issued to officers and/or consultants vest between 12 and 24 months depending on date of grant and nature of service. On February 1, 2012 subsequent to the year end, the Company granted options to acquire 1,992,400 common shares with an exercise price of C$0.53 per share.
Escrow shares
As of December 31, 2011, the Company has 18,124,496 common shares held in escrow with the Company’s escrow agent. The escrow agreement provides for the original 18,124,496 common shares held in escrow and was released as follows:
- 5% of 17,434,489 shares and 10% of 690,007 shares on January 11, 2012, - 5% of 17,434,489 shares and 15% of 690,007 shares on July 11, 2012, - 10% of 17,434,489 shares and 15% of 690,007 shares on January 11, 2013, - 10% of 17,434,489 shares and 15% of 690,007 shares on July 11, 2013, - 15% of 17,434,489 shares and 15% of 690,007 shares on January 11, 2014, - 15% of 17,434,489 shares and 15% of 690,007 shares on July 11, 2014, and - 40% of 17,434,489 shares and 15% of 690,007 shares on January 11, 2015.
13. INCOME TAXES The reconciliation of the combined Canadian federal and provincial income tax rate to the income tax recovery
presented in the accompanying consolidated statements of comprehensive loss is provided below:
Years ended Dec 31, 2011 2011 2010
Accounting Profit (Loss) before income taxes $ (1,179,944) $ (500,734)
Combined federal and provincial statutory income tax rate 26.5% 26.5%
Income tax expense (recovery) at statutory tax rates $ (313,000) $ (133,000) Impact of different foreign statutory tax rates on earnings of subsidiaries 39,000 23,000 Non-deductible expenditures and non-taxable revenues 2,000 2,000 Impact of future income tax rates appplied versus current statutory rate 9,000 9,000 Impact of flow through shares - - Share issue costs (43,000) (3,000) Adjustment to prior years provision versus statutory tax returns - - Change in unrecognized deductible temporary differences 131,000 8,000 Other 175,000 94,000 Total $ - $ -
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ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 13. INCOME TAXES (cont’d….) The Canadian income tax rate declined during the year due to changes in the law that reduced corporate income tax
rates in Canada. Tax attributes are subject to review and potential adjustment by tax authorities. Significant components of deductible and taxable temporary differences, unused tax losses and unused tax credits
that have not been included on the consolidated statements of financial position are as follows:
2011 Expiry dates 2010 Expiry dates
Share issue costs $ 407,000 2013 to 2015 $ 109,000 2013 to 2014 Non-Capital losses 2,359,000 2029 to 2031 1,733,000 2029 to 2030 Capital assets 71,000 Not applicable 63,000 Not applicable Mineral properties 321,000 Not applicable 142,000 Not applicable
Tax attributes are subject to review, and potential adjustment, by tax authorities. 14. SEGMENT INFORMATION
The Company operates in one business segment, the exploration of exploration and evaluation assets. The Company’s exploration activities are centralized whereby management of the Company is responsible for business results and the everyday decision-making. The Company’s operations therefore are segmented on a geographic basis.
The Company’s capital assets are located in the following geographic locations:
December 31, 2011
December 31,
2010 Equipment Canada $ 3,213 $ 3,198 Mongolia 57,686 24,907 60,899 28,105 Exploration and evaluation assets Canada - - Mongolia 6,527,417 3,820,233 $ 6,588,316 $ 3,848,338
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ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 15. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
The significant non-cash transactions for the year ended December 31, 2011 were as follows: Other than the plan of arrangement (Note 10) and the Acquisition (Note 11), the significant non-cash transactions were as follows:
a) The Company issued warrants valued at $83,612 as finders’ fees in its private placements.
b) Accounts payable and accrued liabilities includes $44,375 of exploration and evaluation assets costs. The significant non-cash transactions for the year ended December 31, 2010 were as follows:
a) The Company issued 20,000 warrants valued at $1,220 as finders’ fee in a non-brokered private placement which was recorded as share issuance costs.
b) The Company issued 229,051 units for settlement of accounts payable. The shares were valued at $64,685.
c) Accounts payable and accrued liabilities includes $288,028 (2009 – $156,040) of exploration and evaluation asset costs.
16. CAPITAL MANAGEMENT The Company manages its capital structure and makes adjustments to it, based on the funds available to the
Company, in order to support the acquisition, exploration and development of exploration and evaluation assets. In the management of capital, the Company includes components of shareholders’ equity. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The properties in which the Company currently has an interest are in the exploration stage; as such the Company is dependent on external financing to fund activities. In order to carry out planned exploration and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so.
17. FINANCIAL INSTRUMENTS
The Company is exposed to varying degrees to a variety of financial instrument related risks:
Credit risk Credit risk is the risk of loss associated with counterparty’s inability to fulfil its payment obligations. The Company’s cash and cash equivalents are held at a large Canadian financial institution in interest bearing accounts. The Company has no investment in asset backed commercial paper. The Company’s receivables consist mainly of taxes receivable due from the government of Canada. The Company believes it has no significant credit risk.
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ALTAN RIO MINERALS LIMITED (formerly AMN Capital Corp.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 (Expressed in US Dollars) 17. FINANCIAL INSTRUMENTS (cont’d…)
Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at December 31, 2011, the Company had a cash and cash equivalent balance of $1,705,145 (2010 - $2,847,104) to settle current liabilities of $220,329 (2010 - $1,123,972). The Company believes it has sufficient funds to meet its current liabilities as they become due.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The risk that the Company will realize a loss as a result of a decline in the fair value of the short-term investments included in cash and cash equivalents is minimal because these investments roll over daily.
Foreign currency risk
The Company is exposed to foreign currency risk on fluctuations related to cash, taxes receivable and accounts payables and accrued liabilities that are denominated in Canadian dollars and Mongolian Tugrik.
Price risk
The Company believes it currently has no price risk. Sensitivity Analysis The Company operates in Mongolia and is exposed to risk from changes in the Canadian dollar and the Mongolian
Tugrik. A simultaneous 10% fluctuation in the Canadian dollar and Mongolian Tugrik against the US dollar would affect accumulated other comprehensive loss for the year by approximately $119,400.
18. SUBSEQUENT EVENTS
Stock Options On February 1, 2012 subsequent to the year end, the Company granted options to acquire 1,992,400 common shares with an exercise price of C$0.53 per share.