MIRASOL RESOURCES LTD.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010 and 2009
Canadian Funds
AUDITORS' REPORT
To the Shareholders of
Mirasol Resources Ltd.
We have audited the consolidated balance sheets of Mirasol Resources Ltd. as at June 30, 2010 and 2009 and the
consolidated statements of loss, comprehensive loss and deficit, cash flows and schedules of resources property exploration
costs for the years then ended. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that
we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the
Company as at June 30, 2010 and 2009 and the results of its operations and its cash flows for the years then ended in
accordance with Canadian generally accepted accounting principles.
Vancouver, Canada
October 25, 2010
“DAVIDSON & COMPANY LLP”
Chartered Accountants
Mirasol Resources Ltd.
(An Exploration Stage Company)
Consolidated Balance Sheets
As at June 30
Canadian Funds
ASSETS
Current
Cash
Receivables and advances (Note 10)
Statement 1
2010
2009
$
$
5,147,280
57,331
5,204,611
3,653,477
48,497
3,701,974
Equipment (Note 8)
40,344
55,025
Resource property acquisition costs, Schedule (Note 9)
78,333
78,333
$
5,323,288
$
3,835,332
LIABILITIES
Current
Accounts payable and accrued liabilities (Note 10)
$
161,180
$
161,180
160,691
160,691
SHAREHOLDERS’ EQUITY
Share Capital (Note 11)
Authorized:
Unlimited common shares without par value
Issued and fully paid (Note 11a)
Contributed surplus (Note 11c)
Deficit - Statement 2
Nature of Business (Note 1)
Commitments (Note 14)
Subsequent Events (Note 15)
On Behalf of the Board:
“ Mary L. Little ”
“ Nick DeMare ”
,
,
Director
Director
14,171,636
2,259,578
16,431,214
11,246,301
1,469,648
12,715,949
(11,269,106)
5,162,108
(9,041,308)
3,674,641
$
5,323,288
$
3,835,332
- See accompanying notes to the consolidated financial statements -
Mirasol Resources Ltd.
(An Exploration Stage Company)
Consolidated Statements of Loss, Comprehensive Loss and Deficit
For the Years Ended June 30
Canadian Funds
Statement 2
Operating Expenses
Exploration costs, net – Schedule
Office and miscellaneous
Management fees
Professional fees
Travel
Shareholder information
Listing and filing fees
Amortization
Stock-based compensation
Other Items
Foreign exchange (gain) loss
Interest and bank charges, net
$
2010
2009
$
1,459,581
233,025
210,758
107,657
78,574
42,662
24,681
1,582
-
2,158,520
67,276
2,002
69,278
1,513,848
159,208
199,075
111,423
41,950
25,544
17,390
7,301
215,408
2,291,147
(180,951)
(61,478)
(242,429)
Loss and Comprehensive Loss for the Year
Deficit - Beginning of Year
Deficit - End of Year
(2,227,798)
(9,041,308)
(2,048,718)
(6,992,590)
$
(11,269,106) $
(9,041,308)
Loss per Share – Basic and Diluted
$
(0.07) $
(0.07)
Weighted Average Number of Shares Outstanding
31,062,011
29,258,181
- See accompanying notes to the consolidated financial statements -
Mirasol Resources Ltd.
(An Exploration Stage Company)
Consolidated Statements of Cash Flow
For the Years Ended June 30
Canadian Funds
Statement 3
Operating Activities
Loss for the year
Items not affecting cash:
2010
2009
$
(2,227,798) $
(2,048,718)
Stock-based compensation
Amortization
Amortization included in exploration expenses
-
1,582
15,822
215,408
7,301
20,664
Changes in non-cash working capital items:
Receivables and advances
Accounts payable and accrued liabilities
Cash used in operating activities
Investing Activities
Purchase of equipment
Cash used in investing activities
Financing Activities
Share capital issued, net of issuance costs
Cash provided by financing activities
(8,834)
489
9,601
(43,005)
(2,218,739)
(1,838,749)
(2,723)
(2,723)
(3,534)
(3,534)
3,715,265
3,715,265
-
-
Change in Cash
Cash - beginning of year
Cash - End of Year
1,493,803
3,653,477
(1,842,283)
5,495,760
$
5,147,280
$
3,653,477
Supplemental Schedule of Non-Cash Financing Transactions:
Fair value of private placement warrants
Fair value of finder fee warrants
Fair value of warrants exercised
Fair value of options exercised
$
$
$
$
909,128
202,384
14,419
307,163
$
$
$
$
-
-
-
-
There was no cash paid for interest or income taxes for the years ended June 30, 2010 and 2009.
- See accompanying notes to the consolidated financial statements -
Mirasol Resources Ltd.
(An Exploration Stage Company)
Consolidated Schedules of Resource Property Exploration Costs
For the Years Ended June 30
Canadian Funds
Schedule
Properties:
Claudia
Consultants and salary
Camp and general
Travel
Option payment received
Joaquin
Consultants and salary
Camp and general
Travel
Mining rights and fees
Assays and sampling
Option payment received
La Curva
Consultants and salary
Camp and general
Travel
Mining rights and fees
Assays and sampling
La Libanesa
Consultants and salary
Camp and general
Travel
Mining rights and fees
Assays and sampling
Nico
Consultants and salary
Camp and general
Travel
Mining rights and fees
Assays and sampling
Option payment received
Rubi
Consultants and salary
Camp and general
Travel
Mining rights and fees
Assays and sampling
$
2010
2009
$
15,789
49
173
-
16,011
343,563
96,917
34,864
4,049
537
(78,331)
401,599
31,637
11,417
2,577
440
-
46,071
31,636
34,327
2,294
661
-
68,918
25,043
5,785
1,483
305
-
-
32,616
23,233
2,924
2,426
106,013
10,548
145,144
44,440
-
2,911
(106,950)
(59,599)
22,300
198
2,193
8
10
(93,761)
(69,052)
152,017
133,727
10,049
2,864
28,643
327,300
130,540
94,893
6,929
2,209
6,960
241,531
9,415
5,738
185
318
172
(62,225)
(46,397)
-
11,809
315
28,523
7,978
48,625
Balance Carried forward
$
710,359
$
442,408
- See accompanying notes to the consolidated financial statements -
Mirasol Resources Ltd.
(An Exploration Stage Company)
Consolidated Schedules of Resource Property Exploration Costs
For the Years Ended June 30
Canadian Funds
Schedule - continued
Properties continued
Balances forward
Sascha
Consultants and salary
Camp and general
Travel
Mining rights and fees
Assays and sampling
Santa Rita
Consultants and salary
Camp and general
Virginia
Consultants and salary
Camp and general
Travel
Assays and sampling
Other Projects
General & administrative
Generative exploration
2010
2009
$
710,359
$
442,408
108,698
88,852
3,230
2,020
690
203,490
26,542
8,694
35,236
51,832
12,582
1,632
6,031
72,077
171,730
109,471
157,218
29,941
7,153
7
4
-
37,105
35,723
1,449
37,172
-
-
-
-
-
385,132
-
612,031
Total Costs for the Year
$
1,459,581
$
1,513,848
- See accompanying notes to the consolidated financial statements -
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
1. Nature of Business
Mirasol Resources Ltd. (“Mirasol”) (the “Company”) engages primarily in acquiring and exploring
mineral properties, principally located in Argentina and Chile, with the objective of identifying
mineralized deposits economically worthy of subsequent development, mining or sale.
The business of mining and exploration involves a high degree of risk and there can be no assurance
that current exploration programs will result in profitable mining operations. The Company has no
source of revenue, and has significant cash requirements to meet its administrative overhead and
maintain its mineral interests. The recovery of the Company’s investment in mineral properties is
dependent on the discovery of economically recoverable reserves, and the ability of the Company to
obtain the necessary financing to complete the development of these properties, and future profitable
production or proceeds from disposition of mineral properties. Also, the Company will have to raise
additional funds for future corporate and administrative expenses and to undertake further exploration
and development of its mineral properties. While the Company has been successful in the past at
raising funds, there can be no assurance that it will be able to do so in the future.
2. Significant Accounting Policies
a) Basis of Consolidation
These consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles and include the accounts of the Company and its wholly
owned subsidiaries, Mirasol Argentina S.R.L, Minera Del Sol S.A. and Minera Mirasol Chile
Limitada. Inter-company balances have been eliminated upon consolidation.
b) Cash
For purposes of reporting cash flows, the Company considers cash to include amounts held in
banks and highly liquid investments with maturities at point of purchase of 90 days or less. The
Company places its cash with institutions of high credit worthiness.
c) Equipment
Equipment is valued at cost less accumulated amortization. The Company provides for
amortization for equipment using the declining balance method at a rate of 30% for exploration
equipment and 30% for computer equipment and applies only one-half of the applicable rate in
the year of acquisition.
d)
Income Taxes
The Company accounts for income taxes using the asset and liability method. Future taxes are
recognized for the tax consequences of “temporary differences” by applying enacted or
substantively enacted statutory tax rates applicable to future years on differences between the
financial statement carrying amounts and tax basis of existing assets and liabilities. The effect on
future taxes for a change in tax rates is recognized in income during the period that includes the
date of enactment or substantive enactment. In addition, the method requires the recognition of
future tax benefits to the extent that realization of such benefits is more likely than not.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
e) Earnings (Loss) per Share
Basic earnings (loss) per share is computed by dividing income (loss) attributable to common
shareholders by the weighted average number of common shares outstanding during the year. The
computation of diluted earnings per share assumes the conversion, exercise or contingent issuance
of securities only when such conversion, exercise or issuance would have a dilutive effect on
earnings per share. The dilutive effect of convertible securities is reflected in diluted earnings per
share by application of the "if converted" method. The dilutive effect of outstanding options and
warrants and their equivalents is reflected in diluted earnings per share by application of the
treasury stock method.
f) Management’s Estimates
The preparation of consolidated financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts of revenues and
expenses during the reported periods. Actual results could differ from those estimates.
g) Foreign Currency Translation
The foreign currency-denominated activities of the Company are translated into Canadian dollars
under the temporal method as follows:
• Monetary assets and liabilities at year-end rates;
• Non-monetary assets and liabilities at historical rates;
•
Income and expense items at the average rate of exchange prevailing during the year.
Exchange gains and losses are recognized in the period they are incurred.
h) Stock-Based Compensation
Stock-based awards made to employees and non-employees are measured and recognized
using a fair value based method. Accordingly, the fair value of the options at the measurement
date is accrued and charged to operations over the vesting period, with the offsetting credit to
contributed surplus. If and when the stock options are ultimately exercised, the applicable
amounts of contributed surplus are transferred to share capital.
i) Asset Retirement Obligations
“Asset Retirement Obligations” requires recognition of a legal liability for obligations relating to
retirement of property, plant and equipment, and arising from the acquisition, construction,
development, or normal operation of those assets. Such asset retirement costs must be
recognized at fair value, when a reasonable estimate of fair value can be estimated, in the period
in which it is incurred, added to the carrying value of the asset, and amortized into income on a
systematic basis over its useful life.
As at June 30, 2010 the Company does not have any asset retirement obligations.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
j) Acquisition and Exploration Costs
Exploration costs are expensed as incurred as the Company is in the process of exploring its
mineral tenements and has not yet determined whether these properties contain ore reserves that
are economically recoverable. If and when the Company’s management determines that
economically extractable proven or probable mineral reserves have been established, the
subsequent costs incurred to develop such property, including costs to further delineate the ore
body will be capitalized.
The Company continues to capitalize its acquisition costs related to its mineral properties. Any
option payments received are credited to the cost of the property with the resulting net amount
included in the exploration costs expensed on the income statement.
k) Financial Instruments
Financial assets and financial liabilities, including derivatives, are recognized on the balance
sheet when the Company becomes a party to contractual provisions of the financial instrument or
a derivative contract. All financial instruments are measured at fair value on initial recognition
except for certain related party transactions. Measurement in subsequent periods depends on
whether the financial instrument has been classified as held-for-trading, available-for-sale, held-
to-maturity, loans and receivables or other liabilities.
Financial assets and financial liabilities held-for-trading are measured at fair value with gains and
losses recognized in the Company’s loss for the period. Financial assets held-to-maturity, loans
and receivables and financial liabilities, other than those held-for-trading, are measured at
amortized cost using the effective interest method of amortization. Available-for-sale financial
assets are measured at fair value with unrealized gains and losses including changes in foreign
exchange rates being recognized in other comprehensive income (“OCI”) upon adoption.
Derivative instruments are recorded on the balance sheet at fair value including those derivatives
that are embedded in financial instruments or other contracts but are not closely related to the
host financial instrument or contract, respectively. Changes in the fair values of derivative
instruments are recognized in the Company’s loss for the period.
The Company has designated each of its significant categories of financial instruments as
follows:
Cash
Receivables and advances
Accounts payable and accrued liabilities
Held-for-trading
Loans and receivables
Other financial liabilities
Amendment to Financial Instruments – Disclosures
CICA Handbook Section 3862, Financial Instruments – Disclosures and Section 3863, Financial
Instruments Presentation were amended to place increased emphasis on disclosure about the
nature and the extent of risks arising from financial instruments and how the entity manages
those risks. Disclosure is also required about the inputs used in making fair value measurements,
including their classification within a hierarchy that prioritizes their significance. The three levels of
the fair value hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities;
Level 2 – Inputs other than quoted prices that are observable for the asset or liability
either directly or indirectly; and
Level 3 – Inputs that are not based on observable market data.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
The Company has adopted these amendments for the fiscal year ended June 30, 2010 and the
additional required disclosures are included in Note 5.
l) Comparative Figures
Certain comparative amounts have been reclassified to conform to the current period’s
presentation.
3. Changes in Accounting Policy
a) Credit risk and fair value of financial assets and financial liabilities
Effective July 1, 2009, the Company adopted EIC-173 “Credit Risk and the Fair Value of Financial
Assets and Financial Liabilities.” This guidance clarified that an entity’s own credit risk and the
credit risk of the counterparty should be taken into account in determining the fair value of
financial assets and financial liabilities including derivative instruments. The Company has
evaluated the new section and determined that adoption of these new requirements has had no
impact on the Company’s consolidated financial statements.
b) Mining Exploration Costs
Effective July 1, 2009, the Company adopted EIC-174 “Mining Exploration Costs.” This guidance
clarified that an entity that has initially capitalized exploration costs has an obligation in the
current and subsequent accounting periods to test such costs for recoverability whenever events
or changes in circumstances indicate that its carrying amount may not be recoverable. The
Company has evaluated the new section and determined that adoption of these new
requirements has had no impact on the Company’s consolidated financial statements.
c) Goodwill and intangible assets
in
Effective July 1, 2009 the Company adopted the CICA handbook section 3064, “Goodwill and
Intangible Assets”, which replaces CICA HB Section 3062, “Goodwill and Intangible Assets,”
CICA HB Section 3450, “Research and Development Costs,” amendments to Accounting
Guideline (AcG) 11, “Enterprises
the Development Stage,” EIC-27, “Revenues and
Expenditures during the Pre-operating Period” and CICA HB Section 1000, “Financial Statement
Concepts.” The standard reduces the differences with International Financial Reporting
Standards (“IFRS”) in the accounting for intangible assets and results in closer alignment with
U.S. GAAP. The objectives of Section 3064 are to reinforce the principle-based approach to the
recognition of assets only in accordance with the definition of an asset and the criteria for asset
recognition; and clarify the application of the concept of matching revenues and expenses such
that the current practice of recognizing assets that do not meet the definition and recognition
criteria are eliminated. The standard also provides guidance for the recognition of internally
developed intangible assets (including research and development activities), ensuring consistent
treatment of all intangible assets, whether separately acquired or internally developed. The
Company has evaluated the new section and determined that adoption of these new
requirements has had no impact on the Company’s consolidated financial statements.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
4. Recent Accounting Pronouncements Not Yet Adopted
a)
International Financial Reporting Standards (“IFRS”)
In 2006, the Canadian Accounting Standards Board (“AcSB”) published a new strategic plan that
will significantly affect financial reporting requirements for Canadian companies. The AcSB
strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year
transitional period. In February 2008 the AcSB announced that 2011 is the changeover date for
publicly-listed companies to use IFRS, replacing Canadian GAAP. This date is for interim and
annual financial statements relating to fiscal years beginning on or after January 1, 2011. For the
Company, the transition date will be July 1, 2011 and this will require the restatement for
comparative purposes of amounts reported by the Company for the year ended June 30, 2011.
The Company is currently assessing the financial reporting impact of the transition to IFRS and
the changeover date.
b) Business combinations
In January 2009, the CICA issued Handbook section 1582, “Business Combinations”, which
establishes new standards for accounting for business combinations. This is effective for
business combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after January 1, 2011. Early adoption is permitted. The
Company will be adopting this policy effective July 1, 2010. This adoption is not expected to have
an impact on the Company’s financial position, earnings or cash flows.
c) Non-Controlling Interest
In January 2009, the CICA issued Handbook section 1602, “Non-controlling Interests”, to provide
guidance on accounting for non-controlling interests subsequent to a business combination. The
section is effective for fiscal years beginning on or after January 2011. Early adoption is
permitted. The Company will be adopting this policy effective July 1, 2010. This adoption is not
expected to have an impact on the Company’s financial position, earnings or cash flows.
d) Consolidated Financial Statements
In January 2009, the CICA issued Handbook section 1601, “Consolidated Financial Statements”,
to provide guidance on the preparation of consolidated financial statements. The section is
effective for fiscal years beginning on or after January 1, 2011. The Company will be adopting this
policy effective July 1, 2010. This adoption is not expected to have an impact on the Company’s
financial position, earnings or cash flows.
e) Comprehensive Revaluation of Assets and Liabilities
In August 2009, the CICA amended Handbook Section 1625, “Comprehensive Revaluation of
Assets and Liabilities” to be consistent with Sections 1582, 1601 and 1602, which were issued in
January 2009. The amendments apply prospectively to comprehensive revaluations of assets
and liabilities occurring in fiscal years beginning on or after January 1, 2011. Early adoption is
permitted. The Company will be adopting this policy effective July 1, 2010. This adoption is not
expected to have an impact on the Company’s financial position, earnings or cash flows.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
5. Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, receivables and advances and accounts
payable and accrued liabilities. Cash is carried at fair value using a level 1 fair value
measurement. The fair value of receivables and advances and accounts payable and accrued
liabilities approximates their carrying value due to their short-term maturity or capacity of prompt
liquidation. Unless otherwise noted, it is management’s opinion that the Company is not exposed
to significant interest, currency or credit risks arising from the financial instruments. See note 7
for management’s assessment of risks.
The Company holds cash balances and incurs payables that are denominated in the Canadian
Dollar, the US Dollar, the Argentine Peso and the Chilean Peso. These balances are subject to
fluctuations in the exchange rate between the Canadian Dollar, and the US Dollar and the
Argentine and Chilean Peso, resulting in currency gains or losses for the Company.
6. Capital Management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue
as a going concern in order to pursue the development of its mineral properties and to maintain a
flexible capital structure which optimizes the costs of capital at an acceptable risk. In the
management of capital, the Company includes the components of shareholders’ equity.
The Company manages the capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the
capital structure, the Company may attempt to issue new shares, 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
successful capital deployment and general industry conditions. The annual and updated budgets are
approved by the Board of Directors.
In order to maximize ongoing development efforts, the Company does not pay out dividends.
The Company’s investment policy is to invest its cash in highly liquid short-term interest-bearing
investments with maturities of 90 days or less from the original date of acquisition, selected with
regards to the expected timing of expenditures from continuing operations.
The Company is not subject to externally imposed capital requirements.
7. Management of Financial Risk
The Company’s financial instruments are exposed to certain financial risks. The risk exposures and
the impact on the Company's financial instruments are summarized below.
Sensitivity analysis
The Company’s financial instruments consist of cash, receivables and advances, and accounts
payable and accrued liabilities.
The Company has classified its cash as held-for-trading, and is measured at fair value. Receivables
and advances are designated as loans and receivables and are measured at amortized cost.
Accounts payable and accrued liabilities are classified as other financial liabilities and are measured
at amortized cost.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
As at June 30, 2010, the carrying amount of accounts receivable and advances and accounts
payable and accrued liabilities equals fair market value. Based on management's knowledge and
experience of the financial markets, the Company believes the following movements are reasonably
possible over a twelve month period:
• The Company is exposed to interest rate risk as bank accounts earn interest income at
variable rates. The income earned on these accounts is subject to the movements in interest
rates. The cash proceeds from the Company’s financing activities are invested in term
deposits which are readily convertible to known amounts of cash and not exposed to a risk of
loss in value.
• Price risk is remote since the Company is currently not a producing entity.
Currency risk
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The
Company operates in Canada, Argentina and Chile and a portion of its expenses are incurred in
Canadian dollars and Argentine and Chilean Pesos. A significant change in the currency exchange
rates between the US dollar relative to the Canadian dollar and the Argentine and Chilean Peso to
the Canadian dollar could have an effect on the Company’s results of operations, financial position or
cash flows. The Company has not hedged its exposure to currency fluctuations. At June 30, 2010,
the Company is exposed to currency risk through the following assets and liabilities denominated in
US dollars and Argentine and Chilean Pesos:
June 30, 2010
Cash and cash equivalents
Accounts receivable
Accounts payable and accrued liabilities
US Dollars Argentine Peso
506,845
2,300,975
99,791
16,000
(325,293)
(1,004)
Chilean Peso
4,438,982
435,520
(7,229,694)
Based on the above net exposures as at June 30, 2010, and assuming that all other variables remain
constant, a 10% depreciation or appreciation of the Canadian dollar against the US dollar would
result in an increase/decrease of $242,806 in the Company’s net earnings. Likewise, a 10%
depreciation or appreciation of the Canadian dollar against the Argentine and Chile Peso would result
in an increase/decrease of $7,506 and $468, respectively in the Company’s net earnings.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to
meet its contractual obligations.
The Company’s cash is held through large Canadian financial institutions. The Company’s
receivables consist of goods & services tax due from the Federal Government of Canada.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall
due. The Company manages liquidity risk through the management of its capital structure and
financial leverage as outlined above. As at June 30, 2010 the Company was holding cash and cash
equivalents of $5,147,280 to settle current liabilities of $161,180. Management believes it has
sufficient funds to meet its current obligations as they become due.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The risk that the Company will realize a loss
as a result of a decline in the fair value of the short-term investments included in cash is limited
because these investments are generally held to maturity.
Commodity price risk
The Company is exposed to price risk with respect to commodity prices. The Company closely
monitors commodity prices to determine the appropriate course of action to be taken by the
Company.
8. Equipment
Exploration Equipment
Computer Hardware
Exploration Equipment
Computer Hardware
Cost
2010
117,341 $
14,256
Accumulated
Amortization
2010
78,707
12,546
$
Net Book Value
As at June 30,
2010
38,634
1,710
131,597 $
91,253
$
40,344
Cost
2009
116,228 $
12,646
Accumulated
Amortization
2009
61,876
11,973
$
Net Book Value
As at June 30,
2009
54,352
673
128,874 $
73,849
$
55,025
$
$
$
$
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
9. Resource Property Costs
Cumulative resource expenditures per project under active exploration are as follows
Capitalized
Acquisition
Costs
Exploration
Costs
Balance as
at 30 June
2010
Balance as
at 30 June
2009
Sascha Property, Argentina
$
-
$
446,446 $
446,446 $
371,104
Nico Property, Argentina
8,532
299,594
308,126
292,644
Claudia Property, Argentina
Joaquin Property, Argentina
Santa Rita Property, Argentina
Virginia Property, Argentina
Espejo Property, Argentina
La Curva Property, Argentina
La Libanesa Property, Argentina
Playa Grande Property, Argentina
Morito Property, Argentina
Pajaro, Veloz and Los Loros
Properties, Argentina
-
-
-
-
-
-
-
-
-
38,866
38,866
22,855
276,197
276,197
(73,166)
(57,098)
(57,098)
(92,334)
72,077
72,077
-
201,508
201,508
232,854
613,482
613,482
590,155
573,622
257,579
573,622
257,579
576,790
257,579
-
-
169,694
69,801
2,117
71,918
71,918
$
78,333
$
2,724,390 $
2,802,723 $
2,420,093
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
a) Sascha and Joaquin Properties
The Company owns a 100% interest in the Sascha and Joaquin properties situated in the Santa
Cruz Mining District, Argentina.
The Company signed an option agreement with Coeur d’Alene Mines (“Coeur”) for the exploration
of its 100%-owned Sascha and Joaquin gold-silver projects in Santa Cruz Province, southern
Argentina. The option agreement provides for an agreement to give Coeur the option to earn an
initial 51% in both projects by expending a total of US$8,000,000 in exploration over four years. In
October 2008, Coeur terminated its option on the Sascha property and returned the property to
Mirasol. As such, the total earn-in on both properties must reach US$6 million in order to vest at
51% interest. After earn-in, Coeur may elect to fund a bankable feasibility study to increase its
interest to 61%, at which point Mirasol may elect to maintain a participatory 39% interest or
request Coeur to increase its interest to 71% by providing mine financing at commercial terms to
Mirasol.
Coeur will operate the exploration programs with collaboration from Mirasol. During the 2010
fiscal year an option payment of $78,331 (US$75,000) (2009 - $93,761 (US$100,000)) was
received from Coeur pertaining to the Joaquin property. For the Joaquin project, Exploration
Costs are net of joint venture payments received. In October 2008, Coeur terminated its option
on the Sascha property and returned the property to Mirasol.
b) Claudia and Santa Rita Properties
The Company owns a 100% interest in the Claudia and Santa Rita properties situated in the
Santa Cruz Mining District, Argentina. The Santa Rita property also hosts the Virginia prospect,
thus together Santa Rita and Virginia account for total expenditures on the Santa Rita property.
c) Nico Property
The Company acquired a 100% interest in certain mining interests situated in the Santa Cruz
Mining District, Argentina, by staking.
On February 12, 2009, the Company signed an exploration option agreement with Coeur for the
exploration of its 100%-owned Nico gold-silver project in Santa Cruz Province, southern
Argentina. The option agreement provides for an agreement to give Coeur the option to earn an
initial 55% in the project by expending a total of US$2,300,000 in exploration over four years.
US$250,000 of these exploration expenditures will be made in the first year. On February 13,
2009, a payment of $62,225 (US$50,000) was received upon the signing of this agreement.
Coeur returned the Nico property to Mirasol in January 2010 in order to focus efforts on the
Joaquin joint venture.
d) Espejo, La Libanesa and La Curva Properties
The Company holds a 100% interest in certain mining interests situated in the Santa Cruz Mining
District, Argentina, by staking.
e) Pajaro, Veloz and Los Loros Property
The Company acquired 100% of the rights to three exploration properties, Pajaro, Los Loros and
Veloz, in Santa Cruz Province, Argentina. During 2008, these exploration properties were
acquired by the Company issuing 100,000 common shares. The shares had a fair value
acquisition cost at issuance of $69,801.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
10. Related Party Transactions
Except as noted elsewhere in these financial statements, related party transactions are as follows:
a)
Included in accounts payable and accrued liabilities at June 30, 2010 is an amount of $18,536
(2009 - $13,832) owing to directors and officers of the Company. The amount was incurred in the
ordinary course of business. The amount is unsecured, non-interest bearing and has no specific
terms of repayment. Repayment is expected within the next fiscal year and therefore has been
classified as a current liability in these financial statements. As at June 30, 2010, $10,427 (2009 -
$Nil) was advanced to an officer of the Company for expenses incurred on behalf of the Company
and is included in receivables and advances.
b) The following represents the details of related party transactions paid or accrued during the year
ended June 30:
Consulting fees paid to a company where an
officer of the Company is a principal
$
414,163
$
281,908
2010
2009
The consulting fees have been included in exploration costs $350,852 (2009 - $225,946) and in
management fees $63,311 (2009 - $55,962).
11. Share Capital
a) Details of share capital are as follows:
Authorized:
Unlimited common shares without par value
Issued and allotted:
Balance – June 30, 2008 and June 30, 2009
Shares issued for private placement
Share issuance costs
Fair value of private placement warrants
Fair value of finder fee warrants
Exercise of options
Exercise of warrants
Fair value of options exercised
Fair value of warrants exercised
Shares
Amount
29,258,181 $
11,246,301
2,800,000
-
-
-
1,167,500
16,300
-
-
3,500,000
(256,935)
(909,128)
(202,384)
447,750
24,450
307,163
14,419
Balance – June 30, 2010
33,241,981 $
14,171,636
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
b) On December 22, 2009 the Company completed a non-brokered private placement with the
issuance of 2,800,000 units at a price of $1.25 per unit for gross proceeds of $3.5 million. Each
unit consists of one common share and one-half common share purchase warrant. One whole
warrant will entitle the holder to purchase a common share of the Company for 24 months from
the closing date at a price of $1.50 per share for the first 12 months and $1.75 thereafter. The
Company allocated $2,590,872 to the common shares and $909,128 to the share purchase
warrants based upon the relative fair values.
The Company paid finder’s fees of $208,800 equal to 6% of the value of 2,784,000 units, and
issued 222,720 broker warrants, with a fair value of $202,384 and exercisable at $1.50 per share,
as finder’s fees.
The warrants fair values were based on the following assumptions:
Expected dividend yield
Expected stock price volatility
Risk-free interest rate
Expected life of warrants
c) Details of contributed surplus:
Warrants
0.00%
145.98%
1.31%
2 years
June 30,
2010
June 30,
2009
Balance – beginning of year
Fair value of stock-based compensation
Fair value of private placement warrants
Fair value of finder fee warrants
Fair value of options exercised
Fair value of warrants exercised
$
1,469,648 $
-
909,128
202,384
(307,163)
(14,419)
1,254,240
215,408
-
-
-
-
Balance – end of year
$
2,259,578 $
1,469,648
d) Share Purchase Options
The Company has established a share purchase option plan whereby the board of directors may,
from time to time, grant options to directors, officers, employees or consultants. Options granted
must be exercised no later than five years from the date of grant or such lesser period as
determined by the Company’s board of directors. The exercise price of an option cannot be less
than the “Discounted Market Price” as defined in the policies of the Exchange. Options begin
vesting on the grant date based on a schedule outlined in the share purchase option plan.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
A summary of the Company’s options, which includes options issued under the Company’s stock
option plan and agent’s options at June 30, 2010 and 2009 and the changes for the year are as
follows:
Options outstanding at June 30, 2008
Granted
Cancelled
Options outstanding at June 30, 2009
Exercised
Cancelled
Options outstanding at June 30, 2010
Options vested as at June 30, 2010
Number of
Options
2,657,000
470,000
(186,000)
2,941,000
(1,167,500)
(50,000)
1,723,500
1,723,500
Weighted Average
Exercise Price
$0.54
$0.25
$0.55
$0.49
$0.38
$0.65
$0.56
$0.56
At June 30, 2010, the following stock options are outstanding:
Expiry date
March 28, 2011
May 9, 2011
February 28, 2013
May 21, 2014
Exercise Price
$0.50
$0.70
$0.63
$0.25
$0.56
Options
Outstanding
86,000
455,000
797,500
385,000
1,723,500
Options
Exercisable
86,000
455,000
797,500
385,000
1,723,500
e) Warrants
A summary of the Company’s share purchase warrants and broker warrants at June 30, 2010 and
2009 and the changes for the year are as follows:
Warrants outstanding at June 30, 2008
Expired
Warrants outstanding at June 30, 2009
Granted – private placement warrants *
Granted – broker warrants
Exercised
Balance at June 30, 2010
Warrants
Outstanding
2,000,000
(2,000,000)
-
1,400,000
222,720
(16,300)
1,606,420
Weighted Average
Exercise Price
$1.50
$1.50
-
$1.50
$1.50
$1.50
$1.50
* These warrants are exercisable at $1.50 for the first 12 months from closing of the private
placement and exercisable at $1.75 thereafter.
During the year ended June, 2010, the Company had 16,300 warrants exercised for total
proceeds of $24,450.
f) Share Bonus Plan
The Company has established a share bonus plan for senior management. The Company can
issue 500,000 shares for each 500,000 ounces of gold or gold equivalent of “Indicated Mineral
Resource”, as defined in National Instrument 43-101, up to 1,000,000 shares in total under the
plan on any property in which the Company has an interest that is not less than 20%.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
12. Income Taxes
a)
Income tax expense differs from the amount that would result from applying the federal income
tax rate to earnings before income taxes. These differences result from the following items:
Loss before income taxes
Federal and provincial statutory income tax
rates
Income tax recovery based on the above rates
Increase (decrease) due to:
Non-deductible expenses
Difference between Canadian and foreign tax
rates
Loss and temporary differences for which no
tax benefit has been recorded
Foreign exchange and other
Income tax expense (recovery)
2010
(2,227,798)
$
$
2009
(2,048,718)
29.25%
30.25%
(651,631)
(619,737)
156,267
(2,051)
500,063
(2,648)
-
154,318
(25,935)
467,308
24,046
-
b) The components of future income tax assets are as follows:
Future income tax assets
Non-capital losses
Resource properties
Other
Total future tax assets
Valuation allowance
Net future income tax asset
2010
2009
$
$
1,214,195
1,495,169
171,657
2,881,021
(2,881,021)
-
858,910
1,349,953
112,065
2,320,928
(2,320,928)
-
The Company has non-capital loss carry-forwards of approximately $4,070,063 that may be
available for tax purposes. The loss carry-forwards are principally in respect of Canadian and
Argentinean operations and expire as follows:
2011
2012
2013
2014
2015
2026
2027
2028
2029
2030
No expiry
$
$
4,189
2,599
369,148
208,030
392,146
1,139,503
661,467
409,303
-
645,237
238,441
4,070,063
A full valuation allowance has been recorded against the net potential future income tax assets
associated with all the loss carry-forwards and certain other deductible temporary differences as
their utilization is not considered more likely than not at this time.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
13. Segmented Information
Details on a geographical basis are as follows:
As at June 30
Total Assets
Canada
Argentina
Chile
Total
As at June 30
Property, Plant and Equipment
Canada
Argentina
Chile
Total
As at June 30
Resource Properties
Canada
Argentina
Chile
Total
For the Years Ended June 30
Net Income (Loss)
Canada
Argentina
Chile
Total
$
$
$
$
$
$
2010
2009
5,034,786 $
276,651
11,851
5,323,288 $
3,536,036
276,715
22,581
3,835,332
2010
2009
1,710 $
36,468
2,166
40,344 $
673
51,363
2,989
55,025
2010
2009
- $
78,333
-
78,333 $
-
78,333
-
78,333
2010
2009
$
(617,917) $
(1,411,809)
(198,072)
(2,227,798) $
$
(641,537)
(1,096,519)
(310,662)
(2,048,718)
14. Commitments
The Company has co-signed an operating lease agreement, commencing on November 1, 2007 to
October 31, 2011. The total minimum lease payments are $2,862 per month and $34,344 per
annum. The Company’s proportionate share of the minimum lease payments is $1,431 per month
and $17,172 per annum.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2010 and 2009
Canadian Funds
15. Subsequent Events
Subsequent to June 30, 2010
a) The Company has cancelled its previous operating lease agreement and has signed a new
operating lease agreement, commencing on October 1, 2010 to October 31, 2011. The total
minimum lease payments are $900 per month and $10,800 per annum.
b) The Company granted 1,000,000 incentive stock options to certain directors, officers, employees
and consultants. The options are exercisable at $2.90 per common share for a period of five
years from the date of grant.
c) The Company issued 25,000 common shares on the exercise of options for gross proceeds of
$15,750.
d) The Company issued 571,708 common shares on the exercise of warrants for gross proceeds of
$857,562.
Form 51-102F1
Management Discussion and Analysis
For Mirasol Resources Ltd
Introduction
Prepared September 30, 2010 for the year ended June 30, 2010. All dollar amounts
referenced, unless otherwise indicated, are expressed in Canadian funds.
The following discussion of the Company’s financial condition and results of operations should
be read in conjunction with its annual audited consolidated financial statements and related
notes for the year ended June 30, 2010. This section contains forward-looking statements that
involve risks and uncertainties. The Company’s actual results may differ materially from those
discussed in forward-looking statements as a result of various factors, including those described
under “Forward-Looking Information”.
Forward-Looking Information
to
identify
This management discussion and analysis (“MD&A”) contains certain
forward-looking
statements and information relating to Mirasol Resources Ltd. (“Mirasol” or the “Company”) that
are based on the beliefs of its management as well as assumptions made by and information
currently available to Mirasol. When used in this document, the words “anticipate”, “believe”,
“estimate”, “expect” and similar expressions, as they relate to Mirasol or its management, are
intended
forward-looking
statements relating to, among other things, regulatory compliance, the sufficiency of current
working capital, the estimated cost and availability of funding for the continued exploration and
development of the Company’s exploration properties. Such statements reflect the current
views of Mirasol with respect to future events and are subject to certain risks, uncertainties and
assumptions. Many factors could cause the actual results, performance or achievement of the
Company to be materially different from any future results, performance or achievements that
may be expressed or implied by such forward-looking statements. Aside from factors identified
in the annual MD&A, additional important factors, if any, are identified here.
forward-looking statements. This MD&A contains
Overview
Mirasol Resources Ltd. (TSXV-MRZ) is a precious metals exploration and development
company focused on discovery and acquisition of new, high-potential metals deposits in the
Americas. Mirasol Argentina SRL and Minera Del Sol SA, the Company’s subsidiaries in
Argentina, and Minera Mirasol Chile Limitada, the Company’s subsidiary in Chile, currently hold
100% of the rights, or applications in progress, of twenty-two exploration properties in the
Patagonia region of southern Argentina and in northern Chile. The Company offers
shareholders access to growth from the early stages, a portfolio of 100%-owned high quality
projects in various stages of exploration, and a focus on emerging regions with high potential for
discovery.
Current Highlights
On October 18, 2010, the Company announced results from Phase 5 drilling at its 100% owned
Joaquin project, including hole DDJ-100 at the La Morocha prospect. This is the deepest, widest
and highest silver grade hole drilled at La Morocha, and the third best hole at Joaquin property
to date based on interval-grade thicknesses.
1
Complete results from the remainder of Phase 5 are pending. Upon the completion of Phase 5
drilling, Mirasol’s joint venture partner, Coeur d’Alene Mines commenced infill drilling at the La
Negra prospect.
On September 15, 2010, the Company announced results from newly discovered veins at the
Virginia silver prospect. Mapping and sampling were completed for the 2009-2010 season.
Drilling permits are being obtained and the first round of drilling is expected to begin during the
southern hemisphere summer.
On August 10, 2010, the Company announced the results from Phase 4 diamond drilling and
the results of the first four holes of Phase 5 at its 100% owned Joaquin project. New results
expand the La Negra prospect's silver-gold mineralized corridor and enhance other silver-gold
targets.
On July 22, 2010, the Company announced results from Phase 4 of drilling at its 100% owned
Joaquin project. In late May, Mirasol’s joint venture partner, Coeur d’Alene Mines initiated an
exploration program that includes a Phase 5 drilling program and an exploration program. Coeur
d'Alene Mines Corporation has budgeted US$3.3 million in exploration at Joaquin in 2010.
On June 7, 2010, the Company announced high-grade silver results at the Ely, Margarita and
Naty Veins, Virginia Vein Zone. Preliminary results have identified soil covered extensions of
outcropping high-grade silver veins. Current results increase the total length of veins and
potential drill targets at the zone.
On April 14, 2010, Mirasol launched an updated web page which profiles exploration projects
and project generation activities.
On April 13, 2010, the Company announced the results of 14 infill channels averaging 855 gram
per tonne (g/t) silver at the Julia Vein, Virginia Vein Zone. Combined with the previously
announced 44 channels from the Julia Vein (March 4, 2010) there are now 58 channel
composites with an average grade of 805 g/t silver and an average minimum true width of 1.76
metres along the vein’s greater than 2,000 metre strike length.
On March 17, 2010, the Company announced the start of a fourth phase drilling at its 100%
owned Joaquin project. Mirasol’s joint venture partner, Coeur d’Alene Mines, recently
announced plans to spend US $3.3 million during 2010 in step-out drilling and further
exploration at Joaquin. The Company also reported final results for the third phase of drilling at
Joaquin, completed in late November, 2009. Total metres drilled at the Joaquin project to the
end of phase three were 8,611 metres in 63 diamond drill holes.
On March 4, 2010, the Company announced that systematic sawn-channel sampling has
returned high-grade silver values that significantly exceed previously reported average results
for the Julia Vein at the Virginia Vein Zone. Best individual result from this round of sampling are
0.7 metres at 4,070 grams per ton (g/t) silver, and the best length weighted average result of
3.74 m at 1,592 g/t silver. These results confirm that the Virginia Vein Zone is rapidly developing
into an important high-grade silver project.
On February 16, 2010, the Company announced high-grade silver assays ranging up to 3,170
g/t from rock chip sampling of additional veins discovered at the Virginia zone. Ongoing
mapping and sampling continues to identify new veining while expanding the size of the
mineralized zone at this 100% owned project.
2
On January 11, 2010, the Company announced additional encouraging results from the third
phase of drilling from the La Negra and La Morocha prospects at the Joaquin property, and the
discovery of new outcropping silver zones surrounding La Negra.
On January 6, 2010, the Company announced the discovery of a new high-grade silver vein, the
Julia vein, part of the Virginia vein zone located on a 100% owned mineral property. The Julia
vein was discovered while following up alteration and structural targets during November 2009.
On December 22, 2009, the Company announced it closed a non-brokered private placement
consisting of 2,800,000 units at a price of $1.25 per unit for the gross proceeds of $3.5 million.
Each unit consisted of one common share and one-half of a share purchase warrant. One whole
warrant entitles the holder to purchase an additional common share of the Company at a price
of $1.50 per share for the first year, and $1.75 per share for the second year. The Company
paid finder’s fees equal to 6% of the value of the units, and issued brokerage warrants equal to
8% of the number of units sold entitling the holder to purchase one common share for a period
of two years at a price of $1.50 per share. All securities are subject to a four-month hold.
On November 24, 2009, the Company announced partial results from the third phase of drilling
at the La Negra zone at the Joaquin project. These results include the highest grade silver
intercept drilled to date, hole DDJ-43, at the property.
Activities on Mineral Projects
Activities during the year ended June 30, 2010 were focused on exploration activities on the
Company’s gold-silver prospects and acquisition evaluations in Santa Cruz Province, Argentina.
As of June 30, 2010, through its subsidiaries, the Company held 20 cateos (mineral exploration
concessions) and other applications in progress in Santa Cruz Province. Mirasol identified,
staked and holds a 100% interest in all of its prospects.
The Company intends to carry out “grass-roots” exploration for gold and silver properties in
Argentina, Chile, and elsewhere in Latin America, to advance such properties through further
exploration in order to bring the properties to a stage where the Company can attract the
participation of a major resource company which has the expertise and financial capability to
take such properties to commercial production. At present, Mirasol has a joint venture with
Coeur d’Alene Mines at the Joaquin Project in Santa Cruz Province, Argentina.
As part of its exploration and new project generation strategy, Mirasol plans to joint venture a
number of exploration-stage properties during the 2011 fiscal year.
Generative Exploration
Generative exploration is a key strategy employed by Mirasol for identifying and acquiring new
prospects. To identify and capitalize on a good quality prospect, experienced professionals are
needed to ensure the right opportunity is taken at the right time. Costs of generative exploration
are those costs not attributable to a specific Mirasol project. When Mirasol defines a project as
a distinct exploration target, it is then accounted for as a separate project. Generative
exploration costs totaled $157,218 for the year ended June 30, 2010, down from $660,656
incurred for the same period in 2009. Exploration activities in Chile and Argentina are managed
from the Company’s Mendoza, Argentina exploration office. The majority of costs associated
with generative exploration were for salaried employees, consulting and contractors, travel,
camp and general and administrative costs.
3
Mirasol controls the mineral rights to twenty properties in Santa Cruz Province, Argentina. The
Joaquin property is under joint venture to Coeur d’Alene Mines. Mirasol plans to offer the
following properties for joint venture in 2011: Libanesa, Espejo, Claudia, Sascha, Playa Grande
in Argentina, and the Rubi property in Chile. Other properties will also be considered for joint
ventures.
Joaquin Property
The Joaquin Property is located in the central part of Santa Cruz Province and comprises
exploration “cateos” and “manifestaciones de descubrimiento”. The Joaquin Project is part of
the 2006 Coeur joint venture; they are the project operator and are responsible to fund
exploration and drilling. Initially, a total of four mineralized zones were identified by Mirasol
geologists, including the La Morocha, La Negra, La Morena and the Joaquin Main gold-silver
vein and breccia targets. Mirasol believes it has made a significant silver-gold discovery at the
Joaquin property.
During2010 , Coeur completed approximately 8,000 metres of diamond drilling at Joaquin.
Three prospects, La Negra, La Morocha and La Morena were tested.
Phase 1 drilling at La Negra returned high grade silver and gold assays from a 1.1 to 2.8 metre
wide, steeply- dipping banded epithermal vein and mineralized wall rock. Assay results from the
La Negra vein-breccia, calculated at a 60 g/t silver cut off, include 2.6 metres of 375.9 g/t Ag
and 2.07 g/t Au, and 2.8 metres of 476.6 g/t Ag and 2.39 g/t Au. Phase 1 drilling confirmed that
the La Morocha structure is continuously mineralized over a 300 metre strike length, and down
dip to a depth of 110 metres below surface. Initially, five holes drilled in the La Morocha
structure returned between 15.8 and 42 metre wide intercepts of silver mineralization, with hole
DDJ-15 returning two mineralized intervals each over 20 metres wide.
A second phase of diamond drilling, totaling 2,066.8 metres at Joaquin, was completed during
June 2009 and results were presented in press releases on July 13 and July 23, 2009. DDJ- 38
included a 7.45 metre intercept grading 703 g/t silver with 0.13 g/t gold credit, and the
mineralized zone .
Phase three drilling was initiated in October 2009 and assays from five holes were released on
November 24, 2009. Best down hole intersections returned from this round of results at a 20 g/t
silver equivalent cut-off are: from DDJ-37, 32.2 metres of 164 g/t silver and 0.08 g/t gold,
including 4.7 metres of 767 g/t silver and 0.27 g/t gold; from DDJ-39, 43.3 metres of 119 g/t
silver and 0.11 g/t gold, including 0.9 metres of 1,939 g/t silver and 0.62 g/t gold; and from DDJ-
43, 25.4 metres of 1,164 g/t silver and 0.21 g/t gold including a high grade interval of 3.3 metres
of 7,753 g/t silver and 1.17 g/t gold, hosted in a sulfide vein structure. DDJ-43 assays are the
highest assay results to date at the Joaquin property.
Additional results confirmed in DDJ-58 the high grade extension to DDJ-43 at La Negra.
Assays included 17.3 metres of 1,979 g/t silver and 0.29 g/t gold. Additional detailed information
is available on Mirasol’s website www.mirasolresources.com.
Drilling at La Negra has confirmed continuity for 700 metres of strike length and to depth of at
least 100 metres at both La Negra and La Morocha targets.
Expenses during the year ended June 30, 2010 were $479,930 which included $343,563 for
consultants and salaries, $96,917 for camp and general and $34,864 for travel. The Company
received an option payment during the year of $78,331 (US$75,000) for the Coeur Joint
Venture.
4
Santa Rita Property- Virginia Zone
During the second quarter a new high grade, silver-dominant vein zone was discovered at the
Santa Rita property, named the Virginia zone. On January 6, 2010, the Company reported
initial results from 30 chip samples taken over a two kilometre length of the Julia vein sector.
The average silver grade of the initial 30 chip samples was 645 g/t silver. Exploration is ongoing
and on February 16, 2010, Mirasol reported assays ranging up to 3,170 g/t silver from rock chip
sampling of veins discovered surrounding the Julia vein, which brings the length of total
exposed veins to more than four kilometres.
Sawn channel samples (March 4, 2010) from the Julia vein returned higher silver values yet
from 44 channels, and final results of all 58 Julia vein channels averaged 805 g/t Ag. Ground
geophysical surveys, including ground magnetic and gradient array IP, have been initiated in
tandem with district scale exploration.
Additional press releases in May and June, 2010, confirmed significant silver values from
additional veins parallel to the Julia vein called the Ely, Naty, Margarita and Roxane veins.
Outlying veins were discovered east of the principal vein zone. The Virginia discovery now has
more than 9 kilometres of vein length exposed or interpreted to exist.
The Santa Rita property comprises “manifestaciones de descubrimiento” and exploration
“cateos”, located in the northern sector of the Deseado Massif volcanic terrane.
During the year ended June 30, 2010 expenses for the Santa Rita Property and the Virginia
Zone totaled $107,313 which included $78,374 for consultants and salaries, $21,276 for camp
and general, $6,031 for assays and sampling expenses, and $1,632 for travel.
Sascha Property
The Sascha Project hosts a gold and silver mineralized epithermal quartz vein system of low-
two M.D.s (“manifestaciones de
sulphidation style which comprises
descubrimiento”). The Sascha Project was initially included in the Coeur joint venture. Coeur
initiated drilling in March 2007 and completed 19 diamond drill holes totaling approximately
2500 metres. Results from additional diamond drilling completed in October 2008 tested the
northwest extension of the Sascha Main mineralized vein zone.
four cateos and
Results were deemed by Coeur not sufficiently encouraging to merit additional work, and the
property was returned to Mirasol on October 31, 2008. All environmental reclamation
requirements have been completed.
In the second quarter, the Company’s geologists mapped, compiled and interpreted all drilling
results and have defined a number of new prospective drill targets at Sascha. The project is
available for joint venture.
During the year ended June 30, 2010, the Company incurred costs of $203,490 which included
consultants and salaries of $108,698, camp and general costs of $88,852 and travel costs of
$3,230. As at June 30, 2010, total cumulative costs of exploration by Mirasol, apart from
Coeur’s expenditures, on the Sascha property were $446,446.
5
Nico Property
The Nico property was initially staked in 2004 and expanded in 2005 and 2006. The mineral
property is held as “manifestaciones de descubrimiento”. The property is located 40 km north of
Coeur d’Alene Mines’ (“Coeur”) Martha silver mine, adjacent to a provincial highway. The
central mineralized zone at Nico hosts a north-south trend of quartz veinlets and breccia and
exhibits a silver-gold-polymetallic signature. During the 2007-2008 seasons a prospect-scale
ground magnetic survey and gradient array IP geophysical survey were completed over key
targets. New geophysical interpretation identified a felsic dome field. The Nico main
mineralized zone extends as a traceable geophysical structure for 2.5 km in length.
On February 12, 2009, the Company signed an exploration option agreement with Coeur for the
exploration of the Nico gold-silver project with Coeur as the project operator. The option
agreement provided Coeur the option to earn an initial 55% in the project by expending a total of
US$2,300,000 in exploration over four years and making cash payments totaling US$ 250,000.
Additional details of the agreement were published on February 12, 2009. On February 13,
2009, a payment of $62,225 (US$50,000) was received upon the signing of the agreement.
Coeur drilled eleven shallow diamond holes in late 2009 at the Nico Main target. Coeur
reported best results of 8.23 metres containing 0.43 g/t gold and 27 grams silver, including 1.25
metres of 2.21 g/t gold and 200 g/t silver in DDH-11. Coeur returned the Nico property to
Mirasol in January 2010. Nico hosts multiple targets and will be made available for joint venture.
Expenditures incurred for the year ended June 30, 2010 totaled $32,616, which included
$25,043 for consultants and salaries, $5,785 for camp and general and $1,483 for travel
expenses.
Claudia Property
The Claudia Property comprises exploration concessions (“cateos”) totaling approximately
120,000 hectares located in the central part of Santa Cruz Province, beginning at the limit with,
and for approximately 30 km south of Anglogold Ashanti’s producing Cerro Vanguardia gold-
silver mine. Initial exploration mapping of the La Claudia and Claudia II cateos identified several
zones of veins and veinlets hosted within silicified rhyolite and rhyodacite tuff units. Sampling
returned anomalous gold and silver assays from three discrete zones. Assay results from a
systematic channel sampling program returned values reaching 3.28 g/t gold with 15.33 g/t
silver over 1.7 metres, and individual vein results up to 14.2 g/t Au with 229 g/t Ag over 0.7
metres were obtained in the “J vein” sector. (Further news of the Claudia Project was published
in a news release dated August 3, 2006, November 1, 2007, January 8, 2009, and June 1,
2009).
Mirasol signed a joint venture agreement with Hochschild Mining Group in February 2007.
Hochschild initiated Stage 1 drilling at the Claudia Project and completed 3,871 metres of core
drilling in December 2007. In December, 2008, Hochschild completed 3,011 metres of reverse
circulation drilling. Both campaigns were designed to test outcropping Cerro Vanguardia-style
veins and covered geophysical targets. Although multiple mineralized targets were intersected,
on April 7, 2009 Hochschild elected to terminate the joint venture. Data synthesis and results
show five principal exploration areas, three of which have received minimal exploration and all
are considered highly prospective and remain underexplored.
Key bonanza gold-silver targets at the Rio Seco zone have not been drill tested, among others.
Mirasol intends to seek a joint venture partner for the Claudia project in 2010.
6
Expenses during the year ended June 30, 2010 totaled $16,011 which mainly consisted of
$15,789 for consultants and salaries.
Espejo Property
The Espejo property was staked in April 2006 and adjoins Panamerican Silver’s Manantial
Espejo silver-gold mine.
image)
interpretation, ground magnetic survey, gradient array IP geophysical survey, and geochemical
sampling which define multiple coincident resistive and conductive geophysical anomalies on
strike with the principal vein structures under development at the Manantial Espejo mine. The
Espejo property will be offered for joint venture this year.
includes remote sensing (satellite
Exploration work
Additional exploration cateos were staked in 2008 which expand the property to the south (news
release June 26, 2008). There were no expenses incurred during the year ended June 30,
2010.
La Curva Property
Mirasol’s exploration at La Curva continued during the quarter. Surface mapping, geophysical
surveys and systematic geochemical sampling define two gold-anomalous targets with
associated auriferous (gold-bearing) quartz veins. The two principal targets include the Loma
Arthur vein-dome system and, Cerro Chato, which hosts gold-rich veins and silicified breccias,
and additional targets exist on the property. The dome-vein setting is seen elsewhere in
productive mining districts. The La Curva property covers 169.5 square kilometres of
prospective Jurassic-age volcanic units and older basement rocks which are partly covered by a
thin veneer of younger gravels. (See news releases of April 1, 2008 and February 24, 2009)
Expenses during the year ended June 30, 2010 totaled $46,071, which included $31,637 for
consultants and salaries, $11,417 for camp and general and $2,577 in travel costs.
La Libanesa Property
The La Libanesa property hosts a hydrothermal breccia hill, “Cerro Plomo”, which contains high
grade lead-silver-gold anomalies. Cerro Plomo is hosted in a unique rhombic structural block
and is associated with radial dikes and peripheral gold-bearing veins. La Libanesa was staked
in 2006 and the property was expanded to five cateos during 2007, Trenching, geochemical
sampling, mapping, an MMI (Mobile Metal Ion) geochemical survey have been completed with a
regional interpretation of La Libanesa’s unique geological setting. . In Q2 2010, an AMT ground
geophysical survey identified a strong resistive feature near Cerro Plomo. The MMI soil survey
identified an extended area reaching at least 400 metres east and west of Cerro Plomo which
show highly elevated base metals with silver and gold anomalies. (News release dated
February 24, 2009). Gold-silver bearing quartz vein material has been mapped which forms a
radial distribution around Cerro Plomo. The property is currently available for joint venture.
Expenses during the year ended June 30, 2010 totaled $68,918, which included $34,327 for
camp and general costs, $31,636 for consultants and salaries and $2,294 for travel expenses.
7
Rubi Property, Chile
The Rubi copper property in northern Chile, covering 12,900 hectares, is strategically located 22
km southwest of El Salvador, one of Chile’s giant porphyry-copper producing districts, operated
by Codelco, the Chilean state mining company. The Rubi property, was staked in December
2006 and increased in 2008, and is located in the Eocene-Oligocene metallogenic belt, which
hosts some of the world’s largest porphyry-copper deposits. During 2008, Mirasol consolidated
its mineral land position at Rubi and conducted additional detailed mapping, sampling and re-
interpretation of the area’s geology. An altered and leached lithocap returned copper and gold
anomalies in surface and stream sediment samples and indicate the potential for a porphyry
copper (gold) system to exist. (news release dated June 12, 2007). The Rubi property is
currently being offered for joint venture.
Expenses during the year ended June 30, 210 totaled $145,144, which primarily consisted of
$106,013 for mining rights and fees and $23,233 for consultants and salaries and $10,548 for
assay and sampling costs.
Other Properties
Mirasol holds a number of early stage exploration properties which are prospective for gold
and/or silver mineralization in southern Argentina and northern Chile.
Mirasol’s Results of Operations
For the Year Ended June 30, 2010 as compared to the Year Ended June 30, 2009
The Company’s net loss for the year ended June 30, 2010 was $2,227,798 or $0.07 per share
compared to a net loss of $2,048,718 or $0.07 per share for prior year, an increase of $179,080.
Total operating expenses for the year ended June 30, 2010 were $2,158,520 compared to
$2,291,147 for the prior year, a decrease of $132,627. The decrease in costs is primarily due to
a decrease in stock-based compensation expense ($Nil compared to $215,408) due to fewer
options vesting and a decrease in exploration costs ($1,459,581 compared to $1,513,848).
Office and miscellaneous expenses increased ($233,025 compared to $158,208) primarily due
to expanded marketing efforts, travel costs increased ($78,574 compared to $41,950),
shareholder information costs increased ($42,662 compared to $25,544) due to increased
attendance at mining and investor conferences, and management fees increased ($210,758
compared to $199,075) due to increased exploration activity.
For the Three Months Ended June 30, 2010 as compared to the Three Months Ended
June 30, 2009
Net Loss and Operating Expenses
The Company’s net loss for the quarter ended June 30, 2010 was $661,197 compared to a net
loss of $666,780 for the comparative period in 2009, a decrease of $5,583.
Operating expenses were higher in the quarter ended June 30, 2010 at $758,039 compared
with $594,379 in 2009, an increase of $163,660. The increase in costs is primarily due to an
increase in exploration costs ($537,028 compared to $344,755) and consultants and contractor
expenses ($45,831 compared to $20,584) and travel expenses ($33,211 compared to $14,354)
due to increased exploration activity.
8
Selected Annual Information
The following table sets out selected annual financial information of the Company and is derived
from the Company’s audited consolidated financial statements for the years ended June 30,
2010, 2009 and 2008.
2010
2009
2008
Sales
$
- $
- $
-
Loss for the Period
$ (2,227,798) $ (2,048,718) $ (2,319,665)
Loss per Share - Basic and Diluted $
(0.07) $
(0.07) $
(0.08)
Total Assets
Total Long-term Liabilities
Dividends Declared
$
$
$
5,323,288 $
3,835,332 $
5,711,647
- $
Nil $
- $
Nil $
-
Nil
Summary of Quarterly Results
The following table sets out selected unaudited quarterly financial information of Mirasol and is
derived from unaudited quarterly consolidated financial statements prepared by management.
The Company’s unaudited interim consolidated financial statements are prepared in accordance
with Canadian generally accepted accounting principles and expressed in Canadian dollars.
Period
4th Quarter 2010
3rd Quarter 2010
2nd Quarter 2010
1st Quarter 2010
4th Quarter 2009
3rd Quarter 2009
2nd Quarter 2009
1st Quarter 2009
Revenues
$
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Loss from
Continued
Operations and
Net Loss
$
(661,197)
(708,357)
(400,744)
(457,500)
(666,780)
(411,586)
(468,789)
(501,563)
Basic and Fully Diluted
Loss per Share from
Continued Operations
and Net Loss
$
(0.02)
(0.02)
(0.01)
(0.02)
(0.02)
(0.01)
(0.02)
(0.02)
Quarterly results will vary in accordance with the Company’s exploration and financing activities.
Liquidity
The Company’s net working capital as at June 30, 2010 was $5,043,431 compared to a net
working capital of $3,541,283 at June 30, 2009. The cash balance at June 30, 2010 was
$5,147,280 compared to $3,653,477 at June 30, 2009. As at June 30, 2010, current liabilities
were $161,180 compared to $160,691 at June 30, 2009.
As at September 30, 2010, the Company had 33,322,789 outstanding common shares. The
Company has 1,723,500 share purchase options and 1,572,580 share purchase warrants
outstanding. The weighted average exercise price is $0.56 and $1.72, respectively.
9
Financing Activities
Financing activities provided $3,243,065 from the net proceeds received for shares issued
pursuant to a private placement which closed on December 22, 2009. Terms of the private
placement were 2.8 million units priced at $1.25, comprising one Mirasol share plus one half
share warrant for two years, priced at $1.50 for one year, stepped to $1.75 in year two, subject
to a four month hold period. In addition, the Company received $447,750 proceeds from the
exercise of 1,167,500 options and $24,450 proceeds from the exercise of 16,300 warrants.
Capital Resources
The Company has no operations that generate cash flow and its long term financial success is
dependant on management’s ability to discover economically viable mineral deposits. The mineral
exploration process can take many years and is subject to factors that are beyond the Company’s
control.
In order to finance the Company’s exploration programs and to cover administrative and overhead
expenses, the Company raises money through equity sales and from the exercise of convertible
securities (share purchase warrants). Many factors influence the Company’s ability to raise funds,
including the health of the resource market, the climate for mineral exploration investment, the
Company’s track record and the experience and calibre of its management.
With working capital of $5,043,431 for the year ended June 30, 2010, the Company believes it
has sufficient funds to meet its administrative, corporate development and exploration activities
over the next twelve months. Actual funding requirements may vary from those planned due to a
number of factors. The Company believes it will be able to raise equity capital as required in the
long term, but recognizes there will be risks involved that may be beyond its control.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Transactions with Related Parties
During the year ended June 30, 2010, the Company paid or accrued $414,163 (June 30, 2009 -
$281,908) in exploration costs $350,852 (2009 - $225,946) and management fees $63,311
(2009 - $55,962) to a Company where an officer of the Company is a principal. Included in
accounts payable and accrued liabilities at June 30, 2010 is an amount of $18,536 (2009 -
$13,832) owing to directors and officers of the Company.
By agreement dated September 1, 2004, the Company entered into a consulting agreement
with a director and officer of the Company to act as the President and CEO of the Company.
Compensation is currently US$10,000 per month.
By agreement dated September 1, 2004, the Company entered into a consulting agreement
with a director to act as the Exploration Manager of the Company. Compensation currently is
US$10,000 per month.
Pursuant to an agreement dated September 1, 2004, the Company entered into a consulting
agreement with an officer of the Company to act as the Vice-President of Exploration of the
Company. Compensation is US$500 per day for the days worked.
10
Critical Accounting Policies and Estimates
The details of the Company’s accounting policies are presented in Note 2 of the annual audited
consolidated financial statements. The following policies are considered by management to be
essential to understanding the processes and reasoning that go into the preparation of the
Company’s financial statements and the uncertainties that could have a bearing on its financial
results.
Acquisition and Exploration Costs
Exploration costs are expensed as incurred since the Company is in the process of exploring its
mineral claims and has not yet determined whether these properties contain ore reserves that
are economically recoverable. If and when the Company’s management determines that
economically extractable proven or probable mineral reserves have been established, the
subsequent costs incurred to develop such property, including costs to further delineate the ore
body will be capitalized.
The Company continues to capitalize its acquisition costs (staking) related to its mineral
properties. Any option payments received are first credited to the cost of the property, with any
excess included in income.
Changes in Accounting Policies
Instruments - Disclosure
In June 2009, Handbook Section 3862 was further amended to include disclosures about fair
value measurements of financial instruments and to enhance liquidity risk disclosure. The
additional fair value measurement disclosures include classification of financial instrument fair
values in a fair value hierarchy comprising three levels reflecting the significance of the inputs
used in making the measurements, described as follows:
Level 1: Valuations based on quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2: Valuations based on directly or indirectly observable inputs in active markets for similar
assets or liabilities, other than Level 1 prices such as quoted interest or currency exchange
rates; and
Level 3: Valuations based on significant inputs that are not derived from observable market
data, such as discounted cash flow methodologies based on internal cash flow forecasts.
These amendments are required to be adopted for the fiscal years ending after September 20,
2009. The Company has adopted these amendments for the fiscal year ended June 30, 2010
and the additional required disclosures are included in Note 5 or the annual audited
consolidated financial statements.
Credit risk and fair value of financial assets and financial liabilities
Effective July 1, 2009, the Company adopted EIC-173 “Credit Risk and the Fair Value of
Financial Assets and Financial Liabilities.” This guidance clarified that an entity’s own credit risk
and the credit risk of the counterparty should be taken into account in determining the fair value
of financial assets and financial liabilities including derivative instruments. The Company has
evaluated the new section and determined that adoption of these new requirements did not
have a significant impact on the Company’s consolidated financial statements.
11
Mining Exploration Costs
Effective July 1, 2009, the Company adopted EIC-174 “Mining Exploration Costs.” This
guidance clarified that an entity that has initially capitalized exploration costs has an obligation
in the current and subsequent accounting periods to test such costs for recoverability whenever
events or changes in circumstances indicate that its carrying amount may not be recoverable.
The Company has evaluated the new section and determined that adoption of these new
requirements has had no impact on the Company’s consolidated financial statements.
Goodwill and intangible assets
Effective July 1, 2009 the Company adopted the CICA handbook section 3064, “Goodwill and
Intangible Assets”, which replaces CICA HB Section 3062, “Goodwill and Intangible Assets,”
CICA HB Section 3450, “Research and Development Costs,” amendments to Accounting
Guideline (AcG) 11, “Enterprises in the Development Stage,” EIC-27, “Revenues and
Expenditures during the Pre-operating Period” and CICA HB Section 1000, “Financial Statement
Concepts.” The standard intends to reduce the differences with International Financial
Reporting Standards (“IFRS”) in the accounting for intangible assets and results in closer
alignment with U.S. GAAP. The objectives of Section 3064 are to reinforce the principle-based
approach to the recognition of assets only in accordance with the definition of an asset and the
criteria for asset recognition; and clarify the application of the concept of matching revenues and
expenses such that the current practice of recognizing assets that do not meet the definition and
recognition criteria are eliminated.
The standard will also provide guidance for the recognition of internally developed intangible
assets (including research and development activities), ensuring consistent treatment of all
intangible assets, whether separately acquired or internally developed.
Recent Accounting Pronouncements Not Yet Adopted
Convergence with International Financial Reporting Standards
The Canadian Accounting Standards Board (AcSB) has announced its decision to replace
Canadian generally accepted accounting principles (“GAAP”) with International Financial
Reporting Standards (IFRS) for all Canadian Publicly Accountable Enterprises (PAEs). The
effective changeover date is July 1, 2011, at which time Canadian GAAP will cease to apply for
Mirasol Resources and will be replaced by IFRS. Following this timeline, the Company will issue
its first set of interim financial statements prepared under IFRS in the first quarter of 2011
including comparative IFRS financial results and an opening balance sheet as at July 1, 2010.
The first annual IFRS consolidated financial statements will be prepared for the year ended
June 30, 2012 with restated comparatives for the year ended June 30, 2011.
During the 2009-2010 fiscal year, the Company began planning its transition to IFRS. The
process will consist of three phases: 1) Scoping phase which will assess the overall impact and
effort required by the Company in order to transition to IFRS, 2) Planning phase which will
include a detailed analysis of the conversion process and implementation plan required for
disclosure for the Company’s first quarter 3) Transition phase which will include the preparation
of an IFRS compliant opening balance sheet as at July 1, 2010, any necessary conversion
adjustments and reconciliations, preparation of a fully compliant pro forma financial statements
including all note disclosures and disclosures required for the MD&A.
12
During the third quarter of 2010, the Company, with the assistance of external advisors,
completed an initial scoping and diagnostic assessment. This assessment identified, at a high
level, the key areas for more detailed consideration and that may give rise to potential difference
upon conversion.
Following the completion of the scoping and diagnostic assessment, the Company engaged
external advisors to assist with detailed technical reviews of the identified potential high impact
areas. These reviews include the identification of IFRS - Canadian GAAP differences,
accounting policy considerations, and preliminary implementation plans.
Set out below are the most significant areas, where changes in accounting policies may have
the highest potential impact on the Company’s consolidated financial statements. Many of the
differences identified are not expected to have a material impact on the reported results and
financial position.
In the period leading up to the changeover in 2011, the AcSB has ongoing projects and intends
to issue new accounting standards during the conversion period. As a result, the final impact of
IFRS on the Company’s consolidated financial statements can only be measured once all the
IFRS accounting standards at the conversion date are known.
Impairment Assets
Canadian GAAP generally uses a two-step approach to impairment testing: first comparing
asset carrying values with undiscounted future cash flows to determine whether impairment
exists; and then measuring any impairment by comparing asset carrying values with discounted
cash flows. International Accounting Standard (IAS) 36, “Impairment of Assets” uses a one-step
approach for both testing and measurement of impairment, with asset carrying values compared
directly with the higher of fair value less costs to sell and value in use (which uses discounted
future cash flows). This may potentially result in write downs where the carrying value of assets
were previously supported under Canadian GAAP on an undiscounted cash flow basis, but
could not be supported on a discounted cash flow basis.
Currently the Company has no significant assets for which impairment testing is required.
However, as events and circumstances of the Company’s operations change that give rise to
impairment testing, IAS 36 will be applied.
Share Based Payments
IFRS and Canadian GAAP largely converge on the accounting treatment for share – based
transactions with only a few differences.
Under Canadian GAAP, the fair value of share based payments with graded vesting are
calculated as one grant and the resulting fair value is recognized on an accelerated or straight
line basis over the vesting period. Forfeitures of awards are recognized as they occur.
Under IFRS, each tranche of a grant with different vesting dates is considered a separate grant
for the calculation of fair value and the resulting fair value is amortized over the vesting period of
the respective tranches. Forfeiture estimates are recognized in the period they are estimated,
and are revised for actual forfeitures in subsequent periods.
13
All options granted by the Company which vest in the comparative year for IFRS have been
valued in compliance with IFRS and no adjustments will be needed upon transition. A forfeiture
rate will need to be applied in the comparative year to make the Company fully compliant with
IFRS 2.
Exploration and Evaluation Assets
Under the Company’s current accounting policy, the acquisition costs of mineral properties are
capitalized while the exploration expenses are expensed.
Upon adoption of IFRS, the Company has to determine the accounting policy for exploration
and evaluation (E&E) assets which are the exploration expenses incurred subsequent to
obtaining the right to explore the resource property. The Company is currently in compliance
with the International Accounting Standards Board (“IASB”) Framework which requires
exploration expenditures to be expensed and capitalization of expenditures only after the
completion of a feasibility study.
The classification of the E&E assets will need to be determined to be either tangible or
intangible.
Upon adoption of IFRS 6, “Exploration and Evaluation of Mineral Properties”, the Company will
be fully compliant with the new standard and the adoption is not expected to have an impact on
the financial statements.
Property, Plant and Equipment
Under IFRS, Property, Plant and Equipment (“PP&E”) can be measured at fair value or at cost
while under Canadian GAAP, the Company has to carry PP&E on a cost basis and the
revaluation is prohibited.
Upon adoption of IFRS, the Company has to determine whether to elect a cost model or
revaluation model. Management has yet to decide on which model to adopt. Currently, the
Company has a small amount of office equipment and vehicles, capitalized as property, plant
and equipment and as a result there will be not significant impact on the adoption of either IFRS
model on the Company’s financial statements.
In accordance with IAS 16 “Property, Plant and Equipment”, upon acquisition of significant
assets, the Company will need to allocate an amount initially recognized in respect of an asset
to its component parts and accounts for each component separately when the components
have different useful lives or the components provide benefits to the entity in a different pattern.
Foreign Currency
IFRS requires that the functional currency of each entity in the consolidated group be
determined separately in accordance with IAS 21 and the entity’s financial results and position
should be measured using the currency of the primary economic environment in which the entity
operates (“the functional currency”). The financial information for each Company is then
translated into the presentation currency of the Company’s financial statements. Currently, this
is the Canadian dollar (“CAD”).
The functional currency is most likely Canadian dollars for Mirasol Resources Ltd., Argentine
Pesos for Mirasol Argentina S.R.L and Minera Del Sol S.A., and Chilean Pesos for Minera
Mirasol Chile Limitada but a detailed analysis will need to be completed.
14
As events and conditions relevant to the Company change, it will re-consider the primary and
secondary indicators, as described in IAS 21, in determining the functional currency for each
entity. Going forward under IFRS, management will assess the appropriate functional currency
based on existing circumstances which may have a significant impact on the Company’s
consolidated financial statements prepared under IFRS.
Future Income Taxes
Like Canadian GAAP, deferred income taxes under IFRS are determined using the liability
method for temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes, and by generally
applying tax rates applicable to the Company to such temporary differences. Deferred income
taxes relating to temporary differences that are in equity are recognized in equity and under
IFRS subsequent adjustments thereto are backward traced to equity.
IFRS prohibits recognition where deferred income taxes arise 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 accounting nor taxable net earnings. The Company expects the
impact of implementing IAS 12, Income Taxes will not have a significant impact on the financial
statements. However, as events and circumstances of the Company’s operations change that
give rise to future income taxes, IAS 12 will be applied.
Conclusion
As the Company elects and approves the IFRS accounting policy for each of the areas above,
management will determine and disclose impact of the IFRS adoption at the transition date on
our financial statements. The International Accounting Standards Board will also continue to
issue new accounting standards during the conversion period and, as a result, the final impact
of IFRS on the Company’s consolidated financial statements will only be measured once all the
IFRS applicable accounting standards at the conversion date are known.
Based on the assessment of the information system currently used by the Company, all
information required to be reported under IFRS will be available with minimal system changes.
One of the more significant impacts identified to date of adopting IFRS is the expanded
presentation and disclosures required. Disclosure requirements under IFRS generally contain
more breadth and depth than those required under Canadian GAAP and, therefore, will result in
more extensive note references. The Company is continuing to assess the level of presentation
and disclosures required to its consolidated financial statements.
Business combinations
In January 2009, the CICA issued Handbook section 1582, “Business Combinations”, which
establishes new standards for accounting for business combinations. This is effective for
business combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after January 1, 2011. The Company has early adopted
this policy effective July 1, 2010. This adoption is not expected to have an impact on the
Company’s financial position, earnings or cash flows.
15
Non-Controlling Interest
In January 2009, the CICA issued Handbook section 1602, “Non-controlling Interests”, to
provide guidance on accounting for non-controlling interests subsequent to a business
combination. The section is effective for fiscal years beginning on or after January 2011. The
Company has early adopted this policy effective July 1, 2010. This adoption is not expected to
have an impact on the Company’s financial position, earnings or cash flows.
Consolidated Financial Statements
the CICA
In January 2009,
issued Handbook section 1601, “Consolidated Financial
Statements”, to provide guidance on the preparation of consolidated financial statements. The
section is effective for fiscal years beginning on or after January 1, 2011. The Company early
adopted this policy effective July 1, 2010. This adoption is not expected to have an impact on
the Company’s financial position, earnings or cash flows.
Comprehensive Revaluation of Assets and Liabilities
In August 2009, the CICA amended Handbook Section 1625, “Comprehensive Revaluation of
Assets and Liabilities” to be consistent with Sections 1582, 1601 and 1602, which were issued
in January 2009. The amendments apply prospectively to comprehensive revaluations of
assets and liabilities occurring in fiscal years beginning on or after January 1, 2011. Early
adoption is permitted. The Company early adopted this policy effective July 1, 2010. This
adoption is not expected to have an impact on the Company’s financial position, earnings or
cash flows.
Commitments
The Company has co-signed an office lease agreement, commencing on November 1, 2007 to
October 31, 2010. The total minimum lease payments are $2,864 per month and $34,368, per
annum. The Company’s proportionate share of the minimum lease payments is $1,431 per
month and $17,172 per annum.
Financial Instruments
The Company’s financial instruments consist of cash, receivables and advances, and accounts
payable and accrued liabilities. The fair value of these financial instruments approximates their
carrying value due to their short-term maturity or capacity of prompt liquidation. Unless
otherwise noted, it is management’s opinion that the Company is not exposed to significant
interest rate, foreign exchange, commodity price or credit risks arising from the financial
instruments. The Company may be exposed to liquidity risk such that the Company may not be
able to meet its obligations as they fall due. The Company manages this risk by forecasting
anticipated investing and financing activities.
Management of Financial Risk
The Company’s financial instruments are exposed to certain financial risks. The risk exposures
and the impact on the Company's financial instruments are summarized below.
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Sensitivity analysis
The Company’s financial instruments consist of cash, receivables, and accounts payable and
accrued liabilities.
The Company has classified its cash as held-for-trading, and is measured at fair value.
Receivables are designated as loans and receivables and are measured at amortized cost.
Accounts payable and accrued liabilities are classified as other financial liabilities and are
measured at amortized cost.
As at June 30, 2010, the carrying amount of accounts receivable and advances and accounts
payable and accrued liabilities equals fair market value. Based on management's knowledge
and experience of the financial markets, the Company believes the following movements are
"reasonably possible" over a three month period:
• The Company is exposed to interest rate risk as bank accounts earn interest income at
variable rates. The income earned on these accounts is subject to the movements in
interest rates. The cash proceeds from the Company’s financing activities are invested
in term deposits which are readily convertible to known amounts of cash and not
exposed to a risk of loss in value.
• Price risk is remote since the Company is currently not a producing entity.
Currency risk
The Company is exposed to the financial risk related to the fluctuation of foreign exchange
rates. The Company operates in Canada, Argentina and Chile and a portion of its expenses are
incurred in Canadian dollars and Argentine and Chilean Pesos. A significant change in the
currency exchange rates between the US dollar relative to the Canadian dollar and the
Argentine and Chilean Peso to the Canadian dollar could have an effect on the Company’s
results of operations, financial position or cash flows. The Company has not hedged its
exposure to currency fluctuations.
As at June 30, 2010, the Company is exposed to currency risk through the following assets and
liabilities denominated in US dollars and Argentine and Chilean Pesos:
June 30, 2010
Cash and cash equivalents
Accounts receivable
Accounts payable and accrued liabilities
US Dollars Argentine Peso Chilean Peso
4,438,982
435,520
(7,229,694)
506,845
99,791
(325,293)
2,300,975
16,000
(1,004)
Based on the above net exposures as at June 30, 2010, and assuming that all other variables
remain constant, a 10% depreciation or appreciation of the Canadian dollar against the US
dollar would result in an increase/decrease of $242,806 in the Company’s net earnings.
Likewise, a 10% depreciation or appreciation of the Canadian dollar against the Argentine and
Chile Peso would result in an increase/decrease of $7,506 and $468, respectively in the
Company’s net earnings.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument
fails to meet its contractual obligations.
The Company’s cash is held through large Canadian financial institutions. The Company’s
receivables consist of goods & services tax due from the Federal Government of Canada.
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Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they
fall due. The Company manages liquidity risk through the management of its capital structure
and financial leverage as outlined above. As at June 30, 2010 the Company was holding cash
and cash equivalents of $5,147,280 to settle current liabilities of $161,180. Management
believes it has sufficient funds to meet its current obligations as they become due.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The risk that the Company will realize a
loss as a result of a decline in the fair value of the short-term investments included in cash and
cash equivalents is limited because these investments are generally held to maturity.
Commodity Price risk
The Company is exposed to price risk with respect to commodity prices. The Company closely
monitors commodity prices to determine the appropriate course of action to be taken by the
Company.
Capital Management
The Company’s objectives when managing capital are to safeguard the Company’s ability to
continue as a going concern in order to pursue the development of its mineral properties and to
maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. In
the management of capital, the Company includes the components of shareholders’ equity.
The Company manages the capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. To maintain or adjust
the capital structure, the Company may attempt to issue new shares, 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 successful capital deployment and general industry conditions. The annual and
updated budgets are approved by the Board of Directors.
In order to maximize ongoing development efforts, the Company does not pay out dividends.
The Company’s investment policy is to invest its cash in highly liquid short-term interest-bearing
investments with maturities of 90 days or less from the original date of acquisition, selected with
regards to the expected timing of expenditures from continuing operations.
The Company is not subject to externally imposed capital requirements.
Additional Disclosure for Venture Issuers without Significant Revenue
Additional disclosure concerning Mirasol’s operating expenses and resource property costs is
provided in the Company’s Consolidated Statements of Loss, Comprehensive Loss and Deficit
and the Consolidated Schedule of Resource Property Costs contained in its Consolidated
Financial Statements for June 30, 2010 and June 30, 2009 that is available on Mirasol’s website
at www.mirasolresources.com or on its SEDAR Page Site accessed through www.sedar.com.
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Approval
The Audit Committee of the Company has approved the disclosure contained in this MD&A.
Additional Information
Additional information relating to Mirasol is available on SEDAR at www.sedar.com.
National Instrument 43-101 Disclosure
All technical information for Mirasol's Projects contained within this MD&A has been reviewed by
Mary Little, President, CEO & Director, a qualified person under NI 43-101.
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