AZZ

Azarga	Uranium	Corp.	
CONSOLIDATED	FINANCIAL	STATEMENTS	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars)	

	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
TABLE	OF	CONTENTS

CONSOLIDATED	FINANCIAL	STATEMENTS

Consolidated	Statements	of	Financial	Position
Consolidated	Statement	of	Profit	or	Loss	and	Other	Comprehensive	Income
Consolidated	Statement	of	Changes	in	Equity
Consolidated	Statement	of	Cash	Flows

NOTES	TO	THE	CONSOLIDATED	FINANCIAL	STATEMENTS

1. Corporate	information	and	going	concern
2. Basis	of	preparation
3. Summary	of	significant	accounting	policies
4. Segmented	information
5. Business	acquisition
6. Non‐controlling	interest
7. Exploration	and	evaluation	assets
8. Property,	plant	and	equipment
9. Long‐term	investments

10. Convertible	loan	receivables
11. Loan	payable	
12. Trade	and	other	payables
13. Other	liabilities	
14. Deferred	income	tax	
15. Administration	expenses
16. Finance	costs
17. Unrealized	loss	on	financial	instruments	
18. Realized	gain/(loss)	on	financial	instruments	
19. Earnings	per	share
20. Equity
21. Share	option	reserve
22. Capital	risk	management
23. Financial	instruments
24. Related	party	transactions
25. Supplemental	cash	flow	information
26. Commitments	for	expenditure

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Tel: 604  688 5421 
Fax: 604  688 5132 
www.bdo.ca 

BDO Canada LLP 
600 Cathedral Place 
925 West Georgia Street 
Vancouver BC  V6C 3L2  Canada 

INDEPENDENT AUDITOR'S REPORT 

To the shareholders of Azarga Uranium Corp. 

We  have  audited  the  accompanying  consolidated  financial  statements  of  Azarga  Uranium  Corp.  and  its 
subsidiaries, which comprise the consolidated statement of financial position as at December 31, 2014, and the 
consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for 
the year 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. 

Auditor's Responsibility 

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We 
conducted  our  audit  in  accordance  with  Canadian  generally  accepted  auditing  standards.  Those  standards 
require  that  we  comply  with  ethical  requirements  and  plan  and  perform  the  audit  to  obtain  reasonable 
assurance about whether the financial statements are free from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the 
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the 
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. 
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation 
and fair presentation of the financial statements in order to design audit procedures that are appropriate in 
the  circumstances,  but  not  for  the  purpose  of  expressing  an  opinion  on  the  effectiveness  of  the  entity’s 
internal  control.  An  audit  also  includes  evaluating  the  appropriateness  of  accounting  policies  used  and  the 
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation 
of the consolidated financial statements.  We believe that the audit evidence we have obtained in our audit 
is sufficient and appropriate to provide a basis for our audit opinion. 

Opinion 

In  our  opinion,  the  consolidated  financial  statements  present  fairly,  in  all  material  respects,  the  financial 
position of Azarga Uranium Corp. and its subsidiaries as at December 31, 2014 and its financial performance 
and its cash flows for the year 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 
indicates  that  the  Company  has  not  yet  achieved  profitable  operations,  has  a  working  capital  deficit  of 
$1,567,300, an accumulated deficit of $6,272,029. These conditions, along with other matters as set forth in 
Note 1, indicate the existence of a material uncertainty that may cast significant doubt upon the Company’s 
ability to continue as a going concern. 

Other Matters 

The consolidated financial statements of Azarga Uranium Corp. for the year ended December 31, 2013, were 
audited by another auditor who expressed an unmodified opinion on those statements on May 13, 2014. 

(signed) “BDO CANADA LLP” 

Chartered Accountants 
Vancouver, Canada 
March 30, 2015	

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the 
international BDO network of independent member firms. 

 
 
 
	
	
 
 
 
 
 
 
 
 
 
 
AZARGA	URANIUM	CORP.	
Consolidated	Statements	of	Financial	Position	
As	at	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars)	

ASSETS

Current	assets
Cash
Convertible	loan	receivables
Other	current	assets
Total	current	assets

Non‐current	assets
Restricted	cash
Exploration	and	evaluation	assets
Property,	plant	and	equipment
Investments	in	associates
Investment	in	Anatolia
Convertible	loan	receivables
Other	non‐current	assets
Total	non‐current	assets

Total	assets

EQUITY	AND	LIABILITIES

Current	liabilities
Trade	and	other	payables	
Loans	payable
Deferred	consideration
Other	current	liabilities	
Total	current	liabilities

Non‐current	liabilities
Deferred	income	tax	liabilities
Deferred	consideration
Loans	payable
Warrant	liability
Other	non‐current	liabilities
Total	non‐current	liabilities

Total	liabilities

Equity
Common	shares
Contributed	surplus	reserve/(deficit)
Share	option	reserve
Accumulated	deficit
Foreign	currency	translation	reserve
Equity	attributable	to	the	equity	holders	of	the	Company
Non‐controlling	interest
Total	equity

Notes

As	at	
December 31,	2014 December 31, 2013

10

7
7
8
9.1
9.2
10

12
11
5
13

14.3
5
11
20.2
13

20.1
20.1
21.3
20.3

6

$															

3,214,529
427,139
37,847
3,679,515

$																		

282,013
460,375
20,856
763,244

231,948
37,433,869
197,063
1,890,623
2,061,257

‐
36,877
41,851,637

21,151
12,418,765
171,232
8,605,630
1,738,600
2,320,675
23,130
25,299,183

$													

45,531,152

$													

26,062,427

$															

3,470,711
1,068,522
700,000
7,582
5,246,815

$																		

386,471
70,531
1,741,080
2,971,557
5,169,639

5,619,790
700,672
2,202,094
328,213
1,651,540
10,502,309

15,749,124

36,938,764
(1,594,389)
717,539
(6,272,029)
(713,214)
29,076,671
705,357
29,782,028

1,704,694

‐

1,776,000

‐
377,815
3,858,509

9,028,148

302,333
20,585,082
219,098
(4,994,907)
(69,565)
16,042,041
992,238
17,034,279

Total	equity	and	liabilities

$													

45,531,152

$													

26,062,427

The	accompanying	notes	are	an	integral	part	of	these	consolidated	financial	statements.

APPROVED	BY	THE	BOARD:

									"Joseph	Havlin"																		"Alexander	Molyneux"
															Director																																							Director

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AZARGA	URANIUM	CORP.	
Consolidated	Statements	of	Profit	or	Loss	and	Other	Comprehensive	Income	
For	the	years	ended	December	31,	2014	and	2013	
	(Expressed	in	U.S.	Dollars)	

Administration	expenses
Foreign	exchange	gain/(loss)
Loss	from	operations

Finance	costs
Unrealized	loss	on	financial	instruments
Realized	gain/(loss)	on	financial	instruments
Share	of	equity	loss	from	associates
Impairment	of	investment	in	associates
Bargain	purchase	gain	on	close	of	RTO
Net	loss	before	tax
Deferred	income	tax	expense
Net	loss

Other	comprehensive	loss
Item	that	may	be	reclassified	subsequently	as	profit	or	loss
Foreign	currency	translation	adjustment	
Total	comprehensive	loss

Net	loss	attributable	to:
Equity	holders	of	the	Company
Non‐controlling	interest
Net	loss

Other	comprehensive	loss	attributable	to:
Equity	holders	of	the	Company
Non‐controlling	interest
Other	comprehensive	loss

Basic	loss	per	share
Diluted	loss	per	share

Notes

Year	ended	December 31,
2014
2013

15

$														

16
17
18
9.1
9.1
5

14.2

(3,802,907)
28,026
(3,774,881)

(1,327,720)
(1,561,196)
(171,480)
(2,283,461)
(3,707,133)
11,605,241
(1,220,630)
(255,095)
(1,475,725)

$														

(1,940,724)
(363)
(1,941,087)

(975,318)
(1,314,224)
703,501
(568,414)
‐
‐

(4,095,542)
(217,293)
(4,312,835)

(731,927)
(2,207,652)

$														

(80,953)
(4,393,788)

$														

(1,277,122)
(198,603)
(1,475,725)

$														

(4,119,153)
(193,682)
(4,312,835)

$														

(643,649)
(88,278)
(731,927)

$																	

(66,973)
(13,980)
(80,953)

$																			

19
19

$																						
$																						

(0.04)
(0.04)

$																						
$																						

(0.18)
(0.18)

The	accompanying	notes	are	an	integral	part	of	these	consolidated	financial	statements.

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AZARGA	URANIUM	CORP.	
Consolidated	Statements	of	Cash	Flows	
For	the	years	ended	December	31,	2014	and	2013	
	(Expressed	in	U.S.	Dollars)	

OPERATING	ACTIVITIES

Net	loss	before	tax
Adjustments	for:
Depreciation
Share‐based	compensation
Finance	costs
Share	of	equity	loss	of	associates
Impairment	in	investment	in	associate
Realized	(gain)/loss	on	financial	instruments
Unrealized	loss	on	financial	instruments
Bargain	purchase	gain	on	close	of	RTO
Unrealized	foreign	exchange	loss

Operating	cash	flows	before	changes	in	non‐cash	working	capital	items

Change	in	other	assets
Change	in	trade	and	other	payables
Change	in	other	liabilities
Cash	used	in	operating	activities

INVESTING	ACTIVITIES

Cash	acquired	on	close	of	RTO
Payment	of	deferred	consideration
Investment	in	Centennial	Project
Purchase	of	long‐term	investments	
Sale	of	long‐term	investments
Restricted	cash
Purchase	of	property,	plant	and	equipment,	net	of	disposals
Settlement	of	Anatolia	put	option	agreement
Purchase	of	convertible	loans
Expenditures	on	exploration	and	evaluation	assets

Cash	used	in	investing	activities

FINANCING	ACTIVITIES

Proceeds	from	issuance	of	common	shares	
Issuance	of	equity	instrument	
Interest	paid
Proceeds	from	borrowings,	net	of	repayments

Cash	generated	from	financing	activities

Effect	of	foreign	exchange	rate	changes	on	cash

Increase	in	Cash
Cash,	beginning	of	period

Cash,	end	of	period

Supplemental	cash	flow	information	(Note	25)

Notes

Year ended	December	31,
2014

2013

$																		

(1,220,630)

$														

(4,095,542)

8
15
16
9
9
18
17
5

5

20.4

14,056
620,792
1,327,720
2,283,461
3,707,133
171,480
1,561,196
(11,605,241)
1,097
(3,138,936)
(19,388)
792,850
227,512
(2,137,962)

8,312
(150,000)
‐
(898,100)
335,232
(6,802)
1,312
(348,338)
(3,746,788)
(940,089)
(5,745,261)

4,812,197
6,000,000

‐
‐

10,812,197

3,542

2,932,516
282,013

11,521
169,087
975,318
568,414
‐
(703,501)
1,314,224

‐
363
(1,760,116)
(32,326)
214,277
18,164
(1,560,001)

‐

(1,450,000)
(1,072,468)
(9,734,807)

‐
(21,151)
(166,119)
‐

(3,751,087)
(1,835,545)
(18,031,177)

7,433,311
12,000,000
(135,278)
453,118
19,751,151

4,081

164,054
117,959

$																			

3,214,529

$																		

282,013

The	accompanying	notes	are	an	integral	part	of	these	consolidated	financial	statements.

Page	|	7		

	
	
	
	
																										
																						
																								
																				
																					
																				
																					
																				
																					
																												
																								
																			
																					
																		
																		
																												
																												
																											
																				
																
																									
																					
																								
																				
																								
																						
																				
																
																												
																												
																							
																
																																
																
																							
																
																								
																												
																											
																					
																												
																			
																							
																												
																				
																
																							
																
																				
														
																					
																		
																					
																
																																
																			
																																
																				
														
																												
																								
																					
																				
																								
																				
AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

1.	

CORPORATE	INFORMATION	AND	GOING	CONCERN	

Azarga	 Uranium	 Corp.	 (“Azarga	 Uranium”)	 (formerly	 Powertech	 Uranium	 Corp.	 or	
“Powertech”)	was	incorporated	on	February	10,	1984	in	British	Columbia,	Canada.	Azarga	
Uranium’s	 common	 shares	 are	 publicly	 traded	 on	 the	 Toronto	 Stock	 Exchange	 (Symbol:	
AZZ)	and	the	Frankfurt	Stock	Exchange	(Symbol:	P8AA).	Azarga	Uranium,	together	with	its	
subsidiaries	 (collectively	 referred	 to	 as	 the	 “Company”),	 is	 an	 integrated	 uranium	
exploration	 and	 development	 company.	 	 On	 October	 28,	 2014,	 Powertech	 completed	 a	
reverse	 take‐over	 (“RTO”)	 with	 Azarga	 Resources	 Limited	 (“Azarga	 Resources”).	 Refer	 to	
Note	5	for	additional	details.		

The	Company	controls	uranium	properties	located	in	the	United	States	of	America	(“USA”)	
(South	Dakota,	Wyoming,	and	Colorado)	and	in	the	Kyrgyz	Republic.		The	Company’s	Dewey	
Burdock	 Project,	 located	 in	 South	 Dakota,	 is	 the	 Company’s	 initial	 development	 priority.		
The	 Company	 also	 owns	 80%	 of	 the	 Kyzyl	 Ompul	 Project	 in	 the	 Kyrgyz	 Republic,	 the	
Centennial	 Project	 in	 Colorado,	 the	 Aladdin	 Deposit	 in	 Wyoming	 and	 two	 uranium	
exploration	properties	in	Wyoming.		The	Company	also	holds	investments	in	the	following	
uranium	 exploration	 and	 development	 companies:	 Black	 Range	 Minerals	 Limited	 (“Black	
Range”)	and	Anatolia	Energy	Limited	(“Anatolia”).		

The	address	of	the	Company’s	corporate	office	is	5575	DTC	Parkway	Suite	140,	Greenwood	
Village,	 CO,	 United	 States	 and	 its	 registered	 and	 records	 office	 is	 located	 at	 900‐885	 West	
Georgia	Street,	Vancouver,	B.C.,	Canada,	V6C	3H1.			

The	consolidated	financial	statements	have	been	prepared	on	a	going	concern	basis,	which	
contemplates	that	the	Company	will	continue	operations	for	the	foreseeable	future	and	will	
be	able	to	realize	its	assets	and	discharge	its	liabilities	in	the	normal	course	of	business	as	
they	 come	 due.	 To	 date,	 the	 Company	 has	 not	 generated	 revenues	 from	 operations	 and	 is	
currently	in	the	exploration	and	development	stage.		As	at	December	31,	2014,	the	Company	
had	 negative	 working	 capital	 of	 $1,567,300	 and	 an	 accumulated	 deficit	 of	 $6,272,029	 and	
will	continue	incurring	losses	in	the	foreseeable	future.	Additional	funding	will	be	required	
by	the	Company	to	complete	its	strategic	objectives	and	continue	as	a	going	concern.	There	
is	no	certainty	that	additional	financing,	at	terms	that	are	acceptable	to	the	Company,	will	be	
available.	 The	 inability	 to	 obtain	 additional	 financing	 would	 cast	 significant	 doubt	 on	 the	
Company’s	 ability	 to	 continue	 as	 a	 going	 concern.	 	 The	 Company	 has	 successfully	 raised	
financing	in	the	past	and	will	continue	to	assess	available	alternatives	if	additional	funds	are	
required;	however,	there	is	no	assurance	that	the	Company	will	be	able	to	raise	additional	
funds	in	the	future.	

Page	|	8		

	
	
	
	
	
	
 	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

2.		

BASIS	OF	PREPARATION	

2.1	

Statement	of	compliance	

The	 consolidated	 financial	 statements,	 including	 comparatives,	 have	 been	 prepared	 in	
accordance	 with	 and	 using	 accounting	 policies	 in	 compliance	 with	 the	 International	
Financial	 Reporting	 Standards	 (“IFRS”)	 and	 interpretations	 issued	 by	 the	 International	
Accounting	 Standards	 Board	 (“IASB”)	 and	 Interpretations	 of	 the	 IFRS	 Interpretations	
Committee	(“IFRIC”).		

The	 consolidated	 financial	 statements	 of	 the	 Company	 for	 the	 year	 ended	 December	 31,	
2014	were	approved	and	authorized	for	issue	by	the	Board	of	Directors	of	the	Company	on	
March	30,	2015.	

2.2		

Basis	of	presentation	

The	consolidated	financial	statements	have	been	prepared	on	a	historical	cost	basis	except	
for	 certain	 financial	 assets	 and	 financial	 liabilities,	 which	 are	 measured	 at	 fair	 value.	 The	
Company’s	financial	instruments	are	further	disclosed	in	Note	23.	

2.3		

Comparative	financial	information	

These	 consolidated	 financial	 statements	 have	 been	 prepared	 as	 a	 continuation	 of	 Azarga	
Resources’	 consolidated	 financial	 statements	 and	 the	 comparative	 figures	 presented	
represent	 the	 consolidated	 financial	 statements	 of	 Azarga	 Resources.	 The	 results	 of	
Powertech’s	 operations	 have	 been	 included	 in	 the	 Company’s	 consolidated	 financial	
statements	subsequent	to	the	close	of	the	RTO	on	October	28,	2014	(refer	to	Note	5).	In	the	
statement	of	cash	flow	for	the	year	ended	December	31,	2013,	the	Company	reclassified	the	
purchase	of	convertible	loans	of	$3,751,087	from	financing	activities	to	investing	activities.	

2.4	

Adoption	of	new	and	revised	standards	and	interpretations	

The	Company	has	adopted	the	new	and	revised	standards	and	interpretations	issued	by	the	
IASB	or	IFRIC	listed	below	effective	January	1,	2014.		The	adoption	of	these	standards	did	
not	have	a	material	impact	on	the	financial	statements	of	the	Company.	

IFRS	10,	IFRS	12	and	IAS	27	(2011	Amendments)	

Amendments	 to	 IFRS	 10,	 IFRS	 12	 and	 IAS	 27	 provides	 an	 exception	 to	 consolidation	
requirements	 in	 IFRS	 10	 and	 requires	 investment	 entities	 to	 measure	 particular	
subsidiaries	at	fair	value	through	profit	or	loss,	rather	than	consolidate	them.		

IAS	32	Financial	Instruments:	Presentation	(Amendment)	

Amendments	 to	 IAS	 32	 clarify	 matters	 regarding	 offsetting	 financial	 assets	 and	 financial	
liabilities	as	well	as	related	disclosure	requirements.	

Page	|	9		

	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

2.		

BASIS	OF	PREPARATION	(Continued)	

IAS	36	Impairment	of	Assets	(Amendment)	

Amendments	 to	 IAS	 36	 align	 the	 disclosures	 required	 for	 the	 recoverable	 amount	 of	 an	
asset	(or	cash	generating	unit)	when	this	has	been	determined	on	the	basis	of	fair	value	less	
costs	of	disposal	with	those	required	where	the	recoverable	amount	has	been	determined	
on	the	basis	of	value	in	use.	

IAS	39	Financial	Instruments:	Recognition	and	Measurement	(Amendment)	

Amendments	to	IAS	39	allows	hedge	accounting	to	continue	when	derivatives	are	novated	
to	 effect	 clearing	 with	 a	 central	 counterparty	 as	 a	 result	 of	 laws	 or	 regulations,	 if	 specific	
conditions	are	met.	

IFRIC	21	Levies	

IFRIC	21	provides	guidance	on	accounting	for	levies	in	accordance	with	IAS	37,	Provisions,	
Contingent	Liabilities	and	Contingent	Assets.	The	interpretation	defines	a	levy	as	an	outflow	
from	an	entity	imposed	by	a	government	in	accordance	with	legislation	and	confirms	that	
an	 entity	 recognizes	 a	 liability	 for	 a	 levy	 only	 when	 the	 triggering	 event	 specified	 in	 the	
legislation	occurs.	

Standards	issued	but	not	yet	effective	

The	 standards	 and	 interpretations	 that	 are	 issued	 up	 to	 the	 date	 of	 issuance	 of	 the	
Company’s	financial	statements,	but	were	not	effective	during	the	year	ended	December	31,	
2014	 are	 disclosed	 below.	 The	 Company	 intends	 to	 adopt	 these	 standards,	 if	 applicable,	
when	they	become	effective.	

IFRS	5	Amendment	

Amendments	 to	 IFRS	 5	 Non	 Current	 Assets	 Held	 for	 Sale	
and	Discontinued	Operations(i)	

IFRS	7	Amendment	

Amendments	to	IFRS	7	Financial	Instruments:	Disclosures(i)	

IFRS	9	

Financial	Instruments(iii)	

IFRS	10	and	IAS	28	
Amendments	

Amendments	to	IFRS	10	Consolidated	Financial	Statements	
and	IAS	28	Investments	in	Associates	and	Joint	Ventures(i)	

IFRS	11	Amendments	

Amendments	to	IFRS	11	Joint	Arrangements(i)	

IFRS	15	

Revenue	from	Contracts	with	Customers(ii)	

IAS	1	Amendments		

Amendments	
Statements(i)	

to	

IAS	 1	 Presentation	 of	 Financial	

Page	|	10		

	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

2.		

BASIS	OF	PREPARATION	(Continued)	

IAS	16	and	IAS	38	
Amendments	

Amendments	 to	 IAS	 16	 Property,	 Plant	 and	 Equipment	
and	IAS	38	Intangible	Assets(i)	

IAS	34	Amendments	

Amendments	to	IAS	34	Interim	Financial	Reporting(i)	

i)  Effective	for	annual	periods	beginning	on	or	after	January	1,	2016	
ii)  Effective	for	annual	periods	beginning	on	or	after	January	1,	2017	
iii)  Effective	for	annual	periods	beginning	on	or	after	January	1,	2018	

The	 Company	 is	 in	 the	 process	 of	 assessing	 the	 impact	 of	 the	 adoption	 of	 these	 standards	
and	interpretations.	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	

3.1	

Basis	of	consolidation	

The	 consolidated	 financial	 statements	 include	 the	 financial	 statements	 of	 Azarga	 Uranium	
and	its	controlled	subsidiaries	and	investees	(Note	24).	

The	 results	 of	 subsidiaries	 acquired	 or	 disposed	 of	 during	 the	 year	 are	 included	 in	 the	
consolidated	statement	of	profit	or	loss	and	other	comprehensive	income	from	the	effective	
date	of	acquisition	or	up	to	the	effective	date	of	disposal,	as	appropriate.		All	intercompany	
transactions,	balances,	income	and	expenses	are	eliminated	in	full	on	consolidation.	

3.2	

Business	combinations	

Non‐controlling	 interests	 in	 the	 net	 assets	 of	 consolidated	 subsidiaries	 are	 identified	
separately	 from	 the	 Company’s	 equity	 therein.	 Total	 comprehensive	 income	 of	 the	
Company’s	 subsidiary	 is	 attributed	 to	 the	 equity	 holders	 of	 the	 Company	 and	 to	 the	 non‐
controlling	 interests	 even	 if	 this	 results	 in	 the	 non‐controlling	 interest	 having	 a	 deficit	
balance.	During	the	year	ended	December	31,	2014	and	2013,	20%	of	the	net	assets	of	the	
Company’s	 consolidated	 subsidiary,	 UrAsia	 in	 Kyrgyzstan	 Limited	 Liability	 Company	
(“UrAsia”),	were	attributable	to	its	non‐controlling	interest.			

The	 Company	 applies	 the	 acquisition	 method	 to	 account	 for	 business	 combinations.	 The	
consideration	transferred	for	the	acquisition	of	a	subsidiary	is	the	fair	values	of	the	assets	
transferred,	 the	 liabilities	 incurred	 to	 the	 former	 owners	 of	 the	 acquiree	 and	 the	 equity	
interests	 issued	 by	 the	 Company.	 The	 consideration	 transferred	 includes	 the	 fair	 value	 of	
any	 asset	 or	 liability	 resulting	 from	 a	 contingent	 consideration	 arrangement.	 Identifiable	
assets	acquired	and	liabilities	and	contingent	liabilities	assumed	in	a	business	combination	
are	measured	initially	at	their	fair	values	at	the	acquisition	date.	The	Company	recognizes	
any	non‐controlling	interest	in	the	acquiree	on	an	acquisition‐by‐acquisition	basis,	either	at	
fair	 value	 or	 at	 the	 non‐controlling	 interest's	 proportionate	 share	 of	 the	 recognized	
amounts	 of	 acquiree's	 identifiable	 net	 assets.	 Acquisition	 related	 costs	 are	 expensed	 and	
included	in	profit	or	loss.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

Any	contingent	consideration	payable	is	recognized	at	fair	value	at	the	acquisition	date.		If	
the	contingent	consideration	is	classified	as	equity,	it	is	not	re‐measured	and	settlement	is	
accounted	 for	 within	 equity.	 Otherwise,	 subsequent	 changes	 to	 the	 fair	 value	 of	 the	
contingent	 consideration	 are	 recognized	 in	 profit	 or	 loss	 or	 as	 a	 change	 in	 other	
comprehensive	income.	

Goodwill	is	initially	measured	at	cost,	being	the	excess	of	the	aggregate	of	the	consideration	
transferred	 and	 the	 amount	 recognized	 for	 non‐controlling	 interest	 over	 the	 fair	 value	 of	
the	 identifiable	 net	 assets	 acquired	 and	 liabilities	 assumed.	 If	 this	 consideration	 is	 lower	
than	 the	 fair	 value	 of	 the	 identifiable	 net	 assets	 of	 the	 business	 acquired,	 the	 difference	 is	
recognized	in	profit	or	loss.	

3.3		

Associates		

Associates	are	all	entities	over	which	the	Company	has	significant	influence	but	not	control,	
generally	 accompanying	 a	 shareholding	 of	 between	 20%	 and	 50%	 of	 the	 voting	 rights.	
Investments	in	associates	are	accounted	for	using	the	equity	method	of	accounting.	Under	
the	equity	method,	the	investment	is	initially	recognized	at	cost,	and	the	carrying	amount	is	
increased	or	decreased	to	recognize	the	investor’s	share	of	the	profit	or	loss	of	the	investee	
after	the	date	of	acquisition.	The	carrying	amount	is	further	decreased	by	investor’s	share	of	
the	 payment(s)	 of	 dividends	 by	 the	 investee	 after	 the	 date	 of	 acquisition.	 When	 the	
Company’s	 share	 of	 losses	 in	 an	 associate	 equals	 or	 exceeds	 its	 interest	 in	 the	 associate,	
including	any	other	unsecured	receivables,	the	Company	does	not	recognize	further	losses,	
unless	it	has	incurred	legal	or	constructive	obligations	or	made	payments	on	behalf	of	the	
associate.	 The	 Company’s	 investment	 in	 associates	 includes	 goodwill	 recognized	 on	
acquisition.	

The	 Company	 determines	 at	 each	 reporting	 date	 whether	 there	 is	 any	 objective	 evidence	
that	the	investment	in	the	associate	is	impaired.	If	this	is	the	case,	the	Company	calculates	
the	 amount	 of	 impairment	 as	 the	 difference	 between	 the	 recoverable	 amount	 of	 the	
associate	and	its	carrying	value	and	recognizes	the	amount	in	the	statement	of	profit	or	loss	
and	other	comprehensive	income.	

Profits	 and	 losses	 resulting	 from	 upstream	 and	 downstream	 transactions	 between	 the	
Company	 and	 its	 associate	 are	 recognized	 in	 the	 Company’s	 consolidated	 financial	
statements	only	to	the	extent	of	unrelated	investor’s	interests	in	the	associates.	Unrealized	
losses	are	eliminated	unless	the	transaction	provides	evidence	of	an	impairment	of	the	asset	
transferred.	Accounting	policies	of	associates	have	been	changed	where	necessary	to	ensure	
consistency	with	the	policies	adopted	by	the	Company.	

Dilution	 gains	 and	 losses	 arising	 in	 investments	 in	 associates	 are	 recognized	 in	 profit	 or	
loss.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

A	 step	 acquisition	 of	 an	 associate	 acquired	 in	 stages	 is	 accounted	 under	 the	 ‘Fair	 value	 as	
deemed	cost’	method.	The	cost	of	an	associate	acquired	in	stages	is	measured	as	the	sum	of	
the	 fair	 value	 of	 the	 interest	 previously	 held	 plus	 the	 fair	 value	 of	 any	 additional	
consideration	 transferred	 as	 of	 the	 date	 when	 the	 investment	 became	 an	 associate.	 Any	
acquisition	related	costs	are	expensed	in	the	periods	in	which	the	costs	are	incurred.		

3.4	

Functional	and	presentation	currency	

The	 functional	 currency	 of	 each	 entity	 is	 measured	 using	 the	 currency	 of	 the	 primary	
economic	environment	in	which	the	entity	operates.		The	functional	currency	of	each	entity	
is	 the	 United	 States	 Dollar,	 with	 the	 exception	 of	 UrAsia,	 whose	 functional	 currency	 is	 the	
Kyrgyz	Som.		

These	consolidated	financial	statements	are	presented	in	United	States	Dollar,	which	is	the	
Company’s	presentation	currency.	

Transactions	and	balances	

Foreign	 currency	 transactions	 are	 translated	 into	 the	 functional	 currency	 using	 the	
exchange	rates	prevailing	at	the	dates	of	the	transactions.	Foreign	currency	monetary	items	
are	translated	at	the	period‐end	exchange	rate.	Non‐monetary	items	measured	at	historical	
cost	 continue	 to	 be	 carried	 at	 the	 exchange	 rate	 at	 the	 date	 of	 the	 transaction.	 Non‐
monetary	items	measured	at	fair	value	are	reported	at	the	exchange	rate	at	the	date	when	
fair	values	were	determined.	

Exchange	 differences	 arising	 on	 the	 translation	 of	 monetary	 items	 or	 on	 settlement	 of	
monetary	 items	 are	 recognized	 in	 profit	 or	 loss	 in	 the	 consolidated	 statement	 of	 profit	 or	
loss	and	other	comprehensive	income	in	the	period	in	which	they	arise.	

Exchange	 differences	 arising	 on	 the	 translation	 of	 non‐monetary	 items	 are	 recognized	 in	
other	comprehensive	income/loss	in	the	consolidated	statement	of	profit	or	loss	and	other	
comprehensive	 income	 to	 the	 extent	 that	 gains	 and	 losses	 arising	 on	 those	 non‐monetary	
items	 are	 also	 recognized	 in	 other	 comprehensive	 income/loss.	 Where	 the	 non‐monetary	
gain	 or	 loss	 is	 recognized	 in	 profit	 or	 loss,	 the	 exchange	 component	 is	 also	 recognized	 in	
profit	or	loss.		

Parent	and	subsidiary	companies		

The	financial	position	and	results	of	operations	whose	functional	currency	is	different	from	
the	presentation	currency	are	translated	as	follows:		

(cid:120)  Assets	 and	 liabilities	 are	 translated	 at	 period‐end	 exchange	 rates	 prevailing	 at	 that	

reporting	date;	and		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

(cid:120) 

Income	and	expenses	are	translated	at	the	average	exchange	rates	for	the	period.		

Exchange	differences	are	transferred	directly	to	other	comprehensive	income/loss	and	are	
included	in	a	separate	component	of	shareholders’	equity	titled	foreign	currency	translation	
reserve.	 These	 differences	 are	 recognized	 in	 profit	 or	 loss	 in	 the	 period	 in	 which	 the	
subsidiary	is	disposed	of.		

3.5		

Borrowing	costs	

Borrowing	 costs	 directly	 attributable	 to	 the	 acquisition,	 construction	 or	 production	 of	
qualifying	assets,	which	are	assets	that	necessarily	take	a	substantial	period	of	time	to	get	
ready	 for	 their	 intended	 use	 or	 sale,	 are	 capitalized	 as	 part	 of	 the	 cost	 of	 those	 assets.		
Borrowing	costs	related	to	exploration	and	evaluation	expenditures	are	capitalized	as	part	
of	 the	 historical	 cost	 of	 exploration	 and	 evaluation	 assets.	 All	 other	 borrowing	 costs	 are	
expensed	and	included	in	profit	or	loss.	

3.6	

Cash	and	cash	equivalents	

Cash	 and	 cash	 equivalents	 consist	 of	 cash	 on	 hand,	 bank	 balances	 and	 other	 short‐term	
investments	with	an	original	term	to	maturity	of	three	months	or	less	at	date	of	purchase,	
and	are	carried	at	amortized	cost.		The	Company	does	not	hold	any	cash	equivalents.	

Restricted	cash	

In	 the	 USA,	 restricted	 cash	 consists	 of	 deposits	 held	 for	 collateral	 pursuant	 to	 bonds	
provided	to	 state	authorities	in	connection	with	mineral	property	activities.	In	the	 Kyrgyz	
Republic,	 restricted	 cash	 consist	 of	 deposits	 made	 pursuant	 to	 the	 requirements	 of	 the	
Company’s	 exploration	 license	 agreements.	 The	 Company	 makes	 such	 cash	 deposits	 for	
restoration	provisions	related	to	rehabilitation	obligations.		

3.7	

Property,	plant	and	equipment	(“PPE”)	

PPE	 includes	 the	 Company’s	 machinery	 and	 equipment,	 office	 equipment,	 furniture	 and	
fixtures,	 vehicles	 and	 buildings.	 PPE	 is	 stated	 at	 cost	 less	 accumulated	 depreciation	 and	
accumulated	impairment	losses.			

Initial	recognition	

The	 cost	 of	 an	 item	 of	 property,	 plant	 and	 equipment	 consists	 of	 the	 purchase	 price	 or	
construction	cost,	including	vendor	prepayments,	any	costs	directly	attributable	to	bringing	
the	 asset	 to	 the	 location	 and	 condition	 necessary	 for	 its	 intended	 use	 and	 the	 estimated	
costs	associated	with	dismantling	and	removing	the	assets.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

Depreciation		

Depreciation	 is	 recorded	 based	 on	 the	 cost	 of	 an	 item	 of	 PPE,	 less	 its	 estimated	 residual	
value,	using	the	straight‐line	method	over	the	following	estimated	useful	lives:	

(cid:120)  Machinery	and	equipment		
(cid:120)  Transport	vehicles	
(cid:120)  Office	equipment	
(cid:120)  Furniture	and	fixtures	
(cid:120)  Building	

5	to	10	years	
3	years	
3	to	5	years	
4	to	5	years	
10	to	40	years		

When	major	components	of	an	item	of	PPE	have	 different	useful	lives,	they	are	accounted	
for	as	separate	items	of	PPE	and	depreciated	as	per	each	component’s	useful	life.	

The	cost	of	replacing	a	component	of	PPE	is	recognized	as	part	of	the	carrying	value	of	the	
item	if	it	is	probable	that	the	future	economic	benefit	will	flow	to	the	Company	and	its	cost	
can	be	measured.		The	carrying	amount	of	the	replaced	component	is	derecognized.		

An	 item	 of	 PPE	 is	 derecognized	 upon	 disposal,	 when	 held	 for	 sale	 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.	

The	 Company	 conducts	 an	 annual	 assessment	 of	 the	 residual	 balances,	 estimated	 useful	
lives	 and	 depreciation	 methods	 being	 used	 for	 PPE	 and	 any	 changes	 arising	 from	 the	
assessment	are	applied	by	the	Company	prospectively.	

3.8	

Exploration	and	evaluation	assets	

Pre‐exploration	costs	are	expensed	in	the	period	in	which	they	occur.	

Exploration	 and	 evaluation	 expenditures	 are	 recognized	 as	 assets	 in	 the	 period	 in	 which	
they	are	incurred	once	the	legal	right	to	explore	a	property	has	been	acquired.	This	includes	
any	acquisition	costs	associated	with	such	property.	These	direct	expenditures	include	such	
costs	 as	 drilling/engineering,	 ecological	 monitoring,	 salaries	 and	 consulting,	 rehabilitation	
costs,	license	fees,	inclusive	of	land	payments	and	claims	maintenance,	and	capitalized	value	
added	 tax	 (“VAT”).	 Costs	 not	 directly	 attributable	 to	 exploration	 and	 evaluation	 activities,	
including	 general	 and	 administrative	 overhead	 costs,	 are	 expensed	 in	 the	 period	 in	 which	
they	occur.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

VAT	related	to	exploration	and	evaluation	expenditures	is	capitalized	because	the	costs	are	
directly	 attributable	 to	 these	 activities	 and	 the	 Company	 does	 not	 generate	 revenue	 to	
reclaim	 VAT	 on	 sales.	 	 Therefore,	 the	 Company	 has	 capitalized	 VAT	 to	 exploration	 and	
evaluation	as	opposed	to	recording	a	VAT	receivable.	

The	 Company	 assesses	 exploration	 and	 evaluation	 assets	 for	 impairment	 when	 facts	 and	
circumstances	 suggest	 that	 the	 carrying	 amount	 of	 the	 asset	 may	 exceed	 its	 recoverable	
amount.	Any	such	impairment	charges	will	be	written	off	to	profit	or	loss.	

Once	the	technical	feasibility	and	commercial	viability	of	extracting	the	resource	has	been	
determined	 and	 management	 plans	 to	 develop	 the	 property,	 the	 property	 will	 be	
considered	a	mine	under	development	and	will	be	classified	as	“mines	under	construction.”		

Exploration	and	evaluation	expenditures	are	classified	as	intangible	assets.	

3.9		

Rehabilitation	provisions	

The	 Company	 recognizes	 provisions	 for	 statutory,	 contractual,	 constructive	 or	 legal	
obligations,	including	those	associated	with	the	reclamation	of	environmental	disturbances	
caused	 by	 exploration	 and	 evaluation	 activities.	 The	 nature	 of	 the	 rehabilitation	 activities	
includes	 restoration,	 reclamation	 and	 re‐vegetation	 of	 the	 affected	 exploration	 sites.		
Initially,	a	provision	for	a	decommissioning	liability	is	recognized	as	its	present	value	in	the	
period	 in	 which	 it	 is	 incurred.	 Upon	 initial	 recognition	 of	 the	 liability,	 a	 corresponding	
amount	is	added	to	the	carrying	amount	of	the	related	asset	and	the	cost	is	amortized	as	an	
expense	 over	 the	 economic	 life	 of	 the	 asset	 using	 either	 the	 unit‐of‐production	 method	 or	
the	 straight‐line	 method,	 as	 appropriate.	 Following	 the	 initial	 recognition	 of	 the	
decommissioning	liability,	the	carrying	amount	of	the	liability	is	increased	for	the	passage	of	
time	and	adjusted	for	changes	to	the	current	market	based	discount	rate	and	the	amount	or	
timing	of	the	underlying	cash	flows	needed	to	settle	the	obligation.				

The	 Company	 has	 determined	 that	 no	 rehabilitation	 provisions	 are	 required	 to	 be	
recognized	as	at	December	31,	2014	and	2013.	

3.10	 Taxation	

Income	tax	expense	represents	the	sum	of	tax	currently	payable	and	deferred	tax.	

Current	income	tax	

Current	income	tax	assets	and	liabilities	for	the	current	and	prior	periods	are	measured	at	
the	amount	expected	to	be	recovered	from	or	paid	to	the	taxation	authorities.		The	tax	rates	
and	 tax	 laws	 used	 to	 compute	 the	 amount	 are	 those	 that	 are	 substantively	 enacted	 at	 the	
end	of	each	reporting	period.	The	Company	had	no	current	income	tax	for	the	years	ended	
December	31,	2014	and	2013.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

Deferred	income	tax	

Deferred	income	tax	is	provided	for	using	the	liability	method	on	temporary	differences,	at	
the	 end	 of	 each	 reporting	 period,	 between	 the	 tax	 bases	 of	 assets	 and	 liabilities	 and	 their	
carrying	amounts	for	financial	reporting	purposes.	

Deferred	income	tax	liabilities	are	recognized	for	all	taxable	temporary	differences,	except:	

(cid:120)  Where	the	deferred	income	tax	liability	arises	from	the	initial	recognition	of	goodwill	or	
of	an	asset	or	liability	in	a	transaction	that	is	not	a	business	combination	and,	at	the	time	
of	the	transaction,	affects	neither	the	accounting	profit	nor	taxable	profit	or	loss;	and	
In	respect	of	taxable	temporary	differences	associated	with	investments	in	subsidiaries,	
associates	 and	 joint	 ventures,	 where	 the	 timing	 of	 the	 reversal	 of	 the	 temporary	
differences	can	be	controlled	by	the	parent,	investor	or	venturer	and	it	is	probable	that	
the	temporary	differences	will	not	reverse	in	the	foreseeable	future.	

(cid:120) 

Deferred	 income	 tax	 assets	 are	 recognized	 for	 all	 deductible	 temporary	 differences,	 carry	
forward	 of	 unused	 tax	 credits	 and	 unused	 tax	 losses,	 to	 the	 extent	 that	 it	 is	 probable	 that	
taxable	profit	will	be	available	against	which	the	deductible	temporary	differences	and	the	
carry	forward	of	unused	tax	credits	and	unused	tax	losses	can	be	utilized	except:	

(cid:120)  Where	 the	 deferred	 income	 tax	 asset	 relating	 to	 the	 deductible	 temporary	 difference	
arises	 from	 the	 initial	 recognition	 of	 an	 asset	 or	 liability	 in	 a	 transaction	 that	 is	 not	 a	
business	combination	and,	at	the	time	of	the	transaction,	affects	neither	the	accounting	
profit	nor	taxable	profit	or	loss;	and	
In	 respect	 of	 deductible	 temporary	 differences	 associated	 with	 investments	 in	
subsidiaries,	 associates	 and	 joint	 ventures,	 deferred	 income	 tax	 assets	 are	 recognized	
only	to	the	extent	that	it	is	probable	that	the	temporary	differences	will	reverse	in	the	
foreseeable	 future	 and	 taxable	 profit	 will	 be	 available	 against	 which	 the	 temporary	
differences	can	be	utilized.	

(cid:120) 

The	carrying	amount	of	deferred	income	tax	assets	is	reviewed	at	the	end	of	each	reporting	
period	and	reduced	to	the	extent	that	it	is	no	longer	probable	that	sufficient	taxable	profit	
will	 be	 available	 to	 allow	 all	 or	 part	 of	 the	 deferred	 income	 tax	 asset	 to	 be	 utilized.		
Unrecognized	deferred	income	tax	assets	are	reassessed	at	the	end	of	each	reporting	period	
and	are	recognized	to	the	extent	that	it	has	become	probable	that	future	taxable	profit	will	
allow	the	deferred	tax	asset	to	be	recovered.	Deferred	income	tax	assets	and	liabilities	are	
measured	at	the	tax	rates	that	are	expected	to	apply	to	the	year	when	the	asset	is	realized	or	
the	 liability	 is	 settled,	 based	 on	 tax	 rates	 (and	 tax	 laws)	 that	 have	 been	 substantively	
enacted	at	the	end	of	each	reporting	period.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

In	 consolidated	 financial	 statements,	 temporary	 differences	 are	 determined	 by	 comparing	
the	carrying	amounts	of	assets	and	liabilities	in	the	consolidated	financial	statements	with	
the	appropriate	tax	base.	The	tax	base	is	determined	by	reference	to	the	tax	returns	of	each	
entity	in	the	group.	

Deferred	income	tax	relating	to	items	recognized	directly	in	equity	or	other	comprehensive	
income/loss	 are	 recognized	 in	 equity	 and	 not	 in	 profit	 or	 loss	 or	 other	 comprehensive	
income/loss.	

Deferred	 income	 tax	 assets	 and	 deferred	 income	 tax	 liabilities	 are	 offset	 if,	 and	 only	 if,	 a	
legally	enforceable	right	exists	to	set	off	current	tax	assets	against	current	tax	liabilities	and	
the	 deferred	 tax	 assets	 and	 liabilities	 relate	 to	 income	 taxes	 levied	 by	 the	 same	 taxation	
authority	 on	 either	 the	 same	 taxable	 entity	 or	 different	 taxable	 entities	 which	 intend	 to	
either	 settle	 current	 tax	 liabilities	 and	 assets	 on	 a	 net	 basis,	 or	 to	 realize	 the	 assets	 and	
settle	 the	 liabilities	 simultaneously,	 in	 each	 future	 period	 in	 which	 significant	 amounts	 of	
deferred	tax	assets	or	liabilities	are	expected	to	be	settled	or	recovered.	

3.11	 Financial	instruments		

Financial	assets	

All	 financial	 assets	 are	 initially	 recorded	 at	 fair	 value	 and	 designated	 upon	 inception	 into	
one	 of	 the	 following	 four	 categories:	 held‐to‐maturity,	 available‐for‐sale,	 loans‐and‐
receivables	or	fair	value	through	profit	or	loss.		

Financial	assets	classified	as	fair	value	through	profit	or	loss	(“FVTPL”)	are	measured	at	fair	
value	with	unrealized	gains	and	losses	recognized	through	profit	or	loss.	

Financial	 assets	 classified	 as	 loans‐and‐receivables	 and	 held‐to‐maturity	 are	 measured	 at	
amortized	cost	using	the	effective	interest	method	less	any	allowance	for	impairment.	The	
effective	interest	method	is	a	method	of	calculating	the	 amortized	cost	of	a	financial	 asset	
and	of	allocating	interest	income	over	the	relevant	period.	The	effective	interest	rate	is	the	
rate	that	exactly	discounts	estimated	future	cash	receipts	(including	all	fees	paid	or	received	
that	 form	 an	 integral	 part	 of	 the	 effective	 interest	 rate,	 transaction	 costs	 and	 other	
premiums	 or	 discounts)	 through	 the	 expected	 life	 of	 the	 financial	 asset,	 or,	 where	
appropriate,	a	shorter	period.	

Financial	 assets	 classified	 as	 available‐for‐sale	 are	 measured	 at	 fair	 value	 with	 unrealized	
gains	and	losses	recognized	in	other	comprehensive	income	except	when	there	is	objective	
evidence	 that	 the	 financial	 asset	 is	 impaired.	 Impairment	 losses	 on	 available‐for‐sale	
financial	assets	are	recognized	in	profit	or	loss.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

Transaction	 costs	 associated	 with	 FVTPL	 financial	 assets	 are	 expensed	 as	 incurred,	 while	
transaction	 costs	 associated	 with	 all	 other	 financial	 assets	 are	 included	 in	 the	 initial	
carrying	amount	of	the	asset.		

Derivative	instruments,	including	embedded	derivatives,	are	carried	at	fair	value	with	any	
changes	in	the	fair	values	of	derivative	instruments	being	recognized	in	profit	and	loss	with	
the	exception	of	derivatives	designated	as	effective	cash	flow	hedges.	The	Company	has	no	
such	designated	hedges.	

Financial	liabilities		

All	financial	liabilities	are	initially	recorded	at	fair	value	and	designated	upon	inception	as	
FVTPL	or	other	financial	liabilities.	

Financial	liabilities	classified	as	other	financial	liabilities	are	initially	recognized	at	fair	value	
less	directly	attributable	transaction	costs.	After	initial	recognition,	other	financial	liabilities	
are	 subsequently	 measured	 at	 amortized	 cost	 using	 the	 effective	 interest	 method.	 The	
effective	interest	method	is	a	method	of	calculating	the	amortized	cost	of	a	financial	liability	
and	of	allocating	interest	expense	over	the	relevant	period.	The	effective	interest	rate	is	the	
rate	that	exactly	discounts	estimated	future	cash	payments	through	the	expected	life	of	the	
financial	liability,	or,	where	appropriate,	a	shorter	period.		

Financial	 liabilities	 classified	 as	 FVTPL	 include	 financial	 liabilities	 designated	 upon	 initial	
recognition	 as	 FVTPL.	 Transaction	 costs	 on	 financial	 liabilities	 classified	 as	 FVTPL	 are	
expensed	as	incurred.	At	the	end	of	each	reporting	period	subsequent	to	initial	recognition,	
financial	liabilities	classified	as	FVTPL	are	measured	at	fair	value,	with	changes	in	fair	value	
recognized	directly	in	profit	or	loss	in	the	period	in	which	they	arise.	The	net	gain	or	loss	
recognized	in	profit	or	loss	excludes	any	interest	paid	on	the	financial	liabilities.		

Derivative	instruments,	including	embedded	derivatives,	are	carried	at	fair	value	with	any	
changes	in	the	fair	values	of	derivative	instruments	being	recognized	in	profit	and	loss	with	
the	exception	of	derivatives	designated	as	effective	cash	flow	hedges.	The	Company	has	no	
such	designated	hedges.	

3.12	 Derivative	financial	instruments		

The	 Company	 may	 issue	 or	 hold	 compound	 financial	 instruments	 with	 embedded	
derivatives.	An	embedded	derivative	is	separated	from	its	host	contract	and	accounted	for	
as	a	derivative	only	when	three	criteria	are	satisfied:	

(cid:120)  When	the	economic	risks	and	characteristics	of	the	embedded	derivative	are	not	closely	

related	to	those	of	the	host	contract;		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

(cid:120)  A	separate	instrument	with	the	same	terms	as	the	embedded	derivative	would	meet	the	

definition	of	a	derivative;	and	

(cid:120)  The	 entire	 instrument	 is	 not	 measured	 at	 fair	 value	 with	 changes	 in	 fair	 value	

recognized	in	the	statement	of	profit	or	loss	and	other	comprehensive	income.	

Financial	assets	

The	Company	designates	financial	assets	with	embedded	derivatives	as	FVTPL	on	the	initial	
recognition	 and	 accordingly	 does	 not	 bifurcate	 between	 the	 host	 contract	 and	 the	
embedded	derivative.	The	embedded	derivative	is	measured	at	each	reporting	period	using	
an	 appropriate	 valuation	 model	 with	 changes	 in	 the	 fair	 value	 being	 recognized	
immediately	in	profit	or	loss.			

Financial	liabilities	

The	 Company	 designates	 certain	 financial	 liabilities	 with	 embedded	 derivatives	 as	 FVTPL	
on	the	initial	recognition	and	accordingly	does	not	bifurcate	between	the	host	contract	and	
the	embedded	derivative;	however,	other	financial	liabilities	with	embedded	derivatives	are	
bifurcated	 into	 the	 debt	 host	 component	 and	 the	 embedded	 derivative	 component,	
depending	on	the	instrument.	In	the	case	of	the	latter,	the	debt	host	component	is	classified	
as	 other	 financial	 liabilities	 and	 is	 measured	 at	 amortized	 cost	 using	 the	 effective	 interest	
rate	 method	 and	 the	 embedded	 derivatives	 are	 classified	 as	 FVTPL	 and	 all	 changes	 in	 fair	
value	are	recorded	in	profit	or	loss.		The	difference	between	the	debt	host	component	and	
the	principal	amount	of	the	loan	outstanding	is	accreted	to	profit	or	loss	over	the	expected	
life	of	the	financial	liabilities.	

3.13	

Impairment	of	financial	assets	

Assets	carried	at	amortized	cost		

The	 Company	 assesses	 at	 the	 end	 of	 each	 reporting	 period	 whether	 a	 financial	 asset	 is	
impaired.	

If	there	is	objective	evidence	that	an	impairment	loss	on	assets	carried	at	amortized	cost	has	
been	 incurred,	 the	 amount	 of	 the	 loss	 is	 measured	 as	 the	 difference	 between	 the	 asset’s	
carrying	 amount	 and	 the	 present	 value	 of	 estimated	 future	 cash	 flows	 discounted	 at	 the	
financial	 asset’s	 original	 effective	 interest	 rate.	 The	 carrying	 amount	 of	 the	 asset	 is	 then	
reduced	by	the	amount	of	the	impairment.	The	amount	of	the	loss	is	recognized	in	profit	or	
loss.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

If,	 in	 a	 subsequent	 period,	 the	 amount	 of	 the	 impairment	 loss	 decreases	 and	 the	 decrease	
can	 be	 related	 objectively	 to	 an	 event	 occurring	 after	 the	 impairment	 was	 recognized,	 the	
previously	recognized	impairment	loss	is	reversed	to	the	extent	that	the	carrying	value	of	
the	asset	does	not	exceed	what	the	amortized	cost	would	have	been	had	the	impairment	not	
been	recognized.	Any	subsequent	reversal	of	an	impairment	loss	is	recognized	in	profit	or	
loss.		

Available‐for‐sale		

A	 significant	 or	 prolonged	 decline	 in	 the	 fair	 value	 of	 an	 available‐for‐sale	 financial	 asset	
below	its	cost	provides	objective	evidence	that	the	asset	is	impaired.	If	an	available‐for‐sale	
financial	 asset	 is	 impaired,	 an	 amount	 comprising	 the	 difference	 between	 its	 cost	 and	 its	
current	 fair	 value,	 less	 any	 impairment	 loss	 previously	 recognized	 in	 profit	 or	 loss,	 is	
transferred	from	equity	to	profit	or	loss.	Reversals	of	impairment	losses	in	respect	of	equity	
instruments	classified	as	available‐for‐sale	are	not	recognized	in	profit	or	loss.		

3.14	

Impairment	of	non‐financial	assets	

At	 the	 end	 of	 each	 reporting	 period,	 the	 Company	 reviews	 the	 carrying	 amounts	 of	 its	
tangible	and	intangible	assets	to	determine	whether	there	is	an	indication	that	those	assets	
have	suffered	an	impairment	loss.		If	any	such	indication	exists,	the	recoverable	amount	of	
the	asset	is	estimated	in	order	to	determine	the	extent	of	the	impairment	loss,	if	any.		Where	
it	 is	 not	 possible	 to	 estimate	 the	 recoverable	 amount	 of	 an	 individual	 asset,	 the	 Company	
estimates	the	recoverable	amount	of	the	cash‐generating	unit	to	which	the	assets	belong.	

The	 recoverable	 amount	 is	 the	 higher	 of	 fair	 value	 less	 costs	 to	 sell	 and	 value	 in	 use.	 	 In	
assessing	fair	value	less	costs	to	sell,	recent	market	transactions	are	taken	into	account.		The	
Company	 also	 considers	 the	 results	 of	 an	 appropriate	 valuation	 model,	 which	 would	
generally	be	determined	based	on	the	present	value	of	estimated	future	cash	flows	arising	
from	 the	 continued	 use	 and	 eventual	 disposal	 of	 the	 asset.	 	 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	(or	cash‐generating	unit)	is	estimated	to	be	less	than	
its	carrying	amount,	the	carrying	amount	of	the	asset	(or	cash‐generating	unit)	is	reduced	to	
its	recoverable	amount.		An	impairment	loss	is	recognized	immediately	in	profit	or	loss.		

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	so	
that	the	increased	carrying	amount	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	periods.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

3.15						Derecognition	of	financial	assets	and	financial	liabilities		

Financial	 assets	 are	 derecognized	 when	 the	 rights	 to	 receive	 cash	 flows	 from	 the	 assets	
expire	 or,	 the	 financial	 assets	 are	 transferred	 and	 the	 Company	 has	 transferred	
substantially	all	the	risks	and	rewards	of	ownership	of	the	financial	assets.	On	derecognition	
of	a	financial	asset,	the	difference	between	the	asset’s	carrying	amount	and	the	sum	of	the	
consideration	 received	 and	 receivable	 and	 the	 cumulative	 gain	 or	 loss	 that	 had	 been	
recognized	directly	in	equity	is	recognized	in	profit	or	loss.	

Financial	liabilities	are	derecognized	when	the	obligation	specified	in	the	relevant	contract	
is	 discharged,	 cancelled	 or	 expired.	 The	 difference	 between	 the	 carrying	 amount	 of	 the	
financial	 liability	 derecognized	 and	 the	 consideration	 paid	 and	 payable	 is	 recognized	 in	
profit	or	loss.		

3.16	 Earnings	per	share	

Basic	 earnings	 per	 share	 is	 calculated	 by	 dividing	 the	 profit	 or	 loss	 attributable	 to	 equity	
holders	of	the	Company	by	the	weighted	average	number	of	shares	outstanding	during	the	
reporting	period.		

Diluted	earnings	per	share	is	calculated	by	adjusting	the	profit	or	loss	attributable	to	equity	
holders	 of	 the	 Company	 and	 the	 weighted	 average	 number	 of	 shares	 outstanding	 for	 the	
effects	 of	 all	 dilutive	 share	 equivalents.	 The	 Company’s	 dilutive	 share	 equivalents	 include	
stock	options,	share	purchase	warrants	and	convertible	securities.	

3.17	 Provisions	

Provisions	 are	 recognized	 when	 the	 Company	 has	 a	 present	 obligation	 (legal	 or	
constructive)	 that	 has	 arisen	 as	 a	 result	 of	 a	 past	 event	 and	 it	 is	 probable	 that	 a	 future	
outflow	 of	 resources	 will	 be	 required	 to	 settle	 the	 obligation,	 provided	 that	 a	 reliable	
estimate	can	be	made	of	the	amount	of	the	obligation.	

Provisions	are	measured	at	the	present	value	of	the	expenditures	expected	to	be	required	to	
settle	 the	 obligation	 using	 a	 pre‐tax	 rate	 that	 reflects	 current	 market	 assessments	 of	 the	
time	 value	 of	 money	 and	 the	 risk	 specific	 to	 the	 obligation.	 	 The	 increase	 in	 the	 provision	
due	to	passage	of	time	is	recognized	as	a	finance	cost.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

3.18	 Related	party	transactions	

Parties	are	considered	related	if	one	party	has	the	ability,	directly	or	indirectly,	to	control	
the	other	party	or	exercise	significant	influence	over	the	other	party	in	making	financial	and	
operating	 decisions.	 	 Parties	 are	 also	 considered	 related	 if	 they	 are	 subject	 to	 common	
control.	 Related	 parties	 may	 be	 individuals	 or	 corporate	 entities.	 	 A	 transaction	 is	
considered	 to	 be	 a	 related	 party	 transaction	 when	 there	 is	 a	 transfer	 of	 resources	 or	
obligations	between	related	parties.		

3.19	

Segment	reporting	

Operating	 segments	 are	 reported	 in	 a	 manner	 consistent	 with	 the	 internal	 reporting	
provided	to	the	chief	operating	decision‐maker.	The	chief	operating	decision‐maker,	who	is	
responsible	for	allocating	resources	and	assessing	performance	of	the	operating	segments,	
has	been	identified	as	the	executive	management	that	makes	strategic	decisions	

3.20	

Significant	accounting	judgments	and	estimates	

Information	 about	 judgments	 and	 estimates	 in	 applying	 accounting	 policies	 that	 have	 the	
most	significant	effect	on	the	amounts	recognized	in	the	consolidated	financial	statements	
are	as	follows:	

Liquidity	and	going	concern	assumption	

In	 the	 determination	 of	 the	 Company’s	 ability	 to	 meet	 its	 ongoing	 obligations	 and	 future	
contractual	 commitments	 management	 relies	 on	 the	 Company’s	 planning,	 budgeting	 and	
forecasting	process	to	help	determine	the	funds	required	to	support	the	Company’s	normal	
operations	 on	 an	 ongoing	 basis	 and	 its	 expansionary	 plans.	 	 The	 key	 inputs	 used	 by	 the	
Company	 in	 this	 process	 include	 forecasted	 capital	 deployment,	 results	 from	 the	
exploration	and	development	of	its	properties	and	general	industry	conditions.		Changes	in	
these	 inputs	 may	 alter	 the	 Company’s	 ability	 to	 meet	 its	 ongoing	 obligations	 and	 future	
in	 adjustments	 to	 the	 amounts	 and	
contractual	 commitments	 and	 could	 result	
classifications	of	assets	and	liabilities	should	the	Company	be	unable	to	continue	as	a	going	
concern	(refer	to	Note	1).		

Valuation	of	derivatives	

Certain	 derivatives	 issued	 by	 the	 Company	 are	 valued	 using	 the	 Black	 Scholes	 Option	
Pricing	 Model.	 The	 Black	 Scholes	 Option	 Pricing	 Model	 is	 a	 formula	 that	 is	 used	 to	
determine	 the	 fair	 value	 of	 a	 call	 or	 put	 option	 based	 on	 factors	 such	 as	 underlying	 stock	
volatility,	days	to	expiration,	and	others.	The	key	inputs	used	by	the	Company	in	its	Black	
Scholes	 Option	 Pricing	 Model	 are	 further	 disclosed	 within	 these	 consolidated	 financial	
statements.	Changes	in	the	inputs	to	the	valuation	model	could	impact	the	carrying	value	of	
the	derivatives	and	the	amount	of	unrealized	gains	or	losses	recognized	in	profit	or	loss.			

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

Valuation	of	convertible	loans		

The	 Company’s	 convertible	 loans	 are	 valued	 using	 a	 binomial	 option	 pricing	 model.	 	 A	
binomial	tree	is	a	valuation	model	that	uses	a	lattice	of	the	underlying's	price	varying	over	
discreet	 time	 periods	 and	 determines	 the	 value	 of	 an	 option	 at	each	 node.	 The	 key	 inputs	
used	 by	 the	 Company	 in	 its	 binomial	 option	 pricing	 model	 are	 further	 disclosed	 in	 Note	
10.1.	 The	 financial	 asset	 components	 are	 valued	 based	 on	 the	 present	 value	 of	 expected	
future	 cash	 flows	 at	 the	 discount	 rate	 that	 would	 have	 applied	 to	 the	 financial	 assets	
without	 conversion	 or	 other	 embedded	 derivative	 features.	 Changes	 in	 the	 inputs	 to	 the	
valuation	model	could	impact	the	carrying	value	of	the	embedded	derivatives	and	financial	
assets	in	the	convertible	loans	and	the	amount	of	unrealized	gains	or	losses	recognized	in	
profit	or	loss.			

Review	of	carrying	value	of	assets	and	impairment	charges	

In	 the	 determination	 of	 carrying	 values	 and	 impairment	 charges,	 management	 of	 the	
Company	reviews	the	higher	of	the	recoverable	amount	and	the	fair	value	less	costs	to	sell	
or	 the	 value	 in	 use	 in	 the	 case	 of	 non‐financial	 assets	 and	 at	 objective	 evidence	 indicating	
impairment	 in	 the	 case	 of	 financial	 assets.	 These	 determinations	 and	 their	 individual	
assumptions	 require	 that	 management	 make	 a	 decision	 based	 on	 the	 best	 available	
information	at	each	reporting	period.		Changes	in	these	assumptions	may	alter	the	results	of	
non‐financial	asset	and	financial	asset	impairment	testing,	impairment	charges	recognized	
in	profit	or	loss	and	the	resulting	carrying	amounts	of	assets.	

As	at	each	reporting	date,	the	Company	reviews	 assets	to	determine	whether	there	is	any	
indication	that	those	assets	have	suffered	an	impairment	loss.		

Capitalization	of	exploration	and	evaluation	costs		

Management	has	determined	that	exploration	and	evaluation	costs	incurred	during	the	year	
have	future	economic	benefits	and	are	economically	recoverable.	In	making	this	judgment,	
management	has	assessed	various	sources	of	information	including,	but	not	limited	to,	the	
geologic	 and	 metallurgic	 information,	 history	 of	 conversion	 of	 mineral	 deposits	 to	 proven	
and	 probable	 mineral	 reserves,	 scoping	 studies,	 preliminary	 economic	 assessments,	
proximity	of	operating	facilities,	operating	management	expertise	and	existing	permits.	

Determination	of	business	combinations	and	asset	acquisitions		

Management	determines	the	assets	acquired	and	liabilities	assumed	constitute	a	business	if	
it	 consists	 of	 inputs	 and	 processes	 applied	 to	 those	 inputs	 that	 have	 the	 ability	 to	 create	
outputs.	 Powertech	 completed	 a	 RTO	 with	 Azarga	 Resources	 on	 October	 28,	 2014	 and,	 in	
accordance	 with	 its	 policy,	 applied	 IFRS	 3,	 Business	 Combinations,	 and	 concluded	 that	 the	
transaction	 qualified	 as	 a	 business	 combination	 as	 significant	 inputs	 and	 processes	 that	
constitute	a	business	were	identified.		Refer	to	Note	5	for	additional	details.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

3.	

SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES	(Continued)	

Determination	of	asset	and	liability	fair	values		

Business	 combinations	 require	 judgment	 and	 estimates	 to	 be	 made	 at	 the	 date	 of	
acquisition	 in	 relation	 to	 determining	 asset	 and	 liability	 fair	 values.	 	 The	 information	
necessary	 to	 measure	 the	 fair	 values	 as	 at	 the	 acquisition	 date	 of	 assets	 acquired	 and	
liabilities	 assumed	 requires	 management	 to	 make	 certain	 judgments	 and	 estimates	 about	
future	 events,	 including	 but	 not	 limited	 to	 estimates	 of	 mineral	 resources	 acquired,	
exploration	 potential,	 future	 operating	 costs	 and	 capital	 expenditures,	 future	 metal	 prices	
and	 long‐term	 foreign	 exchange	 rates.	 Changes	 to	 the	 provisional	 measurements	 of	 assets	
and	liabilities	acquired	may	be	retrospectively	adjusted	when	new	information	is	obtained	
until	 the	 final	 measurements	 are	 determined	 which	 is	 within	 one	 year	 of	 the	 acquisition	
date.		

Useful	lives	and	depreciation	rates	for	PPE	

Depreciation	 expense	 is	 allocated	 based	 on	 estimated	 PPE	 useful	 lives	 and	 depreciation	
rates.	 	 Therefore,	 changes	 in	 the	 useful	 life	 or	 depreciation	 rates	 from	 the	 initial	 estimate	
could	 impact	 the	 carrying	 value	 of	 PPE	 and	 an	 adjustment	 would	 recognized	 in	 profit	 or	
loss.	

Income	taxes	and	recoverability	of	deferred	tax	assets	

Actual	amounts	of	income	tax	expense	are	not	final	until	tax	returns	are	filed	and	accepted	
by	 the	 taxation	 authorities.	 	 Therefore,	 profit	 or	 loss	 in	 future	 reporting	 periods	 will	 be	
affected	by	the	amount	that	income	tax	expense	estimates	differ	from	the	final	tax	returns.		

Judgment	 is	 required	 in	 determining	 whether	 deferred	 tax	 assets	 are	 recognized	 on	 the	
statement	of	financial	position.		Deferred	tax	assets,	including	those	arising	from	unutilized	
tax	losses,	require	management	of	the	Company	to	assess	the	likelihood	that	the	Company	
will	 generate	 sufficient	 taxable	 profit	 in	 future	 periods	 in	 order	 to	 utilize	 recognized	
deferred	tax	assets.		Estimates	of	future	taxable	profit	are	based	on	forecast	cash	flows	from	
operations	 and	 the	 application	 of	 existing	 tax	 laws	 in	 each	 jurisdiction.	 To	 the	 extent	 that	
future	 cash	 flows	 and	 taxable	 profit	 differ	 from	 estimates,	 the	 ability	 of	 the	 Company	 to	
realize	 the	 deferred	 tax	 assets	 recorded	 on	 the	 statement	 of	 financial	 position	 could	 be	
impacted.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

4.									SEGMENTED	INFORMATION	

The	Company	has	two	reportable	business	segments:	the	Kyrgyzstan	Uranium	Division	and	
the	United	States	Uranium	Division.	The	Company’s	chief	operating	decision	maker	reviews	
both	 business	 segments’	 discrete	 financial	 information	 in	 order	 to	 make	 decisions	 about	
resources	to	be	allocated	to	each	segment	and	to	assess	its	performance.		

The	carrying	amount	of	the	Company’s	assets,	liabilities,	exploration	and	evaluation	assets,	
long‐term	investments	and	net	loss	analyzed	by	operating	segment	are	as	follows:			

Kyrgyzstan
Uranium	
Division

United States
Uranium	
Division

Segment	assets

As	at	December	31,	2014
As	at	December	31,	2013

Segment	liabilities

As	at	December	31,	2014
As	at	December	31,	2013

$					
$					

10,618,895
10,932,709

$							
$							

2,025,959
1,842,636

Exploration	and	evaluation	assets	(Note	7)

As	at	December	31,	2014
As	at	December	31,	2013

$					
$					

10,536,951
10,719,770

27,243,491

$					
$																

‐

2,933,515

$							
$																

‐

26,896,918

$					
$																

Long‐term	investments	(Note	9)

As	at	December	31,	2014
As	at	December	31,	2013

Net	loss

$																
$																

‐
‐

$																
$																

Year	ended	December	31,	2014
Year	ended	December	31,	2013

$						
$						

(1,030,850)
(1,092,302)

(338,305)

$								
$																

‐

‐
‐

‐

Unallocated	(i)

Consolidated	
Total

$							
$					

7,668,766
15,129,718

$					
$					

45,531,152
26,062,427

$					
$							

10,789,650
7,185,512

$					
$							

15,749,124
9,028,148

$																
$							

1,698,995

‐

$					
$					

37,433,869
12,418,765

$							
$					

3,951,880
10,344,230

$							
$					

3,951,880
10,344,230

$								
$						

(106,570)
(3,220,533)

$						
$						

(1,475,725)
(4,312,835)

(i)	

The	unallocated	amount	contains all amounts associated with the corporate division

Emerging	 markets	 such	 as	 the	 Kyrgyz	 Republic,	 the	 location	 of	 the	 Kyrgyzstan	 Uranium	
Division,	 are	 subject	 to	 different	 risks	 than	 more	 developed	 markets,	 including	 economic,	
political	 and	 social,	 and	 legal	 and	 legislative	 risks.	 	 Laws	 and	 regulations	 affecting	
businesses	 in	 the	 Kyrgyz	 Republic	 continue	 to	 change	 rapidly,	 tax	 and	 regulatory	
frameworks	 are	 subject	 to	 varying	 interpretations.	 The	 future	 economic	 direction	 of	 the	
Kyrgyz	 Republic	 is	 heavily	 influenced	 by	 the	 fiscal	 and	 monetary	 policies	 adopted	 by	 the	
government,	together	with	developments	in	the	legal,	regulatory,	and	political	environment.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

5.	

BUSINESS	ACQUISITION		

Azarga	Resources	Limited		

On	 October	 28,	 2014,	 Powertech	 completed	 its	 acquisition	 of	 all	 of	 the	 issued	 and	
outstanding	 common	 shares	 of	 Azarga	 Resources.	 In	 connection	 with	 closing	 the	
transaction,	 Powertech	 changed	 its	 name	 to	 Azarga	 Uranium	 Corp.	 and	 completed	 a	
consolidation	of	its	outstanding	common	shares	on	the	basis	of	1	post‐consolidation	share	
for	 10	 pre‐consolidation	 shares	 (the	 “Consolidation”).	 Pursuant	 to	 the	 share	 purchase	
agreement,	as	amended,	in	exchange	for	obtaining	all	of	the	issued	and	outstanding	shares	
of	 Azarga	 Resources,	 Powertech	 issued	 41,911,182	 post‐Consolidation	 common	 shares	 to	
the	 former	 shareholders	 of	 Azarga	 Resources,	 subject	 to	 a	 24	 month	 escrow	 period	 with	
25%	releasing	from	escrow	12	months	after	October	28,	2014	and	the	remaining	releasing	
from	 escrow	 24	 months	 after	 October	 28,	 2014,	 representing	 approximately	 82.9%	 of	 the	
combined	 entity’s	 ownership.	 As	 a	 result,	 the	 transaction	 represents	 a	 RTO	 and	 Azarga	
Resources	has	been	identified	as	the	accounting	acquirer.		In	addition,	all	share	options	of	
Azarga	 Resources	 were	 exchanged	 for	 share	 options	 of	 Powertech	 on	 closing	 of	 the	 RTO,	
with	 exercise	 prices	 being	 adjusted	 to	 reflect	 the	 applicable	 exchange	 ratio	 and	 foreign	
exchange	rates.		Certain	agreements	of	Azarga	Resources	were	also	assigned	to	Powertech.			

The	following	table	summarizes	the	consideration	paid,	the	fair	value	of	assets	acquired	and	
liabilities	assumed	and	the	bargain	purchase	gain	at	the	acquisition	date.	

Fair	value	of	common	shares	issued
Fair	value	of	loans	forgiven,	net
Fair	value	of	share	based	securities
Total	consideration	transferred

Recognized	amounts	of	identifiable	assets	acquired	and	liabilities	assumed	

Cash	and	restricted	cash
Other	current	assets
Trade	payables	and	accrued	expenses
Loans	payable
Warrant	liability
Deferred	tax	liability
Property,	plant	and	equipment
Exploration	and	evaluation	assets

Total	identifiable	assets

Bargain	purchase	gain
Total

As	at													
October	28,	2014

$										

5,539,669
782,585
63,886
6,386,140

216,343
22,528
(2,167,354)
(1,216,968)
(25,891)
(3,660,000)
82,723
24,740,000

17,991,381

(11,605,241)
6,386,140

$										

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

5.	

BUSINESS	ACQUISITION	(Continued)		

Azarga	Resources	identified	an	opportunity	to	diversify	the	company’s	uranium	assets	and	
increase	the	merged	company’s	uranium	resource	base	through	an	RTO	with	Powertech.		As	
a	result	of	Powertech’s	assets	being	undervalued,	due	to	a	combination	of	factors,	including	
weak	 equity	 markets,	 the	 Company	 recognized	 a	 bargain	 purchase	 gain	 on	 close	 of	 the	
transaction.	 	 To	 determine	 the	 fair	 value	 of	 the	 exploration	 and	 evaluation	 assets,	 the	
Company	 used	 a	 combination	 of	 valuation	 techniques	 including	 discounted	 cash	 flows,	
precedent	transactions	and	comparable	trading	multiples.	

The	 total	 consideration	 transferred	 for	 the	 RTO	 was	 comprised	 of:	 the	 equivalent	 of	
15,558,071	 (post‐Consolidation)	 common	 shares,	 outstanding	 share	 options	 and	 share	
purchase	warrants	and	the	net	amount	of	loans	forgiven	by	Azarga	Resources.	

The	 fair	 value	 of	 the	 common	 shares	 was	 based	 on	 Powertech’s	 closing	 share	 price	 of	
C$0.40	 on	 the	 first	 day	 of	 trading	 following	 the	 close	 of	 the	 RTO.	 	 The	 fair	 value	 of	 the	
common	shares	was	comprised	of	two	components:	1)	the	fair	value	of	Azarga	Resources’	
previously	 held	 equity	 interest	 and	 2)	 the	 fair	 value	 of	 the	 additional	 interest	 acquired,	
which	 were	 $2,456,542	 and	 $3,083,127,	 respectively.	 The	 Company	 recorded	 an	
impairment	charge	of	$3,707,133	prior	to	completing	the	RTO	based	on	the	fair	value	of	the	
previously	held	equity	interest.		

The	fair	value	of	the	net	loans	forgiven	is	comprised	of	the	outstanding	amounts	owing	from	
Powertech	to	Azarga	Resources	under	the	Powertech	convertible	loans	(refer	to	Note	10.1)	
less	the	outstanding	amount	owing	from	Azarga	Resources	to	Powertech	on	the	promissory	
note	for	the	purchase	of	a	60%	interest	in	the	Centennial	Project	in	2013.		

The	 fair	 value	 of	 the	 outstanding	 share	 options	 and	 share	 purchase	 warrants	 was	
determined	 using	 the	 Black	 Scholes	 Option	 Pricing	 Model.	 	 The	 275,000	 share	 options	
utilized	 the	 following	 assumption:	 Powertech’s	 share	 price	 of	 C$0.40,	 a	 risk	 free	 rate	 of	
return	of	1.02%,	an	expected	life	of	2.55	years,	an	expected	volatility	of	84.36%	(based	on	
the	historical	volatility	of	Powertech),	an	exercise	price	of	C$2.00	and	$nil	dividends.		The	
2,084,980	 share	 purchase	 warrants	 utilized	 the	 following	 assumption:	 Powertech’s	 share	
price	of	C$0.40,	a	risk	free	rate	of	return	of	1.00‐1.02%,	an	expected	life	of	0.02‐1.33	years,	
an	expected	volatility	of	99%	(based	on	the	historical	volatility	of	Powertech),	an	exercise	
price	 of	 C$1.15‐C$2.00	 and	 $nil	 dividends.	 Each	 whole	 warrant	 entitles	 the	 holder	 to	
purchase	one	common	share.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

5.	

BUSINESS	ACQUISITION	(Continued)		

UrAsia	in	Kyrgyzstan	Limited	Liability	Company		

On	 July	 27,	 2012,	 the	 Company	 acquired	 80%	 of	 the	 charter	 capital	 of	 UrAsia	 through	 the	
Share	Transfer	Agreement	and	the	Agreement	of	Participants	(the	“Purchase	Agreements”)	
for	an	upfront	cash	payment	of	$200,000	and	a	deferred	payment	of	$5,800,000.		Under	the	
terms	of	the	Purchase	Agreements,	the	original	sellers	of	UrAsia	also	have	the	right	to	sell	
the	remaining	20%	of	UrAsia’s	charter	capital	to	the	Company	for	1)	$2,000,000	in	cash;	or	
2)	$2,000,000	of	the	Company’s	shares	after	July	27,	2014.		Subsequently,	the	Company	and	
the	original	sellers	of	UrAsia	have	amended	the	Purchase	Agreements.		

In	 2013,	 the	 Company	 and	 the	 original	 sellers	 of	 UrAsia	 amended	 the	 payment	 terms	
surrounding	 the	 $5,800,000	 deferred	 payment.	 	 Instead	 of	 settling	 the	 entire	 deferred	
payment	 in	 cash,	 the	 Company	 issued	 the	 original	 sellers	 of	 UrAsia	 6,250,000	 common	
shares	to	settle	$2,500,000	of	the	obligation.	

Further,	on	February	12,	2014,	payment	terms	for	the	remaining	$1,850,000	owing	to	the	
original	sellers	of	UrAsia	were	amended	to	be	settled	according	to	the	following	schedule:	
$150,000	payable	 on	or	 before	March	30,	2014,	$200,000	payable	 on	or	 before	December	
31,	2014,	$500,000	payable	on	or	before	December	31,	2015,	$500,000	payable	on	or	before	
December	31,	2016	and	$500,000	payable	on	or	before	December	31,	2017.	As	a	result,	the	
original	deferred	consideration	liability	was	extinguished	and	a	new	deferred	consideration	
liability	 was	 recognized,	 calculated	 using	 the	 revised	 expected	 future	 cash	 flows	 and	 an	
effective	interest	rate	of	12%	per	annum.	The	difference	of	$347,737	was	recorded	as	a	gain	
for	the	year	ended	December	31,	2014.		

On	 December	 30,	 2014,	 the	 payment	 terms	 were	 further	 amended	 to	 delay	 the	 $200,000	
payable	 on	 or	 before	 December	 31,	 2014	 to	 be	 payable	 on	 or	 before	 April	 1,	 2015.	 	 The	
Company	 accounted	 for	 the	 amendment	 as	 a	 modification	 of	 the	 liability	 and	 calculated	 a	
new	effective	interest	rate	as	of	the	date	of	the	amendment	based	on	the	then	carrying	value	
of	the	payable	and	the	revised	expected	cash	flows.	The	new	effective	interest	rate	was	used	
to	account	for	the	liability	on	a	prospective	basis.			

As	at	December	31,	2014,	the	carrying	value	of	the	deferred	consideration	was	$1,400,672,	
of	 which	 $700,000	 was	 a	 current	 payable	 (December	 31,	 2013:	 $1,741,080).	 For	 the	 year	
ended	December	31,	2014,	the	Company	made	cash	payments	totaling	$150,000	to	partially	
settle	the	deferred	consideration	(December	31,	2013:	$1,450,000).		

In	 addition,	 if	 Azarga	 Uranium	 fails	 to	 settle	 the	 outstanding	 deferred	 payments	 in	
accordance	with	the	revised	payment	schedule,	its	participation	interest	in	UrAsia’s	charter	
capital	 will	 be	 reduced	 (not	 more	 than	 60%)	 based	 on	 a	 pro‐rata	 calculation	 over	 the	
unpaid	portion	of	the	$5,800,000	and	transferred	back	to	the	original	sellers	of	UrAsia.		

Page	|	29		

	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

5.	

BUSINESS	ACQUISITION	(Continued)		

The	 February	 12,	 2014	 amendment	 also	 aligned	 the	 put	 option	 exercise	 timing	 on	 the	
remaining	20%	of	UrAsia’s	charter	capital	with	the	final	deferred	payment	to	be	made	on	or	
before	December	 31,	 2017.	As	a	result,	the	original	liability	 on	the	put	option	on	 the	non‐
controlling	 interest	 of	 UrAsia	 was	 extinguished	 and	 a	 new	 liability	 was	 recognized,	
calculated	using	the	revised	expected	cash	flows	and	an	effective	interest	rate	of	12%	per	
annum.	The	difference	of	$610,041	was	recorded	as	a	gain	for	the	year	ended	December	31,	
2014.		

As	 at	 December	 31,	 2014,	 the	 carrying	 value	 of	 the	 put	 option	 on	 the	 non‐controlling	
interest	of	UrAsia	was	$1,423,118	(December	31,	2013:	$1,872,592)	and	recorded	in	other	
liabilities.		The	Company	recorded	an	interest	expense	of	$160,567	on	the	put	option	on	the	
non‐controlling	 interest	 of	 UrAsia	 for	 the	 year	 ended	 December	 31,	 2014	 (December	 31,	
2013:	$200,635).		

6.									NON‐CONTROLLING	INTEREST			

The	 non‐controlling	 interest	 in	 UrAsia	 as	 at	 December	 31,	 2014	 was	 $705,357	 (December	
31,	2013:	$992,238).		

Set	 out	 below	 is	 the	 movement	 schedule	 of	 the	 non‐controlling	 interest	 arising	 from	 the	
UrAsia	acquisition:	

Year ended	December	31,
2014

2013

Balance,	beginning	of	year
Less:	non‐controlling	interest	from net loss
Less:	non‐controlling	interest	from	other	
comprehensive	loss
Balance,	end	of	year

$																		

992,238
(198,603)
(88,278)

$														

1,199,900
(193,682)
(13,980)

$																		

705,357

$																	

992,238

Set	out	below	is	the	summarized	financial	information	for	100%	of	UrAsia’s	net	assets,	total	
comprehensive	 loss	 and	 cash	 and	 cash	 equivalents.	 The	 information	 is	 presented	 before	
considering	inter‐company	eliminations.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

6.									NON‐CONTROLLING	INTEREST		(Continued)	

Current
Assets
Liabilities
Total	current	net	assets

Non‐current
Assets
Liabilities
Total	non‐current	net	assets

Net	assets

Net	loss	before	tax
Deferred	income	tax	expense
Net	loss
Other	comprehensive	loss
Total	comprehensive	loss

Net	cash	used	in	operating	activities
Net	cash	used	in	investing	activities
Net	cash	generated	from	financing	activities
Net	decrease	in	cash	and	cash	equivalents
Cash	and	cash	equivalents	at	beginning	of	year
Exchange	gains	on	cash	and	cash	equivalents
Cash	and	cash	equivalents	at	end	of	year

As	at	December	31,

2014

2013

$																		

343,530
66,169
277,361

$																	

197,465
137,942
59,523

3,991,458
2,003,822
1,987,636

4,233,893
1,609,548
2,624,345

$																

2,264,997

$														

2,683,868

Year ended	December	31,
2014

2013

$																	

$															

(668,576)
(324,437)
(993,013)
(441,389)
(1,434,402)

$															

$															

(834,306)
(29,143)
(863,449)
(69,901)
(933,350)

Year	ended	December	31,
2014

2013

$																	

$															

(565,438)
(503,305)
1,052,542
(16,201)
26,580
3,542
13,921

(772,806)
(2,066,267)
2,769,494
(69,579)
93,709
2,450
26,580

$																				

$																			

7.			

EXPLORATION	AND	EVALUATION	ASSETS	

On	 close	 of	 the	 RTO,	 the	 Company	 owned	 the	 Dewey	 Burdock	 Project,	 the	 Centennial	
Project,	the	Aladdin	Deposit	and	two	uranium	exploration	properties	in	the	United	States	as	
well	 as	 the	 Kyzyl	 Ompul	 Project	 in	 the	 Kyrgyz	 Republic.	 Refer	 to	 Note	 5	 for	 additional	
details.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

7.			

EXPLORATION	AND	EVALUATION	ASSETS	(Continued)	

In	 2013,	 the	 Company	 purchased	 a	 60%	 interest	 in	 the	 Centennial	 Project	 for	 $1,500,000.	
The	 Company	 paid	 $1,000,000	 in	 cash	 and	 $500,000	 by	 way	 of	 a	 promissory	 note.	 In	
addition,	 the	 purchase	 agreement	 provided	 Powertech	 with	 a	 put	 option	 to	 sell	 its	
remaining	40%	and	the	Company	with	a	call	option	to	purchase	the	remaining	40%	interest	
in	the	Centennial	Project.	On	close	of	the	RTO,	these	obligations	were	settled.		

As	 at	 December	 31,	 2014,	 the	 Company	 had	 restricted	 cash	 of	 $231,948	 for	 potential	
reclamation	liabilities	related	to	its	exploration	and	evaluation	assets	(December	31,	2013:	
$21,151).	

The	Company's	exploration	and	evaluation	assets	consist	of	the	following	amounts:	

Dewey	
Burdock

As	at	December	31,	2014

Kyzyl	Ompul

Centennial

Other

Total

$

‐

$

10,719,770

$

$														

$	

23,500,000
45,194
‐
122,667
‐
118,260
‐
‐
33,000
‐

$			

23,819,121

‐
28,283
36,666
178,066
13,441
240,794
784
24,678
115
(705,646)
10,536,951

$			

Opening	balance
Acquired	on	close	of	RTO	(Note	5)
Drilling/engineering
Ecological	monitoring
Salaries	and	consulting	
Rehabilitation	costs
License	fees
Capitalized	VAT
Share‐based	compensation	(Note	21)
Other
Currency	translation	effect
Total	exploration	and	evaluation	assets

Opening	balance
Acquisition	of	Centennial	Project
Drilling/engineering
Ecological	monitoring
Salaries	and	consulting	
Rehabilitation	costs
License	fees
Capitalized	VAT
Share‐based	compensation	(Note	21)
Other
Currency	translation	effect
Total	exploration	and	evaluation	assets

1,698,995
1,000,000

‐
‐
77,432
‐
‐
‐
‐
‐
‐

‐
240,000
‐
‐
4,000
‐
‐
‐
‐
57,370
‐
301,370

12,418,765
24,740,000
73,477
36,666
382,165
13,441
359,054
784
24,678
90,485
(705,646)
37,433,869

$					

2,776,427

$							

$				

Kyzyl	Ompul

As	at	December	31,	2013
Centennial

Total

$					

8,940,995

$														

‐

‐

1,698,995

1,169,992
19,734
339,228
12,574
156,335
142,488
50,011
3,694
(115,281)
10,719,770

$			

‐
‐
‐
‐
‐
‐
‐
‐
‐

$					

1,698,995

$						

8,940,995
1,698,995
1,169,992
19,734
339,228
12,574
156,335
142,488
50,011
3,694
(115,281)
12,418,765

$				

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

8.			

PROPERTY,	PLANT	AND	EQUIPMENT	

The	Company's	PPE	assets	consist	of	the	following	amounts:	

Equipment

Office	
equipment

Furniture	
and	fixtures

Vehicles

Building

Total

Cost
Opening	balance
Acquired	on	close	of	RTO	(Note	5)
Disposals
Currency	translation	effect
As	at	December	31,	2014

Accumulated	depreciation	
Opening	balance
Assumed	on	close	of	RTO	(Note	5)
Charge	for	the	year
Disposals
Currency	translation	effect
As	at	December	31,	2014

Carrying	amount
As	at	December	31,	2014

$					

$					

$					

$					

51,505
127,923
‐
(8,431)
170,997

$			

$					

19,657
230,916
‐
(4,950)
245,623

$			

$					
(2,319)
(124,844)
(7,560)
‐
977
(133,746)

$	

(5,003)
$					
(230,718)
(5,252)
‐
3,005
$	
(237,968)

14,170
55,435
‐
(2,320)
67,285

$					

96,179
30,505
(3,232)
(15,458)
107,994

$					

10,292
92,628
‐
(1,685)
101,235

$			

$			

191,803
537,407
(3,232)
(32,844)
693,134

$			

$			

$			

(2,660)
(55,337)
(3,090)
‐
706
(60,381)

(10,160)
(30,505)
(12,806)
1,920
2,459
(49,092)

$								

(429)
(13,279)
(1,331)
‐
155
(14,884)

(20,571)
$			
(454,683)
(30,039)
1,920
7,302
(496,071)

$	

(i)

$			

$			

$			

$					

37,251

$							

7,655

$							

6,904

$					

58,902

$					

86,351

$			

197,063

(i)	Of	the	total	depreciation	expense	of	$30,039,	$15,983	has	been	capitalized	to	evaluation	and	exploration	assets

Equipment

Office	
equipment

Furniture	
and	fixtures

Vehicles

Building

Total

Cost
Opening	balance
Additions
Currency	translation	effect
As	at	December	31,	2013

Accumulated	depreciation	
Opening	balance
Charge	for	the	year
Currency	translation	effect
As	at	December	31,	2013

Carrying	amount
As	at	December	31,	2013

1,926
50,480
(901)
51,505

(234)
(2,129)
44
(2,319)

12,948
7,718
(1,009)
19,657

(718)
(4,787)
502
(5,003)

$							

$					

$							

$					

2,661
11,802
(293)
14,170

12,394
85,655
(1,870)
96,179

$										

‐
10,464
(172)
10,292

$					

$					

29,929
166,119
(4,245)
191,803

$			

$					

$					

$					

$					

$								

$								

$								

$										

$					

(166)
(2,542)
48
(2,660)

$								

(207)
(10,127)
174
(10,160)

$			

‐
(436)
7
(429)

(1,325)
(20,021)
775
(20,571)

(i)

$					

$					

$					

$								

$			

$					

49,186

$					

14,654

$					

11,510

$					

86,019

$							

9,863

$			

171,232

(i)	Of	the	depreciation	charge	of	$20,021,	$8,500	has	been	capitalized	to	evaluation	and	exploration	assets

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

9.									LONG‐TERM	INVESTMENTS		

9.1	

Investment	in	associates	

Set	out	below	is	the	associate	of	the	Company	as	at	December	31	2014:			

Name	of	
entity	

								Place	of	business/country	
of	incorporation

								%	of ownership		
(voting	right)	

Measurement	
method

Black	Range		

Australia

23.6	

Equity

Powertech	 was	 an	 associate	 of	 the	 Company	 until	 close	 of	 the	 RTO	 on	 October	 28,	 2014.	
Refer	to	Note	5	for	additional	details.		

Investment	in	Powertech
Investment	in	Black	Range
Investment	in	associates

Equity	income	pick‐up	from	Powertech
Equity	loss	pick‐up	from	Black	Range	
Share	of	equity	loss	from	associates, net

Investment	in	Powertech		

As at December	31,

2014

2013

$																								

‐

$														

$

1,890,623
1,890,623

$														

5,788,794
2,816,836
8,605,630

Period	from

January	1	to	
December	31,	2014
341,757
$																	
(2,625,218)
(2,283,461)

$

July	2	to	December	
31,	2013

$																			

11,130
(579,544)
(568,414)

$															

In	 July	 2013,	 the	 Company	 purchased	 a	 16.5%	 interest	 in	 Powertech	 and	 a	 convertible	
debenture	in	the	principal	sum	of	$500,000.	On	October	18,	2013,	the	$500,000	convertible	
debenture	was	converted	into	8,450,035	common	shares	of	Powertech	at	C$0.07	per	share	
(see	Note	10.1).	The	Company’s	ownership	stake	in	Powertech	increased	to	22.2%	and	the	
Company	determined	that	it	was	now	able	to	exercise	significant	influence	over	Powertech.	
Therefore,	the	Company	commenced	accounting	for	its	investment	in	Powertech	under	the	
equity	 method.	 In	 November	 2013,	 the	 Company	 further	 increased	 its	 ownership	 stake	 to	
45.1%	 through	 the	 acquisition	 of	 additional	 Powertech	 shares	 at	 a	 price	 of	 C$0.0966	 per	
share.	

In	 2014,	 the	 Company’s	 ownership	 interest	 was	 diluted	 to	 44.3%	prior	 to	 the	 close	 of	 the	
RTO	(refer	to	Note	5	for	additional	details).	On	close	of	the	RTO,	the	Company	recorded	an	
impairment	charge	to	the	carrying	value	of	its	investment	in	Powertech.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

9.									LONG‐TERM	INVESTMENTS	(Continued)	

For	the	period	ended	October	28,	2014,	the	Company	recognized	an	equity	income	pick‐up	
of	 $341,757	 (December	 31,	 2013:	 $11,130)	 and	 a	 dilution	 gain	 of	 $33,124	 (December	 31,	
2013:	$nil).	

The	movement	of	the	Company’s	investment	in	Powertech	is	as	follows:	

Balance,	beginning	of	year
Investment	costs	
Equity	income	pick‐up
Dilution	gain
Impairment	charge	(Note	5)
Settled	on	close	of	RTO	(Note	5)
Balance,	end	of	year

$

Year ended	December 31,
2014
2013

5,788,794	
							‐			
341,757	
33,124	
(3,707,133)
(2,456,542)

	$								

‐

														 5,777,664
11,130
‐
‐
‐

$																								

‐

$														

5,788,794

Set	out	below	is	the	summarized	financial	information	for	Powertech:			

Assets
Total	current	assets
Total	non‐current	assets
Total	assets

Liabilities
Total	current	liabilities
Total	non‐current	liabilities
Total	liabilities

Net	assets

Income	from	operations
Total	comprehensive	income

Investment	in	Black	Range	

As	at	December	31,

2014

2013

$																								

$																								

‐
‐
‐

‐
‐
‐

‐

$																	

449,467
38,928,454
39,377,921

2,621,485
744,828
3,366,313

$												

36,011,608

Period	from

January 1	to	
October	28,	2014

October 18 to
December	31,	2013

$																	
$																	

543,881
543,881

$																	
$																	

248,812
248,812

Black	 Range	 is	 focused	 on	 growth	 through	 acquisition,	 exploration	 and	 development	 of	
uranium	 projects,	 particularly	 in	 the	 USA.	 Its	 growth	 strategy	 is	 underpinned	 by	 its	
ownership	 of	 the	 Hansen/Taylor	 Ranch	 Uranium	 Project	 located	 approximately	 30	
kilometers	northwest	of	Cañon	City	in	Colorado,	USA.	Black	Range	is	listed	on	the	Australian	
Stock	Exchange	(ASX:	BLR).			

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

9.									LONG‐TERM	INVESTMENTS	(Continued)	

On	 March	 14,	 2013,	 the	 Company	 acquired	 a	 19.7%	 interest	 in	 Black	 Range.	 On	 initial	
recognition,	 the	 Company	 accounted	 for	 its	 investment	 in	 Black	 Range	 as	 FVTPL.	
Subsequently,	on	July	2,	2013,	the	Company	entered	into	the	First	Black	Range	Convertible	
Loan	 (Refer	 to	 Note	 10.2).	 The	 Company	 determined	 that,	 in	 conjunction	 with	 its	 existing	
ownership	 stake	 (19.7%)	 and	 the	 First	 Black	 Range	 Convertible	 Loan,	 the	 Company	 had	
significant	influence	over	Black	Range	on	July	2,	2013.	Therefore,	the	Company	commenced	
accounting	for	its	investment	in	Black	Range	under	the	equity	method.		

On	 October	 26,	 2013,	 the	 Company	 and	 Black	 Range	 amended	 the	 First	 Black	 Range	
Convertible	Loan	agreement	to	convert	A$638,000	into	63,800,000	shares	of	Black	Range	at	
a	conversion	price	of	A$0.01	per	share	(Refer	to	Note	10.2).	

In	 June	 2014,	 the	 First	 and	 Second	 Black	 Range	 Convertible	 Loans	 (refer	 to	 Note	 10.2	 for	
additional	 details),	 totaling	 $3,114,101,	 were	 converted	 into	 304,966,667	 shares	 of	 Black	
Range	in	accordance	with	the	terms	stipulated	in	the	loan	agreements.	The	fair	value	of	the	
304,966,667	Black	Range	shares	issued	to	the	Company	was	equal	to	$1,524,833,	calculated	
using	 the	 Black	 Range	 closing	 share	 price	 on	 conversion.	 As	 a	 result,	 the	 Company	
recognized	a	$1,589,268	loss	on	conversion	for	the	year	December	31,	2014.	

On	 October	 3,	 2014,	 the	 Company	 closed	 a	 share	 sale	 agreement	 and	 economic	 exposure	
sharing	 deed	 with	 Empire	 Equity	 Ltd.	 (“Empire	 Equity”)	 to	 sell	 140,000,000	 Black	 Range	
shares	at	Australian	Dollars	(“A$”)	0.008	per	share	for	total	consideration	of	A$1,120,000.	
The	 consideration	 is	 payable	 in	 four	 equal	 installments,	 with	 the	 first	 payment	 due	 on	
closing	and	subsequent	payments	due	12,	24	and	36	weeks	after	closing.			Other	key	terms	
include:	

(cid:120)  Profit	 sharing	 on	 future	 sales	 by	 Empire	 Equity	 –	 The	 Company	 receives	 50%	 of	
proceeds	from	future	sales	of	Black	Range	shares	by	Empire	Equity,	if	Empire	Equity	
sells	 the	 Black	 Range	 shares	 in	 excess	 of	 A$0.010	 per	 share;	 however,	 the	 first	
A$1,260,000	of	proceeds	will	be	retained	by	Empire	Equity;	

(cid:120)  Profit	 guarantee	 on	 future	 sales	 by	 Empire	 Equity	 –	 Two	 years	 after	 closing,	 if	
Empire	 Equity	 sells	 its	 Black	 Range	 shares	 for	 less	 than	 A$0.008	 per	 share,	 the	
Company	will	reimburse	Empire	Equity	the	difference	between	the	sales	price	and	
A$0.008	per	share;	and		

(cid:120)  Anniversary	 payments	 –	 After	 closing,	 at	 each	 12	 week	 interval	 (up	 to	 96	 weeks),	
the	 Company	 is	 obligated	 to	 make	 anniversary	 payments	 to	 Empire	 Equity,	
calculated	based	on	the	cumulative	installments	paid	to	the	Company	at	the	date	of	
the	anniversary	payment,	less	the	value	of	shares	sold	by	Empire	Equity,	multiplied	
by	2.5%.		

Page	|	36		

	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

9.									LONG‐TERM	INVESTMENTS	(Continued)	

The	 Empire	 Equity	 instrument	 is	 a	 hybrid	 instrument,	 containing	 a	 debt	 host	 component	
and	 multiple	 embedded	 derivatives.	 	 The	 entire	 hybrid	 instrument	 has	 been	 classified	 as	
FVTPL	 and	 fair	 value	 changes	 are	 recorded	 through	 profit	 and	 loss.	 	 As	 at	 December	 31,	
2014,	the	Company	had	received	the	first	installment	payment.		

For	the	years	ended	December	31,	2014	and	2013,	the	Company	recognized	an	equity	loss	
pick‐up	of	$2,625,218	and	$579,544,	respectively.		For	the	year	ended	December	31,	2014,	
the	 Company	 recognized	 a	 dilution	 gain	 of	 $436,660	 as	 a	 result	 of	 Black	 Range	 issuing	
equity.		In	addition,	for	the	year‐ended	December	31,	2014,	the	Company	sold	39,388,824	
Black	Range	shares	for	sale	proceeds	of	$301,062.		As	at	December	31,	2014,	the	Company’s	
equity	holding	in	Black	Range	was	23.6%.			

On	 December	 31,	 2014,	 the	 market	 capitalization	 of	 the	 Company’s	 investment	 in	 Black	
Range	was	$2,685,482	based	on	the	quoted	market	price	available	on	the	Australian	Stock	
Exchange	and	the	carrying	amount	of	the	Company's	interest	was	$1,890,623.			

The	movement	of	the	Company’s	investment	in	Black	Range	is	as	follows:	

Balance,	beginning	of	year
Investment	costs	
Equity	loss	pick‐up
Conversion	of	First	and	Second	Black	Range	Convertible	Loan
Dilution	gain
Carrying	value	of	Black	Range	shares	sold
Balance,	end	of	year

Year ended	December	31,
2014
2013
	$																										‐			
	$														2,816,836	
															 3,396,380
				‐			
																 (579,544)
(2,625,218)
1,524,833	
																				436,660	
																		(262,488)
$
1,890,623

																													‐			
																													‐			
2,816,836

$														

‐

Black	Range	prepares	its	annual	financial	statements	as	at	June	30,	2014;	thus,	the	annual	
reporting	period	of	Black	Range	is	different	from	that	of	the	Company.	Set	out	below	is	the	
summarized	financial	information	for	Black	Range:		

Assets
Total	current	assets
Total	non‐current	assets
Total	assets

Liabilities
Total	current	liabilities
Total	liabilities

Net	assets

As at	December	31,

2014

2013

$																	

568,447
12,923,198
13,491,645

$																	

148,654
19,558,784
19,707,438

1,619,319
1,619,319

3,262,981
3,262,981

$												

11,872,326

$												

16,444,457

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

9.									LONG‐TERM	INVESTMENTS	(Continued)	

Interest	revenue
Loss	from	continuing	operations
Other	comprehensive	income/(loss)
Total	comprehensive	loss

9.2				

Investment	in	Anatolia	Energy	Limited	

Year	Ended

December	31,	2014

Period	from
July	2	to December
31,	2013

$																	

$																	

127,870
(11,138,894)
(229,921)
(11,368,815)

135,553
(2,998,471)
113,138
(2,885,333)

$											

$													

Anatolia,	a	company	listed	on	the	Australian	Stock	Exchange	(ASX:	AEK),	is	100%	owner	of	
the	 Temrezli	 Uranium	 Project	 in	 Turkey	 and	 its	 primary	 focus	 is	 its	 advanced	 exploration	
and	 development	 projects	 in	 the	 central	 Anatolian	 region	 of	 Turkey.	 As	 at	 December	 31,	
2014,	the	Company’s	ownership	interest	in	Anatolia	was	11.3%.	

During	2013,	the	Company	acquired	27,209,573	shares	of	Anatolia	for	total	consideration	of	
$1,771,953.	The	Company	accounted	for	the	investment	in	Anatolia	as	FVTPL.	For	the	year	
ended	December	31,	2013,	the	Company	recognized	an	unrealized	loss	of	$33,353	related	to	
its	investment	in	Anatolia.		

On	October	1,	2013,	the	Company	signed	a	put	option	agreement	with	Anatolia.	Under	the	
put	option	agreement,	Anatolia	can	issue	a	total	of	16,666,667	shares	to	the	Company	at	an	
issue	price	of	A$0.12	per	share	in	tranches	of	8,333,333	shares	(“Tranche	1”)	and	8,333,334	
shares	(“Tranche	2”).	During	the	year	ended	December	31,	2013,	the	Company	recorded	an	
unrealized	 loss	 on	 the	 put	 option	 for	 $818,523.	 In	 February	 2014,	 Anatolia	 exercised	
Tranche	 1	 of	 the	 put	 option	 agreement	 and	 issued	 8,333,333	 Anatolia	 shares	 to	 the	
Company	at	an	exercise	price	of	$898,100.		

Further,	 in	 August	 2014,	 Anatolia	 and	 the	 Company	 amended	 the	 put	 option	 agreement.		
The	 Company	 paid	 consideration	 of	 $348,338	 to	 Anatolia	 to	 settle	 Tranche	 2	 of	 the	 put	
option	 agreement	 and	 provide	 the	 Company	 with	 the	 ability	 to	 acquire	 up	 to	 8,333,334	
shares	 in	 Anatolia	 at	 a	 price	 of	 A$0.08	 per	 share	 (the	 “Call	 Option	 Agreement”).	 The	 Call	
Option	Agreement	matured	on	March	31,	2015.		

For	 the	 year	 ended	 December	 31,	 2014,	 the	 Company	 recognized	 an	 unrealized	 loss	 of	
$135,116	 (December	 31,	 2013:	 $33,353)	 on	 the	 revaluation	 of	 its	 investment	 in	 Anatolia.	
For	 the	 year	 ended	 December	 31	 2014,	 the	 Company	 sold	 450,000	 Anatolia	 shares	 for	
proceeds	 of	 $34,172.	 	 The	 Company	 also	 recognized	 a	 realized	 gain	 of	 $172,949	 on	 the	
extinguishment	of	Tranche	2	of	the	put	option	agreement,	a	realized	loss	of	$52,645	on	the	
exercise	of	Tranche	1	of	the	put	option	agreement	and	an	unrealized	loss	of	$19,399	on	the	
Call	Option	Agreement	for	the	year	ended	December	31,	2014.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

9.									LONG‐TERM	INVESTMENTS	(Continued)	

The	movement	of	the	Company’s	investment	in	Anatolia	is	as	follows:	

Year ended	December	31,
2014
2013

Balance,	beginning	of	year
Investment	in	Anatolia
Anatolia	shares	issued	under	Tranche 1 of put option
agreement
Extinguishment	of	Tranche	1	put	option	liability
Unrealized	loss	on	revaluation	of	investment	(Note	17)
Disposal	of	Anatolia	shares
Balance,	end	of	year

$														

$

1,738,600
‐ 	
898,100	

(406,155)
(135,116)
(34,172)
2,061,257

$																								
																	1,771,953

‐

‐

‐

																			 (33,353)

‐

$														

1,738,600

Valuation	assumptions	

The	assumptions	used	in	the	Company’s	valuation	model	of	the	Call	Option	Agreement	are	
as	follows:	

Underlying	share	price	(A$)
Expected	exercise	price	(A$)
Expected	life	in	years
Annualized	volatility
Risk	free	rate	of	return

December 31, 2014

August	12,	2014

As	at	

$																				
$																				

0.072
0.080
0.25	yrs
70%
2.45%

$																				
$																				

0.074
0.074
0.63	yrs

69% (i)

2.45%

(i)  Annualized	volatility	has	been	calculated	based	on	the	historical	volatility	of	Anatolia’s	stock	price.		

10.		 CONVERTIBLE	LOAN	RECEIVABLES	

As	at	December	31,	

2014

2013

Current	convertible	loan	issued	by	Black	Range
Current	convertible	loan	issued	by	Powertech
Current	convertible	loan	receivables

$																	

$																	

427,139
‐
427,139

$																								

$																	

‐
460,375
460,375

Non‐current	convertible	loans	issued	by	Black	Range
Non‐current	convertible	loan	receivables

$																								
$																								

‐
‐

$														
$														

2,320,675
2,320,675

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

10.		 CONVERTIBLE	LOAN	RECEIVABLES	(Continued)	

10.1						Convertible	loans	issued	by	Powertech	

On	 July	 31,	 2013,	 the	 Company	 provided	 a	 convertible	 debenture	 to	 Powertech	 in	 the	
amount	of	C$514,350	($500,000)	repayable	in	cash	or	shares	at	C$0.07	per	share,	pursuant	
to	 the	 terms	 and	 conditions	 of	 a	 private	 placement	 agreement	 dated	 July	 31,	 2013	
(“Powertech	 Convertible	 Debenture”).	 On	 October	 18,	 2013,	 the	 Powertech	 Convertible	
Debenture	was	converted	into	8,450,035	common	shares	at	C$0.07	share.	

In	addition,	on	October	18,	2013,	the	Company	agreed	to	provide	a	loan	facility	in	amount	of	
$3,600,000	to	Powertech	(“Powertech	Convertible	Loan”)	repayable	in	cash	or	shares.	Other	
key	terms	of	the	convertible	loan	are	as	follows:		

(cid:120)  Term	 –	 24	 months	 after	 the	 date	 of	 initial	 advance	 (the	 “Powertech	 CL	 Maturity	

Date”);	

(cid:120)  Conversion	 price	 ‐	 the	 conversion	 price	 shall	 be	 either	 1)	 C$0.12	 per	 share	 in	 the	
event	 that	 Powertech	 receives	 certain	 permits	 before	 December	 31,	 2013	 or	 2)	
C$0.095	per	share	in	the	event	that	such	permits	are	not	received	by	December	31,	
2013.	As	at	December	31,	2013,	Powertech	had	not	received	such	permits;	

(cid:120)  Early	repayment	option	–	Powertech	may	repay	the	loan,	in	whole	or	in	part,	before	

the	Powertech	CL	Maturity	Date;	

(cid:120)  Repayment/conversion	 amount	 –	 115%	 or	 130%	 of	 the	 amount	 of	 the	 Powertech	
Convertible	Loan	to	be	repaid/converted	if	the	repayment/conversion	occurs	on	or	
before	12	months	or	after	12	months	from	issuing	the	Powertech	Convertible	Loan,	
respectively;	

(cid:120)  Powertech’s	 conversion	 right	 ‐	 in	 whole	 or	 in	 part,	 on	 or	 before	 the	 Powertech	 CL	

Maturity	Date;	

(cid:120)  Azarga’s	conversion	right	–	in	whole	or	in	part,	after	the	earlier	of	1)	the	Powertech	
board	 of	 directors	 approving	 a	 transaction	 resulting	 in	 a	 change	 of	 control;	 2)	 a	
change	 of	 control	 of	 Powertech;	 3)	 occurrence	 of	 an	 event	 of	 default;	 4)	 after	 9	
months	following	the	date	of	the	initial	advance;	and	

(cid:120)  Other	‐	the	Powertech	Convertible	Loan	is	non‐interest	bearing	and	is	unsecured.	

During	the	year	ended	December	31,	2014,	Powertech	drew	down	an	additional	$2,575,000	
(December	 31,	 2013:	 $1,025,000)	 under	 the	 Powertech	 Convertible	 Loan	 increasing	 the	
amount	drawn	to	the	facility	limit	of	$3,600,000.	For	the	year	ended	December	31,	2014,	the	
change	in	fair	value	recorded	in	profit	or	loss	for	the	Powertech	Convertible	Loan	was	a	loss	
of	$1,918,710	(December	31,	2013:	$564,625).	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

10.		 CONVERTIBLE	LOAN	RECEIVABLES	(Continued)	

The	movement	of	the	amount	due	under	the	Powertech	Convertible	Loan	is	as	follows:	

Year ended	December	31,
2014
2013

Opening	balance,	beginning	of	year
Principal	drawdown
Decrease	in	fair	value	of	the	convertible loan
Settled	on	close	of	RTO	(Note	5)

Balance,	end	of	year

$

460,375
2,575,000
(1,918,710)
(1,116,665)

$																								

‐

$																		

‐

1,025,000
(564,625)
‐
460,375

$																	

On	 September	 12,	 2014,	 Powertech	 and	 the	 Company	 agreed	 to	 enter	 into	 an	 additional	
$650,000	loan	facility	(“Second	Powertech	Convertible	Loan”).	Other	key	commercial	terms	
of	the	loan	include:	

(cid:120)  Term	 –	 24	 months	 after	 the	 date	 of	 initial	 advance	 (the	 “Second	 Powertech	 CL	

Maturity	Date”);	

(cid:120)  Conversion	price	‐	C$0.06	per	share;		
(cid:120)  Early	repayment	option	–	Powertech	may	repay	the	loan,	in	whole	or	in	part,	before	

the	Second	Powertech	CL	Maturity	Date;	

(cid:120)  Repayment/conversion	 amount	 –	 115%	 or	 130%	 of	 the	 amount	 of	 the	 Second	
Powertech	 Convertible	 Loan	 to	 be	 repaid/converted	 if	 the	 repayment/conversion	
occurs	 on	 or	 before	 12	 months	 or	 after	 12	 months	 from	 issuing	 the	 Second	
Powertech	Convertible	Loan,	respectively;	

(cid:120)  Powertech’s	 conversion	 right	 ‐	 in	 whole	 or	 in	 part,	 on	 or	 before	 the	 Second	

Powertech	CL	Maturity	Date;	

(cid:120)  The	 Company’s	 conversion	 right	 –	 in	 whole	 or	 in	 part,	 after	 the	 earlier	 of	 1)	 the	
Powertech	 board	 of	 directors	 approving	 a	 transaction	 resulting	 in	 a	 change	 of	
control;	2)	a	change	of	control	of	Powertech;	3)	occurrence	of	an	event	of	default;	4)	
after	9	months	following	the	date	of	the	initial	advance;	and	

(cid:120)  Other	 ‐	 the	 Second	 Powertech	 Convertible	 Loan	 is	 non‐interest	 bearing	 and	 is	

unsecured.	

During	 the	 year	 ended	 December	 31,	 2014,	 Powertech	 drew	 down	 $305,000	 under	 the	
Second	 Powertech	 Convertible	 Loan	 (December	 31,	 2013:	 $nil).	 For	 the	 year	 ended	
December	 31,	 2014,	 the	 change	 in	 fair	 value	 recorded	 in	 profit	 or	 loss	 for	 the	 Second	
Powertech	Convertible	Loan	was	a	loss	of	$275,000	(December	31,	2013:	$nil).	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

10.		 CONVERTIBLE	LOAN	RECEIVABLES	(Continued)	

The	 movement	 of	 the	 amount	 due	 under	 the	 Second	 Powertech	 Convertible	 Loan	 is	 as	
follows:	

Year ended	December	31,
2014
2013

Opening	balance,	beginning	of	year
Principal	drawdown
Decrease	in	fair	value	of	the	convertible loan
Settled	on	close	of	RTO	(Note	5)

Balance,	end	of	year

$

‐
305,000
(275,000)
(30,000)
‐

$																		

$																								

‐
‐
‐
‐
‐

$																								

The	Powertech	Convertible	Loan	and	the	Second	Powertech	Convertible	Loan	were	settled	
on	close	of	the	RTO	(refer	to	Note	5).			

The	Powertech	Convertible	Debenture,	Powertech	Convertible	Loan	and	Second	Powertech	
Convertible	Loan	were	all	hybrid	instruments,	containing	a	loan	asset	component	and	three	
embedded	 derivatives	 –	 the	 issuer’s	 prepayment	 option,	 the	 investor’s	 conversion	 option	
and	 issuer’s	 conversion	 option	 (the	 “embedded	 derivatives”).	 All	 of	 these	 financial	
instruments	were	classified	as	FVTPL	and	all	changes	in	fair	value	are	recorded	in	profit	or	
loss.		

Fair	value	measurement		

The	 Company	 designated	 the	 Powertech	 convertible	 loans	 as	 financial	 assets.	 Fair	 value	
changes	 were	 recorded	 to	 profit	 or	 loss.	 The	 embedded	 derivative	 components	 in	 the	
Company’s	 convertible	 loans	 were	 valued	 using	 a	 binomial	 options	 pricing	 model.	 	 A	
binomial	tree	is	a	valuation	model	that	uses	a	lattice	of	the	underlying's	price	varying	over	
discreet	 time	 periods	 and	 determines	 the	 value	 of	 an	 option	 at	each	 node.	 The	 key	 inputs	
used	by	the	Company	in	its	binomial	option	pricing	model	are	further	disclosed	below.	The	
financial	asset	components	were	valued	based	on	the	present	value	of	expected	future	cash	
flows	at	the	discount	rate	that	would	have	applied	to	the	financial	assets	without	conversion	
or	other	embedded	derivative	features.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

10.		 CONVERTIBLE	LOAN	RECEIVABLES	(Continued)	

Valuation	assumptions	

The	assumptions	used	in	the	Company’s	valuation	model	of	the	Powertech	Convertible	Loan	
were	as	follows:	

Conversion	price
Volatility
Risk	free	rate	of	return
Foreign	exchange	spot	rate	(US$	to	C$)	
Underlying	share	price
Market	interest	rate

As at

October	28,	2014
$																				
0.092
75.0%
1.12%
1.1234
0.0312
12.0%

$																			

December	31,	2013
$																				
0.092
75.0% (i)
1.35%
1.0694
0.0725
12.0%

$																			

(i)  Volatility	has	been	calculated	based	on	the	historical	volatility	of	Powertech’s	stock	price.		

The	 assumptions	 used	 in	 the	 Company’s	 valuation	 model	 of	 the	 Second	 Powertech	
Convertible	Loan	were	as	follows:	

Conversion	price
Volatility
Risk	free	rate	of	return
Foreign	exchange	spot	rate	(US$	to	C$)	
Underlying	share	price
Market	interest	rate

As at

October	28,	2014
$																				
0.055
75.0%
1.12%
1.1234
0.0312
12.0%

$																			

December	31,	2013
N/A
N/A
N/A
N/A
N/A
N/A

(i)

(i)  Volatility	has	been	calculated	based	on	the	historical	volatility	of	Powertech’s	stock	price.		

10.2						Convertible	loans	issued	by	Black	Range		

On	July	2,	2013,	the	Company	acquired	an	A$2,000,000	convertible	loan	(“First	Black	Range	
Convertible	Loan”)	issued	by	Black	Range	which	is	repayable	in	cash	or	shares	at	A$0.01	per	
share.	Other	key	commercial	terms	of	the	loan	include:		

(cid:120)  Term	 –	 24	 months	 from	 the	 date	 of	 the	 first	 draw	 down	 (the	 “First	 CL	 Maturity	

Date”);	

(cid:120)  Early	 repayment	 option	 –	 Black	 Range	 may	 repay	 the	 loan,	 in	 whole	 or	 in	 part,	

before	the	First	CL	Maturity	Date;	

(cid:120)  Automatic	redemption	–	occurs	when	Black	Range	raises	an	aggregate	of	more	than	
A$13,000,000	 in	 debt	 and	 equity,	 other	 than	 any	 financing	 where	 no	 proceeds	 are	
received	by	Black	Range;	

(cid:120)  Conversion	 ‐	 If	 not	 repaid,	 the	 loan	 is	 automatically	 converted	 to	 shares	 of	 Black	

Range	at	the	First	CL	Maturity	Date;	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

10.		 CONVERTIBLE	LOAN	RECEIVABLES	(Continued)	

(cid:120)  Conversion/redemption	amount	–	110%,	115%	or	130%	of	the	principal	sum	being	
repaid/converted	 if	 the	 repayment/conversion	 occurs	 before	 6	 months,	 not	 less	
than	6	months	and	not	more	than	12	months,	or	more	than	12	months	from	issuing	
the	First	Black	Range	Convertible	Loan,	respectively;	and	

(cid:120)  Other	 –	 the	 First	 Black	 Range	 Convertible	 Loan	 is	 non‐interest	 bearing	 and	

unsecured.	

On	 October	 26,	 2013,	 the	 Company	 and	 Black	 Range	 amended	 the	 First	 Black	 Range	
Convertible	 Loan	 to	 convert	 the	 amount	 of	 $612,343	 (A$638,000)	 into	 shares	 of	 Black	
Range	at	a	conversion	price	of	A$0.01	per	share.	In	June	2014,	the	balance	of	the	First	Black	
Range	 Convertible	 Loan	 was	 converted	 into	 163,300,000	 Black	 Range	 shares	 at	 a	
conversion	price	of	A$0.01	per	share	and	the	facility	was	extinguished.			

The	First	Black	Range	Convertible	Loan	was	fully	drawn	prior	to	2014.		For	the	year	ended	
December	 31,	 2014,	 the	 change	 in	 fair	 value	 recorded	 in	 profit	 or	 loss	 for	 the	 First	 Black	
Range	Convertible	Loan	was	a	gain	$160,502	(December	31,	2013:	$170,506).	

The	 movement	 of	 the	 amount	 due	 under	 the	 First	 Black	 Range	 Convertible	 Loan	 is	 as	
follows:		

Opening	balance,	beginning	of	year
Principal	drawdown
Increase	in	fair	value	of	the	convertible loan
Conversion	of	the	convertible	loan

Balance,	end	of	year

Second	Black	Range	Convertible	Loan	

Year ended	December	31,
2014
2013

$

1,381,919

$																		

‐

‐
160,502
(1,542,421)

$																								

‐

$														

1,823,756
170,506
(612,343)
1,381,919

The	Second	 Black	Range	Convertible	Loan	(A$1,500,000)	was	signed	on	October	26,	2013	
and	is	repayable	in	cash	or	shares	at	A$0.012	per	share.	Other	key	commercial	terms	of	the	
loan	include:	

(cid:120)  Term	 ‐	 24	 months	 from	 the	 date	 of	 the	 first	 draw	 down	 (the	 “Second	 CL	 Maturity	

Date”);	

(cid:120)  Early	 repayment	 option	 –	 Black	 Range	 may	 repay	 the	 loan,	 in	 whole	 or	 in	 part,	

before	the	Second	CL	Maturity	Date;		

(cid:120)  Automatic	redemption	–	occurs	when	Black	Range	raises	an	aggregate	of	more	than	
A$11,500,000	 in	 debt	 and	 equity,	 other	 than	 any	 financing	 where	 no	 proceeds	 are	
received	by	Black	Range;	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

10.	

CONVERTIBLE	LOAN	RECEIVABLES	(Continued)	

(cid:120)  Conversion	 ‐	 If	 not	 repaid,	 the	 loan	 is	 automatically	 converted	 to	 shares	 of	 Black	

Range	at	the	Second	CL	Maturity	Date;	

(cid:120)  Conversion/redemption	amount	–	110%,	115%	or	130%	of	the	principal	sum	being	
repaid/converted	 if	 the	 repayment/conversion	 occurs	 before	 6	 months,	 not	 less	
than	6	months	and	not	more	than	12	months,	or	more	than	12	months	from	issuing	
the	Second	Black	Range	Convertible	Loan,	respectively;	and	

(cid:120)  Other	 ‐	 the	 Second	 Black	 Range	 Convertible	 Loan	 is	 non‐interest	 bearing	 and	

unsecured.	

In	 June	 2014,	 the	 Second	 Black	 Range	 Convertible	 Loan	 was	 converted	 into	 141,666,667	
Black	 Range	 shares	 at	 a	 conversion	 price	 of	 A$0.012	 per	 share	 and	 the	 facility	 was	
extinguished.	

During	the	year	ended	December	31,	2014,	Black	Range	drew	down	an	additional	$447,708	
(December	 31,	 2013:	 $931,220)	 under	 the	 Second	 Black	 Range	 Convertible	 Loan	 and	 the	
change	in	fair	value	recorded	in	profit	or	loss	was	a	gain	of	$185,217	(December	31,	2013:	
$7,535).	 The	 Second	 Black	 Range	 Convertible	 Loan	 was	 fully	 drawn	 in	 the	 first	 quarter	 of	
2014.		

The	 movement	 of	 the	 amount	 due	 under	 the	 Second	 Black	 Range	 Convertible	 Loan	 is	 as	
follows:	

Opening	balance,	beginning	of	year
Principal	drawdown
Increase	in	fair	value	of	the	convertible loan
Conversion	of	the	convertible	loan

Balance,	end	of	year

Third	Black	Range	Convertible	Loan	

Year ended	December	31,
2014
2013

$																		

$

938,755
447,708
185,217
(1,571,680)

$																								

‐

$																	

‐
931,220
7,535
‐
938,755

On	 February	 25,	 2014,	 Black	 Range	 and	 the	 Company	 agreed	 to	 enter	 into	 an	 additional	
A$2,000,000	 loan	 facility	 (“Third	 Black	 Range	 Convertible	 Loan”).	 Other	 key	 commercial	
terms	of	the	loan	include:	

(cid:120)  Term	 ‐	 12	 months	 from	 the	 date	 of	 the	 first	 draw	 down	 (the	 “Third	 CL	 Maturity	

Date”); 

(cid:120)  Conversion	price	–	The	higher	of	a)	the	three	month	volume	weighted	average	price	
of	Black	Range	shares	traded	on	the	Australian	Stock	Exchange	from	the	date	of	the	
first	draw	down	or	b)	A$.007;	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

10.		 CONVERTIBLE	LOAN	RECEIVABLES	(Continued)	

(cid:120)  Early	 repayment	 option	 –	 Black	 Range	 may	 repay	 the	 loan,	 in	 whole	 or	 in	 part,	

before	the	Third	CL	Maturity	Date;		

(cid:120)  Conversion	 ‐	 If	 not	 repaid,	 the	 loan	 is	 automatically	 converted	 to	 shares	 of	 Black	

Range	at	the	Third	CL	Maturity	Date;		

(cid:120)  The	 Company’s	 conversion	 right	 –	 subject	 to	 Black	 Range	 obtaining	 regulatory	
approvals,	 the	 Company	 can	 convert	 the	 outstanding	 amount	 of	 the	 Third	 Black	
Range	Convertible	Loan	three	months	after	the	first	draw	down;	

(cid:120)  Conversion/redemption	 amount	 –	 115%	 or	 130%	 of	 the	 principal	 sum	 being	
repaid/converted	 if	 the	 repayment/conversion	 occurs	 on	 or	 before	 6	 months	 or	
after	6	months	from	issuing	the	Third	Black	Range	Convertible	Loan,	respectively;	
(cid:120)  Right	to	appoint	a	second	director	–	if	the	fully	diluted	voting	power	of	the	Company	

exceeds	35%;	and	

(cid:120)  Other	 –	 the	 Third	 Black	 Range	 Convertible	 Loan	 is	 non‐interest	 bearing	 and	

unsecured.	

During	the	year	ended	December	31,	2014,	Black	Range	drew	down	A$460,000	($419,080),	
under	the	Third	Black	Range	Convertible	Loan.	For	the	year	ended	December	31,	2014,	the	
change	 in	 fair	 value	 recorded	 in	 profit	 or	 loss	 for	 the	 Third	 Black	 Range	 Convertible	 Loan	
was	a	gain	of	$8,059.	

The	 movement	 of	 the	 amount	 due	 under	 the	 Third	 Black	 Range	 Convertible	 Loan	 is	 as	
follows:	

Year ended	December	31,
2014
2013

Opening	balance,	beginning	of	year
Principal	drawdown
Increase	in	fair	value	of	the	convertible loan

Balance,	end	of	year

$

$																	

‐
419,080
8,059
427,139

$																		

$																								

‐
‐
‐
‐

Subsequent	to	December	31,	2014	the	Third	Black	Range	Convertible	Loan	was	converted	
into	73,284,314	Black	Range	shares	and	the	facility	was	extinguished.		

All	convertible	loans	issued	by	Black	Range	are	hybrid	instruments,	containing	a	loan	asset	
component	 and	 two	 embedded	 derivatives	 ‐	 the	 mandatory	 conversion	 option	 and	 the	
issuer’s	 early	 repayment	 option	 (the	 “embedded	 derivatives”).	 The	 Third	 Black	 Range	
Convertible	 Loan	 contains	 an	 additional	 embedded	 derivative,	 the	 Company’s	 conversion	
right.	 The	 financial	 instruments	 are	 classified	 as	 FVTPL	 and	 all	 changes	 in	 fair	 value	 are	
recorded	 in	 profit	 or	 loss.	 The	 Company	 applied	 a	 12%	 discount	 rate	 to	 the	 First,	 Second	
and	Third	Black	Range	Convertible	Loans	when	determining	the	fair	values	of	the	loan	asset	
component.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

11.	

LOANS	PAYABLE	

Loan	payable	to	shareholders
Other	loans	payable
Loans	Payable

Current	portion
Non‐current	portion

11.1						Loan	payable	to	shareholders	

As at December	31,

2014

2013

$														

$														

$														

2,024,522
1,246,094
3,270,616

1,068,522
2,202,094

$														

1,846,531

‐

$														

1,846,531

$														

70,531
1,776,000

On	July	31,	2012,	the	Company	entered	into	a	$1,800,000	convertible	loan	agreement	with	
its	 founding	 shareholders	 (“Shareholders	 Loan	 Agreement”).	 The	 funds	 were	 used	 for	
funding	the	 UrAsia	2012	exploration	 program	and	general	working	capital	purposes.		The	
key	commercial	terms	of	the	financing	include:		

(cid:120) 

Interest	 –	 10%	 per	 annum	 payable	 on	 each	 anniversary	 date	 of	 the	 Shareholders	
Loan	Agreement;	

(cid:120)  Term	–	3	years,	commencing	July	31,	2012;	
(cid:120)  Conversion	price	–	based	on	the	Company’s	most	recent	sale	of	shares	to	an	outside	

third	party;	

(cid:120)  Founding	shareholders’	conversion	right	–	to	convert	the	outstanding	balance	of	the	
loan	plus	accrued	interest,	in	whole	or	in	part,	into	ordinary	shares	of	the	Company	
at	the	conversion	price;	

(cid:120)  Extension	of	the	term	–	the	Company	has	the	option,	on	maturity,	to	extend	the	term	
of	 the	 loan	 for	 an	 additional	 three	 years.	 Upon	 exercise	 of	 this	 option,	 the	 annual	
interest	rate	increases	to	15%	per	annum;	

(cid:120)  Early	repayment	option	–	the	Company	has	the	right,	but	not	the	obligation,	to	repay	
the	whole	balance	of	the	loan	plus	accrued	interest	at	any	time	out	of	the	proceeds	
of	a	capital	raising	or	if	the	loan	is	refinanced	or	replaced	by	a	new	loan	on	or	before	
the	maturity;	and	

(cid:120)  Other	‐	the	Shareholders	Loan	Agreement	is	unsecured.	

On	February	12,	2014,	the	Shareholders	Loan	Agreement	was	amended	to	extend	the	term	
to	 5	 years.	 The	 conversion	 price	 was	 also	 amended	 to	 a)	 based	 on	 the	 Company’s	 most	
recent	sale	of	shares	to	an	outside	third	party,	if	the	Company	is	private	or	b)	the	higher	of	
the	 Company’s	 20‐day	 volume	 weighted	 average	 share	 price	 or	 $0.40,	 adjusted	 for	 an	
appropriate	transaction	ratio,	if	the	Company	is	public.		On	close	of	the	RTO,	the	conversion	
price	has	been	adjusted	to	C$1.23	per	share.		

As	 at	 December	 31,	 2014,	 the	 Company	 had	 drawn	 $1,776,000	 (December	 31,	 2013:	
$1,776,000)	under	the	Shareholders	Loan	Agreement.	During	the	year	ended	December	31	
2014,	 the	 Company	 recorded	 an	 interest	 expense	 of	 $177,991	 (December	 31,	 2013:	
$171,068).		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

11.	

LOANS	PAYABLE	(Continued)	

The	movement	of	the	amount	due	under	the	Shareholders	Loan	Agreement	is	as	follows:	

Opening	balance,	beginning	of	year
Principal	drawdown
Interest	expense
Interest	paid
Balance,	end	of	year

Current	portion
Non‐current	portion

Year	ended	December	31,
2014
2013

$														

1,846,531

$														

‐
177,991
‐

$														

2,024,522

$														

1,354,741
456,000
171,068
(135,278)
1,846,531

$														

248,522
1,776,000

$														

70,531
1,776,000

The	 convertible	 loan	 is	 a	 hybrid	 instrument,	 containing	 a	 debt	 host	 component	 and	 three	
embedded	 derivatives	 ‐	 the	 investor’s	 conversion	 option,	 early	repayment	 option,	 and	 the	
issuer’s	 term	 extension	 right	 (the	 “embedded	 derivatives”).	 The	 debt	 host	 component	 is	
classified	as	other‐financial‐liabilities	and	is	measured	at	amortized	cost	using	the	effective	
interest	rate	method	and	the	embedded	derivatives	are	classified	as	FVTPL	and	all	changes	
in	fair	value	are	recorded	in	profit	or	loss.		The	difference	between	the	debt	host	component	
and	 the	 principal	 amount	 of	 the	 loan	 outstanding	 is	 accreted	 to	 profit	 or	 loss	 over	 the	
expected	 life	 of	 the	 convertible	 debenture.	 	 The	 fair	 values	 of	 the	 embedded	 derivatives	
were	insignificant	upon	initial	measurement	and	as	at	December	31,	2014	and	2013.		

11.2						Other	loans	payable	

The	movement	of	the	amount	due	under	the	other	loans	payable	is	as	follows:	

Opening	balance,	beginning	of	year
Assumed	as	part	of	RTO	(Note	5)
Interest	expense
Balance,	end	of	year

Current	portion
Non‐current	portion

Year Ended
December 31, 2014

$

$

‐

1,216,968
29,126
1,246,094

$																	

820,000
426,094

The	Company	assumed	loan	agreements	with	Anadarko	Land	Corp	(“Anadarko”)	and	Elston	
on	close	of	the	RTO.		These	agreements	include:	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

11.	

LOANS	PAYABLE	(Continued)		

Anadarko	Agreement	

The	 Company	 entered	 into	 an	 agreement	 with	 Anadarko	 to	 purchase	 uranium	 rights	 on	
certain	 areas	 of	 the	 Centennial	 Project	 for	 total	 consideration	 of	 $3,000,000,	 of	 which	
$1,815,000	 had	 been	 paid	 as	 at	 December	 31,	 2014	 (the	 “Anadarko	 Agreement”).	 Of	 the	
consideration	 outstanding,	 $790,000	 is	 payable	 in	 2015	 and	 $395,000	 is	 payable	 in	 2016.	
An	 additional	 $2,000,000	 is	 payable	 upon	 receipt	 of	 regulatory	 permits	 and	 licenses	
allowing	 uranium	 production	 on	 the	 area	 of	 the	 Centennial	 Project	 pertaining	 to	 these	
mineral	interests.	Other	key	terms	of	the	Anadarko	Agreement	include:	

(cid:120)  Failure	 to	 Permit	 –	 If	 the	 Company	 does	 not	 obtain	 the	 regulatory	 permits	 and	
licenses	 allowing	 uranium	 production	 by	 September	 27,	 2019,	 the	 uranium	 rights	
will	transfer	back	to	Anadarko,	at	Anadarko’s	option;	
In	 the	 event	 of	 default,	 the	 uranium	 rights	 will	 transfer	 back	 to	 Anadarko,	 at	
Anadarko’s	option;	and	

(cid:120) 

(cid:120)  The	Anadarko	Agreement	is	non‐interest	bearing.	

For	the	year	ended	December	31,	2014,	the	imputed	effective	interest	expense	was	$25,945.		

The	 Anadarko	 Agreement	 is	 classified	 as	 other‐financial‐liabilities	 and	 is	 measured	 at	
amortized	 cost	 using	 the	 effective	 interest	 rate	 method.	 	 The	 difference	 between	 the	 debt	
host	 component	 and	 the	 principal	 amount	 of	 the	 loan	 outstanding	 is	 accreted	 to	 profit	 or	
loss	over	the	expected	life	of	the	Anadarko	Agreement.	

Elston	Agreements	

The	Company	entered	into	an	agreement	with	Elston	to	purchase	mineral	rights	on	certain	
areas	of	the	Dewey	Burdock	Project	for	total	consideration	of	$600,000,	of	which	$480,000	
had	 been	 paid	 as	 at	 December	 31,	 2014	 (the	 “Elston	 Agreement”).	 Of	 the	 consideration	
outstanding,	$30,000	is	payable	in	2015	and	$90,000	is	payable	in	three	annual	installments	
of	 $30,000	 from	 2016	 to	 2018.	 An	 additional	 $1,300,000	 is	 payable,	 in	 four	 equal	 annual	
installments,	upon	receipt	of	regulatory	permits	and	licenses	allowing	uranium	production	
on	the	area	of	the	Dewey	Burdock	Project	pertaining	to	these	mineral	interests.	Other	key	
terms	of	the	Elston	Agreement	include:	

(cid:120) 

In	 the	 event	 of	 default,	 Elston	 has	 the	 option	 to	 purchase	 the	 mineral	 property	
interests	for	$1;	and	

(cid:120)  The	Elston	Agreement	is	non‐interest	bearing	

For	the	year	ended	December	31,	2014,	the	imputed	effective	interest	expense	was	$3,181.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

11.	

LOANS	PAYABLE	(Continued)	

The	 Elston	 Agreement	 is	 classified	 as	 other‐financial‐liabilities	 and	 is	 measured	 at	
amortized	 cost	 using	 the	 effective	 interest	 rate	 method.	 	 The	 difference	 between	 the	 debt	
host	 component	 and	 the	 principal	 amount	 of	 the	 loan	 outstanding	 is	 accreted	 to	 profit	 or	
loss	over	the	expected	life	of	the	Elston	Agreement.	

The	Company	also	assumed	an	additional	Elston	agreement	with	$750,000	payable,	in	four	
equal	 annual	 installments,	 upon	 receipt	 of	 regulatory	 permits	 and	 licenses	 allowing	
uranium	 production	 on	 the	 area	 of	 the	 Dewey	 Burdock	 Project	 pertaining	 to	 the	 mineral	
interests	covered	by	the	agreement.		

12.		 TRADE	AND	OTHER	PAYABLES	

Trade	 and	 other	 payables	 of	 the	 Company	 primarily	 consist	 of	 amounts	 outstanding	 for	
trade	 purchases	 relating	 to	 exploration	 activities.	 	 The	 usual	 credit	 period	 taken	 for	 trade	
purchases	is	between	30	to	90	days.		

Less	than	1	month
1‐3	months
3‐6	months
More	than	6	months
Total	trade	and	other	payables

As at December	31,

2014

2013

$														

$														

1,126,423
503,225
910,160
930,903
3,470,711

$																	

$																	

191,985
84,486
110,000
‐
386,471

Included	in	trade	and	other	payables	are	amounts	due	to	related	parties,	which	are	further	
disclosed	in	Note	24.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

13.	 OTHER	LIABILITIES	

Promissory	note	payable	
Put	option	on	non‐controlling	interest of UrAsia (Note 5)
Put	option	held	by	Anatolia	(Note 9.2)
Other	liabilities
Total	other	current	liabilities

$

$

Put	option	held	by	Powertech	on	Centennial	Project	
Promissory	note	payable	
Put	option	on	non‐controlling	interest of UrAsia (Note 5)
Empire	Equity	facility	(Note	9.1)
Total	non‐current other	liabilities

14.		 DEFERRED	INCOME	TAX		

14.1	 Deferred	income	tax		

As at December	31,

2014

2013

‐
‐
‐
7,582
7,582

‐
‐

$																	

$														

250,000
1,872,592
818,523
30,442
2,971,557

177,835
199,980
‐
‐
377,815

$																								

$																	

1,423,118
228,422
1,651,540

$

$																	

Taxation	 on	 profits	 or	 losses	 has	 been	 calculated	 on	 the	 estimated	 assessable	 profits	 or	
losses	for	the	year	at	the	rates	of	taxation	prevailing	in	the	countries	in	which	the	Company	
operates.		

14.2	 Deferred	income	tax	expenses	

Net	loss	before	income	tax
Tax	at	statutory	rate
Income	tax	expense	based	on	statutory rate

Effect	of	different tax	rates	applicable in foreign
jurisdictions
Unrecognized	deferred	tax	assets
Effect	of	permanent	differences
Income	tax	expenses

$

$

$

Year ended	December	31,
2013

2014

1,220,630
26%
317,364

$														

4,095,542
0%

$																		

‐

131,000
(933,000)
229,541
(255,095)

162,631
(69,538)
(310,386)
(217,293)

$															

The	2014	statutory	tax	rate	of	26%	is	based	on	Azarga	Uranium’s	(legal	parent)	applicable	
tax	rate;	the	2013	statutory	tax	rate	of	0%	is	based	on	Azarga	Resources	applicable	tax	rate.		
Azarga	Resources	was	incorporated	in	the	British	Virgin	Islands.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

14.		 DEFERRED	INCOME	TAX	(Continued)	

14.3	 Deferred	tax	balances	

The	Company’s	deferred	tax	assets	and	liabilities	consist	of	the	following	amounts:	

As at December	31,

2014

2013

Tax	loss	carry	forward
Deferred	tax	asset

Exploration	and	evaluation	assets
Property,	plant	and	equipment
Inter‐company	loans	eliminated	on consolidation
Deferred	tax	liabilities

$
$

$

$														

‐
‐

$																	
$																	

155,097
155,097

4,484,194
(2,748)
1,138,344
5,619,790

$																	

$														

752,785
9,385
1,097,621
1,859,791

Net	deferred	tax	liabilities	

$

5,619,790

$														

1,704,694

The	Company’s	deferred	tax	liabilities	movement	schedule	is	shown	as	follows:	

Year ended	December	31,
2014
2013

Opening	balance	
Assumed	on	close	of	RTO	(Note	5)
Deferred	tax	expenses	
Currency	translation	effect
Deferred	tax	liabilities	

$

1,704,694
3,660,000
255,095
‐

$														

1,518,606

‐
217,293
(31,205)
1,704,694

$														

5,619,790

$														

14.4	 Unrecognized	deductible	temporary	differences	and	unused	tax	losses		

The	 Company’s	 deductible	 temporary	 differences	 and	 unused	 tax	 losses	 for	 which	 no	
deferred	tax	asset	is	recognized	consist	of	the	following	amounts	(tax	effected):	

As at December	31,

2014

2013

Non‐capital	losses
Deductible	temporary	differences
Total	unrecognized	amounts

$																	

$														

918,000
210,410
1,128,410

$																			

$																	

79,200
115,726
194,926

As	at	December	31,	2014,	the	Company	had	unrecognized	deferred	tax	assets	attributable	to	
temporary	 differences	 of	 $210,410,	 primarily	 related	 to	 value	 added	 tax	 receivables	 not	
recognized	and	certain	deferred	payments	not	recognized.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

14.		 DEFERRED	INCOME	TAX	(Continued)	

As	at	December	31,	2013,	the	Company	had	unrecognized	deferred	tax	assets	attributable	to	
temporary	 differences	 of	 $115,726,	 primarily	 related	 to	 value	 added	 tax	 receivables	 not	
recognized.		

The	 deferred	 tax	 assets	 related	 to	 the	 temporary	 differences	 were	 not	 recognized,	 as	 its	
recoverability	was	not	considered	to	be	probable.	

14.5	 Expiry	dates	

The	expiry	dates	of	the	Company’s	unused	tax	losses	are	as	follows:	

Non‐capital	losses
Kyrgyz	Republic
Hong	Kong
Canada
United	States

Non‐capital	losses
Kyrgyz	Republic
Hong	Kong

15.				 ADMINISTRATION	EXPENSES	

As at December	31,	2014

Amount

Expiry

$														

3,530,109
581,591
668,944
842,482

2017‐2019
Indefinite
2034
2034

As at December	31,	2013

Amount

Expiry

$														

1,550,978
480,000

2017‐2018
Indefinite

Year	ended	December	31,
2013

2014

Salaries	and	benefits
Consulting	and	professional	fees
Corporate	administration	
Depreciation
Share‐based	compensation
Administration	expenses

$														

$

1,442,346
995,822
729,891
14,056
620,792
3,802,907

$																	

$														

860,203
251,372
648,541
11,521
169,087
1,940,724

For	the	year	ended	December	31,	2014,	a	depreciation	expense	of	$15,983	was	capitalized	
to	exploration	and	evaluation	assets	(December	31,	2013:	$8,500),	the	remaining	expense	of	
$14,056	was	expensed	as	administration	expense	(December	31,	2013:	$11,521).	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

16.		

FINANCE	COSTS	

Interest	expense	on	put	option	on non‐controlling
interest	of	UrAsia	(Note	5)	
Interest	expense	on	deferred	consideration (Note 5)
Interest	expense	on	loan	payable	to shareholders
(Note	11)
Interest	expense	on	equity	instrument issued to Powerlite
(Note	20.4)
Interest	expense	on	other	loans	payable (Note 11.2)
Other	interest	expenses
Finance	costs

Year	ended	December	31,
2014
2013

$																	

160,567

$																	

200,635

157,330
177,991

757,754

29,126
44,952
1,327,720

$														

253,815
171,068

348,493

‐
1,307
975,318

$																	

17.		 UNREALIZED	LOSS	ON	FINANCIAL	INSTRUMENTS	

Year ended	December	31,
2014
2013

Loss	on	convertible	loans	issued	by	Powertech	(Note	10.1)
Gain	on	convertible	loans	issued	by	Black	Range	(Note	10.2)
Loss	on	revaluation	of	put	option	on	Anatolia	shares	(Note	9.2)
Loss	on	revaluation	of	investment	in	Anatolia	(Note	9.2)
Loss	on	revaluation	of	call	option	on	Anatolia	shares	(Note	9.2)
Dilution	gain	on	investment	in	associates	(Note	9.1)
Loss	on	warrant	liability	(Note	20.2)
Unrealized	loss	on	financial	instruments, net

$													

$

(2,193,710)
353,778
‐
(135,116)
(19,399)
469,784
(36,533)
(1,561,196)

$															

(564,625)
102,277
(818,523)
(33,353)
‐
‐
‐

$													

(1,314,224)

18.	

REALIZED	GAIN/(LOSS)	ON	FINANCIAL	INSTRUMENTS	

Year ended	December	31,
2014
2013

Gain/(loss)	on	investment	in	Black	Range
Gain	recognized	on	assets	settled	on	close	of	RTO
Gain	on	revaluation	of	put	option	on	Anatolia	shares
Gain	on	investment	in	Powertech
Gain	on	convertible	debenture	issued	by	Powertech	(Note	10.1)
Gain	on	convertible	loan	issued	by	Black	Range	(Note	10.2)
Gain	on	extinguishment	of	liabilities	to	sellers	of	Urasia	(Note	5)
Realized	gain/(loss)	on	financial	instruments, net

$													

$

(1,550,695)
301,133
120,304
‐
‐
‐
957,777
(171,481)

$																	

$																

407,368
‐
‐
146,485
73,884
75,764
‐
703,501

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

19.		 EARNINGS	PER	SHARE	

Weighted	 average	 shares	 outstanding	 were	 38,105,247	 for	 the	 year	 ended	 December	 31,	
2014	 (December	 31,	 2013:	 65,989,152)	 and	 used	 to	 calculate	 loss	 per	 share.	 The	 effect	 of	
outstanding	 options,	 warrants	 and	 convertible	 securities	 were	 excluded	 from	 the	
calculation	 of	 diluted	 net	 loss	 for	 the	 years	 ended	 December	 31,	 2014	 and	 2013	 as	 the	
impact	would	have	been	anti‐	dilutive.	

20.		 EQUITY	

20.1						Share	capital/contributed	surplus		

The	 Company	 has	 authorized	 the	 issuance	 of	 an	 unlimited	 number	 of	 common	 and	
preferred	shares	with	no	par	value.		As	at	December	31,	2014,	the	Company	had	59,403,733	
(December	31,	2013:	75,583,274)	common	shares	outstanding.		

The	movement	of	Company’s	common	shares	outstanding	and	share	capital	is	as	follows:	

As	at	December	31,	2012

Issuance	of	common	shares

As	at	December	31,	2013

Number of
Common	Shares	

	Amount	($)	

50,000,000

$																							

200,000

25,583,274

102,333

75,583,274

																								 302,333

Issuance	of	common	shares	prior	to	close of RTO

39,241,880

156,968

RTO	transactions	(note	5)

Elimination	of	Azarga	Resources	common shares
Shares	outstanding	on	close	of	RTO
Share	consolidation	on	close	of	RTO
Reclassification	of	contributed	surplus

Private	placement	financing	(net	of	finder's fee)
Shares	issued	pursuant	to	employment agreements
As	at	December	31,	2014

(114,825,154)
505,700,952
(455,130,857)

‐

8,580,830
252,808
59,403,733

‐

3,109,018

‐

29,192,012

4,043,409
135,024
36,938,764

$																		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

20.	

EQUITY	(Continued)	

The	movement	of	Company’s	contributed	surplus	is	as	follows:	

Year ended	December	31,
2014
2013

Opening	balance,	beginning	of	year
Issuance	of	common	shares
Equity	instrument	issued	to	Powerlite (Note 20.4)
Less:	transaction	costs	(Note	24)
Reclassification	to	share	capital	
Balance,	end	of	year

$

$

20,585,082
254,787
6,757,754

‐

(29,192,012)
(1,594,389)

$													

(1,594,389)
10,130,978
12,348,493
(300,000)
‐

$												

20,585,082

For	the	year	ended	December	31,	2013,	the	Company	issued	25,583,274	common	shares	for	
total	 proceeds	 of	 $10,233,311,	 before	 transaction	 costs	 of	 $300,000	 (share	 capital	 of	
$102,333	plus	contributed	surplus	of	$10,130,978),	at	an	average	price	of	$0.40.	Of	which,	
2,500,000	common	shares	were	issued	to	settle	the	deferred	payment	to	the	original	sellers	
of	 UrAsia	 and	 the	 remaining	 number	 of	 common	 shares	 were	 issued	 pursuant	 to	 investor	
subscription	agreements.	

On	July	1,	2014,	38,212,493	shares	were	issued	to	Powerlite	Ventures	Limited	(“Powerlite”)	
(refer	 to	 Note	 20.4	 for	 additional	 details)	 on	 conversion	 of	 the	 accumulated	 Powerlite	
equity	 contributions	 made	 pursuant	 to	 the	 Powerlite	 Facility.	 	 As	 a	 result	 of	 the	 share	
issuance,	 $152,850	 was	 reclassified	 from	 contributed	 surplus	 to	 share	 capital.	 In	 addition,	
the	Company	recorded	$6,757,754	to	contributed	surplus	for	the	equity	instrument	issued	
to	Powerlite	(December	31,	2013:	$12,348,493).			

On	April	1,	2013,	the	Company	entered	into	share	subscription	agreements	with	investors	
to	subscribe	for	4,250,000	shares	for	total	subscription	proceeds	of	$1,700,000	at	$0.40	per	
share.	 As	 at	 the	 close	 of	 the	 RTO,	 the	 investors	 had	 paid	 subscription	 deposits	 totaling	
$645,064	 (December	 31,	 2013:	 $283,310).	 No	 additional	 amounts	 will	 be	 funded	 through	
the	subscription	agreements	as	a	result	of	the	RTO.	In	2014,	the	Company	issued	904,387	
common	shares	to	the	investors	for	total	proceeds	of	$361,755	(share	capital	of	$3,618	plus	
contributed	 surplus	 of	 $358,137)	 at	 an	 average	 price	 of	 $0.40.	 In	 addition,	 the	 Company	
issued	125,000	common	shares	pursuant	to	a	key	management	employment	agreement	at	
an	average	price	of	$0.40,	a	price	equivalent	to	the	fair	value	of	the	common	shares	based	
on	 most	 recent	 equity	 raise,	 resulting	 in	 an	 increase	 in	 the	 Company’s	 equity	 by	 $50,000	
(share	 capital	 of	 $500	 plus	 contributed	 surplus	 of	 $49,500)	 and	 a	 charge	 to	 share‐based	
compensation	expense.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

20.	

EQUITY	(Continued)	

Concurrent	 with	 the	 closing	 of	 the	 RTO	 (refer	 to	 Note	 5	 for	 additional	 details)	 and	 the	
Consolidation,	the	Company	completed	a	private	placement	financing	for	gross	proceeds	of	
approximately	 C$5,000,000	 ($4,450,442)	 (the	 “Financing”)	 through	 the	 issuance	 of	
8,338,134	post‐Consolidation	units	(“Units”),	each	Unit	consisting	of	one	post‐Consolidation	
common	share	and	one‐half	of	a	common	share	purchase	warrant	(“Warrant”).	Each	whole	
Warrant	 entitles	 the	 holder	 to	 purchase	 one	 post‐Consolidation	 common	 share	 at	 an	
exercise	price	of	C$1.00	per	share	until	October	28,	2016.	Accounting	for	the	Consolidation	
adjustment,	 the	 Units	 subscribed	 for	 pursuant	 to	 the	 Financing	 were	 subscribed	 for	 at	
C$0.60	per	Unit.	Finder’s	fees	in	connection	with	the	Financing	comprised	of	C$145,617	and	
242,696	 post‐Consolidation	 shares.	 All	 securities	 issued	 pursuant	 to	 the	 Financing	 were	
subject	to	a	hold	period	that	expired	March	1,	2015.	

In	 addition,	 subsequent	 to	 the	 close	 of	 the	 RTO,	 252,808	 common	 shares	 were	 issued	
pursuant	to	a	key	management	employment	agreement	at	an	average	price	of	$0.60,	a	price	
equivalent	to	the	fair	value	of	the	common	shares	based	on	the	Financing.	

20.2					Share	purchase	warrants	

On	closing	of	the	RTO,	the	Company	assumed	 2,000,000	share	purchase	 warrants	with	an	
exercise	 price	 of	 C$2.00	 per	 share	 and	 84,980	 share	 purchase	 warrants	 with	 an	 exercise	
price	of	C$1.15	per	share.		Each	whole	warrant	entitles	the	holder	to	purchase	one	common	
share.		The	fair	value	of	the	share	purchase	warrants	at	assumption	was	$25,891	compared	
to	 $27,708	 as	 at	 December	 31,	 2014,	 resulting	 in	 a	 gain,	 inclusive	 of	 currency	 translation	
adjustment,	of	$1,817	for	the	year	ended	December	31,	2014.		

For	 the	 year	 ended	 December	 31	 2014,	 the	 Company	 issued	 4,169,067	 share	 purchase	
warrants	as	a	part	of	the	Financing.	Each	whole	warrant	entitles	the	holder	to	purchase	one	
common	 share	 at	 an	 exercise	 price	 of	 C$1.00	 per	 share	 until	 October	 28,	 2016.	 	 The	 fair	
value	of	the	share	purchase	warrants	at	inception	was	$277,410	compared	to	$300,505	as	
at	 December	 31,	 2014,	 resulting	 in	 a	 gain,	 inclusive	 of	 currency	 translation	 adjustment,	 of	
$23,095	 for	 the	 year	 ended	 December	 31,	 2014.	 The	 weighted	 average	 fair	 value	 of	 the	
warrants	granted	in	the	year	ended	December	31,	2014	was	estimated	at	C$0.07	per	share	
at	the	issue	date	using	the	Black‐Scholes	Option	Pricing	Model.	

Risk	free	rate	of	return
Expected	life
Expected	volatility (i)
Expected	dividend per	share

As at December 31,
2014

As	at	October	28,
2014

1.00%
1.20‐1.80 yrs
93‐99%
Nil

1.00‐1.02%
0.02‐2.00 yrs

88%‐99% (i)

Nil

(i)							Volatility	has	been	calculated	based	on	the	historical	volatility	of	the	Company’s	stock	price		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

20.	

EQUITY	(Continued)	

The	 share	 purchase	 warrants	 are	 considered	 a	 derivative	 liability,	 as	 the	 currency	
denomination	of	the	exercise	price	is	different	from	the	functional	currency	of	the	Company.			

The	warrant	transactions	for	the	year	ended	December	31,	2014	are	as	follows:	

Balance,	beginning	of	year
Assumed	on	close	of	RTO	(Note	5)
Share	purchase	warrants	granted
Share	purchase	warrants	expired
Balance,	end	of	year

Year ended December	31,	2014

Number	of	share	purchase	
warrants

Weighted	average	exercise	
price	(C$)

‐

$																																			

2,084,980
4,169,067
(500,000)
5,754,047

$																																	

‐
1.97
1.00
2.00
1.26

The	share	purchase	warrants	outstanding	and	exercisable	as	at	December	31,	2014	are	as	
follows:	

Share purchase warrants outstanding and	exercisable

	Exercise	price	(C$)	

	Share	purchase	warrants	
outstanding	

	Weighted	average	
exercise	
price	(C$)	

	Weighted	average	
remaining	contractual	life	
(years)	

$																			

2.00
1.15
1.00

1,500,000
84,980
4,169,067
5,754,047

$																														

$																														

2.00
1.15
1.00
1.26

1.16
1.16
1.83
1.64

The	movement	of	the	Company’s	share	purchase	warrants	liability	is	as	follows:	

Balance,	beginning	of	year
Assumed	on	close	of	RTO	(Note 5)
Share	purchase	warrants	granted
Loss	on	revaluation	
Currency	translation	effect
Balance,	end	of	year

Year ended
December	31,
2014

$

$

‐
25,891
277,410
36,533
(11,621)
328,213

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

20.	

EQUITY	(Continued)	

20.3					Accumulated	deficit	and	dividends	

As	 at	 December	 31,	 2014,	 the	 Company	 had	 an	 accumulated	 deficit	 of	 $6,272,029		
(December	 31,	 2013:	 $4,994,207).	 	 No	 dividends	 have	 been	 paid	 or	 declared	 by	 the	
Company	since	inception.	

20.4						Equity	instrument	issued	to	Powerlite	Ventures	Limited	

On	 May	 22,	 2013,	 the	 Company	 issued	 an	 equity	 instrument	 to	 Powerlite	 (“Powerlite	
Facility”)	 for	 $15,000,000	 (“Facility	 Limit”).	 In	 accordance	 with	 the	 agreement,	 the	
outstanding	principal	and	interest	accrued	under	the	agreement	will	be	settled	through	the	
issuance	 of	 shares	 at	 $1.54	 per	 share.	 As	 a	 result,	 the	 financial	 instrument	 has	 been	
classified	as	equity.	Accrued	interest	has	been	recorded	to	interest	expense	with	the	offset	
being	recorded	as	equity.	Other	key	commercial	terms	of	the	financing	include:	

(cid:120) 

Interest	 ‐	 10%	 per	 annum,	 payable	 on	 conversion	 of	 each	 note	 (the	 Powerlite	
Facility	can	be	drawn	over	multiple	drawings,	each	a	separate	note);	

(cid:120)  Maturity	–	May	22,	2023;	
(cid:120)  Conversion	price	‐	$1.54	per	share;	
(cid:120)  Powerlite’s	 conversion	 right	 –	 to	 convert	 the	 outstanding	 notes	 plus	 accrued	

interest	into	the	Company’s	shares	after	the	date	of	issue;	

(cid:120)  Company’s	conversion	right	–	to	convert	the	outstanding	notes	plus	accrued	interest	
at	the	earlier	of	six	months	from	the	issuance	date	of	each	note	or	an	event	causing	
conversion	of	any	Black	Range	convertible	loans	(Note	10.2)	held	by	the	Company;		

(cid:120)  Mandatory	 conversion	 –	 all	 outstanding	 notes	 plus	 accrued	

interest	 will	

automatically	convert	to	shares	within	10	business	days	of	the	maturity;	and	

(cid:120)  Other	–	the	Powerlite	Facility	is	unsecured.	

On	August	28,	2013	and	February	12,	2014,	the	facility	limit	was	amended	to	$21,000,000	
and	$26,000,000,	respectively.		As	at	December	31,	2014,	the	Company	had	drawn	a	total	of	
$18,000,000	 (December	 31,	 2013:	 $12,000,000)	 under	 the	 Powerlite	 Facility.	 The	
incremental	facility	amount	of	$5,000,000	agreed	on	February	12,	2014	can	only	be	drawn	
in	 2015	 and	 is	 subject	 to	 a	 mutually	 agreed	 upon	 draw	 down	 schedule	 to	 be	 agreed	 in	
writing	prior	to	the	end	of	2014;	however,	a	draw	down	schedule	was	not	agreed	prior	to	
the	 end	 of	 2014.	 $3,000,000	 remains	 available,	 subject	 to	 the	 Powerlite	 Facility	 terms	
discussed	above.	

On	 July	 1,	 2014,	 38,212,493	 shares	 were	 issued	 to	 Powerlite	 on	 conversion	 of	 the	
accumulated	Powerlite	equity	contributions	($18,000,000)	made	pursuant	to	the	Powerlite	
Facility.	

During	 the	 year	 ended	 December	 31,	 2014,	 the	 Company	 recognized	 interest	 expense	 of	
$757,754	(December	31,	2013:	$348,493).	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

21.		

SHARE	OPTION	RESERVE	

21.1						Stock	option	plan	

On	 October	 28,	 2014,	 the	 Company	 adopted	 a	 new	 stock	 option	 plan	 (the	 “2014	 Plan”),	
which	permits	the	board	of	directors	of	the	Company	to	grant	options	to	acquire	common	
shares	of	the	Company.	The	Company	is	authorized	to	issue	stock	options	for	a	maximum	of	
7,271,816	common	shares	pursuant	to	the	stock	option	plan.	The	stock	option	plan	permits	
the	board	of	directors	of	the	Company	to	set	the	terms	for	each	stock	option	grant;	however,	
stock	options	granted	under	the	plan	cannot	exceed	a	maximum	exercise	period	of	5	years.				
The	options	are	non‐transferable.			

For	 the	 year	 ended	 December	 31,	 2014,	 the	 Company	 granted	 2,650,754	 stock	 options	 to	
officers,	employees,	directors	and	other	eligible	persons	at	an	exercise	price	of	C$1.20	with	
an	expiry	date	of	October	28,	2019.		The	weighted	average	fair	value	of	the	options	granted	
in	the	year	ended	December	31,	2014	was	estimated	at	C$0.15	per	option	at	the	grant	date	
using	the	Black‐Scholes	Option	Pricing	Model.		

For	 the	 year	 ended	 December	 31,	 2013,	 the	 Company	 granted	 1,150,000	 stock	 options	 to	
officers,	 employees,	 directors	 and	 other	 eligible	 persons	 at	 exercise	 prices	 of	 $0.40	 and	
$0.50	 with	 expiry	 dates	 ranging	 from	 May	 1,	 2018	 to	 November	 4,	 2018.	 The	 weighted	
average	 fair	 value	 of	 the	 options	 granted	 in	 the	 year	 ended	 December	 31,	 2013	 was	
estimated	 at	 $0.31	 per	 option	 at	 the	 grant	 date	 using	 the	 Black‐Scholes	 Option	 Pricing	
Model.	

The	assumptions	used	for	the	Black‐Scholes	Option	Pricing	Model	were	as	follows:	

Risk	free	rate	of	return
Expected	life
Expected	volatility
Expected	dividend	per	share

Year	ended	December	31,

2014

2013

1.56%
5	years
83%
Nil

1.15%‐1.77%
5	years
105%‐106% (i)

Nil

(i)  Expected	 volatility	 for	 2014	 has	 been	 calculated	 based	 on	 the	 historical	 volatility	 of	 Powertech’s	 stock	 price	 whereas	
expected	volatility	for	2013	has	been	calculated	based	on	the	historical	volatility	of	the	Company’s	publicly	traded	peer	
group	over	a	period	equal	to	the	expected	life	of	the	options	

For	the	year	ended	December	31,	2014,	a	share‐based	compensation	expense	of	$645,470	
(December	 31,	 2013:	 $219,098)	 was	 recognized,	 of	 which	 $620,792	 (December	 31,	 2013:	
$169,087)	has	been	allocated	to	administration	expenses	and	$24,678	(December	31,	2013:	
$50,011)	has	been	allocated	to	evaluation	and	exploration	assets.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

21.		

SHARE	OPTION	RESERVE	(Continued)	

21.2		 Outstanding	stock	options		

The	option	transactions	under	the	stock	option	plan	are	as	follows:	

Year ended
December 31, 2014

Year	ended
December	31, 2013

Balance,	beginning	of	year
Assumed	on	close	of	RTO	(Note	5)
Options	granted
Balance,	end	of	year

Weighted
average	
exercise	
price	(C$)

Number	of	
options

419,752
275,000
2,650,754
3,345,506

$											

$											

1.24
2.00
1.20
1.27

Number	of	
options

‐
‐
419,752
419,752

Weighted
average	
exercise	
price	(C$)

$											

$									

‐
‐
1.24
1.24

The	stock	options	outstanding	and	exercisable	as	at	December	31,	2014	are	as	follows:	

Options Outstanding

Options	Exercisable

Weighted	
average	
exercise	
price	(C$)

$											

$											

1.20
1.20
1.50
2.00
1.27

	Options	
outstanding	

365,002
2,650,754
54,750
275,000
3,345,506

Weighted
average	
remaining	
contractual	
life	(years)	

	Options	
outstanding	
and	
exercisable	

Weighted	
average	
exercise	
price	(C$)

3.36
4.83
3.85
2.37
4.45

240,901
2,650,754
36,135
275,000
3,202,790

$											

$											

1.20
1.20
1.50
2.00
1.27

Weighted
average	
remaining	
contractual	
life	(years)	

3.36
4.83
3.85
2.37
4.49

Exercise	price	(C$)

$																			
$																			
$																			
$																			

1.20
1.20
1.50
2.00

The	stock	options	outstanding	and	exercisable	as	at	December	31,	2013	are	as	follows:	

Options	Outstanding

Options	Exercisable

Exercise	price	(C$)

	Options	
outstanding	

Weighted	
average	
exercise	
price	(C$)

Weighted
average	
remaining	
contractual	
life	(years)	

	Options	
outstanding	
and	
exercisable	

Weighted	
average	
exercise	
price	(C$)

Weighted
average	
remaining	
contractual	
life	(years)	

$																			
$																			

1.20
1.50

365,002
54,750
419,752

$											

$											

1.20
1.50
1.24

4.36
4.85
4.42

120,451
18,068
138,518

$											

$											

1.20
1.50
1.24

4.36
4.85
4.42

Note	–	the	exercise	price	and	the	stock	options	outstanding	and	exercisable	as	at	December	31,	2013	have	been	adjusted	to	
reflect	the	RTO	and	the	Consolidation.		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

21.		

SHARE	OPTION	RESERVE	(Continued)	

21.3		 Share	option	reserve	

The	 Company’s	 share	 option	 reserve	 relates	 to	 stock	 options	 granted	 by	 the	 Company	 to	
officers,	employees,	directors	and	other	eligible	persons	under	its	stock	option	plan.	

Year ended	December	31,
2014
2013

Balance,	beginning	of	year
Securities	assumed	on	close	of	RTO (Note 5)
Share‐based	compensation	capitalized to exploration
and	evaluation	assets
Share‐based	compensation	charged to operations
Balance,	end	of	year

$

$

219,098
37,995
24,678

435,768
717,539

$																		

‐
‐
50,011

$																	

169,087
219,098

22.	

CAPITAL	RISK	MANAGEMENT		

The	Company’s	capital	risk	management	objectives	are	to	safeguard	the	Company’s	ability	
to	 continue	 as	 a	 going	 concern	 in	 order	 to	 support	 the	 Company’s	 exploration	 and	
development	 of	 its	 mineral	 properties	 and	 to	 maintain	 a	 flexible	 capital	 structure	 which	
optimizes	the	costs	of	capital	at	an	acceptable	risk.	

The	 Company	 depends	 on	 external	 financing	 to	 fund	 its	 activities	 and	 there	 can	 be	 no	
guarantee	that	external	financing	will	be	available	at	terms	acceptable	to	the	Company.	The	
Company	 manages	 its	 capital	 structure	 and	 makes	 adjustments	 to	 it	 in	 light	 of	 changes	 in	
economic	 conditions	 and	 the	 risk	 characteristics	 of	 the	 underlying	 assets.	 	 In	 order	 to	
maintain	or	adjust	the	capital	structure,	the	Company	may	issue	new	shares,	issue	new	debt	
or	 acquire	 or	 dispose	 of	 assets.	 In	 order	 to	 facilitate	 the	 management	 of	 its	 capital	
requirements,	 the	 Company	 prepares	 annual	 expenditure	 budgets	 that	 are	 updated	 as	
necessary	 depending	 on	 various	 factors,	 including	 capital	 deployment,	 results	 from	 the	
exploration	and	development	of	its	properties	and	general	industry	conditions.		The	annual	
and	updated	budgets	are	approved	by	the	board	of	directors.	For	the	year	ended	December	
31,	2014,	there	were	no	significant	changes	in	the	processes	used	by	the	Company	or	in	the	
Company’s	objectives	and	policies	for	managing	its	capital.		The	Company	is	not	subject	to	
any	externally	imposed	capital	requirements.	

As	at	December	31,	2014,	the	Company’s	capital	structure	consists	of	loans	payable	(Note	
11)	and	the	equity	of	the	Company	(Note	20).		

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

23.		

FINANCIAL	INSTRUMENTS	

23.1	 Categories	of	financial	instruments	

Financial	assets

Loans	and	receivables

Cash	and	cash	equivalents
Restricted	cash

Fair	value	through	profit	or	loss

Investment	in	Anatolia	(Note	9.2 )
Convertible	loans	issued	by	Black Range
(Note	10.2	)
Convertible	loans	issued	by	Powertech (Note 10.1)
Call	option	on	Anatolia	shares

Total	financial	assets

As at December	31,

2014

2013

$

$

3,214,529
231,948

$																	

282,013
21,151

2,061,257
427,139

‐
36,877
5,971,750

1,738,600
2,320,675

460,375
‐

$														

4,822,814

As at December	31,

2014

2013

Financial	liabilities

Other	financial	liabilities

Trade	and	other	payables	(Note	12	)
Loan	payable	to	shareholders	(Note	11)
Deferred	consideration	(Note	5)
Put	option	on	non‐controlling interest of UrAsia
(Note	5)
Promissory	note	on	Centennial Project
Put	option	held	by	Powertech on Centennial Project
Other	loans	payable	(Note	11)

$														

3,470,711
2,024,522
1,400,672
1,423,118

‐
‐

1,246,094

Fair	value	through	profit	or	loss

Put	option	held	by	Anatolia	(Note 9.2)
Warrant	Liability
Empire	Equity	facility	(Note	9.1)

Total	financial	liabilities

‐
328,213
228,422
10,121,752

$												

$																	

386,471
1,846,531
1,741,080
1,872,592

449,980
177,835
‐

818,523
‐
‐

$														

7,293,012

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

23.		

FINANCIAL	INSTRUMENTS	(Continued)		

23.2	 Fair	value	

The	 fair	 value	 of	 financial	 assets	 and	 financial	 liabilities	 measured	 at	 amortized	 cost	 is	
determined	in	accordance	with	generally	accepted	pricing	models	based	on	discounted	cash	
flow	 analysis	 or	 using	 prices	 from	 observable	 current	 market	 transactions.	 	 The	 Company	
considers	 that	 the	 carrying	 amount	 of	 all	 its	 financial	 assets	 and	 financial	 liabilities	
measured	at	amortized	cost	approximates	their	fair	value.			

The	fair	values	of	the	Company’s	financial	instruments	classified	as	FVTPL	are	determined	
as	follows:	

(cid:120)  The	fair	value	of	financial	instruments	that	are	traded	on	an	active	liquid	market	are	
determined	 with	 reference	 to	 the	 quoted	 market	 prices.	 	 The	 fair	 value	 of	 the	
Company’s	 investment	 in	 the	 shares	 of	 Anatolia	 is	 determined	 using	 this	
methodology.		

(cid:120)  The	 fair	 value	 of	 financial	 instruments	 that	 are	 not	 traded	 in	 an	 active	 market	 are	
determined	using	generally	accepted	valuation	models	using	inputs	that	are	directly	
(i.e.	prices)	or	indirectly	(i.e.	derived	prices)	observable.	

o  The	fair	value	of	the	put	option	held	by	Anatolia	and	the	fair	value	of	the	call	
option	 held	 by	 the	 Company	 for	 Anatolia	 shares	 are	 determined	 using	 the	
Black‐Scholes	Option	Pricing	Model.	

o  The	fair	value	of	the	warrant	liability	is	determined	using	the	Black‐Scholes	

Option	Pricing	Model.	

(cid:120)  The	 fair	 value	 of	 financial	 instruments	 that	 are	 not	 traded	 in	 an	 active	 market	 are	
determined	 using	 generally	 accepted	 valuation	 models	 using	 inputs	 that	 are	 not	
directly	(i.e.	prices)	or	indirectly	(i.e.	derived	from	prices)	observable.	

o  The	 fair	 values	 of	 the	 embedded	 derivatives	 within	 the	 convertible	 loans	
issued	 by	 Powertech	 are	 determined	 using	 a	 Binomial	 Pricing	 Model.	 The	
loan	 asset	 components	 for	 both	 Powertech	 and	 Black	 Range	 are	 valued	
based	on	the	present	value	of	expected	future	cash	flows	at	the	discount	rate	
that	would	have	applied	to	the	financial	assets	without	conversion	or	other	
embedded	 derivative	 features.	 None	 of	 the	 fair	 value	 change	 in	 the	
convertible	loans	for	the	year	ended	December	31,	2014	and	2013	is	related	
to	 a	 change	 in	 the	 credit	 risk	 of	 the	 convertible	 loans.	 	 All	 of	 the	 change	 in	
fair	value	is	associated	with	changes	in	market	conditions.	

The	 fair	 value	 of	 all	 the	 other	 financial	 instruments	 of	 the	 Company	 approximates	 their	
carrying	value	because	of	the	demand	nature	or	short‐term	maturity	of	these	instruments.	

The	Company’s	cash	and	cash	equivalents,	restricted	cash	and	other	financial	liabilities	are	
carried	at	amortized	cost.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

23.		

FINANCIAL	INSTRUMENTS	(Continued)		

The	 following	 table	 provides	 an	 analysis	 of	 the	 Company’s	 financial	 instruments	 that	 are	
measured	subsequent	to	initial	recognition	at	fair	value,	grouped	into	Level	1	to	3	based	on	
the	degree	to	which	the	inputs	used	to	determine	the	fair	value	are	observable.	

(cid:120)  Level	 1	 fair	 value	 measurements	 are	 those	 derived	 from	 quoted	 prices	 in	 active	

markets	for	identical	assets	or	liabilities.	

(cid:120)  Level	 2	 fair	 value	 measurements	 are	 those	 derived	 from	 inputs	 other	 than	 quoted	
prices	included	within	Level	1,	that	are	observable	either	directly	or	indirectly.		
(cid:120)  Level	 3	 fair	 value	 measurements	 are	 those	 derived	 from	 valuation	 techniques	 that	

include	inputs	that	are	not	based	on	observable	market	data.			

As	at	December	31,	2014

Level	1

Level	2

Level	3

Total

Investment	in	Anatolia	
Convertible	loans	issued	by	Black	Range	
Call	option	on	Anatolia	shares
Total	financial	assets	at	fair	value

$						

2,061,257

‐
‐

$																

$																

$						

‐
‐
36,877
36,877

‐
427,139
‐
427,139

2,061,257
427,139
36,877
2,525,273

$						

2,061,257

$											

$									

$						

Empire	Equity	facility
Warrant	liability
Total	financial	liabilities	at	fair	value	

$																

$																

‐
‐
‐

$									

$									

228,422
328,213
556,635

$																

$																

‐
‐
‐

$									

$									

228,422
328,213
556,635

As	at	December	31,	2013

Level	1

Level	2

Level	3

Total

Investment	in	Anatolia	
Convertible	loans	issued	by	Black	Range	
Convertible	loan	issued	by	Powertech
Total	financial	assets	at	fair	value

$						

1,738,600

$																

‐
‐

$						

1,738,600

$																

‐
‐
‐
‐

$																

‐

2,320,675
460,365
2,781,040

$						

$						

$						

1,738,600
2,320,675
460,365
4,519,640

Put	option	held	by	Anatolia
Total	financial	liabilities	at	fair	value	

$																
$																

‐
‐

$									
$									

818,523
818,523

$																
$																

‐
‐

$									
$									

818,523
818,523

There	were	no	transfers	between	Level	1,	2	and	3	in	2014	and	2013.	

23.3	 Financial	risk	management	objectives	and	policies	

The	 financial	 risk	 arising	 from	 the	 Company’s	 operations	 are	 market	 risk,	 credit	 risk,	 and	
liquidity	risk.		These	risks	arise	from	the	normal	course	of	operations	and	all	transactions	
undertaken	are	to	support	the	Company’s	ability	to	continue	as	a	going	concern.		The	risks	
associated	with	these	financial	instruments	and	the	policies	on	how	to	mitigate	these	risks	
are	set	out	below.		Management	of	the	Company	manages	and	monitors	these	exposures	to	
ensure	 appropriate	 measures	 are	 implemented	 on	 a	 timely	 and	 effective	 manner.	 For	 the	
year	 ended	 December	 31,	 2014,	 there	 were	 no	 significant	 changes	 in	 the	 Company’s	
financial	 risk	 management	 objectives	 and	 policies.	 The	 Company’s	 risk	 exposure	 and	 the	
impact	on	the	Company’s	financial	instrument	are	summarized	below:	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

23.		

FINANCIAL	INSTRUMENTS	(Continued)		

Market	risk	

Market	risk	is	the	risk	that	the	fair	value	of	the	future	cash	flows	of	a	financial	instrument	
will	fluctuate	due	to	changes	in	market	factors.	Market	risk	comprises	three	types	of	risks:	
currency	risk,	price	risk	and	interest	rate	risk:	

Currency	risk	

Currency	risk	is	the	risk	that	the	fair	values	or	future	cash	flows	of	the	Company’s	financial	
instruments	 will	 fluctuate	 because	 of	 changes	 in	 foreign	 currency	 exchange	 rates.	 The	
Company	is	exposed	to	currency	risk	through	financial	assets	and	liabilities	denominated	in	
currencies	other	than	the	United	States	dollar.	

The	 sensitivity	 of	 the	 Company’s	 comprehensive	 income	 due	 to	 changes	 in	 the	 carrying	
values	 of	 monetary	 assets	 and	 liabilities	 denominated	 in	 foreign	 currencies	 is	 presented	
below.	 	 A	 positive	 number	 indicates	 an	 increase	 in	 comprehensive	 income,	 whereas	 a	
negative	number	indicates	a	decrease	in	comprehensive	income.	

10%	increase	in	foreign	exchange	rate
Changes	to	balances	as	at	December	31,	2014
Changes	to	balances	as	at	December	31,	2013

KGS

C$

A$

HK$

$											
$											

(2,130)
(8,546)

$									
$																

(83,613)
(77)

$									
$									

229,685
324,075

$											
$											

(8,609)
(1,345)

10%	decrease	in	foreign	exchange	rate
Changes	to	balances	as	at	December	31,	2014
Changes	to	balances	as	at	December	31,	2013

KGS

C$

A$

HK$

$												
$												

2,130
8,546

$											
$																	

83,613
77

$							
$							

(229,685)
(324,075)

$												
$												

8,609
1,345

Price	risk	

Price	 risk	 is	 the	 risk	 that	 the	 fair	 value	 of	 future	 cash	 flows	 of	 the	 Company’s	 financial	
instruments	will	fluctuate	because	of	changes	in	market	prices.	The	Company	is	exposed	to	
the	 risk	 of	 fluctuations	 in	 prevailing	 market	 prices	 for	 its	 uranium	 products.	 	However,	 as	
the	 Company	 is	 currently	 an	 exploration	 and	 development	 stage	 company,	 the	 risk	 is	
insignificant.		The	Company	is	subject	to	share	price	risk	with	respect	to	its	investments	in	
Black	Range	and	Anatolia.		

Interest	rate	risk	

Interest	rate	risk	is	the	risk	that	the	fair	values	and	future	cash	flows	of	the	Company	will	
fluctuate	because	of	changes	in	market	interest	rates.	The	Company	is	exposed	to	interest	
rate	 risk	 to	 the	 extent	 that	 the	 cash	 maintained	 at	 the	 financial	 institutions	 is	 subject	 to	 a	
floating	rate	of	interest.	The	interest	rate	risk	on	cash	is	not	considered	significant.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

23.		

FINANCIAL	INSTRUMENTS	(Continued)		

The	 Company’s	 loan	 payable	 to	 shareholders	 (Note	 11)	 and	 Empire	 Equity	 (Note	 9.1)	
accrues	interest	at	fixed	rates;	therefore	the	Company	is	not	exposed	to	interest	rate	risk	on	
these	instruments.	

Credit	risk	

Credit	 risk	 is	 the	 risk	 of	 potential	 loss	 to	 the	 Company	 if	 the	 counterparty	 to	 a	 financial	
instrument	fails	to	meet	its	contractual	obligations.	

The	 Company	 is	 exposed	 to	 credit	 risk	 associated	 with	 its	 cash	 and	 cash	 equivalents,	 its	
convertible	 loans	 acquired	 from	 Black	 Range	 and	 the	 installment	 payments	 owing	 from	
Empire	 Equity.	 The	 Company’s	 maximum	 exposure	 to	 credit	 risk	 is	 equal	 to	 the	 carrying	
amount	of	its	cash	and	cash	equivalents,	the	nominal	amount	of	the	convertible	loans	and	
the	amount	of	installments	outstanding	from	Empire	Equity.	

The	 Company’s	 credit	 risk	 on	 cash	 and	 cash	 equivalents	 and	 the	 Empire	 Equity	 facility	
arises	 from	 default	 of	 the	 counterparty.	 The	 Company	 limits	 its	 exposure	 to	 counterparty	
credit	risk	on	cash	and	cash	equivalents	by	only	dealing	with	financial	institutions	with	high	
credit	ratings.		The	Company	limits	its	exposure	on	the	Empire	Equity	facility	through	the	
execution	 of	 legal	 agreements	 with	 various	 protections	 that	 are	 governed	 by	 first	 world	
jurisdictions.		

The	Company	seeks	to	manage	its	credit	risk	on	the	convertible	loans	acquired	from	Black	
Range	by	including	mechanisms	that	provide	protection	should	Black	Range	not	be	able	to	
repay	 the	 convertible	 loans,	 e.g.	 the	 conversion	 feature.	 The	 Company	 also	 has	 board	
representation	to	ensure	that	the	Company	is	fully	apprised	of	the	financial	environment	at	
Black	 Range.	 	 Subsequent	 to	 December	 31,	 2014,	 all	 of	 the	 Black	 Range	 convertible	 loans	
had	been	converted	into	shares.	

Liquidity	risk	

Liquidity	risk	is	the	risk	that	the	Company	will	not	be	able	to	settle	or	manage	its	obligations	
associated	 with	 financial	 liabilities.	 	 The	 Company’s	 approach	 to	 managing	 liquidity	 is	 to	
evaluate	 current	 and	 expected	 liquidity	 requirements	 under	 both	 normal	 and	 stressed	
conditions	 to	 ensure	 that	 it	 maintains	 sufficient	 reserves	 of	 cash	 and	 cash	 equivalents	 (or	
access	to	financing	facilities)	to	meet	its	liquidity	requirements	in	the	short	and	long	term.	
In	order	to	ensure	that	the	Company	has	sufficient	cash	and	cash	equivalents	(or	access	to	
financing	 facilities)	 to	 meet	 expected	 expenditures,	 the	 Company	 prepares	 annual	
expenditure	budgets	that	are	updated	as	necessary	depending	on	various	factors,	including	
capital	 deployment,	 results	 from	 the	 exploration	 and	 development	 of	 its	 properties	 and	
general	industry	conditions.	The	annual	and	updated	budgets	are	approved	by	the	board	of	
directors.	

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

23.		

FINANCIAL	INSTRUMENTS	(Continued)	

The	 Company’s	 current	 and	 expected	 remaining	 contractual	 maturities	 for	 its	 financial	
liabilities	 with	 agreed	 repayment	 periods	 are	 presented	 below.	 	 The	 table	 includes	 the	
undiscounted	 cash	 flows	 of	 financial	 liabilities	 based	 on	 the	 earliest	 date	 on	 which	 the	
Company	can	be	required	to	satisfy	the	liabilities.		

As	at	December	31,	2014

0 to 3
months

3 to 12
months

1	to	5	years

Total

Trade	and	other	payables
Loan	payable	to	shareholders
Deferred	consideration
Other	loans	payable
Other	non‐current	liabilities

$

3,020,711

$

‐
‐

395,000

‐

450,000
248,522
700,000
435,000
‐

$		

3,415,711

$					

1,833,522

$ 											

‐

1,776,000
1,000,000
475,000
2,228,422
5,479,422

$			

$		

3,470,711
2,024,522
1,700,000
1,305,000
2,228,422
10,728,655

$	

As	at	December	31,	2013

0 to 3
months

3 to 12
months

1	to	5	years

Total

Trade	and	other	payables
Loan	payable	to	shareholders
Deferred	consideration
Other	current	liabilities
Other	non‐current	liabilities

$

276,471
‐
‐

1,000,000

‐

$

110,000
70,531
1,850,000
3,280,442

‐

$		

1,276,471

$					

5,310,973

24.	

RELATED	PARTY	TRANSACTIONS	

$ 											

‐

$		

1,776,000

‐
‐
500,000
2,276,000

$			

386,471
1,846,531
1,850,000
4,280,442
500,000
8,863,444

$				

The	 consolidated	 financial	 statements	 include	 the	 financial	 statements	 of	 Azarga	 Uranium	
Corp.	and	its	significant	subsidiaries	and	associates	listed	in	the	following	table:		

Name

Azarga	Resources	(Hong	Kong)	Limited
Azarga	Resource	Limited	(BVI)
Azarga	Resources	Canada	Ltd.
Azarga	Resources	USA
UrAsia
Powertech	USA,	Inc.
Black	Range

Country	of
incorporation

Hong Kong
British Virgin Islands
Canada
United States of America
Kyrgyz	Republic	
United States of America
Australia

%	equity	interest
As	at	December	31,
2014
2013

100%
100%
100%
100%
80%
100%
24%

100%
100%
100%
100%
80%
45%
23%

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

24.	

RELATED	PARTY	TRANSACTIONS	(Continued)	

As	 at	 December	 31,	 2014,	 the	 Company	 held	 a	 significant	 influence	 investment	 in	 Black	
Range	 (Note	 9.1).	 Black	 Range	 became	 an	 associate	 of	 the	 Company	 on	 July	 2,	 2013.	 The	
Company	 held	 a	 significant	 influence	 investment	 in	 Powertech	 from	 October	 18,	 2013	 to	
October	28,	2014,	at	which	point	the	RTO	closed	(refer	to	Note	5).			

During	 the	 year	 ended	 December	 31,	 2014	 and	 2013,	 the	 Company	 had	 related	 party	
transactions	 with	 the	 Company’s	 directors,	 shareholders,	 management	 and	 significant	
influence	investees	including:	

(cid:120)  Shareholders	and	key	management	personnel	subscribed	for	the	Company’s	shares	

under	subscription	agreements;	

(cid:120)  A	 shareholder	 of	 the	 Company	 received	 a	 commission	 of	 $300,000	 for	 brokering	

(cid:120) 

private	placements,	this	was	recorded	to	equity	in	2013;	
Interest	 continued	 to	 accrue	 to	 shareholders	 of	 the	 Company	 on	 the	 Shareholders	
Loan	Agreement;		

(cid:120)  The	disposal	of	Black	Range	shares	(Note	9.1);	
(cid:120)  The	conversion	of	the	First	and	Second	Black	Range	Convertible	Loans	(Note	10.2);	
(cid:120)  The	 purchase	 of	 convertible	 loans	 issued	 by	 Powertech	 and	 Black	 Range	 (Note	

10.1/10.2);	and	

(cid:120)  The	RTO	with	Powertech	(Note	5).	

Related	party	assets		

Convertible	loans issued	by	Black Range
Convertible	loan	issued	by	Powertech
Centennial	Project	with	Powertech
Investment	in	Powertech	
Investment	in	Black	Range
Total	assets	with	related	parties	

Related	party	liabilities	

As at December	31,

2014

2013

427,139
‐
‐
‐

1,890,623
2,317,762

$														

$												

2,320,675
460,375
1,698,995
5,788,794
2,816,836
13,085,675

$

$

As at December	31,

2014

2013

Loan	payable	to	shareholders
Promissory	note	issued	to	Powertech for Centennial
Project	
Put	option	held	by	Powertech	on	Centennial	Project	
Total	liabilities	with	related	parties	

$

2,024,522

$														

‐

‐

$														

2,024,522

$														

1,846,531
449,980

177,835
2,474,346

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

24.	

RELATED	PARTY	TRANSACTIONS	(Continued)	

Related	party	expenses		

Interest	expense	on	loan	payable to shareholders
Interest	expense	on	promissory	note issued to
Powertech	for	Centennial	Project	
Interest	expense	on	put	option	held by Powertech on
Centennial	Project	
Equity	loss	pick‐up	from	Black	Range
Realized	loss	on	investment	in	Black	Range
Unrealized	loss	on	Powertech	convertible loan
Total	related	party	expenses

Related	party	income		

Realized	gain	upon	equity	accounting for Powertech
Realized	gain	upon	equity	accounting	for	Black	Range
Equity	income	pick‐up	from	Powertech (Note 9.1)
Gain	recognized	on	assets	settled on close of RTO
Unrealized	gain	on	Black	Range	convertible loans
Dilution	gain	on	investment	in	associates (Note 9.1)
Total	related	party	income

Key	management	personnel	compensation	

Year ended	December	31,
2013

2014

177,991
19,795

17,604

2,625,218
1,550,695
2,193,710
6,585,013

$																	

171,068
682

606

579,544
‐
564,625
1,316,525

$														

Year	ended	December	31,
2014
2013

‐
‐
341,757
301,133
353,778
469,784
1,466,452

$																	

$																	

220,369
483,132
11,130
‐
102,277
‐
816,908

$

$

$

$

The	remuneration	of	the	Company’s	directors	and	other	members	of	key	management,	who	
have	the	authority	and	responsibility	for	planning,	directing	and	controlling	the	activities	of	
the	Company,	consist	of	the	following	amounts:	

Share‐based	compensation
Salaries,	fees	and	other	benefits
Key	management	personnel	compensation

$

$														

490,992
887,029
1,378,021

$																	

$																	

169,087
481,308
650,395

Year ended	December	31,
2014
2013

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AZARGA	URANIUM	CORP.	
Notes	to	the	Consolidated	Financial	Statements	
For	the	year	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

25.		

SUPPLEMENTAL	CASH	FLOW	INFORMATION	

Non‐cash	financing	and	investing	activities	

During	 the	 year	 ended	 December	 31,	 2014	 and	 2013,	 the	 Company	 entered	 into	 the	
following	 non‐cash	 investing	 and	 financing	 activities	 which	 are	 not	 reflected	 in	 the	
consolidated	statement	of	cash	flows:	

(cid:120)  Share	 based	 compensation	 expense	 of	 $24,678	 (December	 31,	 2013:	 $50,011)	 and	
depreciation	 expense	 of	 $15,983	 (December	 31,	 2013:	 $8,500)	 were	 capitalized	 as	
exploration	and	evaluation	assets	for	the	year	ended	December	31,	2014;	

(cid:120)  For	the	year	ended	December	31,	2014,	the	Company	settled	$129,622	of	financing	

costs	with	the	issuance	of	242,696	shares;	

(cid:120)  For	the	year	ended	December	31,	2013,	the	Company	settled	a	$2,500,000	deferred	
payment	with	issuance	of	6,750,000	shares	to	the	original	sellers	of	UrAsia;	and	
(cid:120)  For	the	year	ended	December	31,	2014	no	interest	(December	31,	2013:	$135,278)	

or	income	taxes	were	paid	(December	31,	2013:	$nil).	

26.		 COMMITMENTS	FOR	EXPENDITURE	

As	at	December	31,	2014	and	2013,	the	Company’s	commitments	for	expenditures	that	have	
not	been	disclosed	elsewhere	in	the	consolidated	financial	statements	are	as	follow:		

Within	1	year

As at December 31,	2014
2‐4	years

Over	4	years

Total

Capital	expenditure	commitments
Operating	expenditure	commitments
Commitments

Capital	expenditure	commitments
Operating	expenditure	commitments
Commitments

$															

$															

‐
678,100
678,100

$								

$								

‐
909,970
909,970

$															

‐

$															

‐

1,019,395
1,019,395

$						

2,607,465
2,607,465

$						

As at December 31,	2013

Within	1	year

2‐4	years

Over	4	years

Total

$															

‐
19,111
19,111

$															

$															

‐
‐
‐

$															

$															

‐
‐
‐

$										

$															

‐
19,111
19,111

$										

Page	|	71		

	
	
	
	
	
	
	
	
	
 
	
	
	
	
	
	
	
	
	
										
										
								
								
												
																	
																	
												
Azarga	Uranium	Corp.	
MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars)	

	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

DISCLAIMER	FOR	FORWARD‐LOOKING	STATEMENTS	

Certain	statements	in	this	Management’s	Discussion	and	Analysis	of	Financial	Condition	
and	Results	of	Operations	are	forward‐looking	statements.		Forward‐looking	statements	
consist	of	statements	that	are	not	purely	historical,	including	any	statements	regarding	
beliefs,	 plans,	 expectations	 or	 intentions	 regarding	 the	 future.	 	 Often,	 but	 not	 always,	
forward‐looking	 statements	 can	 be	 identified	 by	 the	 use	 of	 words	 such	 as	 “plans”,	
“expects”,	 “budget”,	 “scheduled”,	 “estimates”,	 “forecasts”,	 “intends”,	 “anticipates”,	 or	
“believes”	or	variations	(including	negative	and	grammatical	variations)	of	such	words	
and	 phrases	 or	 statements	 that	 certain	 actions,	 events	 or	 results	 “may”,	 “could”,	
“would”,	 “should”,	 “might”	 or	 “will”	 be	 taken,	 occur	 or	 be	 achieved.	 Such	 forward‐
looking	statements	involve	known	and	unknown	risks,	uncertainties	and	other	factors,	
which	 may	 cause	 the	 Company’s	 actual	 results,	 performance	 or	 achievements,	 or	
industry	 results,	 to	 be	 materially	 different	 from	 any	 future	 results,	 performance	 or	
achievements	expressed	or	implied	by	such	forward‐looking	statements.		No	assurance	
can	be	given	that	any	of	the	events	anticipated	by	the	forward‐looking	statements	will	
occur	 or,	 if	 they	 do	 occur,	 what	 benefits	 the	 Company	 will	 obtain	 from	 them.	 	 These	
assumptions,	 which	 include,	 management’s	 current	 expectations,	 estimates	 and	
assumptions	about	the	Company’s	investments,	the	global	economic	environment,	and	
the	 Company’s	 ability	 to	 manage	 its	 assets	 and	 operating	 costs,	 may	 prove	 to	 be	
incorrect.	 	 A	 number	 of	 risks	 and	 uncertainties	 could	 cause	 its	 actual	 results	 to	 differ	
materially	 from	 those	 expressed	 or	 implied	 by	 the	 forward	 looking	 statements,	
including,	 but	 not	 limited	 to:	 global	 economic	 conditions;	 uranium	 price	 fluctuations;	
public	 acceptance	 of	 nuclear	 energy	 and	 competition	 from	 other	 energy	 sources;	 the	
Company	 will	 require	 significant	 amounts	 of	 additional	 capital	 in	 the	 future;	
competition	for	properties	and	experienced	employees;	uranium	industry	competition	
and	 international	 trade	 restrictions;	 possible	 loss	 of	 interests	 in	 exploration	 and	
development	 properties;	 mining	 and	 mineral	 exploration	 is	 inherently	 dangerous	 and	
subject	to	factors	beyond	the	Company’s	control;	the	Company’s	mineral	resources	are	
estimates;	 the	 nature	 of	 exploration	 and	 development	 projects;	 environmental	
regulatory	 requirements	 and	 risks;	 currency	 fluctuations;	 government	 regulation	 and	
policy	 risks;	 public	
in	 the	 permitting	 process;	 Native	 American	
involvement	 in	 the	 permitting	 process;	 political	 risk;	 the	 Company	 has	 no	 history	 of	
mining	 operations;	 property	 title	 rights;	 dependence	 on	 key	 personnel	 and	 qualified	
and	 experienced	 employees;	 delineation	 of	 mineral	 reserves	 and	 additional	 mineral	
resources;	 insurance	 coverage;	 dilution	 from	 further	 equity	 financing	 and	 outstanding	
stock	 options	 and	 warrants;	 the	 market	 price	 of	 the	 Company’s	 shares;	 the	 Company	
has	 never	 paid	 dividends	 and	 may	 not	 do	 so	 in	 the	 foreseeable	 future;	 litigation	 and	
other	legal	proceedings;	technical	innovation	and	obsolescence;	disclosure	and	internal	
controls;	 conflicts	 of	 interest	 and	 exposure	 to	 emerging	 markets.	 Please	 refer	 to	 the	
Risks	 and	 Uncertainties	 section	 of	 this	 Management’s	 Discussion	 and	 Analysis	 of	
Financial	Condition	and	Results	of	Operations	for	additional	information	on	the	above	
risk	factors.		

involvement	

2	

	
 
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

DISCLAIMER	FOR	FORWARD‐LOOKING	STATEMENTS	(Continued)	

Undue	 reliance	 should	 not	 be	 placed	 on	 forward‐looking	 statements	 because	 they	
involve	 known	 and	 unknown	 risks,	 uncertainties	 and	 other	 factors	 that	 are	 in	 many	
cases	beyond	the	Company’s	control.	Forward‐looking	statements	are	not	guarantees	of	
future	performance	and	the	Company’s	actual	results	of	operations,	financial	condition	
and	 liquidity,	 and	 the	 development	 of	 the	 industry	 in	 which	 it	 operates,	 may	 differ	
materially	 from	 statements	 made	 or	 incorporated	 by	 reference	 in	 this	 Management’s	
Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations.	

The	 Company	 undertakes	 no	 obligation	 to	 update	 forward‐looking	 statements	 if	
management’s	beliefs,	estimates	and	opinions	or	the	Company’s	circumstances	as	at	the	
date	 hereof	 should	 change.	 	 The	 Company	 disclaims	 any	 intention	 or	 obligation	 to	
update	 or	 revise	 any	 forward‐looking	 statements,	 whether,	 as	 a	 result	 of	 new	
information,	future	events	or	otherwise.	

3	

	
 
	
	
		
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

TABLE	OF	CONTENTS

1. General
2. Significant	events	and	highlights
3. Background
4. Industry	trends	and	outlook
5. Mineral	properties
6. Selected	annual	information
7. Summary	of	quarterly	results
8. Financing,	liquidity	and	capital	resources
9. Contractual	commitments

10. Off	balance	sheet	arrangements
11. Financial	instruments
12. Related	party	transactions
13. Share	capital
14. Critical	accounting	estimates	and	judgments
15. Recent	accounting	pronouncements
16. Management's	responsibility	for	financial	information
17. Disclosure	controls	and	procedures
18. Internal	controls	over	financial	reports
19. Disclosure	of	a	scientific	or	technical	nature
20. Risks	and	uncertainties

Page

5
5
7
9
11
18
20
21
32
32
32
35
37
40
42
43
44
44
45
45

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

GENERAL	

This	 Management’s	 Discussion	 and	 Analysis	 of	 Financial	 Condition	 and	 Results	 of	
Operations	 (“MD&A”)	 of	 Azarga	 Uranium	 Corp.	 (“Azarga	 Uranium”)	 (formerly	
Powertech	 Uranium	 Corp.	 (“Powertech”))	 (which,	 together	 with	 its	 subsidiaries,	 is	
collectively	 referred	 to	 as	 the	 “Company”)	 dated	 March 31, 2015 should	 be	 read	 in	
conjunction	 with	 the	 consolidated	 financial	 statements	 of	 the	 Company	 and	 the	 notes	
thereto	for	the	year	ended	December	31,	2014	and	2013.	The	Company’s	consolidated	
financial	 statements	 have	 been	 prepared	 in	 accordance	 with	 International	 Financial	
Reporting	 Standards	 (“IFRS”)	 issued	 by	 the	 International	 Accounting	 Standards	 Board	
(“IASB”)	and	Interpretations	of	the	IFRS	Interpretations	Committee	(“IFRIC”).	

Financial	information	presented	in	this	 MD&A	has	 been	prepared	as	a	continuation	of	
Azarga	 Resources’	 consolidated	 financial	 statements.	 The	 results	 of	 Powertech’s	
operations	 have	 been	 included	 in	 the	 Company’s	 consolidated	 financial	 statements	
subsequent	 to	 the	 close	 of	 the	 reverse	 take‐over	 (“RTO”)	 on	 October	 28,	 2014.	 In	 the	
statement	of	cash	flow	for	the	year	ended	December	31,	2013,	the	Company	reclassified	
the	 purchase	 of	 convertible	 loans	 of	 $3,751,087	 from	 financing	 activities	 to	 investing	
activities.	

The	 functional	 currency	 of	 each	 entity	 is	 measured	 using	 the	 currency	 of	 the	 primary	
economic	 environment	 in	 which	 the	 entity	 operates.	 	 The	 functional	 currency	 of	 each	
entity	 is	 the	 United	 States	 Dollar,	 with	 the	 exception	 of	 UrAsia	 in	 Kyrgyzstan	 Limited	
Liability	Company	(“UrAsia”),	whose	functional	currency	is	the	Kyrgyz	Som.		

All	 references	 to	 $	 in	 the	 MD&A	 refer	 to	 the	 United	 States	 Dollar,	 all	 references	 to	 C$	
refer	to	the	Canadian	Dollar	and	all	references	to	the	A$	refer	to	Australian	Dollars.	

SIGNIFICANT	EVENTS	AND	HIGHLIGHTS	

The	Company’s	significant	events	and	highlights	for	the	year	ended	December	31,	2014	
and	subsequent	period	to	March	31,	2015	are	as	follows:	

(cid:120) 

(cid:120) 

(cid:120) 

In	January	2014,	the	United	States	Nuclear	Regulatory	Commission	(the	“NRC”)	
completed	 and	 published	 the	 Final	 Supplemental	 Environmental	 Impact	
Statement	for	the	Dewey	Burdock	In‐Situ	Uranium	Project	(the	“Dewey	Burdock	
Project”).		

In	April	2014,	 the	 Company	received	the	Final	Source	and	Byproduct	 Materials	
License	for	the	Dewey	Burdock	Project	from	the	NRC.	

In	May	2014,	the	Company	filed	a	maiden	National	Instrument	43‐101	(“NI	43‐
101”)	 Technical	 Report	 and	 Mineral	 Resource	 Estimation	 (the	 “Kyzyl	 Ompul	
Technical	Report”)	for	its	80%	owned	Kyzyl	Ompul	License	(refer	to	the	Mineral	
Properties	section	of	this	MD&A	for	additional	details).	

5	

	
 
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

SIGNIFICANT	EVENTS	AND	HIGHLIGHTS	(Continued)	

(cid:120) 

(cid:120) 

In	 August	 2014,	 the	 Atomic	 Safety	 and	 Licensing	 Board	 (“ASLB”)	 completed	 its	
oral	hearing	for	the	Dewey	Burdock	Project.	

In	October	2014,	the	Company	completed	a	RTO	with	Azarga	Resources	Limited	
(“Azarga	Resources”).		In	addition,	the	Company	completed	a	private	placement	
financing	 of	 approximately	 C$5.0	 million,	 a	 name	 change	 from	 “Powertech	
Uranium	 Corp.”	 to	 “Azarga	 Uranium	 Corp.”,	 a	 TSX	 stock	 symbol	 change	 from	
“PWE”	to	“AZZ”	and	a	one	(1)	for	ten	(10)	share	consolidation.		

(cid:120)  On	December	10,	2014,	the	ASLB	announced	that	the	evidentiary	portion	of	the	
hearing	 for	 the	 Company’s	 Dewey	 Burdock	 Project	 is	 now	 fully	 closed.	 	 All	
contentions	have	now	been	closed.			

(cid:120) 

In	March	2015,	the	Company	filed	an	updated	resource	estimate	and	preliminary	
economic	assessment	(“PEA”)	for	the	Dewey	Burdock	Project,	prepared	by	TREC	
Inc.	 (“TREC”)	 and	 Rough	 Stock	 Mining	 Services	 (“Rough	 Stock”).	 Subsequent	 to	
filing	 of	 the	 PEA,	 the	 British	 Columbia	 Securities	 Commission	 (“BCSC”)	 has	
identified	certain	technical	disclosure	deficiencies	relating	to	NI	43‐101	that	will	
necessitate	the	filing	of	an	amended	PEA	by	the	Company	in	the	near	term.		The	
Company	 is	 in	 discussions	 with	 the	 BCSC	 regarding	 the	 amended	 PEA	 and	
related	disclosure,	and	intends	to	issue	a	news	release	clarifying	the	disclosure	in	
the	PEA	and	an	amended	PEA	following	such	discussions.		As	such,	investors	are	
cautioned	 not	 to	 place	 undue	 reliance	 on	 the	 information	 incorporated	 by	
reference	into	this	MD&A	from	the	PEA	until	such	time	as	the	Company	issues	a	
clarifying	press	release	and	an	amended	PEA	in	consultation	with	the	BCSC.	

(cid:120)  The	 Company	announced	Board	and	Senior	 Management	changes	including	 the	
appointments	of	Alexander	Molyneux,	Chairman,	Curtis	Church,	Alexander	Bayer	
and	Joseph	Havlin	to	the	Board.		Richard	F.	Clement	Jr.	was	also	named	Deputy	
Chairman	and	Douglas	Eacrett	resigned	from	the	Board.		Richard	Clement	retired	
as	Chief	Executive	Officer	(“CEO”),	President	and	Corporate	Secretary.		The	CEO	
duties	were	assumed	by	Mr.	Molyneux	and	the	Corporate	Secretarial	duties	were	
assumed	 by	 Blake	 Steele,	 the	 Company’s	 Chief	 Financial	 Officer	 (“CFO”).	 Mr.	
Steele	 replaced	 Adria	 Hutchison	 as	 CFO	 in	 October	 2014.	 In	 addition	 to	 joining	
the	 Board,	 Mr.	 Church	 was	 named	 Vice	 President,	 International	 Operations,	 on	
close	of	the	RTO.	

6	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

BACKGROUND	

Azarga	 Uranium	 is	 a	 publicly	 listed	 company	 incorporated	 in	 Canada	 on	 February	 10,	
1984	with	limited	liability	under	the	legislation	of	the	Province	of	British	Columbia	and	
its	 shares	 are	 listed	 on	 the	 Toronto	 Stock	 Exchange	 (symbol:	 TSX:AZZ)	 and	 the	
Frankfurt	 Stock	 Exchange	 (symbol:	 P8AA).	 The	 Company	 is	 an	 integrated	 uranium	
exploration	and	development	company.		On	October	28,	2014,	the	Company	completed	
a	 RTO	 with	 Azarga	 Resources.	 Refer	 to	 the	 “Reverse	 Take‐over	 of	 Powertech	 Uranium	
Corp.”	section	of	this	MD&A	for	additional	details.		

The	 Company	 controls	 uranium	 properties	 located	 in	 the	 United	 States	 of	 America	
(“USA”)	 (South	 Dakota,	 Wyoming,	 and	 Colorado)	 and	 in	 the	 Kyrgyz	 Republic.	 	 The	
Company’s	 Dewey	 Burdock	 Project,	 located	 in	 South	 Dakota,	 is	 the	 Company’s	 initial	
development	priority.		The	Company	also	owns	80%	of	the	Kyzyl	Ompul	Project	in	the	
Kyrgyz	 Republic;	 the	 Centennial	 Project	 in	 Colorado,	 the	 Aladdin	 Deposit	 in	 Wyoming	
and	two	uranium	exploration	properties	in	Wyoming.		As	at	the	date	of	this	MD&A,	the	
Company	also	holds	investments	in	the	following	uranium	exploration	and	development	
companies:	 a	 23.7%	 stake	 (23.7%	 accounting	 ownership;	 18.7%	 legal	 ownership)	 in	
Black	 Range	 Minerals	 Limited	 (“Black	 Range”),	 a	 publicly	 listed	 company	 on	 the	
Australian	 Stock	 Exchange	 (“ASX”)	 (symbol:	 ASX:BLR)	 and	 a	 11.3%	 stake	 in	 Anatolia	
Energy	Limited	(“Anatolia”),	a	publicly	listed	company	on	the	ASX	(symbol:	ASX:AEK).		

Reverse	Take‐over	of	Powertech	Uranium	Corp.	

On	 October	 28,	 2014,	 Powertech	 completed	 its	 acquisition	 of	 all	 of	 the	 issued	 and	
outstanding	 common	 shares	 of	 Azarga	 Resources.	 In	 connection	 with	 closing	 the	
transaction,	the	Company	completed	 a	private	placement	 financing	for	gross	proceeds	
of	 approximately	 C$5,000,000	 (the	 “Financing”).	 The	 Company	 also	 changed	 its	 name	
from	 “Powertech	 Uranium	 Corp.”	 to	 “Azarga	 Uranium	 Corp.”	 and	 completed	 a	
consolidation	of	its	outstanding	 common	shares	on	the	basis	of	(1)	 post‐consolidation	
share	 for	 (10)	 pre‐consolidation	 shares	 (the	 “Consolidation”).	 	 Pursuant	 to	 the	 share	
purchase	 agreement,	 as	 amended,	 in	 exchange	 for	 obtaining	 all	 of	 the	 issued	 and	
outstanding	 shares	 of	 Azarga	 Resources,	 Powertech	
issued	 41,911,182	 post‐
Consolidation	 common	 shares	 to	 the	 former	 shareholders	 of	 Azarga	 Resources,	
representing	 approximately	 82.9%	 of	 the	 combined	 entity’s	 ownership,	 prior	 to	
completion	of	the	Financing.	 As	a	result,	the	transaction	 represents	a	RTO	and	Azarga	
Resources	has	been	identified	as	the	accounting	acquirer.		In	addition,	all	share	options	
of	Azarga	Resources	were	exchanged	for	share	options	of	Powertech	on	closing	of	the	
RTO,	 with	 exercise	 prices	 being	 adjusted	 to	 reflect	 the	 applicable	 exchange	 ratio	 and	
foreign	exchange	rates.		Certain	agreements	of	Azarga	Resources	were	also	assigned	to	
Powertech.			

7	

	
 
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

BACKGROUND	(Continued)	

Azarga	Resources	identified	an	opportunity	to	diversify	the	company’s	uranium	assets	
and	 increase	 the	 merged	 company’s	 uranium	 resource	 base	 through	 an	 RTO	 with	
Powertech.		As	a	result	of	Powertech’s	assets	being	undervalued,	due	to	a	combination	
of	factors,	including	weak	equity	markets,	the	Company	recognized	a	bargain	purchase	
gain	 of	 $11,605,241	 on	 close	 of	 the	 RTO	 (the	 difference	 between	 the	 fair	 value	 of	 the	
consideration	transferred	and	the	fair	value	of	the	identifiable	net	assets	of	the	business	
acquired).	The	fair	value	of	the	identifiable	net	assets	of	Powertech	was	$17,991,381.	To	
determine	the	fair	value	of	the	exploration	and	evaluation	assets,	the	Company	used	a	
combination	 of	 valuation	 techniques	 including	 discounted	 cash	 flows,	 precedent	
transactions	and	comparable	trading	multiples.	

The	 fair	 value	 of	 total	 consideration	 transferred	 on	 completion	 of	 the	 RTO	 was	
$6,386,140,	comprised	of	$5,539,669	of	common	shares,	$782,585	of	net	loans	forgiven	
by	Azarga	Resources	and	$63,886	of	outstanding	share	based	securities.	The	fair	value	
of	the	common	shares	was	calculated	to	be	$5,539,669	based	on	a	fair	market	value	of	
C$0.40	 per	 share	 using	 the	 closing	 market	 price	 on	 the	 day	 following	 the	 close	 of	 the	
RTO.		The	fair	value	of	the	share‐based	securities	was	calculated	using	the	Black	Scholes	
Option	Pricing	Model.		

The	 Financing	 raised	 gross	 proceeds	 of	 approximately	 C$5,000,000	 through	 the	
issuance	 of	 8,338,134	 post‐Consolidation	 units	 (“Units”),	 each	 Unit	 consisting	 of	 one	
post‐Consolidation	 common	 share	 and	 one‐half	 of	 a	 common	 share	 purchase	 warrant	
(“Warrant”).	 Each	 whole	 Warrant	 will	 entitle	 the	 holder	 to	 purchase	 one	 post‐
Consolidation	common	share	at	an	exercise	price	of	C$1.00	per	share	until	October	28,	
2016.	Accounting	for	the	Consolidation	adjustment,	the	Units	subscribed	for	pursuant	to	
the	Financing	were	subscribed	for	at	C$0.60	per	Unit.	Finder’s	fees	in	connection	with	
the	Financing	were	comprised	of	C$145,617	and	242,696	post‐Consolidation	shares.		

On	closing	of	the	RTO,	the	Financing	and	the	Consolidation	(the	“Closing”),	59,403,733	
common	 shares	 were	 issued	 and	 outstanding.	 The	 undiluted	 capitalization	 of	 the	
Company	after	Closing	is	as	follows:	

Common	shares	outstanding	before	Closing	(excluding	shares	
owned	by	Azarga	Resources	shareholders)	
Common	shares	issued	to	Azarga	Resources	shareholders	on	close
of	the	RTO	
Common	shares	issued	pursuant	to	the	Financing	
Common	shares	issued	pursuant	to	employment	agreements
Total	post‐Consolidation	common	shares	outstanding

41,911,182

8,580,830
252,808
59,403,733

											Post‐Consolidation	
8,658,913

8	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

BACKGROUND	(Continued)	

All	common	shares	issued	pursuant	to	the	RTO	are	subject	to	a	24	month	escrow	and	
will	be	released	from	escrow	as	 follows:	Nil	 on	the	closing	date,	25%	of	the	escrowed	
securities	 on	 October	 28,	 2015	 and	 the	 remaining	 escrowed	 securities	 on	 October	 28,	
2016.	All	securities	issued	pursuant	to	the	Financing	were	subject	to	a	hold	period	that	
expired	March	1,	2015.	

On	 close	 of	 the	 RTO,	 the	 Company	 owned	 the	 Dewey	 Burdock	 Project,	 the	 Centennial	
Project,	 the	 Aladdin	 Deposit	 and	 two	 uranium	 exploration	 properties	 in	 the	 United	
States	as	well	as	the	Kyzyl	Ompul	Project	in	the	Kyrgyz	Republic.	Refer	to	the	“Mineral	
Properties”	section	of	this	MD&A	for	additional	details.	

Prior	to	completion	of	the	RTO,	in	December	2013,	Azarga	 Resources	acquired	a	60%	
interest	in	the	Centennial	Project	located	in	Weld	County,	Colorado	from	Powertech	for	
total	purchase	consideration	of	$1,698,955.		

INDUSTRY	TRENDS	AND	OUTLOOK	

In	May	2014,	the	TradeTech	Weekly	U3O8	Spot	Price	Indicator	reached	a	nine‐year	low	
of	 $28.25	 per	 pound.	 It	 seems	 apparent	 that	 the	 earthquake	 and	 tsunami	 in	 Japan	 in	
March	 2011,	 with	 the	 resultant	 damaging	 effect	 on	 that	 country’s	 nuclear	 power	
industry,	 is	 still	 having	 ramifications	 on	 the	 broader	 nuclear	 and	 uranium	 industries.	
Prior	 to	 March	 2011,	 Japan	 was	 the	 world’s	 second	 largest	 consumer	 of	 uranium	 and	
since	that	time	 Japan	has	been	 almost	 absent	from	 the	uranium	market.	Certain	other	
major	nuclear	power	producing	nations,	such	as	Germany,	have	implemented	plans	to	
reduce	or	eliminate	nuclear	power.		

A	spot	uranium	price	below	cost	of	production	is	forcing	many	uranium	companies	to	
curtail	mining,	development	and	exploration	activities.	Furthermore,	the	industry	is	at	
a	historical	low‐point	in	terms	of	equity	valuations	and	the	availability	of	financing	for	
the	industry.	

Despite	the	current	market	environment	for	the	uranium	industry,	the	Company	holds	a	
belief	 in	 a	 meaningful	 turnaround.	 Our	 views	 are	 predicated	 on	 a	 number	 of	 key	
elements:	

9	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

INDUSTRY	TRENDS	AND	OUTLOOK	(Continued)	

(cid:120)  Many	countries	that	eliminated	or	reduced	their	nuclear	reliance	are	now	
encountering	 significant	 consequences	 and	 switching	 back	 to	 nuclear	 –
increased	cost	of	electricity	generation	and	increased	pollution	from	switching	to	
fossil	fuels	is	a	key	issue	for	such	countries.	Switching	away	from	nuclear	energy	
has	radically	increased	cost	of	electricity	generation	and	CO2	emissions	for	Japan.	
Furthermore,	the	switch	has	caused	a	significant	increase	in	Japan’s	trade	deficit.	
As	 a	 result,	 Japan	 revised	 its	 energy	 policy	 in	 February	 of	 2014	 to	 reintroduce	
nuclear	power	as	a	source	of	future	long‐term	base	load	power	supply.	Nineteen	
Japanese	 nuclear	 reactors1	have	 applied	 for	 regulatory	 approvals	 to	 re‐start	
operations	 and	 regulators	 have	 prioritized	 two	 nuclear	 reactors	 to	 re‐start	
during	the	summer	of	2015.	

(cid:120)  Demand	is	rapidly	accelerating	in	new	markets	 –	 all	 of	 the	 ‘BRIC’	 countries	
(i.e.	 Brazil,	 Russia,	 India	 and	 China)	 are	 rapidly	 growing	 their	 nuclear	 power	
capacity	 and	 increasing	 their	 reliance	 on	 nuclear	 power	 as	 a	 proportion	 of	
overall	 power	 generation.	 In	 fact,	 when	 considering	 the	 number	 of	 nuclear	
power	 plants	 operating,	 those	 under	 construction	 and	 those	 proposed	 for	
construction,	the	figures	have	 reached	an	all‐time	high.	China,	Russia	and	India	
lead	 the	 world	 in	 terms	 of	 the	 number	 of	 new	 nuclear	 power	 plants	 under	
construction,	with	twenty‐six,	nine	and	six,	respectively2.	Even	the	United	States	
is	 seeing	 renewed	 growth	 in	 its	 nuclear	 industry,	 with	 the	 NRC	 approving	 the	
licensing	of	new	nuclear	reactors	in	the	United	States	for	the	first	time	in	over	30	
years.	

(cid:120)  Current	 prices	 will	 constrain	 supply	–	according	 to	 supply	 cost	 curves	
published	 by	 industry	 analysts,	 less	 than	 one	 third	 of	 current	 mine	 supply	 is	
economic	 at	 the	 current	 spot	 price.	 Low	 prices	 are	 forcing	 producers	 to	 curtail	
mining,	 development	 and	 exploration.	 In	 2014,	 announcements	 by	 producers	
suggest	 at	 least	 12	 million	 pounds	 of	 annual	 U3O8	 supply	 has	 already	 been	
eliminated	due	to	recent	mine	closures.		

In	 the	 latter	 part	 of	 2014	 and	 through	 early	 2015,	 the	 uranium	 price	 remained	 low	
relative	 to	 the	 last	 10‐years	 average,	 but	 improved	 meaningfully.	 The	 TradeTech	
Weekly	U3O8	price	as	at	March	27,	2015	is	$39.40	per	pound.		

Despite	 the	 Company’s	 firm	 belief	 that	 a	 uranium	 industry	 turnaround	 is	 coming	 and	
based	 on	 certain	 indicators,	 may	 actually	 be	 tentatively	 underway,	 its	 strategies	 are	
focused	 on	 making	 prudent	 plans	 to	 progress	 its	 business,	 whilst	 conserving	 its	
financial	 resources.	 At	 this	 time,	 the	 Company’s	 strategy	 involves	 the	 following	 key	
elements:	

1 Nuclear Energy Institute 
2 World Nuclear Association 

10	

	
 
	
	
	
	
	
																																																								
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

INDUSTRY	TRENDS	AND	OUTLOOK	(Continued)	

(cid:120)  Continue	 with	 the	 advancement	 of	 the	 Dewey	 Burdock	 Project	 –	 receiving	
the	NRC	permit	for	Dewey	Burdock	in	April	2014	was	a	key	risk	reduction	event	
for	 the	 Dewey	 Burdock	 Project.	 Azarga	 is	 now	 continuing	 to	 work	 on	 the	
Environmental	 Protection	 Agency	 (“EPA”)	 and	 South	 Dakota	 state	 permitting	
requirements	through	the	remainder	of	2015	in	order	to	have	the	project	ready	
for	construction	in	2016.	Furthermore,	the	Company	has	embarked	on	a	process	
to	consider	project‐financing	options	for	the	Dewey	Burdock	Project,	with	a	view	
to	having	a	funding	solution	in	place	concurrent	with	the	finalization	of	permits.	
(cid:120)  Undertake	a	limited	exploration	program	in	the	Kyrgyz	Republic	–	a	maiden	
National	Instrument	43‐101	uranium	resource	was	completed	in	April	2014	on	
the	foundations	of	a	two‐year	exploration	program	on	the	Kyzyl	Ompul	Project.	
The	Company	has	planned	a	limited	exploration	program	in	2015.	

(cid:120)  Manage	 investments	 for	 value	 –	 the	 Company’s	 investments	 in	 Black	 Range	
and	Anatolia	have	a	combined	market	value	of	$3.9	million	as	at	March	31,	2015.	
On	 January	 29,	 2015,	 Black	 Range	 announced	 that	 it	 received	 a	 takeover	
proposal	 from	 Western	 Uranium	 Corporation	 representing	 a	 106%	 premium	
over	 the	 closing	 price	 of	 Black	 Range	 shares	 on	 the	 ASX	 one	 day	 prior	 to	 the	
announcement	 of	 the	 transaction.	 The	 Company	 will	 continue	 to	 monitor	 these	
investments	 for	 opportunities	 to	 create	 value	 through	 consolidation	 or	
realization,	
the	 continued	 evaluation	 of	 Western	 Uranium	
Corporation’s	proposal	for	Black	Range.	

including	

The	Company	believes	a	unique	opportunity	exists	for	investors	to	build	an	investment	
in	 the	 Company.	 Firstly,	 the	 Company	 has	 a	 firm	 belief	 that	 uranium	 prices	 will	 move	
meaningfully	 higher	 in	 the	 medium	 term.	 Secondly,	 the	 Company’s	 ‘flagship’	 Dewey	
Burdock	Project	is	one	of	the	world’s	leading	undeveloped	uranium	deposits	in	terms	of	
its	low	initial	capital	expenditure	and	post	start‐up	operating	cash	costs;	therefore,	the	
Company	 believes	 that	 the	 likelihood	 of	 attracting	 financing	 and	 moving	 into	 the	
construction	phase	as	soon	as	permitting	is	complete	is	high.	Thirdly,	the	Company	has	
a	 global	 asset	 suite	 inclusive	 of	 mineral	 properties	 and	 equity	 investments	 at	 various	
stages	 of	 development,	 which	 provide	 a	 pipeline	 for	 continued	 growth.	 Lastly,	
management	 and	 the	 board	 of	 directors	 have	 extensive	 experience	 in	 uranium,	 the	
broader	mining	sector	and	financial	markets.	

MINERAL	PROPERTIES	

The	Dewey	Burdock	Project	(100%	interest)	–	South	Dakota,	USA	

The	 Company’s	 100%	 owned	 Dewey	 Burdock	 Project	 is	 an	 in‐situ	 recovery	 (“ISR”)	
uranium	 project	 located	 in	 the	 Edgemont	 uranium	 district,	 in	 South	 Dakota,	 USA.	 The	
project	is	comprised	of	approximately	50	mining	leases	and	approximately	370	mining	
claims	covering	approximately	13,880	surface	acres	and	17,800	net	mineral	acres.		The	
Dewey	Burdock	Project	is	the	Company’s	initial	development	priority.			

11	

	
 
	
	
	
	
	
 
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

MINERAL	PROPERTIES	(Continued)	

In	March	2015,	the	Company	filed	an	updated	independent	resource	estimate	and	PEA	
for	 the	 Dewey	 Burdock	 Project	 prepared	 by	 TREC	 and	 Rough	 Stock	 (the	 “Dewey	
Burdock	 PEA”)	 with	 an	 effective	 date	 of	 January	 29,	 2015.	 The	 Dewey	 Burdock	 PEA	
provides	 an	 updated	 preliminary	 economic	 analysis	 of	 the	 Dewey	 Burdock	 Project	
based	 on	 exploration	 and	 development	 work	 performed	 subsequent	 to	 the	 previous	
PEA	filed	in	April	2012.		

Subsequent	 to	 filing	 of	 the	 Dewey	 Burdock	 PEA,	 the	 BCSC	 has	 identified	 certain	
technical	disclosure	deficiencies	relating	to	NI	43‐101	that	will	necessitate	the	filing	of	
an	amended	PEA	by	the	Company	in	the	near	term.		The	Company	is	in	discussions	with	
the	 BCSC	 regarding	 the	 amended	 PEA	 and	 related	 disclosure,	 and	 intends	 to	 issue	 a	
news	release	clarifying	the	disclosure	in	the	Dewey	Burdock	PEA	and	an	amended	PEA	
following	such	discussions.		As	such,	investors	are	cautioned	not	to	place	undue	reliance	
on	the	information	incorporated	by	reference	into	this	MD&A	from	the	Dewey	Burdock	
PEA	until	such	time	as	 the	Company	issues	a	clarifying	press	release	and	an	amended	
PEA	in	consultation	with	the	BCSC.	

The	Dewey	Burdock	Project	contains	measured	uranium	resources	of	4,122,000	pounds	
at	0.33%	U3O8	and	indicated	uranium	resources	of	4,460,000	pounds	at	0.21%	U3O8	at	a	
0.5	grade‐thickness	(“GT”)	cut‐off	and	inferred	uranium	resources	of	3,528,000	pounds	
at	 0.05%	 U3O8	 at	 a	 0.2	 GT	 cut‐off	 in	 the	 ISR	 mineral	 resource	 estimate.	 The	 mineral	
resource	estimate	further	estimates	an	additional	940,000	pounds	of	non‐ISR	(located	
above	 the	 water	 table)	 inferred	 resources	 at	 0.17%	 U3O8.	 Such	 resources	 are	 not	
included	in	the	resources	presented	in	the	economic	analysis	of	the	PEA.	The	Company’s	
measured	 and	 indicated	 resources	 increased	 to	 8,582,000	 pounds	 of	 uranium,	 an	
increase	of	28%,	at	0.25%	U3O8.	Mineral	resources	that	are	not	mineral	reserves	do	not	
have	demonstrated	economic	viability.			

The	 Dewey	 Burdock	 PEA	 resulted	 in	 a	 pre‐federal	 income	 tax	 net	 present	 value	 of	
$149.4	 million	 at	 a	 discount	 rate	 of	 8%	 and	 an	 internal	 rate	 of	 return	 of	 67%.	 	 The	
Dewey	 Burdock	 PEA	 assumed	 uranium	 prices	 of	 $65/lb	 U3O8,	 cash	 operating	 costs	 of	
$18.86/lb	U3O8	and	initial	capital	expenditures	of	$27.0	million.		Over	its	16‐year	mine	
life,	 the	 Dewey	 Burdock	 Project	 is	 forecast	 to	 produce	 9.7	 million	 lbs	 of	 U3O8	 and	
generate	a	pay‐back	period	in	the	third	quarter	of	the	second	year	of	production.		

12	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

MINERAL	PROPERTIES	(Continued)	

A	comparison	of	the	key	metrics	from	the	updated	Dewey	Burdock	PEA	to	2012	Dewey	
Burdock	PEA	is	presented	below:		

Life	of	mine	uranium	production
Initial	capital	costs
Net	 pre‐tax	 cash	 flow	 (at	 US$65/lb	
uranium)	
NPV	(at	8%	discount	rate)	
IRR	

2015	PEA
9.7m	lb
$27.0m
$284.2m

2012	PEA	
8.4m	lb	
$54.3m	
$194.9m	

Improvement
15%
50%
46%

$149.4m
67%

$109.1m	
48%	

37%
‐

Mineral	 resources	 that	 are	 not	 mineral	 reserves	 do	 not	 have	 demonstrated	 economic	
viability.		Details	of	the	assumptions	and	parameters	used	to	with	respect	to	the	Dewey	
Burdock	 PEA,	 including	 information	 on	 data	 verification	 are	 set	 out	 in	 the	 Dewey	
Burdock	Technical	Report	dated	January	29th,	2015,	a	copy	of	which	is	available	under	
the	 Company’s	 profile	 at	 www.sedar.com.	 The	 Dewey	 Burdock	 PEA	 is	 preliminary	 in	
nature;	 it	 includes	 inferred	 mineral	 resources	 that	 are	 considered	 too	 speculative	
geologically	 to	 have	 the	 economic	 considerations	 applied	 to	 them	 that	 would	 enable	
them	 to	 be	 categorized	 as	 mineral	 reserves.		 There	 is	 no	 certainty	 that	 the	 Dewey	
Burdock	PEA	will	be	realized.		

The	Company’s	immediate	objective	is	to	obtain	the	necessary	permits	and	licenses	to	
advance	the	Dewey	Burdock	Project	to	the	construction	phase.		

The	NRC	issued	the	final	Supplemental	Environment	Impact	Statement	(“SEIS”)	for	the	
Dewey	Burdock	Project	on	January	31,	2014.		The	EPA	issued	a	notice	of	receipt	of	the	
final	SEIS	on	February	7,	2014,	stating	a	30‐day	review	period	and	subsequently	issued	
final	 comments	 on	 the	 SEIS	 on	 March	 10,	 2014.	 	 The	 NRC	 also	 prepared	 a	 Safety	
Evaluation	Report	(“SER”),	which	was	published	in	November	2013,	and	a	draft	Section	
106	Programmatic	Agreement	(“PA”).	The	final	Section	106	PA	was	executed	on	April	7,	
2014	by	the	Advisory	Council	on	Historic	Preservation,	the	NRC,	the	South	Dakota	State	
Historic	Preservation	Office	and	the	Bureau	of	Land	Management	(“BLM”).	Subsequent	
to	 the	 PA	 being	 executed,	 the	 NRC	 issued	 a	 revised	 SER	 and	 the	 Company’s	 Dewey	
Burdock	 Project	 received	 its	 Source	 and	 Byproduct	 Materials	 License	 SUA‐1600	 (an	
operating	license)	on	April	8,	2014,	covering	10,580	acres.	

In	April	2014,	a	motion	to	stay	the	operating	license	for	the	Dewey	Burdock	Project	was	
submitted	to	the	ASLB.		Following	brief	oral	arguments,	this	motion	was	denied	by	the	
ASLB	on	May	20,	2014.	

13	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

MINERAL	PROPERTIES	(Continued)	

In	 August	 2014,	 the	 evidentiary	 hearing	 was	 held	 with	 the	 ASLB	 in	 regards	 to	 the	
limited	contentions	raised	with	respect	to	the	Dewey	Burdock	Project.	These	hearings	
with	the	ASLB	are	normal	practice	and	are	undertaken	after	the	NRC	license	is	granted	
to	 determine	 whether	 or	 not	 the	 NRC	 staff	 has	 considered	 all	 issues	 related	 to	 the	
license.	At	this	point,	only	limited	additional	evidence	and	testimony	can	be	presented	
and	a	final	decision	from	the	ASLB	is	expected	by	April	29,	2015	in	accordance	with	the	
scheduling	 order	 issued	 by	 the	 ASLB.	 The	 final	 ASLB	 decision	 can	 be	 appealed,	 which	
could	delay	the	permitting	process	for	the	Dewey	Burdock	Project.	

The	 Company	 continues	 to	 be	 in	 compliance	 with	 all	 NRC	 licensing	 and	 other	
permitting/licensing	requirements.		In	order	to	commence	construction	and	operations	
at	 the	 Dewey	 Burdock	 Project,	 the	 Company	 requires	 regulatory	 approvals	 from	 two	
major	agencies,	the	EPA	and	the	South	Dakota	Department	of	Environment	and	Natural	
Resources	 (“DENR”).	 These	 approvals	 include	 the	 Class	 III	 and	 Class	 V	 underground	
injection	control	(“UIC”)	permits	from	the	EPA	and	three	state	permits	to	be	issued	by	
South	Dakota	DENR.	

The	 EPA	 continues	 to	 work	 on	 the	 draft	 Class	 III	 and	 Class	 V	 UIC	 permits	 and	 the	
Company	 currently	anticipates	 receiving	 the	 draft	Class	III	 and	Class	 V	 UIC	 permits	 in	
the	 second	 quarter	 of	 2015,	 with	 final	 permits	 following	 in	 the	 second	 half	 of	 2015.		
However,	due	to	the	lack	of	mandated	regulatory	timelines,	the	dates	may	be	subject	to	
change.		

The	 Company	 has	 submitted	 applications	 to	 the	 South	 Dakota	 DENR	 in	 2012	 for	 its	
Groundwater	 Disposal	 Plan	 (“GDP”),	 Water	 Rights	 (“WR”)	 and	 Large	 Scale	 Mine	 Plan	
(“LSM”)	 permits.	 	 All	 permit	 applications	 have	 been	 deemed	 complete	 and	 have	 been	
recommended	for	conditional	approval	by	the	DENR	staff.	The	GDP	and	WR	permits	are	
subject	 to	 hearing	 with	 public	 participation.	 The	 hearing	 commenced	 on	 October	 28,	
2013	and	continued	through	November	25,	2013,	until	such	time	as	the	NRC	and	EPA	
ruled	 and	 set	 the	 federal	 surety.	 The	 LSM	 permit	 has	 been	 finalized	 subject	 to	
continuation	 of	 a	 hearing	 before	 the	 Board	 of	 Minerals	 and	 Environment,	 which	
commenced	the	week	of	September	23,	2013	and	continued	through	November	5,	2013,	
until	such	time	as	the	NRC	and	EPA	ruled	and	set	the	federal	surety.	

On	 July	 8,	 2014,	 the	 BLM	 requested	 additional	 information	 on	 the	 Company’s	 plan	 of	
operations	 for	 the	 Dewey	 Burdock	 Project.	 The	 Company	 submitted	 the	 requested	
information	 and	 anticipates	 that	 the	 BLM	 will	 approve	 the	 plan	 of	 operations	 for	 the	
Dewey	 Burdock	 Project	 in	 the	 second	 quarter	 of	 2015,	 at	 which	 point	 it	 is	 also	
anticipated	 that	 the	 BLM	 will	 prepare	 an	 environmental	 assessment	 and	 issue	 its	
Record	of	Decision.		

14	

	
 
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

MINERAL	PROPERTIES	(Continued)	

The	Company	anticipates	the	regulatory	process	to	be	completed	in	the	second	half	of	
2015;	however,	the	 Company	 remains	 cautious	 regarding	 the	 anticipated	 schedule	for	
obtaining	 the	 outstanding	 regulatory	 approvals	 because	 of	 factors	 outside	 the	
Company’s	 control,	 including	 a	 lack	 of	 mandated	 regulatory	 timelines	 for	 permit	
issuances	and	the	logistics	of	scheduling	and	holding	of	regulatory	hearings.	

The	Centennial	Project	(100%	interest)	–	Colorado,	USA	

The	Company’s	100%	owned	Centennial	Project	is	located	in	the	western	part	of	Weld	
County	in	northeastern	Colorado.	Through	property	purchase	and/or	lease	agreements,	
the	Centennial	Project	is	comprised	of	approximately	2,320	acres	of	surface	rights	and	
approximately	7,240	acres	of	mineral	rights.		

Historical	 exploration	 work	 included	 drilling,	 recovery	 tests,	 water	 well	 tests	 and	
environmental	studies.	At	the	request	of	the	Colorado	Division	of	Reclamation,	Mining	
and	Safety,	the	Company	prepared	and	submitted	an	updated	Site	Characterization	Plan	
in	April	2009.	All	the	required	environmental	surveys	and	studies	have	been	completed	
and	the	draft	reports	have	been	received.	The	Company	completed	its	application	to	the	
EPA	for	a	Class	I	UIC	Permit	in	November	2010.	In	December	2010,	the	EPA	informed	
the	Company	that	the	application	was	deemed	complete.			

In	 August	 2010,	 a	 NI	 43‐101	 compliant	 independent	 PEA	 (the	 “Centennial	 PEA”)	 was	
prepared	 by	 SRK	 Consulting	 (U.S.),	 Inc.	 (“SRK”)	 and	 Lyntek	 Incorporated	 (“Lyntek”)	
with	an	effective	date	of	June	2,	2010.		The	Centennial	PEA	indicated	that	the	Centennial	
Project	 can	 be	 developed	 using	 the	 ISR	 method	 and	 resulted	 in	 a	 net	 present	value	 of	
$51.8	 million,	 at	 a	 discount	 rate	 of	 8%,	 and	 an	 internal	 rate	 of	 return	 of	 18%.	 	 The	
Centennial	 PEA	 assumed	 uranium	 prices	 of	 $65/lb	 U3O8,	 cash	 operating	 costs	 of	
$34.95/lb	 U3O8	 and	 capital	 costs	 of	 $71.1	 million.	 	 The	 Centennial	 PEA	 included	
indicated	uranium	resources	of	10,371,571	pounds	at	0.09%	U3O8	and	inferred	uranium	
resources	 of	 2,325,514	 pounds	 at	 0.09%	 U3O8	 at	 a	 0.02	 GT	 cut‐off	 and	 annual	
production	of	700,000	lbs	per	annum	which	resulted	in	a	14	year	mine	life.			

Mineral	 resources	 that	 are	 not	 mineral	 reserves	 do	 not	 have	 demonstrated	 economic	
viability.	 Details	 of	 the	 assumptions	 and	 parameters	 used	 to	 with	 respect	 to	 the	
Centennial	PEA,	including	information	on	data	verification	are	set	out	in	the	Centennial	
PEA	dated	August	6,	2010,	a	copy	of	which	is	available	under	the	Company’s	profile	at	
www.sedar.com.	 The	 Centennial	 PEA	 is	 preliminary	 in	 nature	 and	 includes	 inferred	
mineral	resources	that	are	considered	too	speculative	geologically	to	have	the	economic	
considerations	 applied	 to	 them	 that	 would	 enable	 them	 to	 be	 categorized	 as	 mineral	
reserves.		There	is	no	certainty	that	the	Centennial	PEA	will	be	realized.	

Subsequent	 to	 the	 Centennial	 PEA	 being	 completed,	 certain	 lease	 agreements	 with	
respect	 to	 the	 Centennial	 Project	 were	 not	 renewed;	 however,	 the	 impact	 to	 the	
Centennial	PEA	is	immaterial.				

15	

	
 
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

MINERAL	PROPERTIES	(Continued)	

The	Company	has	engaged	an	independent	mining	consultant	to	prepare	development	
scenarios	 for	 the	 Centennial	 Project	 in	 order	 to	 maximize	 the	 value	 that	 can	 be	
extracted	from	this	project.			

The	Aladdin	Deposit	(100%	interest)	–	Wyoming,	USA	

The	 Aladdin	 Deposit	 comprises	 approximately	 10,161	 acres	 of	 mineral	 rights	 located	
along	the	Wyoming/South	Dakota	border	 on	the	northwestern	flank	of	the	 Black	Hills	
Uplift,	within	sandstones	of	the	Lower	Cretaceous‐age	Inyan	Kara	Group.		The	Aladdin	
property	is	80	miles	northwest	of	the	Dewey	Burdock	Project.	Uranium	resources	at	the	
Aladdin	 Deposit	 have	 developed	 within	 the	 same	 host	 rocks	 that	 contain	 the	 Dewey	
Burdock	uranium	resources.	

In	 June	 2012,	 the	 Company	 completed	 a	 NI	 43‐101	 compliant	 technical	 report	 for	 the	
Aladdin	 Deposit,	 with	 an	 effective	 date	 of	 June	 21,	 2012,	 describing	 the	 results	 of	 the	
Company’s	 confirmation	 drilling	 program	 and	 continued	 evaluation	 of	 the	 historic	
exploration	drilling	data	from	Teton	Exploration	Company.		

The	 Aladdin	 Deposit	 contains	 indicated	 uranium	 resources	 of	 1,038,023	 pounds	 at	
0.111%	 U3O8	 and	 inferred	 uranium	 resources	 of	 101,255	 pounds	 at	 0.119%	 U3O8	
included	 at	 a	 0.02	 GT	 cut‐off.	 Using	 the	 same	 cut‐off,	 a	 range	 of	 exploration	 potential	
was	determined	to	be	5.0	to	11.0	million	pounds	of	uranium,	averaging	0.11%	‐	0.12%	
U3O8.	 The	 grade	 and	 quantity	 of	 this	 exploration	 potential	 is	 conceptual	 in	 nature	 and	
there	has	been	insufficient	exploration	work	performed	with	respect	to	the	exploration	
potential	 to	 define	 a	 NI	 43‐101	 compliant	 resource.	 It	 is	 uncertain	 whether	 further	
exploration	 of	 the	 exploration	 potential	 will	 result	 in	 the	 delineation	 of	 a	 NI	 43‐101	
compliant	resource.	Details	of	the	assumptions	and	parameters	used	with	respect	to	the	
Aladdin	 NI	 43‐101	 Technical	 Report,	 including	 quality	 estimates	 and	 information	 on	
the	 Company’s	 profile	 on	 SEDAR	 at	
data	 verification	 are	 available	 under	
www.sedar.com.	 Mineral	 resources	 that	 are	 not	 mineral	 reserves	 do	 not	 have	
demonstrated	economic	viability.	

Kyzyl	Ompul	Project	(80%	interest)	–	Kyrgyz	Republic	

The	uranium	deposit/prospects	and	rare	earth	prospects	of	the	Kyzyl	Ompul	Project	are	
located	in	the	Kyrgyz	Republic,	approximately	125	kilometers	(“km”)	east	of	the	capital	
of	Bishkek.	More	specifically,	the	Kyzyl	Ompul	Project	is	located	in	the	Kochkor	region	
of	the	Naryn	Oblast	and	the	Issyk‐Kul	region	of	the	Issyk‐Kul	Oblast.		The	Kyzyl	Ompul	
Project	 is	 100%	 owned	 and	 operated	 by	 UrAsia,	 of	 which	 the	 Company	 has	 an	 80%	
interest	in,	and	consists	of	one	exploration	license	with	an	area	of	42,379	hectares.	The	
license	is	valid	until	December	31,	2015	and	permits	exploration	for	uranium,	thorium,	
iron,	titanium,	phosphate,	rare	earth	elements	and	feldspar.	

16	

	
 
	
	
	
	
	
		
	
	
 
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

MINERAL	PROPERTIES	(Continued)	

The	 Kyzyl	 Ompul	 Project	 has	 been	 explored	 since	 the	 1950s	 for	 uranium,	 with	 most	
historic	 exploration	 occurring	 during	 the	 1950s	 and	 1960s.	 This	 historic	 exploration	
identified	 a	 number	 of	 hydrothermal	 and	 placer	 uranium	 prospects	 within	 the	 Kyzyl	
Ompul	Project.		In	total,	five	hydrothermal	uranium	prospects	and	five	placer	uranium	
prospects	were	identified.		

The	 Kok	 Moinok	 deposit,	 the	 most	 advanced	 of	 the	 hydrothermal	 deposits,	 was	
discovered	in	1953.	From	1953	to	1957,	144	holes	were	drilled	on	a	grid	of	50m	x	50m.	
Soviet	 classified	 C1	 and	 C2	 reserves	 were	 calculated	 using	 the	 information	 obtained	
from	these	drill	holes.		Additional	drilling	was	completed	from	1958	to	1969	on	a	200m	
x	200m	grid	attempting	to	identify	further	extensions	of	the	uranium	prospects.	

Further	 exploration	 was	 undertaken	 by	 UrAsia	 from	 2005	 to	 2008,	 with	 the	 aim	 to	
confirm	 the	 hydrothermal	 uranium	 mineralization	 and	 placer	 uranium	 mineralization	
by	 targeting	 previously	 identified	 uranium	 deposits	 and	 prospects.	 	 The	 exploration	
program	during	this	period	included	traverses,	geological	mapping	(80km2),	trenching	
(4,300m3),	soil	gas	radon	emanation	surveys	(60	readings),	geophysical	surveys	and	the	
collection	of	84	hydrogeological	samples	for	radon	assays,	7,458	channel	samples,	455	
rock	chip	samples	and	28	crushed	samples.		

Subsequent	to	the	Company’s	80%	acquisition	of	UrAsia,	a	more	extensive	exploration	
program	commenced.		The	2012	and	2013	exploration	programs	concentrated	on	both	
uranium	and	rare	earth	elements	exploration.	Over	this	period,	the	Company	completed	
nine	drill	holes	for	approximately	2,275m	at	the	Sai	Bezvodniy	hydrothermal	prospect,	
40	 drill	 holes	 at	 the	 Tash	 Bulak	 placer	 prospect,	 31	 drill	 holes	 at	 the	 Backe	 placer	
prospect	and	9	drill	holes	at	the	Tunduk	placer	prospect.		The	Company	also	completed	
17	drill	holes	for	approximately	4,345m	at	the	Kok	Moinok	deposit.	The	2012	and	2013	
drilling	 program	 was	 designed	 to	 twin	 a	 selection	 of	 historic	 drill	 holes	 to	 confirm	
mineralized	 intervals	 and	 uranium	 grades	 in	 those	 mineralized	 intervals	 as	 well	 as	
confirm	the	geological	and	mineralogical	understanding	of	the	Kyzyl	Ompul	Project.	

In	 April	 2014,	 Ravensgate	 prepared	 a	 maiden	 NI	 43‐101	 compliant	 independent	
resource	estimate	for	the	Kok	Moinok	deposit	located	within	the	Kyzyl	Ompul	Project.		
Ravensgate	 estimated	 that	 the	 Kok	 Moinok	 deposit	 contained	 inferred	 uranium	
resources	of	7.51	million	pounds	at	225.2	parts	per	million	U3O8	using	a	cut‐off	of	100	
parts	per	million	as	at	December	31,	2013.		Details	of	the	assumptions	and	parameters	
used	 for	 the	 resource	 estimate	 at	 Kyzyl	 Ompul,	 including	 information	 on	 data	
verification	 are	 set	 out	 in	 the	 Kyzyl	 Ompul	 Technical	 Report	 dated	 April	 14,	 2014,	 a	
copy	 of	 which	 is	 available	 under	 the	 Company’s	 profile	 at	 www.sedar.com.	 Mineral	
resources	that	are	not	mineral	reserves	do	not	have	demonstrated	economic	viability.	

In	 2015,	 the	 Company	 plans	 to	 undertake	 a	 limited	 exploration	 program	 on	 the	 Kyzyl	
Ompul	Project	to	further	investigate	the	potential	for	rare	earth	elements,	continuing	its	
limited	rare	earth	element	exploration	program	from	2014.			

17	

	
 
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

MINERAL	PROPERTIES	(Continued)	

Black	Range	(23.7%	accounting	interest	as	at	the	date	of	this	MD&A)		

Black	Range	is	focused	on	growth	through	acquisition,	exploration	and	development	of	
uranium	projects,	particularly	in	the	United	States.	Its	growth	strategy	is	underpinned	
by	
located	
approximately	30	kilometers	northwest	of	Cañon	City	in	Colorado,	USA.			

in	 the	 Hansen/Taylor	 Ranch	 Uranium	 Project	

its	 100%	

interest	

On	 April	 23,	 2014,	 Black	 Range	 issued	 a	 press	 release	 announcing	 a	 JORC	 code	 2012	
compliant	 resource	 estimate	 for	 the	 Hansen/Taylor	 Ranch	 Uranium	 Project.	 	 Please	
refer	to	Black	Range’s	press	release	entitled	“Hansen/Taylor	Ranch	Uranium	Project	–	
JORC	 Code	 2012	 Mineral	 Resource	 Estimate”	 for	 details	 of	 the	 assumptions	 and	
parameters	 used	 to	 calculate	 the	 resources	 and	 uranium	 quality	 estimates	 and	
information	on	data	verification.	Mineral	resources	that	are	not	mineral	reserves	do	not	
have	demonstrated	economic	viability.	

Anatolia	(11.3%	interest	as	at	the	date	of	this	MD&A)	

Anatolia’s	 primary	 focus	 is	 its	 advanced	 exploration	 and	 development	 projects	 in	 the	
central	 Anatolian	 region	 of	 Turkey.	 	 Anatolia	 owns	 100%	 of	 the	 Temrezli	 Uranium	
Project	 in	 Turkey.	 On	 February	 16,	 2015,	 Anatolia	 issued	 a	 press	 release	 stating	 the	
results	 of	 a	 pre‐feasibility	 study	 on	 the	 Temrezli	 Uranium	 Project	 prepared	 by	 Tetra	
Tech	 Inc.	 Please	 refer	 to	 Anatolia’s	 press	 release	 entitled	 “Pre‐feasibility	 Study”	 for	
details	of	the	assumptions	and	parameters	used	to	calculate	the	resources	and	uranium	
quality	 estimates	 and	 information	 on	 data	 verification.	 The	 Anatolia	 Pre‐feasibility	
Study	is	preliminary	in	nature;	certain	scenarios	prepared	by	Anatolia	include	inferred	
mineral	resources	that	are	considered	too	speculative	geologically	to	have	the	economic	
considerations	 applied	 to	 them	 that	 would	 enable	 them	 to	 be	 categorized	 as	 mineral	
reserves.		 There	 is	no	certainty	 that	 the	 Pre‐feasibility	 Study	 will	 be	 realized.	 	 Mineral	
resources	that	are	not	mineral	reserves	do	not	have	demonstrated	economic	viability.	

SELECTED	ANNUAL	INFORMATION	

Management	 cautions	 the	 reader	 of	 the	 comparability	 of	 financial	 information	
presented	 in	 the	 consolidated	 statements	 of	 profit	 or	 loss	 and	 other	 comprehensive	
income	 and	 the	 consolidated	 statements	 of	 cash	 flows	 in	 this	 MD&A.	 	 The	 financial	
information	 has	 been	 prepared	 as	 a	 continuation	 of	 Azarga	 Resources’	 consolidated	
financial	statements	and	the	comparative	figures	presented	represent	the	consolidated	
financial	 statements	 of	 Azarga	 Resources.	 The	 results	 of	 Powertech’s	 operations	 have	
been	 included	 in	 the	 Company’s	 consolidated	 financial	 statements	 subsequent	 to	 the	
close	 of	 the	 RTO	 on	 October	 28,	 2014.	 	 Further,	 financial	 information	 for	 the	 period	
ended	 2012	 is	 presented	 for	 a	 seven‐month	period	 as	 the	 Company	 was	 incorporated	
on	May	30,	2012.	

18	

	
 
	
	
	
	
	
 
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

SELECTED	ANNUAL	INFORMATION	(Continued)		

Year ended December 31,
2014

2013

Period	ended
December	31,	2012

Total	working	capital	deficit
Total	assets
Exploration	and	evaluation	assets
Long	term	investments	(i)
Total	comprehensive	loss

$															

(1,567,300)
45,531,152
37,433,869
3,951,880
(2,207,652)

$													

(4,406,395)
26,062,427
12,418,765
10,344,230
(4,393,788)

$													

(5,531,871)
9,102,386
8,940,995

‐
(938,543)

(i)	Includes	investments	in	associates	and	the	investment	in	Anatolia

As	 at	 December	 31,	 2014,	 the	 working	 capital	 deficit	 primarily	 related	 to	 deferred	
consideration	owing	to	the	original	sellers	of	UrAsia,	trade	and	other	payables	and	loans	
payable,	 which	 primarily	 related	 to	 the	 loan	 agreement	 with	 Anadarko	 Land	 Corp	
(“Anadarko”).	 The	 Company	 continues	 to	 actively	 manage	 its	 working	 capital	 position	
and	is	evaluating	alternatives	to	 improve	its	working	capital	position.	As	 at	December	
31,	2013,	the	working	capital	deficit	primarily	related	to	deferred	consideration	owing	
to	the	original	sellers	of	UrAsia	and	other	current	liabilities	comprised	primarily	of	the	
put	option	on	the	non‐controlling	interest	of	UrAsia	(the	original	sellers	of	UrAsia	have	
the	right	to	sell	the	remaining	20%	of	UrAsia’s	charter	capital	to	Azarga	for	$2,000,000	
in	 cash	 or	 $2,000,000	 in	 Azarga	 shares)	 and	 the	 put	 option	 held	 by	 Anatolia.	 As	 at	
December	 31,	 2012,	 the	 working	 capital	 deficit	 is	 primarily	 the	 result	 of	 deferred	
payments	owing	to	the	original	sellers	of	UrAsia.	

As	at	December	31,	2014,	the	Company’s	total	assets	were	primarily	comprised	of	the	
Company’s	 investment	 in	 exploration	 and	 evaluation	 assets,	 which	 primarily	 includes	
the	Company’s	investment	in	the	Dewey	Burdock	Project,	the	Kyzyl	Ompul	Project	and	
the	 Centennial	 Project	 and	 the	 Company’s	 long‐term	 investments,	 which	 included	 its	
investment	in	associates	(Black	Range)	and	the	Company’s	investment	in	Anatolia.	As	at	
December	31,	2013,	the	total	assets	were	primarily	comprised	of	the	Company’s	long‐
term	 investments,	 which	 included	 its	 investment	 in	 associates	 (Black	 Range	 and	
Powertech)	 and	 the	Company’s	 investment	 in	 Anatolia	 and	 the	Company’s	 investment	
in	 exploration	 and	 evaluation	 assets,	 which	 primarily	 included	 the	 Company’s	
investment	in	the	Kyzyl	Ompul	Project.			As	at	December	31,	2012,	the	total	assets	were	
primarily	comprised	of	the	Company’s	investment	in	exploration	and	evaluation	assets,	
which	solely	related	to	the	Kyzyl	Ompul	Project.	

For	the	year	ended	December	31,	2014,	total	comprehensive	loss	primarily	consisted	of	
administration	 expenses,	 unrealized	 losses	 on	 financial	 instruments,	 finance	 costs	 and	
an	 impairment	 on	 an	 investments	 in	 associate,	 partially	 offset	 by	 a	 bargain	 purchase	
gain	 recognized	 on	 close	 of	 the	 RTO.	 For	 the	 year	 ended	 December	 31,	 2013,	 total	
comprehensive	 loss	 primarily	 consisted	 of	 administration	 expenses,	 unrealized	 losses	
on	financial	instruments	and	finance	costs.		For	the	period	ended	December	31,	2012,	
total	 comprehensive	 loss	 primarily	 consisted	 of	 administration	 expenses	 and	 finance	
costs.	

19	

	
 
	
	
	
	
	
	
	
	
																
														
																
																
														
																
																		
														
																									
																
															
																	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

SELECTED	ANNUAL	INFORMATION	(Continued)		

Administration	 expenses	 for	 the	 year	 ended	 December	 31,	 2014	 were	 $3,802,907	
compared	 to	 $1,940,724	 for	 the	 period	 ended	 December	 31,	 2013.	 	 The	 increase	 in	
administration	 expenses	 is	 primarily	 explained	 by	 the	 completion	 of	 the	 RTO,	 which	
resulted	 in	 increased	 consulting	 and	 professional	 feels	 and	 increased	 share‐based	
compensation	expense	as	well	as	increased	salaries	and	benefits	due	to	additional	staff.	
For	the	period	ended	December	31,	2012,	administration	expenses	were	$370,133.		The	
increase	in	administration	expenses	for	the	year	ended	December	31,	2013	compared	to	
the	 period	 ended	 December	 31,	 2012	 is	 primarily	 explained	 by	 the	 ramp‐up	 of	 the	
Company’s	 operations,	 but	 also	 by	 the	 7‐month	 reporting	 period	 in	 2012	 due	 to	 the	
foundation	of	the	Company	on	May	30,	2012.	

SUMMARY	OF	QUARTERLY	RESULTS		

The	 following	 table	 provides	 selected	 quarterly	 financial	 information	 for	 the	 most	
recent	four	quarters.			Quarterly	financial	information	is	not	available	for	prior	periods.	

QUARTER	ENDED

Administration	expenses

Finance	costs

2014

31‐Dec

30‐Sep

30‐Jun

31‐Mar

$			

(1,622,416)

$							

(464,607)

$							

(729,183)

$							

(986,701)

(164,118)

(138,134)

(546,740)

(478,728)

Unrealized	gain/(loss)	on	financial	instruments

(749,459)

(1,283,982)

(52,451)

Realized	gain/(loss)	on	financial	instruments

Share	of	equity	income/(loss)	from	associates

Impairment	of	investment	in	associates

Gain	on	bargain	purchase	on	close	of	RTO

301,133

(1,942,957)

(3,707,133)

11,605,241

170,216

234,964

‐

‐

‐

‐

(1,589,776)

(352,905)

(222,563)

Deferred	income	tax	recovery/(expense)

(122,546)

(33,196)

28,907

Net	income/(loss)

3,633,140

(1,514,918)

(3,251,385)

Total	comprehensive	income/(loss)

3,238,470

(1,679,572)

(3,093,264)

524,696

946,947

‐

‐

(128,260)

(342,562)

(673,286)

The	Company	recorded	net	income	of	$3,633,140	for	the	three	months	ended	December	
31,	2014	primarily	related	to	the	following:	

Administration	 expenses	 were	 $1,622,416	 for	 the	 three	 months	 ended	 December	 31,	
2014	 and	 primarily	 consisted	 of	 share‐based	 compensation	 recorded	 on	 close	 of	 the	
RTO,	 consulting	 and	 professional	 fees,	 which	 included	 expenditures	 required	 to	 close	
the	RTO,	 corporate	administration	fees,	 which	included	 filing	fees	on	close	of	the	RTO	
and	salaries	and	benefits.		Administration	expenditures	were	higher	than	prior	periods	
due	to	Powertech’s	operations	being	 included	in	the	Company’s	consolidated	financial	
statements	subsequent	to	the	close	of	the	RTO	on	October	28,	2014	and	additional	costs	
related	to	the	RTO.		

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

SUMMARY	OF	QUARTERLY	RESULTS	(Continued)	

Finance	 costs	 were	 $164,118	 for	 the	 three	 months	 ended	 December	 31,	 2014	 and	
primarily	consisted	of	interest	expense	on	the	put	option	on	the	non‐controlling	interest	
of	 UrAsia,	 the	 deferred	 consideration	 payable	 to	 the	 original	 sellers	 of	 UrAsia,	 the	
Shareholders	Loan	Agreement	and	the	Anadarko	Agreement.	

The	 Company	 recognized	 an	 unrealized	 loss	 of	 $749,459	 for	 the	 three	 months	 ended	
December	31,	2014	primarily	related	to	a	loss	on	convertible	loans	issued	outstanding	
to	Powertech	and	a	loss	on	the	revaluation	of	the	Company’s	investment	in	Anatolia.	

The	 Company	 recognized	 a	 realized	 gain	 of	 $301,333	 for	 the	 three	 months	 ended	
December	31,	2014	on	the	settlement	of	outstanding	obligations	between	the	Company	
and	Powertech	on	close	of	the	RTO.	

The	 Company	 recognized	 an	 equity	 loss	 pick‐up	 of	 $1,942,957	 for	 the	 three	 months	
ended	 December	 31,	 2014	 related	 to	 an	 equity	 income	 pick‐up	 recognized	 on	 the	
Company’s	investment	in	Powertech,	which	was	partially	offset	by	an	equity	loss	pick‐
up	recognized	on	the	Company’s	investment	in	Black	Range.	

The	Company	recognized	an	impairment	charge	of	$3,707,133	prior	to	completing	the	
RTO	 based	 on	 the	 fair	 value	 of	 the	 Company’s	 previously	 held	 equity	 interest	 in	
Powertech.	

The	Company	recognized	a	$11,605,241	bargain	purchase	gain	on	close	of	the	RTO	for	
the	three	months	ended	December	31,	2014	as	a	result	of	the	fair	value	of	consideration	
paid	being	lower	than	the	fair	value	of	the	identifiable	net	assets	acquired.	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	

The	 Company’s	 capital	 risk	 management	 objectives	 are	 to	 safeguard	 the	 Company’s	
ability	 to	 continue	 as	 a	 going	 concern	 in	 order	 to	 support	 the	 Company’s	 exploration	
and	 development	 of	 its	 mineral	 properties	 and	 to	 maintain	 a	 flexible	 capital	 structure	
which	 optimizes	 the	 costs	 of	 capital	 at	 an	 acceptable	 risk.	 In	 order	 to	 facilitate	 the	
management	 of	 its	 capital	 requirements,	 the	 Company	 prepares	 annual	 expenditure	
budgets	that	 are	 updated	 as	 necessary	 depending	 on	 various	 factors,	 including	 capital	
deployment,	results	from	the	exploration	and	development	of	its	properties	and	general	
industry	 conditions.	 	 The	 annual	 and	 updated	 budgets	 are	 approved	 by	 the	 board	 of	
directors.		

The	 consolidated	 financial	 statements	 have	 been	 prepared	 on	 a	 going	 concern	 basis,	
which	 contemplates	 that	 the	 Company	 will	 continue	 operations	 for	 the	 foreseeable	
future	 and	 will	 be	 able	 to	 realize	 its	 assets	 and	 discharge	 its	 liabilities	 in	 the	 normal	
course	of	business	as	they	come	due.	To	date,	the	Company	has	not	generated	revenues	
from	operations	and	is	currently	in	the	exploration	and	development	stage.		

21	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	(Continued)	

As	at	December	31,	2014,	the	Company	had	negative	working	capital	of	$1,567,300	and	
an	 accumulated	 deficit	 of	 $6,272,029	 and	 will	 continue	 incurring	 losses	 in	 the	
foreseeable	future.	Additional	funding	will	be	required	by	the	Company	to	complete	its	
strategic	 objectives	 and	 continue	 as	 a	 going	 concern.	 There	 is	 no	 certainty	 that	
additional	financing,	at	terms	that	are	acceptable	to	the	Company,	will	be	available.	The	
inability	 to	 obtain	 additional	 financing	 would	 cast	 significant	 doubt	 on	 the	 Company’s	
ability	to	continue	as	a	going	concern.		The	Company	has	successfully	raised	financing	in	
the	 past	 and	 will	 continue	 to	 assess	 available	 alternatives	 if	 additional	 funds	 are	
required;	 however,	 there	 is	 no	 assurance	 that	 the	 Company	 will	 be	 able	 to	 raise	
additional	funds	in	the	future.	

The	 Company	 manages	 its	 capital	 structure	 and	 makes	 adjustments	 to	 it	 in	 light	 of	
changes	in	economic	conditions	and	the	risk	characteristics	of	the	underlying	assets.		In	
order	 to	 maintain	 or	 adjust	 the	 capital	 structure,	 the	 Company	 may	 issue	 new	 shares,	
issue	new	debt	or	acquire	or	dispose	of	assets.	

As	 at	 December	 31,	 2014,	 the	 Company	 had	 cash	 of	 $3,214,529	 compared	 to	 cash	 of	
$282,013	 as	 at	 December	 31,	 2013.	 	 The	 Company’s	 working	 capital	 deficit	 (current	
assets	 less	 current	 liabilities)	 was	 $1,567,300	 as	 at	 December	 31,	 2014	 compared	 to	
$4,406,395	 as	 at	 December	 31,	 2013.	 The	 Company	 continues	 to	 actively	 manage	 its	
working	 capital	 position	 and	 is	 evaluating	 alternatives	 to	 further	 improve	 its	 working	
capital	 position.	 The	 Company	 is	 not	 subject	 to	 any	 externally	 imposed	 capital	
expenditure	requirements.			

Powertech	Uranium	Corp.	

In	July	2013,	the	Company	purchased	a	16.5%	interest	in	Powertech	and	the	Company	
provided	a	convertible	debenture	to	Powertech	in	the	amount	of	C$514,350	($500,000)	
repayable	in	cash	or	shares	at	C$0.07	per	share,	pursuant	to	the	terms	and	conditions	of	
a	 private	 placement	 agreement	 dated	 July	 31,	 2013	 (“Powertech	 Convertible	
Debenture”).	On	October	18,	2013,	the	Powertech	Convertible	Debenture	was	converted	
into	8,450,035	common	shares	at	C$0.07	share.		

In	 addition,	 on	 October	 18,	 2013,	 the	 Company	 agreed	 to	 provide	 a	 loan	 facility	 in	
amount	of	$3,600,000	to	Powertech	(“Powertech	Convertible	Loan”)	repayable	in	cash	
or	shares.	Other	key	terms	of	the	convertible	loan	are	as	follows:		

(cid:120)  Term	–	24	months	after	the	date	of	initial	advance	(the	“Powertech	CL	Maturity	

Date”);	

(cid:120)  Conversion	price	‐	the	conversion	price	shall	be	either	1)	C$0.12	per	share	in	the	
event	that	Powertech	receives	certain	permits	before	December	31,	2013	or	2)	
C$0.095	per	share	in	the	event	that	such	permits	are	not	received	by	December	
31,	2013.	As	at	December	31,	2013,	Powertech	had	not	received	such	permits;	

22	

	
 
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	(Continued)	

(cid:120)  Early	 repayment	 option	 –	 Powertech	 may	 repay	 the	 loan,	 in	 whole	 or	 in	 part,	

before	the	Powertech	CL	Maturity	Date;	

(cid:120)  Repayment/conversion	 amount	 –	 115%	 or	 130%	 of	 the	 amount	 of	 the	
Powertech	
the	
to	
repayment/conversion	occurs	on	or	before	12	months	or	after	12	months	from	
issuing	the	Powertech	Convertible	Loan,	respectively;	

repaid/converted	

Convertible	

Loan	

be	

if	

(cid:120)  Powertech’s	conversion	right	‐	in	whole	or	in	part,	on	or	before	the	Powertech	CL	

Maturity	Date;	

(cid:120)  Azarga’s	 conversion	 right	 –	 in	 whole	 or	 in	 part,	 after	 the	 earlier	 of	 1)	 the	
Powertech	 board	 of	 directors	 approving	 a	 transaction	 resulting	 in	 a	 change	 of	
control;	2)	a	change	of	control	of	Powertech;	3)	occurrence	of	an	event	of	default;	
4)	after	9	months	following	the	date	of	the	initial	advance;	and	

(cid:120)  Other	‐	the	Powertech	Convertible	Loan	is	non‐interest	bearing	and	is	unsecured.	

In	November	2013,	the	Company	further	increased	its	ownership	stake	to	45%	through	
the	acquisition	of	additional	Powertech	shares	at	a	price	of	C$0.0966	per	share.	

In	addition,	on	September	12,	2014,	Powertech	and	the	Company	agreed	to	enter	into	
an	additional	$650,000	loan	facility	(“Second	Powertech	Convertible	Loan”).	Other	key	
commercial	terms	of	the	loan	include:	

(cid:120)  Term	 –	 24	 months	 after	 the	 date	 of	 initial	 advance	 (the	 “Second	 Powertech	 CL	

Maturity	Date”);	

(cid:120)  Conversion	price	‐	C$0.06	per	share;		
(cid:120)  Early	 repayment	 option	 –	 Powertech	 may	 repay	 the	 loan,	 in	 whole	 or	 in	 part,	

before	the	Second	Powertech	CL	Maturity	Date;	

(cid:120)  Repayment/conversion	 amount	 –	 115%	 or	 130%	 of	 the	 amount	 of	 the	 Second	
Powertech	
the	
to	
repayment/conversion	occurs	on	or	before	12	months	or	after	12	months	from	
issuing	the	Second	Powertech	Convertible	Loan,	respectively;	

repaid/converted	

Convertible	

Loan	

be	

if	

(cid:120)  Powertech’s	 conversion	 right	 ‐	 in	 whole	 or	 in	 part,	 on	 or	 before	 the	 Second	

Powertech	CL	Maturity	Date;	

(cid:120)  The	Company’s	conversion	right	–	in	whole	or	in	part,	after	the	earlier	of	1)	the	
Powertech	 board	 of	 directors	 approving	 a	 transaction	 resulting	 in	 a	 change	 of	
control;	2)	a	change	of	control	of	Powertech;	3)	occurrence	of	an	event	of	default;	
4)	after	9	months	following	the	date	of	the	initial	advance;	and	

(cid:120)  Other	 ‐	 the	 Second	 Powertech	 Convertible	 Loan	 is	 non‐interest	 bearing	 and	 is	

unsecured.	

The	Powertech	Convertible	Loan	and	the	Second	Powertech	Convertible	Loan	were	
settled	in	accordance	with	the	terms	and	conditions	of	the	share	purchase	agreements,	
as	amended,	on	close	of	the	RTO.		

23	

	
 
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	(Continued)	

UrAsia	in	Kyrgyzstan	Limited	Liability	Company	

On	July	27,	2012,	the	Company	acquired	80%	 of	the	charter	capital	of	UrAsia	through	
the	 Share	 Transfer	 Agreement	 and	 Agreement	 of	 Participants	 (the	 “Purchase	
Agreements”)	 for	 an	 upfront	 cash	 payment	 of	 $200,000	 and	 a	 deferred	 payment	 of	
$5,800,000.			

Under	the	terms	of	the	Purchase	Agreements,	the	original	sellers	of	UrAsia	also	have	the	
right	 to	 sell	 the	 remaining	 20%	 of	 UrAsia’s	 charter	 capital	 to	 the	 Company	 for	 1)	
$2,000,000	 in	 cash;	 or	 2)	 $2,000,000	 of	 the	 Company’s	 shares	 after	 July	 27,	 2014.		
Subsequently,	 the	 Company	 and	 the	 original	 sellers	 of	 UrAsia	 have	 amended	 the	
Purchase	Agreements.	

In	 2013,	 the	 Company	 and	 the	 original	 sellers	 of	 UrAsia	 amended	 the	 payment	 terms	
surrounding	 the	 $5,800,000	deferred	payment.		 Instead	 of	 settling	the	 entire	deferred	
payment	in	cash,	the	Company	issued	the	original	sellers	of	UrAsia	6,250,000	common	
shares	to	settle	$2,500,000	of	the	obligation.	

On	 February	 12,	 2014,	 payment	 terms	 for	 the	 remaining	 $1,850,000	 owing	 to	 the	
original	 sellers	 of	 UrAsia	 were	 amended	 to	 be	 settled	 according	 to	 the	 following	
schedule:	 $150,000	 payable	 on	 or	 before	 March	 30,	 2014,	 $200,000	 payable	 on	 or	
before	 December	 31,	 2014,	 $500,000	 payable	 on	 or	 before	 December	 31,	 2015,	
$500,000	payable	on	or	before	December	31,	2016	and	$500,000	payable	on	or	before	
December	31,	2017.		Further,	on	December	30,	2014,	the	payment	terms	were	amended	
to	 delay	 the	 $200,000	 payable	 on	 or	 before	 December	 31,	 2014	 to	 be	 payable	 on	 or	
before	April	1,	2015.		

For	 the	 year	 ended	 December	 31,	 2014,	 the	 Company	 made	 cash	 payments	 totaling	
$150,000	to	partially	settle	the	deferred	consideration.		

If	 Azarga	 fails	 to	 settle	 the	 outstanding	 deferred	 payments	 in	 accordance	 with	 the	
revised	 payment	 schedule,	 its	 participation	 interest	 in	 UrAsia’s	 charter	 capital	 will	 be	
reduced	(not	more	than	60%)	based	on	a	pro‐rata	calculation	over	the	unpaid	portion	
of	the	$5,800,000	and	transferred	back	to	the	original	sellers	of	UrAsia.	

The	February	12,	2014	amendment	also	aligned	the	put	option	exercise	timing	on	the	
remaining	20%	of	UrAsia’s	charter	capital	with	the	final	deferred	payment	to	be	made	
on	or	before	December	31,	2017.		

24	

	
 
	
	
	
	
	
	
	
	
	
		
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	(Continued)	

Investment	in	Black	Range		

On	March	14,	2013,	the	Company	acquired	a	19.7%	interest	in	Black	Range.		On	July	2,	
2013,	the	Company	entered	into	a	financing	agreement	with	Black	Range	to	provide	an	
A$2,000,000	 convertible	 loan	 (“First	 Black	 Range	 CL”)	 repayable	 in	 cash	 or	 common	
shares	of	Black	Range	(the	“Black	Range	Shares”).	Other	key	terms	include:	

(cid:120)  Term	–	24	months	from	the	date	of	the	first	draw	down	(the	“First	CL	Maturity	

Date”);	

(cid:120)  Early	repayment	option	–	Black	Range	may	repay	the	loan,	in	whole	or	in	part,	

before	the	First	CL	Maturity	Date;	

(cid:120)  Automatic	 redemption	 –	 occurs	 when	 Black	 Range	 raises	 an	 aggregate	 of	 more	
than	 A$13,000,000	 in	 debt	 and	 equity,	 other	 than	 any	 financing	 where	 no	
proceeds	are	received	by	Black	Range;	

(cid:120)  Conversion	‐	If	not	repaid,	the	loan	is	automatically	converted	to	shares	of	Black	

Range	at	the	First	CL	Maturity	Date;	

(cid:120)  Conversion/redemption	 amount	 –	 110%,	 115%	 or	 130%	 of	 the	 principal	 sum	
being	 repaid/converted	 if	 the	 repayment/conversion	 occurs	 before	 6	 months,	
not	less	than	6	months	and	not	more	than	12	months,	or	more	than	12	months	
from	issuing	the	First	Black	Range	Convertible	Loan,	respectively;	and	

(cid:120)  Other	 –	 the	 First	 Black	 Range	 Convertible	 Loan	 is	 non‐interest	 bearing	 and	

unsecured.	

Subsequently,	 on	 October	 26,	 2013,	 the	 Company	 and	 Black	 Range	 amended	 the	 First	
Black	 Range	 CL	 and	 agreed	 to	 convert	 A$638,000	 into	 Black	 Range	 Shares	 at	 the	
conversion	price	of	A$0.01	per	share.		

On	 October	 26,	 2013,	 the	 Company	 entered	 into	 a	 second	 financing	 agreement	 with	
Black	 Range	 to	 provide	 an	 A$1,500,000	 convertible	 loan	 (“Second	 Black	 Range	 CL”)	
repayable	in	cash	or	Black	Range	Shares.		Other	key	terms	include:	

(cid:120)  Term	‐	24	months	from	the	date	of	the	first	draw	down	(the	“Second	CL	Maturity	

Date”);	

(cid:120)  Early	repayment	option	–	Black	Range	may	repay	the	loan,	in	whole	or	in	part,	

before	the	Second	CL	Maturity	Date;		

(cid:120)  Automatic	 redemption	 –	 occurs	 when	 Black	 Range	 raises	 an	 aggregate	 of	 more	
than	 A$11,500,000	 in	 debt	 and	 equity,	 other	 than	 any	 financing	 where	 no	
proceeds	are	received	by	Black	Range;	

(cid:120)  Conversion	‐	If	not	repaid,	the	loan	is	automatically	converted	to	shares	of	Black	

Range	at	the	Second	CL	Maturity	Date;	

25	

	
 
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	(Continued)	

(cid:120)  Conversion/redemption	 amount	 –	 110%,	 115%	 or	 130%	 of	 the	 principal	 sum	
being	 repaid/converted	 if	 the	 repayment/conversion	 occurs	 before	 6	 months,	
not	less	than	6	months	and	not	more	than	12	months,	or	more	than	12	months	
from	issuing	the	Second	Black	Range	Convertible	Loan,	respectively;	and	

(cid:120)  Other	 ‐	 the	 Second	 Black	 Range	 Convertible	 Loan	 is	 non‐interest	 bearing	 and	

unsecured.	

In	June	2014,	the	First	and	Second	Black	Range	Convertible	Loans	were	converted	into	
304,966,667	shares	of	Black	Range	in	accordance	with	the	terms	stipulated	in	the	loan	
agreements.			

Further,	on	February	25,	2014,	the	Company	entered	into	a	third	financing	agreement	
with	Black	Range	to	provide	an	A$2,000,000	convertible	loan	(“Third	Black	Range	CL”)	
repayable	in	cash	or	Black	Range	Shares.		Other	key	terms	include:	

(cid:120)  Term	‐	12	months	from	the	date	of	the	first	draw	down	(the	“Third	CL	Maturity	

Date”);	

(cid:120)  Conversion	 price	 –	 The	 higher	 of	 a)	 the	 three	 month	 volume	 weighted	 average	
price	 of	 Black	 Range	 shares	 traded	 on	 the	 Australian	 Stock	 Exchange	 from	 the	
date	of	the	first	draw	down	or	b)	A$.007;	

(cid:120)  Early	repayment	option	–	Black	Range	may	repay	the	loan,	in	whole	or	in	part,	

before	the	Third	CL	Maturity	Date;		

(cid:120)  Conversion	‐	If	not	repaid,	the	loan	is	automatically	converted	to	shares	of	Black	

Range	at	the	Third	CL	Maturity	Date;		

(cid:120)  The	 Company’s	 conversion	 right	 –	 subject	 to	 Black	 Range	 obtaining	 regulatory	
approvals,	the	Company	can	convert	the	outstanding	amount	of	the	Third	Black	
Range	Convertible	Loan	three	months	after	the	first	draw	down;	

(cid:120)  Conversion/redemption	 amount	 –	 115%	 or	 130%	 of	 the	 principal	 sum	 being	
repaid/converted	if	the	repayment/conversion	occurs	on	or	before	6	months	or	
after	 6	 months	 from	 issuing	 the	 Third	 Black	 Range	 Convertible	 Loan,	
respectively;	

(cid:120)  Right	 to	 appoint	 a	 second	 director	 –	 if	 the	 fully	 diluted	 voting	 power	 of	 the	

Company	exceeds	35%;	and	

(cid:120)  Other	 –	 the	 Third	 Black	 Range	 Convertible	 Loan	 is	 non‐interest	 bearing	 and	

unsecured.	

During	 the	 year	 ended	 December	 31,	 2014,	 Black	 Range	 drew	 down	 A$460,000	
($419,080),	under	the	Third	Black	Range	Convertible	Loan.	Subsequent	to	year‐end	the	
Third	Black	Range	Convertible	Loan	was	converted	into	73,284,314	Black	Range	shares	
and	the	facility	was	extinguished.		

26	

	
 
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	(Continued)	

In	 addition,	 during	 2014,	 the	 Company	 sold	 39,388,824	 Black	 Range	 shares	 for	 gross	
proceeds	of	$301,062.			

On	October	3,	2014,	the	Company	closed	a	share	sale	agreement	and	economic	exposure	
sharing	 deed	 with	 Empire	 Equity	 Ltd.	 (“Empire	 Equity”)	 to	 sell	 140,000,000	 Black	
Range	 shares	 at	 A$0.008	 per	 share	 for	 total	 consideration	 of	 A$1,120,000.	 The	
consideration	 is	 payable	 in	 four	 equal	 installments,	 with	 the	 first	 payment	 due	 on	
closing	 and	 subsequent	 payments	 due	 12,	 24	 and	 36	 weeks	 after	 closing.	 	 Other	 key	
terms	include:	

(cid:120)  Profit	sharing	on	future	sales	by	Empire	Equity	–	The	Company	receives	50%	of	
proceeds	 from	 future	 sales	 of	 Black	 Range	 shares	 by	 Empire	 Equity,	 if	 Empire	
Equity	sells	the	Black	Range	shares	in	excess	of	$A0.010	per	share;	however,	the	
first	A$1,260,000	of	proceeds	will	be	retained	by	Empire	Equity;	

(cid:120)  Profit	 guarantee	 on	 future	 sales	 by	 Empire	 Equity	 –	 Two	 years	 after	 closing,	 if	
Empire	 Equity	 sells	 its	Black	Range	shares	for	less	than	 A$0.008	per	share,	the	
Company	 will	 reimburse	 Empire	 Equity	 the	 difference	 between	 the	 sales	 price	
and	A$0.008	per	share;	and		

(cid:120)  Anniversary	payments	–	After	closing,	at	each	12	week	interval	(up	to	96	weeks),	
the	 Company	 is	 obligated	 to	 make	 anniversary	 payments	 to	 Empire	 Equity,	
calculated	based	on	the	cumulative	installments	paid	to	the	Company	at	the	date	
of	 the	 anniversary	 payment,	 less	 the	 value	 of	 shares	 sold	 by	 Empire	 Equity,	
multiplied	by	2.5%.		

To	date,	the	Company	has	received	the	first	installment	payment.		

Subsequent	 to	 year‐end,	 on	 March	 23,	 2015,	 Black	 Range	 announced	 that	 a	 definitive	
Merger	 Implementation	 Agreement	 has	 been	 executed	 with	 Western	 Uranium	
Corporation	 (“Western”),	 pursuant	 to	 which	 Western	 will	 offer	 to	 acquire	 all	 of	 the	
issued	 shares	 of	 Black	 Range.	 Black	 Range	 shareholders	 will	 receive	 1	 new	 Western	
share	for	every	750	shares	of	Black	Range	held.		

According	 to	 the	 announcement,	 based	 on	 Western’s	 closing	 share	 price	 on	 the	
Canadian	Securities	Exchange	(Symbol:	CNX:WUC)	at	the	date	of	the	proposed	offer	on	
January	29,	2015	and	an	exchange	rate	of	C$1:A$1:02,	the	offer	valued	Black	Range	at	
A$18.5	 million	 or	 $A0.00617	 per	 share.	 The	 offer	 will	 be	 implemented	 via	 scheme	 of	
arrangement	and	an	indicative	timetable	estimates	the	arrangement	to	be	implemented	
in	July	2015.		The	offer	is	subject	to	a	number	of	conditions.		

27	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	(Continued)	

Investment	in	Anatolia	

During	 2013,	 the	 Company	 acquired	 27,209,573	 shares	 of	 Anatolia	 for	 total	
consideration	 of	 $1,771,953.	 On	 October	 1,	 2013,	 the	 Company	 signed	 a	 put	 option	
agreement	with	Anatolia.	Under	the	put	option	agreement,	Anatolia	can	issue	a	total	of	
16,666,667	shares	to	the	Company	at	an	issue	price	of	A$0.12	per	share	in	tranches	of	
8,333,333	shares	(“Tranche	1”)	and	8,333,334	shares	(“Tranche	2”).	In	February	2014,	
Anatolia	 exercised	 Tranche	 1	 of	 the	 put	 option	 agreement	 and	 issued	 8,333,333	
Anatolia	shares	to	the	Company	at	an	exercise	price	of	$898,100.	

Further,	in	August	2014,	Anatolia	and	the	Company	amended	the	put	option	agreement.		
The	Company	paid	consideration	of	$348,338	to	Anatolia	to	settle	Tranche	2	of	the	put	
option	agreement	and	provide	the	Company	with	the	ability	to	acquire	up	to	8,333,334	
shares	in	Anatolia	at	a	price	of	A$0.08	per	share	(the	“Call	Option	Agreement”).	The	Call	
Option	Agreement	expired	on	March	31,	2015.		

Powerlite	Ventures	Limited	–	Powerlite	Facility	

On	 May	 22,	 2013,	 the	 Company	 issued	 an	 equity	 instrument	 (“Powerlite	 Facility”)	 to	
Powerlite	 Ventures	 Limited	 (“Powerlite”)	 for	 $15,000,000	 (“Facility	 Limit”).	 In	
accordance	 with	 the	 agreement,	 the	 outstanding	 principal	 and	 interest	 accrued	 under	
the	agreement	will	be	settled	through	the	issuance	of	the	Company’s	shares	at	$1.54	per	
share.	 	 As	 a	 result,	 the	 financial	 instrument	 has	 been	 classified	 as	 equity.	 	 Accrued	
interest	has	been	recorded	to	interest	expense	with	the	offset	being	recorded	as	equity.		
Other	key	commercial	terms	of	the	financing	include:	

(cid:120) 

Interest	 ‐	 10%	 per	 annum,	 payable	 on	 conversion	 of	 each	 note	 (the	 Powerlite	
Facility	can	be	drawn	over	multiple	drawings,	each	a	separate	note);	

(cid:120)  Maturity	–	May	22,	2023;	
(cid:120)  Conversion	price	–	$1.54	per	share;	
(cid:120)  Powerlite’s	 conversion	 right	 –	 convert	 the	 outstanding	 notes	 plus	 accrued	

interest	into	the	Company’s	shares	after	the	date	of	issue;	

(cid:120)  Company’s	 conversion	 right	 –	 convert	 the	 outstanding	 notes	 plus	 accrued	
interest	 at	 the	 earlier	 of	 six	 months	 from	 the	 issuance	 date	 of	 each	 note	 or	 an	
event	 causing	 conversion	 of	 any	 Black	 Range	 convertible	 loans	 held	 by	 the	
Company;	

(cid:120)  Mandatory	 conversion	 –	 all	 outstanding	 notes	 plus	 accrued	 interest	 will	
automatically	convert	to	shares	within	10	business	days	of	the	maturity;	and	

(cid:120)  Other	–	the	Powerlite	Facility	is	unsecured.	

28	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	(Continued)	

On	 August	 28,	 2013	 and	 February	 12,	 2014,	 the	 facility	 limit	 was	 amended	 to	
$21,000,000	and	$26,000,000,	respectively.		As	at	December	31,	2014,	the	Company	had	
drawn	 a	 total	 of	 $18,000,000	 (December	 31,	 2013:	 $12,000,000)	 under	 the	 Powerlite	
Facility.	The	incremental	facility	amount	of	$5,000,000	agreed	on	February	12,	2014	can	
only	be	drawn	in	2015	and	is	subject	to	a	mutually	agreed	upon	draw	down	schedule	to	
be	agreed	in	writing	prior	to	the	end	of	2014;	however,	a	draw	down	schedule	was	not	
agreed	prior	to	the	end	of	2014.	$3,000,000	remains	available,	subject	to	the	Powerlite	
Facility	terms	discussed	above.	

On	 July	 1,	 2014,	 38,212,493	 shares	 were	 issued	 to	 Powerlite	 on	 conversion	 of	 the	
accumulated	 Powerlite	 equity	 contributions	 ($18,000,000)	 made	 pursuant	 to	 the	
Powerlite	Facility.	

Shareholders	Loan	Agreement	

On	 July	 31,	 2012,	 the	 Company	 entered	 into	 a	 $1,800,000	 convertible	 loan	 agreement	
with	its	founding	shareholders	(“Shareholders	Loan	Agreement”).	The	funds	were	used	
for	funding	the	UrAsia	2012	exploration	program	and	general	working	capital	purposes.		
The	key	commercial	terms	of	the	financing	include:		

(cid:120) 

Interest	–	10%	per	annum	payable	on	each	anniversary	date	of	the	Shareholders	
Loan	Agreement;	

(cid:120)  Term	–	3	years,	commencing	July	31,	2012;	
(cid:120)  Conversion	 price	 –	 based	 on	 the	 Company’s	 most	 recent	 sale	 of	 shares	 to	 an	

outside	third	party;	

(cid:120)  Founding	shareholders’	conversion	right	–	to	convert	the	outstanding	balance	of	
the	 loan	 plus	 accrued	 interest,	 in	 whole	 or	 in	 part,	 into	 ordinary	 shares	 of	 the	
Company	at	the	conversion	price;	

(cid:120)  Extension	of	the	term	–	the	Company	has	the	option,	on	maturity,	to	extend	the	
term	of	the	loan	for	an	additional	three	years.	Upon	exercise	of	this	option,	the	
annual	interest	rate	increases	to	15%	per	annum;	

(cid:120)  Early	 repayment	 option	 –	 the	 Company	 has	 the	 right,	 but	not	 the	obligation,	 to	
repay	the	whole	balance	of	the	loan	plus	accrued	interest	at	any	time	out	of	the	
proceeds	of	a	capital	raising	or	if	the	loan	is	refinanced	or	replaced	by	a	new	loan	
on	or	before	the	maturity;	and	

(cid:120)  Other	‐	the	Shareholders	Loan	Agreement	is	unsecured.	

On	 February	 12,	 2014,	 the	 Shareholders	 Loan	 Agreement	 was	 amended	 to	 extend	 the	
term	to	5	years.	The	conversion	price	was	also	amended	to	a)	based	on	the	Company’s	
most	recent	sale	of	shares	to	an	outside	third	party,	if	the	Company	is	private	or	b)	the	
higher	of	the	Company’s	20‐day	volume	weighted	average	share	price	or	$0.40,	adjusted	
for	an	appropriate	transaction	ratio,	if	the	Company	is	public.		On	close	of	the	RTO,	the	
conversion	price	has	been	adjusted	to	C$1.23	per	share.		

29	

	
 
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	(Continued)	

As	at	December	31,	2014,	the	Company	had	drawn	$1,776,000	under	the	Shareholders	
Loan	Agreement,	no	change	from	December	31,	2013.		

Other	Loans	Payable	

The	Company	assumed	loan	agreements	with	Anadarko	and	Elston	on	close	of	the	RTO.		
These	agreements	include:	

Anadarko	Agreement	

The	Company	entered	into	an	agreement	with	Anadarko	to	purchase	uranium	rights	on	
certain	 areas	 of	 the	 Centennial	 Project	 for	 total	 consideration	 of	 $3,000,000,	 of	 which	
$1,815,000	had	been	paid	as	at	December	31,	2014	(the	“Anadarko	Agreement”).	Of	the	
consideration	 outstanding,	 $790,000	 is	 payable	 in	 2015	 and	 $395,000	 is	 payable	 in	
2016.	 An	 additional	 $2,000,000	 is	 payable	 upon	 receipt	 of	 regulatory	 permits	 and	
licenses	allowing	uranium	production	on	the	area	of	the	Centennial	Project	pertaining	
to	these	mineral	interests.	Other	key	terms	of	the	Anadarko	Agreement	include:	

(cid:120)  Failure	 to	 Permit	 –	 If	 the	Company	 does	 not	 obtain	 the	 regulatory	 permits	 and	
licenses	 allowing	 uranium	 production	 by	 September	 27,	 2019,	 the	 uranium	
rights	will	transfer	back	to	Anadarko,	at	Anadarko’s	option;	
In	 the	 event	 of	 default,	 the	 uranium	 rights	 will	 transfer	 back	 to	 Anadarko,	 at	
Anadarko’s	option;	and	

(cid:120) 

(cid:120)  The	Anadarko	Agreement	is	non‐interest	bearing.	

Elston	Agreements	

The	 Company	 entered	 into	 an	 agreement	 with	 Elston	 to	 purchase	 mineral	 rights	 on	
certain	areas	of	the	Dewey	Burdock	Project	for	total	consideration	of	$600,000,	of	which	
$480,000	 had	 been	 paid	 as	 at	 December	 31,	 2014	 (the	 “Elston	 Agreement”).	 Of	 the	
consideration	outstanding,	$30,000	is	payable	in	2015	and	$90,000	is	payable	in	three	
annual	installments	of	$30,000	from	2016	to	2018.	An	additional	$1,300,000	is	payable,	
in	 four	 equal	 annual	 installments,	 upon	 receipt	 of	 regulatory	 permits	 and	 licenses	
allowing	 uranium	 production	 on	 the	 area	 of	 the	 Dewey	 Burdock	 Project	 pertaining	 to	
these	mineral	interests.	Other	key	terms	of	the	Elston	Agreement	include:	

(cid:120) 

In	 the	 event	 of	 default,	 Elston	 has	 the	 option	 to	 purchase	 the	 mineral	 property	
interests	for	$1;	and	

(cid:120)  The	Elston	Agreement	is	non‐interest	bearing.	

30	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCING,	LIQUIDITY	AND	CAPITAL	RESOURCES	(Continued)	

The	Company	also	assumed	an	additional	Elston	agreement	with	$750,000	payable,	in	
four	equal	annual	installments,	upon	receipt	of	regulatory	permits	and	licenses	allowing	
uranium	production	on	the	area	of	the	Dewey	Burdock	Project	pertaining	to	the	mineral	
interests	covered	by	the	agreement.		

Cash	Flow	Highlights	

Cash	used	in	Operating	Activities	

For	 the	 year	 ended	 December	 31,	 2014,	 the	 Company	 used	 $2,137,962	 of	 cash	 in	
operating	 activities	 compared	 to	 $1,560,001	 for	 the	 year	 ended	 December	 31,	 2013.	
Cash	 used	 in	 operating	 activities	 increased	 in	 2014	 primarily	 due	 to	 increased	
administration	 expenditures	 as	 a	 result	 of	 the	 RTO.	 	 The	 increased	 administration	
expenditures	were	partially	offset	by	changes	in	working	capital	items	related	to	trade	
and	other	payables	and	other	liabilities.		

Cash	used	in	Investing	Activities	

For	 the	 year	 ended	 December	 31,	 2014,	 the	 Company	 used	 $5,745,261	 of	 cash	 in	
investing	activities	compared	to	$18,031,177	for	the	year	ended	December	31,	2013.	In	
2014,	 cash	 used	 in	 investing	 activities	 primarily	 related	 to	 $898,100	 of	 long‐term	
investments	 in	 Anatolia,	 $348,338	 to	 settle	 the	 Anatolia	 put	 option	 agreement,	
$3,746,788	to	purchase	convertible	loans	in	Powertech	and	Black	Range	and	$940,089	
of	 exploration	 and	 evaluation	 expenditures	 related	 to	 the	 Company’s	 mineral	
properties,	 partially	 offset	 by	 the	 sale	 of	 $335,232	 of	 long‐term	 investments	 in	 Black	
Range	and	Anatolia.			

In	 2013,	 cash	 used	 in	 investing	 activities	 primarily	 related	 to	 a	 $1,450,000	 deferred	
payment	 to	 the	 original	 sellers	 of	 UrAsia,	 a	 $1,072,468	 payment	 related	 to	 the	
Company’s	 60%	 acquisition	 of	 the	 Centennial	 Project	 ($1,000,000	 paid	 to	 Powertech	
and	 $72,468	 of	 transaction	 fees),	 $9,734,807	 of	 long‐term	 investments	 in	 Powertech,	
Black	Range	and	Anatolia,	$3,751,087	to	purchase	convertible	loans	in	Powertech	and	
Black	Range	and	$1,835,545	of	exploration	and	evaluation	expenditures	related	to	the	
Kyzyl	Ompul	Project.		

Cash	generated	from	Financing	Activities	

For	 the	 year	 ended	 December	 31,	 2014,	 the	 Company	 generated	 $10,812,197	 of	 cash	
from	 financing	 activities	 compared	 to	 $19,751,151	 for	 the	 year	 ended	 December	 31,	
2013.	 	 In	 2014,	 cash	 generated	 from	 financing	 activities	 related	 to	 $6,000,000	 drawn	
under	 the	 Powerlite	 Facility	 and	 $4,812,197	 proceeds	 from	 share	 issuances.	 In	 2013,	
cash	generated	from	financing	activities	primarily	related	to	$12,000,000	drawn	under	
the	Powerlite	Facility	and	$7,433,311	proceeds	from	share	issuances.		

31	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

CONTRACTUAL	COMMITMENTS	

As	at	December	31,	2014	and	2013,	the	Company’s	commitments	for	expenditures	are	
as	follows:		

Within	1	year

As at December 31, 2014
2‐4	years

Over	4	years

Total

Capital	expenditure	commitments
Operating	expenditure	commitments
Commitments

Capital	expenditure	commitments
Operating	expenditure	commitments
Commitments

$															

$															

‐
678,100
678,100

$								

$								

‐
909,970
909,970

$															

‐

$															

‐

1,019,395
1,019,395

$						

2,607,465
2,607,465

$						

As at December 31, 2013

Within	1	year

2‐4	years

Over	4	years

Total

$															

‐
19,111
19,111

$															

$															

‐
‐
‐

$															

$															

‐
‐
‐

$										

$															

‐
19,111
19,111

$										

OFF	BALANCE	SHEET	ARRANGEMENTS	

The	 Company	 does	 not	 have	 any	 off	 balance	 sheet	 arrangements	 that	 have	 or	 are	
reasonably	likely	to	have	a	current	or	future	effect	on	its	financial	condition,	changes	in	
financial	 condition,	 revenues	 or	 expenses,	 results	 of	 operations,	 liquidity,	 capital	
expenditures	or	capital	resources.	

FINANCIAL	INSTRUMENTS	

The	fair	value	of	financial	assets	and	financial	liabilities	measured	at	amortized	cost	is	
determined	in	accordance	with	generally	accepted	pricing	models	based	on	discounted	
cash	 flow	 analysis	 or	 using	 prices	 from	 observable	 current	 market	 transactions.	 	 The	
Company	 considers	 that	 the	 carrying	 amount	 of	 all	 its	 financial	 assets	 and	 financial	
liabilities	measured	at	amortized	cost	approximates	their	fair	value.			

The	 fair	 values	 of	 the	 Company’s	 financial	 instruments	 classified	 as	 FVTPL	 are	
determined	as	follows:	

(cid:120)  The	fair	value	of	financial	instruments	that	are	traded	on	an	active	liquid	market	
are	determined	with	reference	to	the	quoted	market	prices.		The	fair	value	of	the	
Company’s	 investment	 in	 the	 shares	 of	 Anatolia	 is	 determined	 using	 this	
methodology.		

(cid:120)  The	fair	value	of	financial	instruments	that	are	not	traded	in	an	active	market	are	
determined	 using	 generally	 accepted	 valuation	 models	 using	 inputs	 that	 are	
directly	(i.e.	prices)	or	indirectly	(i.e.	derived	prices)	observable.	

32	

	
 
	
	
	
 
 
	
	
	
	
	
	
	
	
	
	
	
										
										
								
								
												
																	
																	
												
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCIAL	INSTRUMENTS	(Continued)	

(cid:120)  The	fair	value	of	the	put	option	held	by	Anatolia	and	the	fair	value	of	the	
call	option	held	by	the	Company	for	Anatolia	shares	are	determined	using	
the	Black‐Scholes	Option	Pricing	Model.	

(cid:120)  The	 fair	 value	 of	 the	 warrant	 liability	 is	 determined	 using	 the	 Black‐

Scholes	Option	Pricing	Model.	

(cid:120)  The	fair	value	of	financial	instruments	that	are	not	traded	in	an	active	market	are	
determined	using	generally	accepted	valuation	models	using	inputs	that	are	not	
directly	(i.e.	prices)	or	indirectly	(i.e.	derived	from	prices)	observable.	

(cid:120)  The	fair	values	of	the	embedded	derivatives	within	the	convertible	loans	
issued	by	Powertech	are	determined	using	a	Binomial	Pricing	Model.	The	
loan	 asset	 components	 for	 both	 Powertech	 and	 Black	 Range	 are	 valued	
based	on	the	present	value	of	expected	future	cash	flows	at	the	discount	
rate	that	would	have	applied	to	the	financial	assets	without	conversion	or	
other	embedded	derivative	features.	None	of	the	fair	value	change	in	the	
convertible	 loans	 for	 the	 year	 ended	 December	 31,	 2014	 and	 2013	 is	
related	 to	a	 change	 in	the	 credit	 risk	 of	 the	 convertible	 loans.	 	 All	 of	 the	
change	in	fair	value	is	associated	with	changes	in	market	conditions.	

The	fair	value	of	all	the	other	financial	instruments	of	the	Company	approximates	their	
carrying	 value	 because	 of	 the	 demand	 nature	 or	 short‐term	 maturity	 of	 these	
instruments.	

Financial	assets

Loans	and	receivables

Cash	and	cash	equivalents
Restricted	cash

Fair	value	through	profit	or	loss

Investment	in	Anatolia	
Convertible	loans	issued	by	Black	Range
Convertible	loans	issued	by	Powertech
Call	option	on	Anatolia	shares

Total	financial	assets

As at December	31,

2014

2013

$

$

3,214,529
231,948

$																	

282,013
21,151

2,061,257
427,139
‐
36,877
5,971,750

1,738,600
2,320,675
460,375
‐

$														

4,822,814

33	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
																				
																
																		
																
																		
																									
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

FINANCIAL	INSTRUMENTS	(Continued)	

As	at	December	31,

2014

2013

Financial	liabilities

Other	financial	liabilities

Trade	and	other	payables	
Loan	payable	to	shareholders	
Deferred	consideration	
Put	option	on	non‐controlling	interest	of	UrAsia	
Promissory	note	on	Centennial	Project	
Put	option	held	by	Powertech	on	Centennial	Project	
Other	loans	payable	

$														

3,470,711
2,024,522
1,400,672
1,423,118

‐
‐

1,246,094

$																	

386,471
1,846,531
1,741,080
1,872,592
449,980
177,835
‐

Fair	value	through	profit	or	loss
Put	option	held	by Anatolia	
Warrant	Liability
Empire	Equity	facility	
Total	financial	liabilities

‐
328,213
228,422
10,121,752

$

818,523
‐
‐

$														

7,293,012

The	Company	is	exposed	to	credit	risk	associated	with	its	cash	and	cash	equivalents,	its	
convertible	loans	acquired	from	Black	Range	and	the	installment	payments	owing	from	
Empire	Equity.	The	Company’s	maximum	exposure	to	credit	risk	is	equal	to	the	carrying	
amount	 of	 its	 cash	 and	 cash	 equivalents,	 the	 nominal	 amount	 of	 the	 convertible	 loans	
and	the	amount	of	installments	outstanding	from	Empire	Equity.	

The	Company’s	credit	risk	on	cash	and	cash	equivalents	and	the	Empire	Equity	facility	
arises	 from	 default	 of	 the	 counterparty.	 The	 Company	 limits	 its	 exposure	 to	
counterparty	 credit	 risk	 on	 cash	 and	 cash	 equivalents	 by	 only	 dealing	 with	 financial	
institutions	 with	 high	 credit	 ratings.	 	 The	 Company	 limits	 its	 exposure	 on	 the	 Empire	
Equity	facility	through	the	execution	of	legal	agreements	with	various	protections	that	
are	governed	by	first	world	jurisdictions.		

The	 Company	 seeks	 to	 manage	 its	 credit	 risk	 on	 the	 convertible	 loans	 acquired	 from	
Black	Range	by	including	mechanisms	that	provide	protection	should	Black	Range	not	
be	able	to	repay	the	convertible	loans,	e.g.	the	conversion	feature.	The	Company	also	has	
board	 representation	 to	 ensure	 that	 the	 Company	 is	 fully	 apprised	 of	 the	 financial	
environment	at	Black	Range.		Subsequent	to	December	31,	2014,	all	of	the	Black	Range	
convertible	loans	had	been	converted	into	shares.	

The	 Company	 is	 subject	 to	 share	 price	 risk	 with	 respect	 to	 its	 investments	 in	 Black	
Range	and	Anatolia.	

34	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
																
																
																
																
																
																
																									
																		
																									
																		
																									
																		
																									
																									
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RELATED	PARTY	TRANSACTIONS	

This	 MD&A	 includes	 the	 financial	 statements	 of	 Azarga	 Uranium	 and	 its	 significant	
subsidiaries	and	associates	listed	in	the	following	table:		

Name

Azarga	Resources	(Hong	Kong)	Limited
Azarga	Resource	Limited	(BVI)
Azarga	Resources	Canada	Ltd.
Azarga	Resources	USA
UrAsia
Powertech	USA,	Inc.
Black	Range

Country	of
incorporation

Hong Kong
British Virgin Islands
Canada
United	States	of	America
Kyrgyz	Republic	
United States of America
Australia

%	equity	interest
As at	December	31,
2014
2013

100%
100%
100%
100%
80%
100%
24%

100%
100%
100%
100%
80%
45%
23%

As	at	December	31,	2014,	the	Company	held	a	significant	influence	investment	in	Black	
Range.	Black	Range	became	an	associate	of	the	Company	on	July	2,	2013.	The	Company	
held	a	significant	influence	investment	in	Powertech	from	October	18,	2013	to	October	
28,	2014,	at	which	point	the	RTO	closed.		

During	 the	 year	 ended	 December	 31,	 2014	 and	 2013,	 the	 Company	 had	 related	 party	
transactions	 with	 the	 Company’s	 directors,	 shareholders,	 management	 and	 significant	
influence	investees	including:	

(cid:120)  Shareholders	 and	 key	 management	 personnel	 subscribed	 for	 the	 Company’s	

shares	under	subscription	agreements;	

(cid:120)  A	shareholder	of	the	Company	received	a	commission	of	$300,000	for	brokering	

(cid:120) 

private	placements,	this	was	recorded	to	equity	in	2013;	
Interest	 continued	 to	 accrue	 to	 shareholders	 of	 the	 Company	 on	 the	
Shareholders	Loan	Agreement;		
(cid:120)  The	disposal	of	Black	Range	shares;	
(cid:120)  The	conversion	of	the	First	and	Second	Black	Range	Convertible	Loans;	
(cid:120)  The	purchase	of	convertible	loans	issued	by	Black	Range	and	Powertech;	and	
(cid:120)  The	RTO	with	Powertech.	

35	

	
 
	
	
	
	
	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RELATED	PARTY	TRANSACTIONS	(Continued)		

Related	party	assets		

The	assets	of	the	Company	include	the	following	amounts	due	to	related	parties:	

Convertible	loans	issued	by	Black	Range
Convertible	loan	issued	by	Powertech
Centennial	Project	with	Powertech	
Investment	in	Powertech	
Investment	in	Black	Range
Total	assets	with	related	parties	

Related	party	liabilities	

As at December	31,

2014

2013

$

$														

427,139
‐
‐
‐

1,890,623
2,317,762

$														

$												

2,320,675
460,375
1,698,995
5,788,794
2,816,836
13,085,675

The	liabilities	of	the	Company	include	the	following	amounts	due	to	related	parties:	

Loan	payable	to	shareholders
Promissory	note	issued	to	Powertech for Centennial
Project	
Put	option	held	by	Powertech	on	Centennial Project
Total	liabilities	with	related	parties	

$

$

Related	party	income	and	expenses		

As at December	31,

2014

2013

2,024,522

$														

‐

‐

2,024,522

$														

1,846,531
449,980

177,835
2,474,346

The	Company’s	related	party	income	and	expenses	consist	of	the	following	amount:	

Realized	gain	upon	equity	accounting for Powertech
Realized	gain	upon	equity	accounting for Black Range
Equity	income	pick‐up	from	Powertech
Gain	recognized	on	assets	settled	on	close of RTO
Unrealized	gain	on	Black	Range	convertible loans
Dilution	gain	on	investment	in	associates
Total	related	party	income

$

$

Year ended December	31,
2014
2013

‐
‐
341,757
301,133
353,778
469,784
1,466,452

$																	

$																	

220,369
483,132
11,130
‐
102,277
‐
816,908

36	

	
 
	
	
	
	
	
	
	
	
	
 
 
	
	
	
	
	
	
	
	
	
	
	
																									
																		
																
																
																
																
																									
																		
																		
																		
																				
																									
																		
																									
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RELATED	PARTY	TRANSACTIONS	(Continued)		

Year	ended	December	31,
2014
2013

Interest	expense	on	loan	payable	to	shareholders
Interest	expense	on	promissory	note issued to
Powertech	for	Centennial	Project	
Interest	expense	on	put	option	held	by Powertech on
Centennial	Project	
Equity	loss	pick‐up	from	Black	Range
Realized	loss	on	investment	in	Black	Range
Unrealized	loss	on	Powertech	convertible	loan	
Total	related	party	expenses

$

$														

177,991
19,795

17,604

2,625,218
1,550,695
2,193,710
6,585,013

$																	

171,068
682

606

579,544
‐
564,625
1,316,525

$														

Key	management	personnel	compensation	

The	remuneration	of	the	Company’s	directors	and	other	members	of	key	management,	
who	 have	 the	 authority	 and	 responsibility	 for	 planning,	 directing	 and	 controlling	 the	
activities	of	the	Company,	consists	of	the	following	amounts:	

Share‐based	compensation
Salaries,	fees	and	other	benefits
Key	management	personnel	compensation

$

$

490,992
887,029
1,378,021

$																	

$																	

169,087
481,308
650,395

Year ended December	31,
2014
2013

SHARE	CAPITAL	

The	 Company	 has	 authorized	 the	 issuance	 of	 an	 unlimited	 number	 of	 common	 and	
preferred	 shares	 with	 no	 par	 value.	 	 As	 at	 December	 31,	 2014,	 the	 Company	 had	
59,403,733	(December	31,	2013:	75,583,274)	common	shares	outstanding.		

37	

	
 
	
	
	
	
	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
	
																				
																									
																				
																									
																		
																									
																
																		
																		
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

SHARE	CAPITAL	(Continued)	

The	 movement	 of	 Company’s	 common	 shares	 outstanding	 and	 share	 capital	 is	 as	
follows:	

As	at	December	31,	2012

Issuance	of	common	shares

As	at	December	31,	2013

Number of
Common	Shares	

	Amount	($)	

50,000,000

$																							

200,000

25,583,274

102,333

														75,583,274	

																										302,333	

Issuance	of	common	shares	prior	to	close	of RTO

39,241,880

156,968

RTO	transactions	

Elimination	of	Azarga Resources	common shares
Shares	outstanding	on	close	of	RTO
Share	consolidation	on	close	of	RTO
Reclassification	of	contributed	surplus

Private	placement	financing	(net	of	finder's	fee)
Shares	issued	pursuant	to	employment	agreements
As	at	December	31,	2014

(114,825,154)
505,700,952
(455,130,857)

‐

8,580,830
252,808
59,403,733

‐

3,109,018

‐

29,192,012

4,043,409
135,024
36,938,764

$																		

The	movement	of	Company’s	contributed	surplus	is	as	follows:	

Year ended December	31,
2014
2013

Opening	balance,	beginning	of	year
Issuance	of	common	shares
Equity	instrument	issued	to	Powerlite	
Less:	transaction	costs	
Reclassification	to	share	capital	on	close of RTO
Balance,	end	of	year

$

$

20,585,082
254,787
6,757,754

‐

(29,192,012)
(1,594,389)

$													

(1,594,389)
10,130,978
12,348,493
(300,000)
‐

$												

20,585,082

For	 the	 year	 ended	 December	 31,	 2013,	 the	 Company	 issued	 25,583,274	 common	
shares	 for	 total	 proceeds	 of	 $10,233,311,	 before	 transaction	 costs	 of	 $300,000	 (share	
capital	 of	 $102,333	 plus	 contributed	 surplus	 of	 $10,130,978),	 at	 an	 average	 price	 of	
$0.40.	Of	which,	2,500,000	common	shares	were	issued	to	settle	the	deferred	payment	
to	 the	 original	 sellers	 of	 UrAsia	 and	 the	 remaining	 number	 of	 common	 shares	 were	
issued	pursuant	to	investor	subscription	agreements.	

On	 July	 1,	 2014,	 38,212,493	 shares	 were	 issued	 to	 Powerlite	 Ventures	 Limited	
(“Powerlite”)	 on	 conversion	 of	 the	 accumulated	 Powerlite	 equity	 contributions	 made	
pursuant	 to	 the	 Powerlite	 Facility.	 	 As	 a	 result	 of	 the	 share	 issuance,	 $152,850	 was	
reclassified	 from	 contributed	 surplus	 to	 share	 capital.	 In	 addition,	 the	 Company	
recorded	 $6,757,754	 to	 contributed	 surplus	 for	 the	 equity	 instrument	 issued	 to	
Powerlite	(December	31,	2013:	$12,348,493).			

38	

	
 
	
	
	
	
	
	
	
	
	
	
	
																						
																						
																													
												
																							
											
																																	
																									
																					
																
																							
																						
													
														
																
														
																	
																									
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

SHARE	CAPITAL	(Continued)	

On	 April	 1,	 2013,	 the	 Company	 entered	 into	 share	 subscription	 agreements	 with	
investors	 to	 subscribe	 for	 4,250,000	 shares	 for	 total	 subscription	 proceeds	 of	
$1,700,000	 at	 $0.40	 per	 share.	 As	 at	 the	 close	 of	 the	 RTO,	 the	 investors	 had	 paid	
subscription	deposits	totaling	$645,064	(December	31,	2013:	$283,310).	No	additional	
amounts	will	be	funded	through	the	subscription	agreements	as	a	result	of	the	RTO.	In	
2014,	the	Company	issued	904,387	common	shares	to	the	investors	for	total	proceeds	
of	 $361,755	 (share	 capital	 of	 $3,618	 plus	 contributed	 surplus	 of	 $358,137)	 at	 an	
average	 price	 of	 $0.40.	 In	 addition,	 the	 Company	 issued	 125,000	 common	 shares	
pursuant	to	a	key	management	employment	agreement	at	an	average	price	of	$0.40,	a	
price	 equivalent	 to	 the	 fair	 value	 of	 the	 common	 shares	 based	 on	 most	 recent	 equity	
raise,	resulting	in	an	increase	in	the	Company’s	equity	by	$50,000	(share	capital	of	$500	
plus	 contributed	 surplus	 of	 $49,500)	 and	 a	 charge	 to	 share‐based	 compensation	
expense.		

In	 connection	 with	 the	 closing	 of	 the	 RTO	 and	 the	 Consolidation,	 the	 Company	
completed	 the	 Financing	 through	 the	 issuance	 of	 8,338,134	 post‐Consolidation	 Units,	
each	 Unit	 consisting	 of	 one	 post‐Consolidation	 common	 share	 and	 one‐half	 Warrant.	
Each	 whole	 Warrant	 entitles	 the	 holder	 to	 purchase	 one	 post‐Consolidation	 common	
share	at	an	exercise	price	of	C$1.00	per	share	until	October	28,	2016.	Accounting	for	the	
Consolidation	 adjustment,	 the	 Units	 subscribed	 for	 pursuant	 to	 the	 Financing	 were	
subscribed	for	at	C$0.60	per	Unit.	Finder’s	fees	in	connection	with	the	Financing	were	
comprised	 of	 C$145,617	 and	 242,696	 post‐Consolidation	 shares.	 All	 securities	 issued	
pursuant	to	the	Financing	were	subject	to	a	hold	period	that	expired	March	1,	2015.	

In	 addition,	 subsequent	 to	 the	 close	 of	 the	 RTO,	 252,808	 common	 shares	 were	 issued	
pursuant	to	a	key	management	employment	agreement	at	an	average	price	of	$0.60,	a	
price	equivalent	to	the	fair	value	of	the	common	shares	based	on	the	Financing.	

For	the	year	ended	December	31,	2014,	the	Company	granted	2,650,754	stock	options	
to	officers,	employees,	directors	and	other	eligible	persons	at	an	exercise	price	of	C$1.20	
with	an	expiry	date	of	October	28,	2019.		The	weighted	average	fair	value	of	the	options	
granted	in	the	year	ended	December	31,	2014	was	estimated	at	C$0.15	per	option	at	the	
grant	date	using	the	Black‐Scholes	Option	Pricing	Model.		

For	the	year	ended	December	31,	2013,	the	Company	granted	1,150,000	stock	options	
to	 officers,	 employees,	 directors	 and	 other	 eligible	 persons	 at	 exercise	 prices	 of	 $0.40	
and	 $0.50	 with	 expiry	 dates	 ranging	 from	 May	 1,	 2018	 to	 November	 4,	 2018.	 The	
weighted	 average	 fair	 value	 of	 the	 options	 granted	 in	 the	 year	 ended	 December	 31,	
2013	was	estimated	at	$0.31	per	option	at	the	grant	date	using	the	Black‐Scholes	Option	
Pricing	Model.	

39	

	
 
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

CRITICAL	ACCOUNTING	ESTIMATES	AND	JUDGMENTS	

The	preparation	of	financial	statements	in	conformity	with	IFRS	requires	the	Company	
to	establish	accounting	policies	and	to	make	 estimates	and	 judgments	that	affect	 both	
the	amount	and	timing	of	the	recording	of	assets,	liabilities,	revenues	and	expenses.	

A	detailed	summary	of	all	of	the	Company’s	significant	accounting	policies	is	included	in	
Note	3	to	the	Company’s	consolidated	financial	statements	for	the	year	ended	December	
31,	2014	and	2013.	Information	about	judgments	and	estimates	in	applying	accounting	
policies	 that	 have	 the	 most	 significant	 effect	 on	 the	 amounts	 recognized	 in	 the	
consolidated	financial	statements	are	as	follows:	

Liquidity	and	going	concern	assumption	

In	the	determination	of	the	Company’s	ability	to	meet	its	ongoing	obligations	and	future	
contractual	 commitments	 management	 relies	 on	 the	 Company’s	 planning,	 budgeting	
and	forecasting	process	to	help	determine	the	funds	required	to	support	the	Company’s	
normal	operations	on	an	ongoing	basis	and	its	expansionary	plans.		The	key	inputs	used	
by	the	Company	in	this	process	include	forecasted	capital	deployment,	results	from	the	
exploration	 and	 development	 of	 its	 properties	 and	 general	 industry	 conditions.		
Changes	in	these	inputs	may	alter	the	Company’s	ability	to	meet	its	ongoing	obligations	
and	 future	 contractual	 commitments	 and	 could	 result	 in	 adjustments	 to	 the	 amounts	
and	classifications	of	assets	and	liabilities	should	the	Company	be	unable	to	continue	as	
a	going	concern.		

Valuation	of	derivatives	

Certain	 derivatives	 issued	 by	 the	 Company	 are	 valued	 using	 the	 Black	 Scholes	 Option	
Pricing	 Model.	 The	 Black	 Scholes	 Option	 Pricing	 Model	 is	 a	 formula	 that	 is	 used	 to	
determine	the	fair	value	of	a	call	or	put	option	based	on	factors	such	as	underlying	stock	
volatility,	days	to	expiration,	and	others.	Changes	in	the	inputs	to	the	valuation	model	
could	impact	the	carrying	value	of	the	derivatives	and	the	amount	of	unrealized	gains	or	
losses	recognized	in	profit	or	loss.			

Valuation	of	convertible	loans		

The	Company’s	convertible	loans	are	valued	using	a	binomial	option	pricing	model.		A	
binomial	 tree	is	a	valuation	model	that	uses	a	lattice	of	the	underlying's	price	varying	
over	 discreet	 time	 periods	 and	 determines	 the	 value	 of	 an	 option	 at	 each	 node.	 The	
financial	 asset	 components	 are	 valued	 based	 on	 the	 present	 value	 of	 expected	 future	
cash	flows	at	the	discount	rate	that	would	have	applied	to	the	financial	assets	without	
conversion	 or	 other	 embedded	 derivative	 features.	 Changes	 in	 the	 inputs	 to	 the	
valuation	 model	 could	 impact	 the	 carrying	 value	 of	 the	 embedded	 derivatives	 and	
financial	 assets	 in	 the	 convertible	 loans	 and	 the	 amount	 of	 unrealized	 gains	 or	 losses	
recognized	in	profit	or	loss.			

40	

	
 
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

CRITICAL	ACCOUNTING	ESTIMATES	AND	JUDGMENTS	(Continued)	

Review	of	carrying	value	of	assets	and	impairment	charges	

In	 the	 determination	 of	 carrying	 values	 and	 impairment	 charges,	 management	 of	 the	
Company	reviews	the	higher	of	the	recoverable	amount	and	the	fair	value	less	costs	to	
sell	 or	 the	 value	 in	 use	 in	 the	 case	 of	 non‐financial	 assets	 and	 at	 objective	 evidence	
indicating	 impairment	 in	 the	 case	 of	 financial	 assets.	 These	 determinations	 and	 their	
individual	 assumptions	 require	 that	 management	 make	 a	 decision	 based	 on	 the	 best	
available	information	at	each	reporting	period.		Changes	in	these	assumptions	may	alter	
the	 results	 of	 non‐financial	 asset	 and	 financial	 asset	 impairment	 testing,	 impairment	
charges	recognized	in	profit	or	loss	and	the	resulting	carrying	amounts	of	assets.	

As	 at	 each	 reporting	 date,	 the	 Company	 reviews	 assets	 to	 determine	 whether	 there	 is	
any	indication	that	those	assets	have	suffered	an	impairment	loss.		

Capitalization	of	exploration	and	evaluation	costs		

Management	has	determined	that	exploration	and	evaluation	costs	incurred	during	the	
year	 have	 future	 economic	 benefits	 and	 are	 economically	 recoverable.	 In	 making	 this	
judgment,	management	has	assessed	various	sources	of	information	including,	but	not	
limited	 to,	 the	 geologic	 and	 metallurgic	 information,	 history	 of	 conversion	 of	 mineral	
deposits	 to	 proven	 and	 probable	 mineral	 reserves,	 scoping	 studies,	 preliminary	
economic	 assessments,	 proximity	 of	 operating	 facilities,	 operating	 management	
expertise	and	existing	permits.	

Determination	of	business	combinations	and	asset	acquisitions		

Management	 determines	 the	 assets	 acquired	 and	 liabilities	 assumed	 constitute	 a	
business	 if	 it	 consists	 of	 inputs	 and	 processes	 applied	 to	 those	 inputs	 that	 have	 the	
ability	 to	 create	 outputs.	 Powertech	 completed	 a	 RTO	 with	 Azarga	 Resources	 on	
October	 28,	 2014	 and,	 in	 accordance	 with	 its	 policy,	 applied	 IFRS	 3,	 Business	
Combinations,	 and	 concluded	 that	 the	 transaction	 qualified	 as	 a	 business	 combination	
as	significant	inputs	and	processes	that	constitute	a	business	were	identified.		

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

CRITICAL	ACCOUNTING	ESTIMATES	AND	JUDGMENTS	(Continued)	

Determination	of	asset	and	liability	fair	values		

Business	 combinations	 require	 judgment	 and	 estimates	 to	 be	 made	 at	 the	 date	 of	
acquisition	 in	 relation	 to	 determining	 asset	 and	 liability	 fair	 values.	 	 The	 information	
necessary	 to	 measure	 the	 fair	 values	 as	 at	 the	 acquisition	 date	 of	 assets	 acquired	 and	
liabilities	 assumed	 requires	 management	 to	 make	 certain	 judgments	 and	 estimates	
about	 future	 events,	 including	 but	 not	 limited	 to	 estimates	 of	 mineral	 resources	
acquired,	exploration	potential,	future	operating	costs	and	capital	expenditures,	future	
metal	 prices	 and	 long‐term	 foreign	 exchange	 rates.	 Changes	 to	 the	 provisional	
measurements	of	assets	and	liabilities	acquired	may	be	retrospectively	adjusted	when	
new	 information	 is	 obtained	 until	 the	 final	 measurements	 are	 determined	 which	 is	
within	one	year	of	the	acquisition	date.		

Useful	lives	and	depreciation	rates	for	Property,	Plant	and	Equipment	(“PPE”)	

Depreciation	expense	is	allocated	based	on	estimated	PPE	useful	lives	and	depreciation	
rates.	 	 Therefore,	 changes	 in	 the	 useful	 life	 or	 depreciation	 rates	 from	 the	 initial	
estimate	could	impact	the	carrying	value	of	PPE	and	an	adjustment	would	recognized	in	
profit	or	loss.	

Income	taxes	and	recoverability	of	deferred	tax	assets	

Actual	 amounts	 of	 income	 tax	 expense	 are	 not	 final	 until	 tax	 returns	 are	 filed	 and	
accepted	 by	 the	 taxation	 authorities.	 	 Therefore,	 profit	 or	 loss	 in	 future	 reporting	
periods	 will	 be	 affected	 by	 the	 amount	 that	 income	 tax	 expense	 estimates	 differ	 from	
the	final	tax	returns.		

Judgment	is	required	in	determining	whether	deferred	tax	assets	are	recognized	on	the	
statement	 of	 financial	 position.	 	 Deferred	 tax	 assets,	 including	 those	 arising	 from	
unutilized	tax	losses,	require	management	of	the	Company	to	assess	the	likelihood	that	
the	Company	will	generate	sufficient	taxable	profit	in	future	periods	in	order	to	utilize	
recognized	deferred	tax	assets.		Estimates	of	future	taxable	profit	are	based	on	forecast	
cash	flows	from	operations	and	the	application	of	existing	tax	laws	in	each	jurisdiction.	
To	the	extent	that	future	cash	flows	and	taxable	profit	differ	from	estimates,	the	ability	
of	the	Company	to	realize	the	deferred	tax	assets	recorded	on	the	statement	of	financial	
position	could	be	impacted.		

RECENT	ACCOUNTING	PRONOUNCEMENTS	

The	Company	has	adopted	the	new	and	revised	standards	and	interpretations	issued	by	
the	 IASB	 or	 IFRIC	 listed	 below	 effective	 January	 1,	 2014.	 	 The	 adoption	 of	 these	
standards	did	not	have	a	material	impact	on	the	financial	statements	of	the	Company.	

42	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RECENT	ACCOUNTING	PRONOUNCEMENTS	(Continued)	

IFRS	10,	IFRS	12	and	IAS	27	(2011	Amendments)	

Amendments	 to	 IFRS	 10,	 IFRS	 12	 and	 IAS	 27	 provides	 an	 exception	 to	 consolidation	
requirements	 in	 IFRS	 10	 and	 requires	 investment	 entities	 to	 measure	 particular	
subsidiaries	at	fair	value	through	profit	or	loss,	rather	than	consolidate	them.			

IAS	32	Financial	Instruments:	Presentation	(Amendment)	

Amendments	to	IAS	32	clarify	matters	regarding	offsetting	financial	assets	and	financial	
liabilities	as	well	as	related	disclosure	requirements.	

IAS	36	Impairment	of	Assets	(Amendment)	

Amendments	to	IAS	36	align	the	disclosures	required	for	the	recoverable	amount	of	an	
asset	(or	cash	generating	unit)	when	this	has	been	determined	on	the	basis	of	fair	value	
less	 costs	 of	 disposal	 with	 those	 required	 where	 the	 recoverable	 amount	 has	 been	
determined	on	the	basis	of	value	in	use.	

IAS	39	Financial	Instruments:	Recognition	and	Measurement	(Amendment)	

Amendments	 to	 IAS	 39	 allows	 hedge	 accounting	 to	 continue	 when	 derivatives	 are	
novated	to	effect	clearing	with	a	central	counterparty	as	a	result	of	laws	or	regulations,	
if	specific	conditions	are	met.	

IFRIC	21	Levies	

IFRIC	 21	 provides	 guidance	 on	 accounting	 for	 levies	 in	 accordance	 with	 IAS	 37,	
Provisions,	Contingent	Liabilities	and	Contingent	Assets.	The	interpretation	defines	a	levy	
as	 an	 outflow	 from	 an	 entity	 imposed	 by	 a	 government	in	 accordance	 with	 legislation	
and	 confirms	 that	 an	 entity	 recognizes	 a	 liability	 for	 a	 levy	 only	 when	 the	 triggering	
event	specified	in	the	legislation	occurs.	

MANAGEMENT’S	RESPONSIBILITY	FOR	FINANCIAL	INFORMATION	

The	Company’s	audited	annual	consolidated	financial	statements	are	the	responsibility	
of	the	Company's	management,	and	have	been	approved	by	the	Board.	The	Company’s	
audited	 annual	 consolidated	 financial	 statements	 were	 prepared	 by	 the	 Company’s	
management	 in	 accordance	 with	 IFRS.	 The	 Company’s	 audited	 annual	 consolidated	
financial	 statements	 include	 certain	 amounts	 based	 on	 the	 use	 of	 estimates	 and	
assumptions.	 Management	 has	 established	 these	 amounts	 in	 a	 reasonable	 manner,	 in	
order	 to	 ensure	 that	 the	 Company’s	 audited	 annual	 consolidated	 financial	 statements	
are	presented	fairly	in	all	material	respects. 

43	

	
 
	
	
	
	
	
	
	
	
	
	
	
	
	
 
 
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

DISCLOSURE	CONTROLS	AND	PROCEDURES	

Disclosure	controls	and	procedures	are	designed	to	provide	reasonable	assurance	that	
information	required	to	be	disclosed	by	the	Company	in	its	annual	filings,	interim	filings	
or	 other	 reports	 filed	 or	 submitted	 by	 it	 under	 securities	 legislation	 is	 recorded,	
processed,	summarized	and	reported	within	the	time	periods	specified	in	the	securities	
legislation	 and	 include	 controls	 and	 procedures	 designed	 to	 ensure	 that	 information	
required	 to	 be	 disclosed	 by	 the	 Company	 in	 its	 annual	 filings,	 interim	 filings	 or	 other	
reports	
is	 accumulated	 and	
communicated	 to	 the	 Company’s	 management,	 including	 its	 CEO	 and	 CFO,	 as	
appropriate	to	allow	timely	decisions	regarding	required	disclosure.	

filed	 or	 submitted	 under	 securities	

legislation	

Management,	including	the	CEO	and	CFO,	has	evaluated	the	effectiveness	of	the	design	
and	 operation	 of	 the	 Company’s	 disclosure	 controls	 and	 procedures.	 	 As	 of	 December	
31,	2014,	the	CEO	and	CFO	have	each	concluded	that	the	Company’s	disclosure	controls	
and	 procedures,	 as	 required	 by	 the	 applicable	 rules	 of	 the	 Canadian	 Securities	
Administrators	(or	Canadian	securities	regulatory	authorities),	are	effective	to	achieve	
the	purpose	for	which	they	have	been	designed.	

INTERNAL	CONTROLS	OVER	FINANCIAL	REPORTING	

Internal	controls	over	financial	reporting	are	designed	to	provide	reasonable	assurance	
regarding	 the	 reliability	 of	 financial	 reporting	 and	 the	 preparation	 of	 financial	
statements	in	 accordance	 with	IFRS.	Management	is	 also	 responsible	 for	the	design	of	
the	Company’s	internal	control	over	financial	reporting	in	order	to	provide	reasonable	
assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial	
statements	for	external	purposes	in	accordance	with	IFRS.	

The	 Company’s	 internal	 controls	 over	 financial	 reporting	 include	 policies	 and	
procedures	 that:	 pertain	 to	 the	 maintenance	 of	 records	 that,	 in	 reasonable	 detail	
accurately	 and	 fairly	 reflect	 the	 transactions	 and	 disposition	 of	 assets;	 provide	
reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	
of	the	financial	statements	in	accordance	with	IFRS	and	that	receipts	and	expenditures	
are	being	made	only	in	accordance	with	authorization	of	management	and	directors	of	
the	 Company;	 and	 provide	 reasonable	 assurance	 regarding	 prevention	 or	 timely	
detection	 of	 unauthorized	 acquisition,	 use	 or	 disposition	 of	 assets	 that	 could	 have	 a	
material	effect	on	the	financial	statements.	

Because	 of	 their	 inherent	 limitations,	 internal	 controls	 over	 financial	 reporting	 can	
provide	 only	 reasonable	 assurance	 and	 may	 not	 prevent	 or	 detect	 misstatements.	
Furthermore,	projections	of	any	evaluation	of	effectiveness	to	future	periods	are	subject	
to	 the	 risk	 that	 controls	 may	 become	 inadequate	 because	 of	 changes	 in	 conditions,	 or	
that	the	degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.	

44	

	
 
	
	
 
	
 
	
 
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

INTERNAL	CONTROLS	OVER	FINANCIAL	REPORTING	(Continued)	

The	 Company’s	 management,	 under	 the	 supervision	 of	 the	 CEO	 and	 the	 CFO,	 has	
evaluated	the	effectiveness	of	the	Company’s	internal	controls	over	financial	reporting	
using	 the	 framework	 and	 criteria	 as	 required	 by	 the	 applicable	 rules	 of	 the	 Canadian	
Securities	Administrators	(or	Canadian	securities	regulatory	authorities).	Based	on	the	
evaluation,	 management	 has	 concluded	 that	 internal	 controls	 over	 financial	 reporting	
were	effective	as	at	December	31,	2014.	

There	has	been	 no	 change	 in	 the	 Company’s	 internal	 controls	 over	 financial	 reporting	
that	 occurred	 subsequent	 to	 December	 31,	 2014	 that	 has	 materially	 affected,	 or	 is	
reasonably	 likely	 to	 materially	 affect,	 the	 Company’s	 internal	 controls	 over	 financial	
reporting.	

DISCLOSURE	OF	A	SCIENTIFIC	OR	TECHNICAL	NATURE	

Disclosure	 of	 a	 scientific	 or	 technical	 nature	 in	 this	 MD&A	 has	 been	 reviewed	 and	
approved	 by	 Richard	 F.	 Clement,	 Jr.,	 the	 Deputy	 Chairman	 of	 the	 Company	 and	 a	
“qualified	person”	as	defined	under	NI	43‐101.	

RISKS	AND	UNCERTAINTIES	

The	Company’s	operations	and	financial	performance	are	subject	to	the	normal	risks	of	
mining	investments	made	in	other	entities	and	are	subject	to	various	identified	factors	
which	are	beyond	the	control	of	the	Company.		Additional	risks	not	currently	known	to	
the	Company,	or	that	it	currently	considers	immaterial,	may	also	adversely	impact	the	
Company’s	 business,	 operations,	 financial	 results	 or	 prospects,	 should	 any	 such	 other	
events	occur.			

Global	Economic	Conditions	

In	the	event	of	a	general	economic	downturn	or	a	recession,	there	can	be	no	assurance	
that	 the	 business,	 financial	 condition	 and	 results	 of	 operations	 of	 the	 Company	 would	
not	be	materially	adversely	affected.	During	the	past	several	years,	the	global	economy	
faced	a	number	of	challenges.	During,	the	global	financial	crisis	of	2007/2008	economic	
problems	 in	 the	 United	 States	 and	 Eurozone	 caused	 deterioration	 in	 the	 global	
economy,	 as	 numerous	 commercial	 and	 financial	 enterprises	 either	 went	 into	
bankruptcy	 or	 creditor	 protection	 or	 had	 to	 be	 rescued	 by	 governmental	 authorities.	
Access	to	public	financing	was	negatively	impacted	by	sub‐prime	mortgage	defaults	in	
the	United	States,	the	 liquidity	 crisis	 affecting	 the	 asset‐backed	 commercial	 paper	 and	
collateralized	 debt	 obligation	 markets,	 and	 massive	 investment	 losses	 by	 banks	 with	
resultant	recapitalization	efforts.		

45	

	
 
	
	
	
	
	
	
	
	
	
 
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

Although	 economic	 conditions	 have	 shown	 improvement	 in	 recent	 years,	 the	 global	
recovery	 from	 the	 recession	 has	 been	 slow	 and	 uneven.	 The	 effects	 of	 the	 global	
financial	 crisis	 continue	 to	 limit	 growth.	 In	 addition,	 increasing	 levels	 of	 government	
debt,	 slowing	 economic	 growth	 in	 certain	 key	 regions	 including	 China,	 the	 threat	 of	
sovereign	defaults	including	Greece,	and	political	instability	in	Eastern	Europe	continue	
to	 weigh	 on	 markets.	 These	 factors	 continue	 to	 impact	 commodity	 prices,	 including	
uranium,	as	well	as	currencies	and	global	debt	and	stock	markets.	

These	factors	may	impact	the	Company’s	ability	to	obtain	equity,	debt,	or	bank	financing	
on	terms	commercially	reasonable	to	the	Company,	or	at	all.		Additionally,	these	factors,	
as	well	as	other	related	factors,	may	cause	decreases	in	asset	values	that	are	deemed	to	
be	 other	 than	 temporary,	 which	 may	 result	 in	 impairment	 losses.	 	 If	 these	 increased	
levels	of	volatility	and	market	turmoil	continue,	or	there	is		a	material	deterioration	in	
general	 business	 and	 economic	 conditions,	 the	 Company’s	 operations	 could	 be	
adversely	impacted	and	the	trading	price	of	the	Company’s	securities	could	continue	to	
be	adversely	affected.		

Uranium	Price	Fluctuations		

The	Company’s	potential	revenue	is	anticipated	to	be	derived	from	the	sale	of	uranium	
products.	 The	 Company’s	 financial	 condition,	 results	 of	 operations,	 earnings	 and	
operating	cash	flows	will	be	significantly	affected	by	the	market	price	of	uranium,	which	
is	 cyclical	 and	 subject	 to	 substantial	 short	 and	 long‐term	 price	 fluctuations.	 Among	
other	factors,	uranium	prices	also	affect	the	value	of	the	Company’s	resources,	as	well	as	
the	market	price	of	the	Company’s	common	shares.	

Market	 prices	 are	 affected	 by	 numerous	 factors	 beyond	 the	 Company’s	 control.	 Such	
factors	 include,	 among	 others:	 demand	 for	 nuclear	 power;	 political	 and	 economic	
conditions	 in	 uranium	 producing	 and	 consuming	 countries;	 public	 and	 political	
response	to	a	nuclear	incident;	reprocessing	of	used	reactor	fuel,	the	re‐enrichment	of	
depleted	uranium	tails	and	the	enricher	practice	of	underfeeding;	sales	of	excess	civilian	
and	 military	 inventories	 (including	 from	 the	 dismantling	 of	 nuclear	 weapons;	 the	
premature	decommissioning	of	nuclear	power	plants;	and	from	the	build‐up	of	Japanese	
utility	uranium	inventories	as	a	result	of	the	Fukushima	incident)	by	governments	and	
industry	 participants;	 uranium	 supply,	 including	 the	 supply	 from	 other	 secondary	
sources;	production	 levels	 and	 costs	 of	 production;	 levels	 of	 supply	 and	 demand	 for	 a	
broad	range	of	industrial	products;	substitution	of	new	or	different	products	in	critical	
applications	for	the	Company’s	potential	products;	expectations	with	respect	to	the	rate	
of	 inflation;	 the	 relative	 strength	 of	 the	 US	 dollar	 and	 of	 certain	 other	 currencies;	
interest	 rates;	 global	 or	 regional	 political	 or	 economic	 crises;	 regional	 and	 global	
economic	conditions;	and	sales	of	uranium	by	holders	in	response	to	such	factors.		

46	

	
 
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

If	the	Company	is	able	to	successfully	commence	uranium	production	and	the	price	of	
uranium	 declines	 below	 the	 Company’s	 cash	 costs	 of	 production	 and	 remains	 at	 such	
levels	for	any	sustained	period,	the	Company	may	determine	that	it	is	not	economically	
feasible	 to	 continue	 commercial	 production	 at	 any	 or	 all	 of	 the	 Company’s	 sites.	 The	
Company’s	 expected	 business	 activities	 are	 dependent	 on	 the	 Company’s	 and	 the	
industry’s	 expectations	 of	 uranium	 prices,	 which	 may	 or	 may	 not	 be	 realized.	 In	 the	
event	 the	 Company	 concludes	 that	 a	 significant	 deterioration	 in	 expected	 future	
uranium	 prices	 has	 occurred,	 the	 Company	 will	 assess	 whether	 an	 impairment	
allowance	is	necessary,	which,	if	required,	could	be	material.	

The	 recent	fluctuations	 in	 the	price	 of	 many	 commodities	 is	 an	example	 of	 a	 situation	
over	which	the	Company	has	no	control	and	which	could	materially	adversely	affect	the	
Company	in	a	manner	for	which	it	may	not	be	able	to	compensate.		

Public	Acceptance	of	Nuclear	Energy	and	Competition	from	Other	Energy	Sources		

Growth	of	the	uranium	and	nuclear	industry	will	depend	upon	continued	and	increased	
acceptance	of	nuclear	technology	as	a	means	of	generating	electricity.	Because	of	unique	
political,	 technological	 and	 environmental	 factors	 that	 affect	 the	 nuclear	 industry,	
including	 the	 risk	 of	 a	 nuclear	 incident,	 the	 industry	 is	 subject	 to	 public	 opinion	 risks	
that	could	have	an	adverse	impact	on	the	demand	for	nuclear	power	and	increase	the	
regulation	of	the	nuclear	power	industry.	Nuclear	energy	competes	with	other	sources	
of	 energy,	 including	 oil,	 natural	 gas,	 coal,	 hydro‐electricity	 and	 renewable	 energy	
sources.	 These	 other	 energy	 sources	 are	 to	 some	 extent	 interchangeable	 with	 nuclear	
energy,	particularly	over	the	longer	term.	Sustained	lower	prices	of	oil,	natural	gas,	coal	
and	 hydroelectricity	 may	 result	 in	 lower	 demand	 for	 uranium	 concentrates.	 Technical	
advancements	in	renewable	and	other	alternate	forms	of	energy,	such	as	wind	and	solar	
power,	could	make	these	forms	of	energy	more	commercially	viable	and	put	additional	
pressure	on	the	demand	for	uranium	concentrates.	

The	Company	Will	Require	Significant	Amounts	of	Additional	Capital	in	the	Future		

The	 Company	 has	 limited	 financial	 resources.	 The	 Company	 will	 need	 additional	
financing	 in	 connection	 with	 the	 implementation	 of	 its	 business	 and	 strategic	 plans	
from	time	to	time,	including	the	continued	exploration	and	development	of	its	mineral	
properties.	 The	 exploration	 and	 development	 of	 mineral	 properties	 requires	 a	
substantial	 amount	 of	 capital	 and	 may	 depend	 on	 the	 Company’s	 ability	 to	 obtain	
financing	 through	 joint	 ventures,	 debt	 financing,	 equity	 financing	 or	 other	 means.	 The	
Company	 may	 accordingly	 need	 further	 capital	 in	 order	 to	 take	 advantage	 of	 further	
opportunities	or	acquisitions.		

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

The	 Company’s	 financial	 condition,	 general	 market	 conditions,	 volatile	 uranium	
markets,	volatile	interest	rates,	a	claim	against	the	Company,	a	significant	disruption	to	
the	 Company’s	 business	 or	 operations	 or	 other	 factors	 may	 make	 it	 difficult	 to	 secure	
financing	 necessary	 for	 exploration	 and	 development	 of	 the	 Company’s	 mineral	
properties	 or	 to	 take	 advantage	 of	 opportunities	 for	 acquisitions.	 Further,	 continuing	
volatility	in	the	credit	markets	may	increase	costs	associated	with	debt	instruments	due	
to	increased	spreads	over	relevant	interest	rate	benchmarks,	or	may	affect	the	ability	of	
the	 Company,	 or	 third	 parties	 it	 seeks	 to	 do	 business	 with,	 to	 access	 those	 markets.	
There	 is	 no	 assurance	 that	 the	 Company	 will	 be	 successful	 in	 obtaining	 required	
financing	as	and	when	needed	on	acceptable	terms,	if	at	all.		

Failure	 to	 obtain	 such	 financing,	 including	 further	 advances	 under	 the	 Powerlite	
Facility,	 could	 result	 in	 a	 delay	 or	 indefinite	 postponement	 of	 further	 exploration	 and	
development	 of	 the	 Company’s	 mineral	 properties,	 including	 the	 loss	 of	 rights	
associated	 with	 such	 mineral	 properties.	 In	 the	 event	 the	 Company’s	 exploration	 and	
development	 of	 mineral	 properties	 is	 delayed,	 the	 Company	 will	 assess	 whether	 an	
impairment	allowance	is	necessary,	which,	if	required,	could	be	material.	

Competition	for	Properties	and	Experienced	Employees		

The	 Company	 competes	 with	 other	 mining	 companies	 and	 individuals	 for	 capital,	
mining	 interests	 on	 exploration	 properties	 and	 undeveloped	 lands,	 acquisitions	 of	
mineral	resources	and	reserves	and	other	mining	assets.		The	Company	also	competes	
with	other	mining	companies	to	attract	and	retain	key	executives	and	employees.	There	
can	be	no	assurance	that	the	Company	will	continue	to	be	able	to	compete	successfully	
with	 its	 competitors	 in	 acquiring	 such	 properties	 and	 assets	 or	 in	 attracting	 and	
retaining	 skilled	 and	 experienced	 employees.	 The	 mining	 industry	 has	 been	 impacted	
by	 increased	 worldwide	 demand	 for	 critical	 resources	 such	 as	 input	 commodities,	
labor,	 and	 these	 shortages	 have	 caused	
drilling	 equipment,	 tires	 and	 skilled	
unanticipated	cost	increases	and	delays	in	delivery	times,	thereby	impacting	operating	
costs,	capital	expenditures	and	production	schedules.	

The	 Company	 may	 be	 at	 a	 competitive	 disadvantage	 due	 to	 the	 fact	 that	 many	 of	 the	
Company’s	 competitors	 have	 greater	 financial	 resources	 to	 source	 mineral	 properties	
and	 attract	 and	 retain	 key	 executives	 and	 employees.	 Accordingly,	 there	 can	 be	 no	
assurance	 that	 the	 Company	 will	 be	 able	 to	 compete	 successfully	 with	 industry	
competitors.		

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

Uranium	Industry	Competition	and	International	Trade	Restrictions		

The	 international	 uranium	 industry,	 including	 the	 supply	 of	 uranium	 concentrates,	 is	
competitive.	 The	 Company	 is	 marketing	 uranium	 in	 direct	 competition	 with	 supplies	
available	 from	 a	 relatively	 small	 number	 of	 uranium	 mining	 companies,	 from	
nationalized	 uranium	 companies,	 from	 uranium	 produced	 as	 a	 byproduct	 of	 other	
mining	operations,	from	excess	inventories,	including	inventories	made	available	from	
decommissioning	of	nuclear	weapons,	from	reprocessed	uranium	and	plutonium,	from	
used	reactor	fuel,	and	from	the	use	of	excess	Russian	enrichment	capacity	to	re‐enrich	
depleted	uranium	tails	held	by	European	enrichers	in	the	form	of	UF6.	A	large	quantity	
of	current	World	production	is	inelastic,	in	that	uranium	market	prices	have	little	effect	
on	the	quantity	supplied.	The	supply	of	uranium	from	Russia	and	from	certain	republics	
of	 the	 former	 Soviet	 Union	 is,	 to	 some	 extent,	 impeded	 by	 a	 number	 of	 international	
trade	 agreements	 and	 policies.	 These	 agreements	 and	 any	 similar	 future	 agreements,	
governmental	policies	or	trade	restrictions	are	beyond	the	control	of	the	Company	and	
may	 affect	 the	 supply	 of	 uranium	 available	 in	 the	 United	 States	 and	 the	 rest	 of	 the	
World.	

Possible	Loss	of	Interests	in	Exploration	and	Development	Properties		

If	the	Company	does	not	have	the	financial	capacity	(see	the	above	risk	“The	Company	
Will	Require	Significant	Amounts	of	Additional	Capital	in	the	Future”)	to	 make	 required	
payments	 or	 minimum	 expenditures	 to	 maintain	 mineral	 properties	 in	 good	 standing,	
the	 Company	 may	 lose	 some,	 or	 all,	 of	 its	 interest	 in	 those	 mineral	 properties.	 This	 is	
particularly	 significant	 with	 respect	 to	 the	 Company’s	 material	 properties,	 the	 Dewey	
Burdock	 Project	 in	 the	 United	 States	 and	 the	 Kyzyl	 Ompul	 Project	 in	 the	 Kyrgyz	
Republic.	 	 A	 loss	 of	 an	 interest	 in	 either	 of	 these	 mineral	 properties	 could	 have	 a	
material	adverse	effect	on	the	Company’s	reported	resources.		In	addition,	the	Company	
will	 have	 to	 assess	 whether	 an	 impairment	allowance	 is	 necessary,	 which,	 if	 required,	
could	be	material.		

Mining	 and	 Mineral	 Exploration	 is	 Inherently	 Dangerous	 and	 Subject	 to	 Factors	 Beyond	
the	Company’s	Control		

The	Company’s	business,	and	any	future	development	or	mining	operations,	will	involve	
various	types	of	risks	and	hazards	typical	of	companies	engaged	in	the	mining	industry.	
These	risks	will	affect	the	exploration	and	development	of	the	Company,	and	will	affect	
its	 business	 to	 an	 even	 larger	 extent	 once	 commercial	 mining	 operations,	 if	 any,	
commence.		

49	

	
 
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

Such	 risks	 include,	 but	 are	 not	 limited	 to:	 industrial	 accidents,	 unusual	 or	 unexpected	
rock	 formations,	 structural	 cave‐ins	 or	 slides	 and	 pitfall,	 ground	 or	 slope	 failures	 and	
accidental	 release	 of	 water	 from	 surface	 storage	 facilities,	 fire,	 flooding	 and	
earthquakes,	 rock	 bursts,	 minerals	 losses,	 periodic	 interruptions	 due	 to	 inclement	 or	
hazardous	 weather	 conditions,	 environmental	 hazards,	 discharge	 of	 pollutants	 or	
hazardous	 materials,	 failure	 of	 processing	 and	 mechanical	 equipment	 and	 other	
performance	 problems,	 geotechnical	 risks,	 including	 the	 stability	 of	 the	 underground	
hanging	 walls	 and	 unusual	 and	 unexpected	 geological	 conditions,	 unanticipated	
variations	 in	 grade	 and	 other	 geological	 problems,	 water,	 surface	 or	 underground	
conditions,	labor	disputes	or	slowdowns,	work	force	health	issues	as	a	result	of	working	
conditions,	and	force	majeure	events,	or	other	unfavorable	operating	conditions.		

These	 risks,	 conditions	 and	 events	 could	 result	 in:	 damage	 to,	 or	 destruction	 of,	 the	
value	 of,	 the	 Company’s	 projects	 or	 their	 facilities,	 personal	 injury	 or	 death,	
environmental	damage	to	the	Company’s	projects	or	the	properties	of	others,	delays	or	
prohibitions	on	mining	or	the	transportation	of	minerals,	monetary	losses,	and	potential	
legal	liability.	Any	of	the	foregoing	could	have	a	material	adverse	effect	the	Company’s	
business,	financial	condition,	results	of	operation	or	prospects.	

The	Company’s	Mineral	Resources	are	Estimates		

Mineral	 resources	 are	 statistical	 estimates	 of	 mineral	 content,	 based	 on	 limited	
information	 acquired	 through	 drilling	 and	 other	 sampling	 methods,	 and	 require	
judgmental	interpretations	of	geology.	The	Company’s	mineral	resources	are	estimates	
and	 no	 assurance	 can	 be	 given	 that	 the	 estimated	 resources	 are	 accurate	 or	 that	 the	
indicated	level	of	uranium	will	be	produced.	Such	estimates	are,	in	large	part,	based	on	
interpretations	 of	 geological	 data	 obtained	 from	 drill	 holes	 and	 other	 sampling	
techniques.	Actual	mineralization	or	formations	may	be	different	from	those	predicted.	
Further,	it	may	take	many	years	 from	the	initial	phase	of	drilling	before	production	 is	
possible,	 and	 during	 that	 time	 the	 economic	 feasibility	 of	 exploiting	 a	 discovery	 may	
change.	

Mineral	 resource	 estimates	 for	 properties	 that	 have	 not	 commenced	 production	 are	
based,	in	many	instances,	on	limited	and	widely	spaced	drill‐hole	information,	which	is	
not	necessarily	indicative	of	the	conditions	between	and	around	drill	holes.	Accordingly,	
such	 mineral	 resource	 estimates	 may	 require	 revision	 as	 more	 drilling	 information	
becomes	 available	 or	 as	 actual	 production	 experience	 is	 gained.	 It	 should	 not	 be	
assumed	that	all	or	any	part	of	the	Company’s	mineral	resources,	constitute	or	will	be	
converted	into	reserves.	The	extent	to	which	resources	may	ultimately	be	reclassified	as	
proven	 or	 probable	 reserves	 is	 dependent	 upon	 the	 demonstration	 of	 their	 profitable	
recovery.	 The	 evaluation	 of	 resources	 and	 reserves	 is	 influenced	 by	 economic	 and	
technological	factors,	which	may	change	over	time.		

50	

	
 
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

Nature	of	Exploration	and	Development	Projects	

The	 exploration	 and	 development	 of	 mineral	 properties	 involves	 significant	 risks.	
Development	of	exploration	properties,	in	which	the	Company	has	an	interest,	will	only	
follow	 subsequent	 to	 obtaining	 satisfactory	 exploration	 results.	 The	 exploration	 and	
development	of	mineral	properties	involves	significant	risks	over	an	extended	period	of	
time,	 which	 even	 a	 combination	 of	 careful	 evaluation,	 experience	 and	 knowledge	 may	
not	 eliminate.	 While	 the	 discovery	 of	 a	 mineral	 property	 may	 result	 in	 significant	
rewards,	 few	 properties	 which	 are	 explored	 are	 ultimately	 developed	 into	 producing	
mines.	Significant	expenses	may	be	required	to	establish	mineral	reserves	and	mineral	
resources	 and	 to	 construct	 mining	 and	 processing	 facilities.	 It	 is	 impossible	 to	 ensure	
that	the	Company’s	 exploration	and	 development	properties	 will	 result	 in	a	profitable	
commercial	mining	operation.	

Whether	 a	 mineral	 property	 will	 be	 commercially	 viable	 depends	 on	 a	 number	 of	
factors,	 which	 include,	 among	 other	 things:	 the	 accuracy	 of	 reserve	 and	 resource	
estimates;	the	particular	attributes	of	the	deposit,	such	as	its	size	and	grade;	ability	to	
to	
economically	 recover	 commercial	 quantities	 of	
infrastructure;	 financing	 costs	 and	 governmental	 regulations,	 including	 regulations	
relating	to	prices,	taxes,	royalties;	infrastructure;	land	use;	importing	and	exporting	and	
environmental	 protection.	 The	 effect	 of	 these	 factors	 cannot	 be	 accurately	 predicted,	
but	 the	 combination	 of	 these	 factors	 may	 result	 in	 the	 Company	 not	 receiving	 an	
adequate	return	on	invested	capital.	

the	 minerals;	 proximity	

Environmental	Regulatory	Requirements	and	Risks			

The	 Company	 is	 required	 to	 comply	 with	 environmental	 protection	 laws	 and	
regulations	 and	permitting	 requirements	 in	 the	 jurisdictions	 in	 which	 it	 operates.	 The	
uranium	 industry	 is	 subject	 not	 only	 to	 health	 and	 safety	 and	 environmental	 risks	
associated	 with	 all	 mining	 businesses,	 but	 also	 to	 additional	 risks	 uniquely	 associated	
with	the	uranium	industry.	The	Company	expends	significant	resources,	both	financial	
and	 managerial,	 to	 comply	 with	 these	 laws	 and	 regulations.	 The	 possibility	 of	 more	
stringent	 regulations	 exists	 in	 the	 areas	 of	 worker	 health	 and	 safety,	 storage	 of	
hazardous	materials,	standards	for	heavy	equipment	used	in	mining,	the	disposition	of	
wastes,	 the	 decommissioning	 and	 reclamation	 of	 exploration	 and	 in‐situ	 sites,	 climate	
change	and	other	environmental	matters,	each	of	which	could	have	a	material	adverse	
effect	on	the	cost	or	the	viability	of	a	particular	project.	

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

The	 Company	 cannot	 predict	 what	 environmental	 legislation,	 regulations	 or	 policies	
will	 be	 enacted	 or	 adopted	 in	 the	 future	 or	 how	 future	 laws	 and	 regulations	 will	 be	
administered	 or	 interpreted.	 The	 recent	 trend	 in	 environmental	 legislation	 and	
regulation	is	generally	toward	stricter	standards,	and	this	trend	is	likely	to	continue	in	
the	future.	This	recent	trend	includes,	without	limitation,	laws	and	regulations	relating	
to	air	and	water	quality,	mine	reclamation,	waste	handling	and	disposal,	the	protection	
of	certain	species	and	the	preservation	of	certain	lands.	These	regulations	may	require	
the	acquisition	of	permits	or	other	authorizations	for	certain	activities.	These	laws	and	
regulations	may	also	limit	or	prohibit	activities	on	certain	lands.	Compliance	with	more	
stringent	 laws	 and	 regulations,	 as	 well	 as	 potentially	 more	 vigorous	 enforcement	
policies,	 stricter	 interpretation	 of	 existing	 laws	 and	 stricter	 permit	 and	 license	
conditions,	 may	 necessitate	 significant	 capital	 outlays,	 may	 materially	 affect	 the	
Company’s	results	of	operations	and	business	or	may	cause	material	changes	or	delays	
in	 the	 Company’s	 intended	 activities.	 There	 can	 be	 no	 assurance	 of	 the	 Company’s	
continued	 compliance	 or	 ability	 to	 meet	 stricter	 environmental	 laws	 and	 regulations	
and	permit	or	license	conditions.	Delays	in	obtaining	permits	and	licenses	could	impact	
expected	the	Company’s	development	plans.	

The	 Company’s	 operations	 may	 require	 additional	 analysis	 in	 the	 future	 including	
environmental,	 cultural	 and	 social	 impact	 and	 other	 related	 studies.	 Certain	 activities	
require	 the	 submission	 and	 approval	 of	 environmental	 impact	 assessments.	 The	
Company	 cannot	 provide	 assurance	 that	 it	 will	 be	 able	 to	 obtain	 or	 maintain	 all	
necessary	permits	that	may	be	required	to	continue	exploration	and	development	of	its	
properties	or,	if	feasible,	to	commence	construction	or	operation	of	mining	facilities	at	
such	 properties	 on	 terms	 that	 enable	 operations	 to	 be	 conducted	 at	 economically	
justifiable	 costs.	 If	 the	 Company	 is	 unable	 to	 obtain	 or	 maintain,	 licenses,	 permits	 or	
other	rights	for	development	of	its	properties,	or	otherwise	fails	to	manage	adequately	
future	environmental	issues,	its	operations	could	be	materially	and	adversely	affected.	

Currency		

The	Company’s	operations	are	subject	to	foreign	currency	fluctuations.		The	Company’s	
operating	 expenditures	 are	 primarily	 incurred	 in	 United	 States	 Dollars,	 while	 some	 of	
the	 Company’s	 cash	 balances	 and	 expenses	 are	 measured	 in	 Canadian	 Dollars,	 Kyrgyz	
Som	and	Australian	Dollars.		The	appreciation/depreciation	of	the	United	States	Dollar	
against	the	Canadian	Dollar,	Kyrgyz	Som	and	Australian	Dollar	will	consequently	have	
an	impact	on	the	Company’s	financial	results.			

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

Government	Regulation	and	Policy	Risks	

The	Company’s	mineral	exploration	and	planned	development	activities	are	subject	to	
various	 laws	 governing,	 among	 other	 things;	 acquisition	 of	 the	 mining	 interests;	
maintenance	 of	 claims;	 tenure;	 expropriation;	 prospecting;	 exploration;	 development;	
mining;	taxes	and	royalties;	labor	standards;	occupational	health;	waste	disposal;	toxic	
substances;	water	use;	land	use;	Native	American	land	claims;	environmental	protection	
and	 remediation;	 endangered	 and	 protected	 species;	 mine	 decommissioning	 and	
reclamation;	 mine	 safety;	 transportation	 safety	 and	 emergency	 response;	 and	 other	
matters.	Compliance	with	such	laws	and	regulations	has	increased	the	Company’s	costs	
of	exploring,	drilling	and	developing	mineral	properties.		

It	is	possible	that,	in	the	future,	the	costs,	delays	and	other	effects	associated	with	such	
laws	and	regulations	may	impact	the	Company’s	decision	as	to	whether	to	proceed	with	
exploration	 or	 development	 of	 mineral	 properties,	 or	 that	 such	 laws	 and	 regulations	
may	 result	in	 the	 Company	 incurring	 significant	 costs	 to	 remediate	properties	that	 do	
not	 comply	 with	 applicable	 environmental	 standards	 at	 such	 time.	 The	 Company	
expends	 significant	 financial	 and	 managerial	 resources	 to	 comply	 with	 such	 laws	 and	
regulations.	 The	 Company	 anticipates	 it	 will	 have	 to	 continue	 to	 do	 so	 as	 the	 historic	
trend	toward	stricter	government	regulation	may	continue.	There	can	be	no	assurance	
that	 future	 changes	 in	 applicable	 laws	 and	 regulations	 will	 not	 adversely	 affect	 the	
financial	condition	of	the	Company.	New	laws	and	regulations,	amendments	to	existing	
laws	and	regulations	or	more	stringent	implementation	of	existing	laws	and	regulations,	
including	through	stricter	license	and	permit	conditions,	could	have	a	material	adverse	
impact	on	the	Company,	increase	costs	and/or	delay	or	prevent	the	development	of	new	
mining	properties.	

Mining	 is	 subject	 to	 potential	 risks	 and	 liabilities	 associated	 with	 pollution	 of	 the	
environment	 and	 the	 disposal	 of	 waste	 products	 occurring	 as	 a	 result	 of	 mineral	
exploration,	 mining	 and	 production.	 Environmental	 liability	 may	 result	 from	 mining	
activities	conducted	by	others	prior	to	the	Company’s	ownership	of	a	property.	Failure	
to	comply	with	applicable	laws,	regulations	and	permitting	requirements	may	result	in	
enforcement	actions.	These	actions	may	result	in	orders	issued	by	regulatory	or	judicial	
authorities	 causing	 operations	 to	 cease	 or	 be	 curtailed,	 and	 may	 include	 corrective	
measures	 requiring	 capital	 expenditures,	 installation	 of	 additional	 equipment	 or	
remedial	 actions.	 Companies	 engaged	 in	 uranium	 exploration	 operations	 may	 be	
required	to	compensate	others	who	suffer	loss	or	 damage	by	reason	of	such	activities	
and	 may	 have	 civil	 or	 criminal	 fines	 or	 penalties	 imposed	 for	 violations	 of	 applicable	
laws	or	regulations.	Should	the	Company	be	unable	to	fully	fund	the	cost	of	remedying	
an	 environmental	 problem,	 it	 might	 be	 required	 to	 suspend	 operations	 or	 enter	 into	
interim	compliance	measures	pending	completion	of	the	required	remedy,	which	could	
have	a	material	adverse	effect	on	the	Company.		

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

To	 the	 extent	 that	 the	 Company	 is	 subject	 to	 uninsured	 environmental	 liabilities,	 the	
payment	 of	 such	 liabilities	 would	 reduce	 otherwise	 available	 cash	 and	 could	 have	 a	
material	 adverse	 effect	 on	 the	 Company.	 In	 addition,	 the	 Company	 does	 not	 have	
insurance	 coverage	 for	 certain	 environmental	 losses	 and	 other	 risks	 as	 such	 coverage	
cannot	 be	 purchased	 at	 a	 commercially	 reasonable	 cost.	 Compliance	 with	 applicable	
environmental	 laws	 and	 regulations	 requires	 significant	 expenditures	 and	 increases	
mine	development	and	operating	costs.	

Worldwide	demand	for	uranium	is	directly	tied	to	the	demand	for	electricity	produced	
by	the	nuclear	power	industry,	which	is	also	subject	to	extensive	government	regulation	
and	 policies.	 The	 development	 of	 mines	 and	 related	 facilities	 is	 contingent	 upon	
governmental	 approvals	 that	 are	 complex	 and	 time	 consuming	 to	 obtain	 and	 which,	
depending	 upon	 the	 location	 of	 the	 project,	 involve	 multiple	 governmental	 agencies.	
The	 duration	 and	 success	 of	 such	 approvals	 are	 subject	to	 many	 variables	 outside	 the	
Company’s	 control.	 Any	 significant	 delays	 in	 obtaining	 or	 renewing	 such	 permits	 or	
licenses	in	the	future	could	have	a	material	adverse	effect	on	the	Company.	In	addition,	
the	international	marketing	of	uranium	is	subject	to	governmental	policies	and	certain	
trade	 restrictions,	 such	 as	 those	 imposed	 by	 the	 suspension	 agreement	 between	 the	
United	 States	 and	 Russia.	 Changes	 in	 these	 policies	 and	 restrictions	 may	 adversely	
impact	the	Company’s	business.	

With	respect	to	the	Company’s	Dewey	Burdock	Project,	a	final	decision	from	the	ASLB	is	
expected	by	April	29,	2015,	in	accordance	with	the	scheduling	order	issued	by	the	ASLB;	
however,	 the	 final	 ASLB	 decision	 can	 be	 appealed,	 which	 could	 delay	 the	 permitting	
process	 for	 the	 Dewey	 Burdock	 Project.	 With	 respect	 to	 the	 Company’s	 Centennial	
Project,	 originating	 from	 opposition	 to	 the	 Centennial	 Project	 by	 numerous	 interested	
parties	in	Colorado,	a	bill	was	signed	(House	Bill	1161)	creating	a	specialized	regulatory	
regime	for	in‐situ	uranium	recovery	in	the	State	of	Colorado.	The	implementation	of	this	
law	may	establish	standards	for	in‐situ	recovery	mining	and	restoration	that	ultimately	
affect	the	financial	viability	of	the	Centennial	Project.		

Public	Involvement	in	the	Permitting	Process		

The	 process	 of	 obtaining	 radioactive	 materials	 licenses	 (“RML”)	 for	 the	 Company’s	
mineral	 properties	 in	 the	 United	 States	 allows	 for	 public	 participation.	 Third	 parties	
may	 object	 to	 the	 issuance	 of	 RMLs	 and/or	 permits	 required	 by	 the	 Company,	 which	
may	 significantly	 delay	 the	 Company’s	 ability	 to	 obtain	 an	 RML	 and/or	 permit.	
Generally,	 public	 objections	 can	 be	 overcome	 through	 the	 procedures	 set	 forth	 in	 the	
applicable	 permitting	
financial	 resources	 and	
managerial	 resources	 are	 required	 through	 this	 process.	 In	 addition,	 the	 various	
regulatory	 agencies	 must	 allow	 and	 fully	 consider	 the	 public	 objections/comments	
according	 to	 such	procedures	set	out	in	the	applicable	legislation	and	there	 can	be	no	
assurance	 that	 the	 Company	 will	 be	 successful	 in	 obtaining	 an	 RML	 and/or	 permit,	
which	could	have	a	material	adverse	effect	on	the	viability	of	a	project.		

legislation;	 however,	 significant	

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

In	 the	 Kyrgyz	 Republic,	 the	 process	 of	 obtaining	 RMLs	 is	 determined	 by	 the	 State	
Agency	of	Geology,	the	State	Department	on	Technical	Safety,	and	the	State	Department	
of	Ecology.	

Native	American	Involvement	in	the	Permitting	Process		

None	of	the	Company’s	mineral	properties	are	located	within	the	boundaries	of	Native	
American	 lands,	 property	 interests	 that	 are	 controlled	 or	 owned	 by	 Native	 Americans	
under	 the	 jurisdiction	 of	 the	 United	 States	 Federal	 Government.	 However,	 under	
Federal	 legislation,	 “historic	 cultural	 properties	 of	 religious	 significance	 that	 can	 be	
identified	are	to	be	avoided	or	activities	are	to	be	mitigated	such	that	the	essential	nature	
of	 the	 properties	 is	 not	 lost	 to	 a	 culture.	 Throughout	 the	 western	 United	 States,	 Indian	
tribes	 have	 had	 historical	 relationship	 with	 properties	 that	 are	 now	 owned	 by	 private	
parties,	the	Federal	Government	or	State	Government.	In	any	Federal	permitting	action	on	
these	properties,	the	agency	involved	is	required	to	make	an	effort	to	communicate	with	
Native	American	Tribes	to	determine	any	areas	of	“Traditional	Cultural	Significance”.	This	
process	involves	“Government	to	Government”	discussions	with	the	potentially	affected	
Native	American	Tribes;	therefore,	delays	in	permitting	may	occur	through	this	process.	
In	the	 event	that	 “Traditional	Cultural	Properties”	 are	identified	within	a	 project	area,	
the	Company	and	the	agency	must	determine	the	best	method	of	development	to	ensure	
that	disturbances	are	minimized	or	mitigated.	This	process	could	affect	the	final	license	
timing	at	the	Company’s	Dewey	Burdock	Project.		

Political	Risk		

The	 Company’s	 prospects	 may	 be	 affected	 by	 political	 decisions	 that	 impact	 the	
uranium	market.	There	can	be	no	assurance	that	the	United	States,	the	Kyrgyz	Republic	
or	other	government	/	quasi‐governmental	authorities	in	the	jurisdictions	in	which	the	
Company	operates	or	holds	investments	in	will	not	enact	legislation	restricting	uranium	
exploration,	 development,	 extraction	 and	 processing	 or	 the	 actual	 sale	 of	 uranium.	 In	
addition,	the	price	of	uranium	may	be	impacted	by	decisions	of	national	governments	to	
decommission	nuclear	weapons;	thus,	increasing	the	supply	of	uranium.		

The	Company	has	no	History	of	Mining	Operations		

The	 Company	 has	 never	 owned/operated	 uranium‐producing	 properties.	 There	 is	 no	
assurance	 that	 commercially	 viable	 quantities	 of	 uranium	 will	 be	 discovered	 at	 the	
Company’s	 mineral	 properties	 nor	 is	 there	 any	 assurance	 that	 the	 Company’s	
exploration	and	development	programs	will	yield	positive	results.	Even	if	commercially	
viable	quantities	of	uranium	are	discovered,	there	can	be	no	assurance	that	any	of	the	
Company’s	mineral	properties	will	be	brought	to	a	stage	of	profitable	production	or	that	
an	 adequate	 return	 on	 invested	 capital	 will	 be	 achieved.	 Factors	 that	 may	 limit	 the	
ability	 of	 the	 Company	 to	 produce	 uranium	 resources	 from	 its	 properties	 include,	 but	
are	 not	 limited	 to,	 the	 price	 of	 uranium,	 the	 availability	 of	 additional	 capital	 and	
financing	and	the	nature	of	the	mineral	deposits.		

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

Property	Title	Rights	

The	Company	has	investigated	its	rights	to	explore	and	develop	its	material	properties	
and,	 to	 the	 best	 of	 its	 knowledge,	 those	 rights	 are	 in	 good	 standing.	 However,	 no	
assurance	can	be	given	that	such	rights	will	not	be	revoked,	or	significantly	altered,	to	
the	Company’s	detriment.	There	can	also	be	no	assurance	that	the	Company’s	rights	will	
not	be	challenged	or	impugned	by	third	parties,	including	by	local	governments	and	title	
insurance	is	generally	not	available.	

The	 validity	 of	 unpatented	 mining	 claims	 on	 United	 States	 public	 lands	 is	 sometimes	
difficult	 to	 confirm	 and	 may	 be	 contested.	 Due	 to	 the	 extensive	 requirements	 and	
associated	 expense	 required	 to	 obtain	 and	 maintain	 mining	 rights	 on	 United	 States	
public	 lands,	 the	 Company's	 United	 States	 properties	 are	 subject	 to	 various	 title	
uncertainties	 which	 are	 common	 to	 the	 industry	 or	 the	 geographic	 location	 of	 such	
claims,	 with	 the	 resultant	 risk	 that	 there	 may	 be	 defects	 in	 its	 title.	 The	 Company’s	
surface	 or	 mineral	 properties	 may	 also	 be	 subject	 to	 prior	 unregistered	 agreements,	
transfers	or	claims,	and	title	may	be	affected	by,	among	other	things,	undetected	defects.	
Such	 third	 party	 claims	 could	 have	 a	 material	 adverse	 impact	 on	 the	 Company’s	
reported	resources	and	operations.	In	addition,	the	Company	may	be	unable	to	enforce	
its	rights	or	operate	the	impacted	mineral	property	as	previously	permitted.	

If	 Company’s	 exploration	 license	 for	 the	 Kyzyl	 Ompul	 Project	 is	 not	 extended	 past	
December	 31,	 2015,	 the	 loss	 of	 this	 mineral	 property	 could	 have	 a	 material	 adverse	
effect	 on	 the	 Company’s	 reported	 resources.	 In	 addition,	 the	 Company	 will	 have	 to	
assess	 whether	 an	 impairment	 allowance	 is	 necessary,	 which,	 if	 required,	 could	 be	
material.		

Dependence	on	Key	Personnel	and	Qualified	and	Experienced	Employees	

The	Company’s	success	will	largely	depend	on	the	efforts	and	abilities	of	certain	senior	
officers	and	key	employees.	Certain	of	these	individuals	have	significant	experience	in	
the	 uranium	 industry.	 The	 number	 of	 individuals	 with	 significant	 experience	 in	 this	
industry	is	small.	While	the	Company	does	not	foresee	any	reason	why	such	officers	and	
key	employees	will	not	remain	with	the	Company,	other	than	through	retirement,	if	for	
any	reason	they	do	not,	the	Company	could	be	adversely	affected.		

The	Company’s	success	will	also	depend	on	the	availability	of	qualified	and	experienced	
employees	 to	 work	 in	 the	 Company’s	 operations	 and	 the	 Company’s	 ability	 to	 attract	
and	 retain	 such	 employees.	 The	 number	 of	 individuals	 with	 relevant	 mining	 and	
operational	experience	in	this	industry	is	small.	

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

Delineation	of	Mineral	Reserves	and	Additional	Mineral	Resources	

The	 extent	 to	 which	 resources	 may	 ultimately	 be	 reclassified	 as	 proven	 or	 probable	
reserves	 is	 dependent	 upon	 the	 demonstration	 of	 their	 profitable	 recovery.	 The	
evaluation	 of	 resources	 and	 reserves	 is	 influenced	 by	 economic	 and	 technological	
factors,	 which	 may	 change	 over	 time.	 	 At	 present,	 the	 Company	 does	 not	 have	 any	
mineral	reserves.		

There	 can	 be	 no	 assurance	 that	 the	 Company’s	 future	 exploration,	 development	 and	
acquisition	 efforts	 will	 be	 successful	 in	 determining	 mineral	 reserves	 and	 additional	
resources.	The	Company’s	ability	to	delineate	mineral	reserves	and	additional	mineral	
resources	may	impact	future	operations.	There	can	be	no	assurance	that	the	Company	
will	 be	 able	 to	 bring	 any	 of	 its	 mineral	 properties	 into	 production	 or	 identify	 mineral	
reserves	on	any	of	its	mineral	properties.		

Insurance	Coverage		

The	 Company’s	 business	 will	 be	 subject	 to	 a	 number	 of	 risks	 and	 hazards	 (as	 further	
described	 herein).	 Although	 the	 Company	 will	 maintain	 insurance	 to	 protect	 against	
certain	risks	in	such	amounts	as	it	considers	to	be	reasonable,	such	insurance	will	likely	
not	 cover	 all	 the	 potential	 risks	 associated	 with	 its	 activities,	 including	 any	 future	
mining	operations.	The	Company	may	also	be	unable	to	maintain	insurance	to	cover	its	
risks	at	economically	feasible	premiums,	or	at	all.	Insurance	coverage	may	not	continue	
to	 be	 available	 or	 may	 not	 be	 adequate	 to	 cover	 any	 resulting	 liability.	 Moreover,	
insurance	against	risks	such	as	environmental	pollution	or	other	hazards	as	a	result	of	
exploration	 or	 production	 may	 not	 be	 available	 to	 the	 Company	 on	 acceptable	 or	 any	
terms.	 The	 Company	 might	 also	 become	 subject	 to	 liability	 for	 pollution	 or	 other	
hazards,	which	it	is	not	currently	 insured	against	and/or	in	 the	 future	may	not	insure	
against	because	of	premium	costs	or	other	reasons.	Losses	from	these	events	may	cause	
the	 Company	 to	 incur	 significant	 costs,	 which	 could	 have	 a	 material	 adverse	 effect	 on	
the	Company’s	business,	financial	condition,	results	of	operations	or	prospects.	

Dilution	from	Further	Equity	Financing	and	Outstanding	Stock	Options	and	Warrants	

If	 the	 Company	 raises	 additional	 funding	 by	 issuing	 additional	 equity	 securities	 or	
convertible	securities,	exercisable	or	exchangeable	for	equity	securities,	such	financing	
may	 substantially	 dilute	 the	 interests	 of	 shareholders	 of	 the	 Company	 and	 reduce	 the	
value	of	their	investment.	

In	addition,	the	Company	currently	has	outstanding	stock	options	and	warrants,	which	
if	exercised,	may	substantially	dilute	the	interests	of	shareholders	of	the	Company	and	
reduce	the	value	of	their	investment.		

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

Market	Price	of	Shares	

Securities	of	mining	companies	have	experienced	substantial	volatility	in	the	past,	often	
based	on	factors	unrelated	to	the	financial	performance	or	prospects	of	the	companies	
involved.	 These	 factors	 include	 macroeconomic	 conditions	 in	 North	 America	 and	
globally,	and	market	perceptions	of	the	attractiveness	of	particular	industries.	The	price	
of	 the	 Company’s	 securities	 is	 also	 likely	 to	 be	 significantly	 affected	 by	 short‐term	
changes	 in	 uranium	 prices,	 changes	 in	 industry	 forecasts	 of	 uranium	 prices,	 other	
mineral	prices,	currency	exchange	fluctuation,	or	in	its	financial	condition	or	results	of	
operations.	Other	factors	unrelated	to	the	performance	of	the	Company	that	may	have	
an	effect	on	the	price	of	the	securities	of	the	Company	include	the	following:	the	extent	
of	 analytical	 coverage	 available	 to	 investors	 concerning	 the	 business	 of	 the	 Company	
may	 be	 limited	 if	 investment	 banks	 with	 research	 capabilities	 do	 not	 follow	 the	
Company’s	 securities;	 lessening	 in	 trading	 volume	 and	 general	 market	 interest	 in	 the	
Company’s	 securities	 may	 affect	 an	 investor's	 ability	 to	 trade	 significant	 numbers	 of	
securities	 of	 the	 Company;	 the	 size	 of	 the	 Company’s	 public	 float	 and	 its	 inclusion	 in	
market	 indices	 may	 limit	 the	 ability	 of	 some	 institutions	 to	 invest	 in	 the	 Company's	
securities;	 and	 a	 substantial	 decline	 in	 the	 price	 of	 the	 securities	 of	 the	 Company	 that	
persists	 for	 a	 significant	 period	 of	 time	 could	 cause	 the	 Company’s	 securities	 to	 be	
delisted	from	an	exchange,	further	reducing	market	liquidity.	If	an	active	market	for	the	
securities	 of	 the	 Company	 does	 not	 continue,	 the	 liquidity	 of	 an	 investor's	 investment	
may	be	limited	and	the	price	of	the	securities	of	the	Company	may	decline.	If	an	active	
market	does	not	exist,	investors	may	lose	their	entire	investment	in	the	Company.	As	a	
result	of	any	of	these	factors,	the	market	price	of	the	securities	of	the	Company	at	any	
given	 point	 in	 time	 may	 not	 accurately	 reflect	 the	 long‐term	 value	 of	 the	 Company.	
Securities	class‐action	litigation	often	has	been	brought	against	companies	in	periods	of	
volatility	 in	 the	 market	 price	 of	 their	 securities,	 and	 following	 major	 corporate	
transactions	or	mergers	and	acquisitions.	The	Company	may	in	the	future	be	the	target	
of	 similar	 litigation.	 Securities	 litigation	 could	 result	 in	 substantial	 costs	 and	 damages	
and	divert	management's	attention	and	resources.	

The	Company	has	Never	Paid	Dividends	and	May	Not	do	so	in	the	Foreseeable	Future		

The	Company	has	never	paid	dividends	and	intends	to	retain	its	future	earnings,	if	any,	
to	fund	the	development	and	growth	of	its	business	and	does	not	anticipate	paying	any	
dividends	 in	 the	 near	 future.	 Thus,	 shareholders	 of	 the	 Company	 will	 have	 to	 rely	 on	
capital	 appreciation,	 if	 any,	 to	 earn	 a	 return	 on	 their	 investment	 in	 the	 Company’s	
shares	for	the	foreseeable	future.	The	Board	will	review	the	Company’s	dividend	policy	
from	time	to	time.		

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AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

Litigation	and	Other	Legal	Proceedings		

The	Company	is	subject	to	litigation	and	other	legal	proceedings	arising	in	the	normal	
course	 of	 business	 and	 may	 be	 involved	 in	 disputes	 with	 other	 parties	 in	 the	 future,	
which	 may	 result	 in	 litigation.	 The	 causes	 of	 potential	 future	 litigation	 and	 legal	
proceedings	 cannot	 be	 known	 and	 may	 arise	 from,	 among	 other	 things,	 business	
activities,	 environmental	 laws,	 permitting	 and	 licensing	 activities,	 volatility	 in	 stock	
prices	 or	 failure	 to	 comply	 with	 disclosure	 obligations.	 The	 results	 of	 litigation	 and	
proceedings	cannot	be	predicted	with	certainty,	and	may	include	potential	injunctions	
pending	 the	 outcome	 of	 such	 litigation	 and	 proceedings.	 If	 the	 Company	 is	 unable	 to	
resolve	 these	 disputes	 favourably,	 it	 may	 have	 a	 material	 adverse	 impact	 on	 the	
Company’s	financial	performance,	cash	flow	and	results	of	operations.	

Technical	Innovation	and	Obsolescence		

Requirements	 for	 the	 Company’s	 potential	 products	 may	 be	 affected	 by	 technological	
changes	 in	 nuclear	 reactors,	 enrichment	 and	 used	 uranium	 fuel	 reprocessing.	 These	
technological	changes	could	reduce	the	demand	for	uranium.	In	addition,	the	Company’s	
competitors	may	 adopt	 technological	advancements	that	give	them	an	advantage	over	
the	Company.	

Disclosure	and	Internal	Controls	

Disclosure	controls	and	procedures	are	designed	to	provide	reasonable	assurance	that	
information	required	to	be	disclosed	by	the	Company	in	its	annual	filings,	interim	filings	
or	 other	 reports	 filed	 or	 submitted	 by	 it	 under	 securities	 legislation	 is	 recorded,	
processed,	summarized	and	reported	within	the	time	periods	specified	in	the	securities	
legislation	 and	 include	 controls	 and	 procedures	 designed	 to	 ensure	 that	 information	
required	 to	 be	 disclosed	 by	 the	 Company	 in	 its	 annual	 filings,	 interim	 filings	 or	 other	
is	 accumulated	 and	
reports	
communicated	 to	 the	 Company’s	 management,	 including	 its	 CEO	 and	 CFO,	 as	
appropriate	to	allow	timely	decisions	regarding	required	disclosure.	

filed	 or	 submitted	 under	 securities	

legislation	

Internal	controls	over	financial	reporting	are	designed	to	provide	reasonable	assurance	
regarding	 the	 reliability	 of	 financial	 reporting	 and	 the	 preparation	 of	 financial	
statements	in	 accordance	 with	IFRS.	Management	is	 also	 responsible	 for	the	design	of	
the	Company’s	internal	control	over	financial	reporting	in	order	to	provide	reasonable	
assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial	
statements	for	external	purposes	in	accordance	with	IFRS.	

A	 control	 system,	 no	 matter	 how	 well	 designed	 and	 operated,	 can	 provide	 only	
reasonable,	not	absolute,	assurance	with	respect	to	the	reliability	of	reporting,	including	
financial	reporting	and	financial	statement	preparation.	

59	

	
 
	
	
	
	
	
	
AZARGA	URANIUM	CORP.	
Management’s	Discussion	and	Analysis	
For	the	years	ended	December	31,	2014	and	2013	
(Expressed	in	U.S.	Dollars	and	shares,	unless	otherwise	indicated)	

RISKS	AND	UNCERTAINTIES	(Continued)	

Conflicts	of	Interest	

Some	 of	 the	 directors	 of	 the	 Company	 are	 also	 directors	 of	 other	 companies	 that	 are	
similarly	 engaged	 in	 the	 business	 of	 acquiring,	 exploring	 and	 developing	 natural	
resource	properties.	Such	associations	may	give	rise	to	conflicts	of	interest	from	time	to	
time.	 In	 particular,	 one	 of	 the	 consequences	 will	 be	 that	 corporate	 opportunities	
presented	 to	 a	 director	 of	 the	 Company	 may	 be	 offered	 to	 another	 company	 or	
companies	 with	 which	 the	 director	 is	 associated,	 and	 may	 not	 be	 presented	 or	 made	
available	 to	 the	 Company.	 The	 directors	 of	 the	 Company	 are	 required	 by	 law	 to	 act	
honestly	and	in	good	faith	with	a	view	to	the	best	interests	of	the	Company,	to	disclose	
any	interest	which	they	may	have	in	any	project	or	opportunity	of	the	Company,	and	to	
abstain	from	voting	on	such	matter.	Conflicts	of	interest	that	arise	will	be	subject	to	and	
governed	 by	 the	 procedures	 prescribed	 in	 the	 Company’s	 Code	 of	 Ethics	 and	 by	 the	
Business	Corporations	Act	(British	Columbia).	

Exposure	to	Emerging	Markets		

Emerging	markets	such	as	the	Kyrgyz	Republic	are	subject	to	different	risks	than	more	
developed	 markets,	 including	 economic,	 political	 and	 social,	 and	 legal	 and	 legislative	
risks.	Laws	and	regulations	affecting	businesses	in	Kyrgyz	Republic	continue	to	change	
rapidly,	 tax	 and	 regulatory	 frameworks	 are	 subject	 to	 varying	 interpretations.	 The	
future	 economic	 direction	 of	 Kyrgyz	 Republic	 is	 heavily	 influenced	 by	 the	 fiscal	 and	
monetary	policies	adopted	by	the	government,	together	with	developments	in	the	legal,	
regulatory,	and	political	environment.		Varying	interpretations	of	the	above	frameworks	
could	have	a	material	adverse	affect	on	the	Company’s	operations.		

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