MIRASOL RESOURCES LTD.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2011 and 2010
Canadian Funds
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Mirasol Resources Ltd.
We have audited the accompanying consolidated financial statements of Mirasol Resources Ltd. which comprise the
consolidated balance sheets as at June 30, 2011 and 2010 and the consolidated statements of loss, comprehensive loss and
deficit and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our
audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Mirasol
Resources Ltd. as at June 30, 2011 and 2010 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 24, 2011
“DAVIDSON & COMPANY LLP”
Chartered Accountants
Mirasol Resources Ltd.
(An Exploration Stage Company)
Consolidated Balance Sheets
As at June 30
Canadian Funds
ASSETS
Current
Cash and cash equivalents
Receivables and advances
Statement 1
2011
2010
$
$
10,114,703
169,813
10,284,516
5,147,280
57,331
5,204,611
Equipment (Note 7)
147,043
40,344
Resource property acquisition costs, Schedule (Note 8)
78,333
78,333
$
10,509,892
$
5,323,288
LIABILITIES
Current
Accounts payable and accrued liabilities (Note 9)
$
780,033
$
780,033
161,180
161,180
SHAREHOLDERS’ EQUITY
Share Capital (Note 10)
Authorized:
Unlimited common shares without par value
Issued and fully paid (Note 10a)
Contributed surplus (Note 10c,d)
Deficit - Statement 2
Nature of Business (Note 1)
Commitments (Note 13)
Subsequent Events (Note 14)
On Behalf of the Board:
“ Mary L. Little ”
“ Nick DeMare ”
,
,
Director
Director
24,633,294
9,150,607
33,783,901
14,171,636
2,259,578
16,431,214
(24,054,042)
(11,269,106)
9,729,859
5,162,108
$
10,509,892
$
5,323,288
- 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
Stock-based compensation (Note 10c)
Exploration costs, net – Schedule
Management fees
Office and miscellaneous
Professional fees
Listing and filing fees
Shareholder information
Travel
Amortization
Other Items
Foreign exchange loss
Interest and bank charges, net
$
2011
2010
$
5,958,127
5,843,196
272,375
253,933
184,501
55,431
49,404
40,002
2,223
12,659,192
140,308
(14,564)
125,744
-
1,459,581
210,758
233,025
107,657
24,681
42,662
78,574
1,582
2,158,520
67,276
2,002
69,278
Loss and Comprehensive Loss for the Year
Deficit - Beginning of Year
Deficit - End of Year
(12,784,936)
(11,269,106)
(2,227,798)
(9,041,308)
$
(24,054,042) $
(11,269,106)
Loss per Share – Basic and Diluted
$
(0.35) $
(0.07)
Weighted Average Number of Shares Outstanding
36,070,377
31,062,011
- 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:
Stock-based compensation
Amortization
Amortization included in exploration expenses
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
Change in Cash
Cash - beginning of year
Cash - End of Year
2011
2010
$
(12,784,936) $
(2,227,798)
5,958,127
2,223
28,488
(112,482)
618,853
-
1,582
15,822
(8,834)
489
(6,289,727)
(2,218,739)
(137,411)
(137,411)
(2,723)
(2,723)
11,394,561
11,394,561
3,715,265
3,715,265
4,967,423
5,147,280
1,493,803
3,653,477
$
10,114,703
$
5,147,280
Supplemental Schedule of Non-Cash Financing Transactions:
Fair value of private placement warrants
Fair value of finders’ fee warrants
Fair value of options exercised
Fair value of warrants exercised
$
$
$
$
1,945,690
371,005
347,485
1,036,308
$
$
$
$
909,128
202,384
307,163
14,419
There was no cash paid for interest or income taxes for the years ended June 30, 2011 and 2010.
- 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
2011
2010
Properties:
Argentina
Claudia
Consultants and salaries
Camp and general
Travel
Mining rights and fees
Assays and sampling
Homenaje
Consultants and salaries
Camp and general
Travel
Mining rights and fees
Assays and sampling
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
Los Loros
Consultants and salary
Camp and general
Travel
Assays and sampling
Morito
Consultants and salary
Camp and general
Travel
Mining rights and fees
Assays and sampling
$
$
313,635
230,273
63,020
2,119
7,441
616,488
25,929
8,848
4,854
271
18
39,920
156,562
40,282
11,608
1,388
13,335
(75,008)
148,167
42,794
21,379
12,497
4,987
8,485
90,142
108,175
53,461
22,587
1,731
13,269
199,223
49,002
19,873
10,830
5,864
85,569
60,889
48,544
22,650
1,117
8,252
141,452
15,789
49
173
-
-
16,011
7,755
7,042
1,663
172
1,495
18,127
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
-
-
-
137
-
-
-
-
137
- 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
2011
2010
Nico
Consultants and salary
Camp and general
Travel
Mining rights and fees
Santa Rita and Virginia
Drilling
Consultants and salary
Camp and general
Travel
Mining rights and fees
Assays and sampling
Sascha
Consultants and salary
Camp and general
Travel
Mining rights and fees
Chile
Gorbea
Drilling
Consultants and salaries
Camp and general
Travel
Mining rights and fees
Assays and sampling
Rubi
Consultants and salary
Camp and general
Travel
Mining rights and fees
Assays and sampling
Value added tax and other taxes paid
General & administrative
Generative exploration
Other Projects
Total Costs for the Year
$
$
889
3,224
35
320
4,468
1,396,255
451,543
678,218
261,378
1,684
136,077
2,925,155
2,396
12,482
123
496
15,497
651
277,691
52,022
42,272
46,867
67,608
487,111
5,516
4,703
1,282
137,684
39,646
188,831
517,752
176,885
134,641
71,895
25,043
5,785
1,483
305
32,616
-
78,374
21,276
1,632
-
6,031
107,313
108,698
89,542
3,230
2,020
203,490
-
-
-
-
-
-
-
23,233
2,924
2,426
106,013
10,548
145,144
60,466
109,471
96,752
153,466
$
5,843,196
$
1,459,581
- 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, 2011 and 2010
Canadian Funds
1. Nature of Business
Mirasol Resources Ltd. (“Mirasol” or “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 and Presentation
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., Australis S.A., Gran Nueva
Victoria S.A., Cabo Sur S.A., and Minera Mirasol Chile Limitada. Inter-company balances have
been eliminated upon consolidation.
b) Cash and cash equivalents
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, 2011 and 2010
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
The Company recognizes a legal liability for obligations relating to retirement of property and
equipment, and those 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, 2011 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, 2011 and 2010
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 require disclosure 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, 2011 and 2010
Canadian Funds
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 6 for management’s assessment of risks.
l) Comparative Figures
Certain comparative amounts have been reclassified to conform to the current period’s
presentation.
3. Changes in Accounting Policy
a) 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 elected to
early adopt this policy effective July 1, 2010. The adoption of this standard did not have an
impact on the Company’s consolidated financial position, earnings or cash flows.
b) 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 elected
to early adopt this policy effective July 1, 2010. The adoption of this standard did not have an
impact on the Company’s consolidated financial position, earnings or cash flows.
c) 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 has elected to early
adopt this policy effective July 1, 2010. The adoption of this standard did not have an impact on
the Company’s consolidated financial position, earnings or cash flows.
d) 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. The Company has
elected to early adopt this policy effective July 1, 2010. The adoption of this standard did not
have an impact on the Company’s consolidated financial position, earnings or cash flows.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2011 and 2010
Canadian Funds
4. Recent Accounting Pronouncements Not Yet Adopted
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, 2010 and this will require the restatement for comparative purposes of
amounts reported by the Company for the year ended June 30, 2011.
The Company has completed the diagnostic phase of planning for the implementation of IFRS. It has
determined that the principal areas of impact will be IFRS 1 – First-time adoption of IFRS, IAS 1 –
Presentation of financial statements, IAS 21 – The effects of changes in foreign exchange rates,
IFRS 2 – Share-based payment, IAS 36 – Impairment of assets, and IFRS 6 – Exploration and
evaluation of mineral resources.
The Company expects its detailed analysis of relevant IFRS requirements to be complete for its
reporting on fiscal quarter ending September 30, 2011, along with its determination of changes to
accounting policies and choices to be made. The Company has not yet reached the stage where a
quantified impact of conversion on its consolidated financial statements can be measured.
5. 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, enter
into joint ventures or obtain debt financing. 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.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2011 and 2010
Canadian Funds
6. 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.
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, 2011, the Company is exposed to currency risk through the following assets and liabilities
denominated in US dollars and Argentine and Chilean Pesos:
June 30, 2011
Cash and cash equivalents
Accounts receivable
Accounts payable and accrued liabilities
US Dollars
6,420,986
2,000
(58,308)
Argentine Peso
4,235,879
568,742
(2,298,615)
Chilean Peso
11,604,844
3,573,504
(15,314,286)
Based on the above net exposures as at June 30, 2011, 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 $621,702 in the Company’s net earnings. Likewise, a 10%
depreciation or appreciation of the Canadian dollar against the Argentine and Chilean Peso would
result in an increase/decrease of $59,668 and $28, 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 harmonized sales 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, 2011 the Company was holding cash and cash
equivalents of $10,114,703 to settle current liabilities of $780,033. 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 is limited
because these investments are generally held to maturity.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2011 and 2010
Canadian Funds
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.
7. Equipment
Exploration Equipment
Computer Hardware
Exploration Equipment
Computer Hardware
8. Resource Property Costs
Cost
2011
247,859 $
23,936
Accumulated
Amortization
2011
109,277
15,475
$
Net Book Value
As at June 30,
2011
138,582
8,461
271,795 $
124,752
$
147,043
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
$
$
$
$
Cumulative resource expenditures per project under active exploration are as follows:
Claudia
Espejo
Joaquin
La Curva
La Libanesa
Nico
Pajaro, Veloz and Los Loros
Santa Rita and Virginia
Sascha
Other
Total Argentina Properties
Gorbea
Rubi
Total Chile Properties
$
$
$
Capitalized
Acquisition
Costs
-
-
-
-
-
8,532
69,801
-
-
-
78,333
-
-
-
$
$
$
Exploration
Costs
655,354
205,101
424,364
703,624
772,845
304,062
89,240
2,940,134
461,943
4,634,252
11,190,919
656,956
400,654
1,057,610
$
$
$
Balance as at
June 30,
2011
655,354 $
205,101
424,364
703,624
772,845
312,594
159,041
2,940,134
461,943
4,634,252
Balance as at
June 30,
2010
38,866
201,508
276,197
613,482
573,622
308,126
71,918
14,979
446,446
3,556,854
6,101,998
11,269,252 $
656,956
400,654
1,057,610 $
169,845
211,823
381,668
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2011 and 2010
Canadian Funds
a) Claudia Property
The Company owns a 100% interest in the Claudia property situated in the Santa Cruz Mining
District, Argentina.
b) Espejo, La Libanesa, and La Curva Properties
The Company owns a 100% interest in mining interests of Espejo, La Libanesa, and La Curva
properties situated in the Santa Cruz Mining District, Argentina, by staking.
The Company signed a letter of intent on April 27, 2011 with Pan American Silver Corp. (“Pan
American”) which permits Pan American to earn a 51% interest in the Espejo property by
expending US$4 million over 4 years, and then to reach a 61% interest by completing a 43-101
compliant feasibility study, at which time Mirasol can retain its equity interest in the project or
request Pan American to finance project development, to be repaid through cash flow. A definitive
Exploration Agreement has not yet been signed.
c) 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 million 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 in Joaquin property, which was achieved by Coeur in December 2010. Coeur has
elected to fund a bankable feasibility study to increase its interest to 61%. Mirasol, at its option,
can 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.
d) Nico Property
The Company owns a 100% interest in the Nico property mining interests situated in the Santa
Cruz Mining District, Argentina, by staking.
e) Pajaro, Veloz and Los Loros Properties
The Company owns 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.
f) Santa Rita Property and Virginia Zone
The Company owns a 100% interest in the Santa Rita property 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.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2011 and 2010
Canadian Funds
g) Gorbea Project
The Company owns 100% of the claims under its Gorbea project in Northern Chile. It is engaged
in prospect generation and exploration of disseminated gold and copper prospects in the region.
h) Rubi Property
The Company owns a 100% interest in the Rubi property located 22 km southwest of El Salvador
in Northern Chile.
i) 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.
9. 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, 2011 is an amount of $10,310
(2010 - $393) owing to directors and officers of the Company and an amount of $79,560 (2010 -
$18,143) owing to a company where an officer of the Company is a principal. The amount was
incurred in the ordinary course of business, 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.
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
$
805,624
$
414,163
2011
2010
The consulting fees have been included in exploration costs $701,472 (2010 - $350,852) and in
management fees $104,152 (2010 - $63,311).
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2011 and 2010
Canadian Funds
10. Share Capital
a) Details of share capital are as follows:
Authorized:
Unlimited common shares without par value
Issued and allotted:
Balance – June 30, 2009
Shares
Amount
29,258,181 $
11,246,301
Shares issued for private placement
Share issuance costs
Fair value of private placement warrants
Fair value of finders’ fee warrants
Exercise of options
Exercise of warrants
Fair value of options exercised
Fair value of warrants exercised
2,800,000
-
-
-
1,167,500
16,300
-
-
Balance – June 30, 2010
33,241,981 $
Shares issued for private placement
Share issuance costs
Fair value of private placement warrants
Fair value of finders’ fee warrants
Exercise of options
Exercise of warrants
Fair value of options exercised
Fair value of warrants exercised
3,000,000
-
-
-
653,200
1,447,020
-
-
3,500,000
(256,935)
(909,128)
(202,384)
447,750
24,450
307,163
14,419
14,171,636
9,300,000
(595,786)
(1,945,690)
(371,005)
433,330
2,257,016
347,485
1,036,308
Balance – June 30, 2011
38,342,201 $
24,633,294
b) On December 7, 2010 the Company completed a non-brokered private placement with the
issuance of 3,000,000 units at a price of $3.10 per unit for gross proceeds of $9.3 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 1 year from the
closing date at a price of $4.00 per share. The Company allocated $7,354,310 to the common
shares and $1,945,690 to the share purchase warrants based upon the relative fair values.
The Company paid finder’s fees of $555,210 equal to 6% of the value of 2,985,000 units, and
issued 179,100 broker warrants, with a fair value of $371,005 and exercisable for one year at
$3.10 per share. The total share issuance costs relating to this transaction amounted to
$595,786.
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
Warrants
0.00%
77.66%
1.7%
1 year
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2011 and 2010
Canadian Funds
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 total share issuance costs relating to this transaction amounted to
$256,935.
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
b) Details of contributed surplus:
Balance – beginning of year
Fair value of stock-based compensation
Fair value of private placement warrants
Fair value of finders’ fee warrants
Fair value of options exercised
Fair value of warrants exercised
Balance – end of year
c) Share Purchase Options
Warrants
0.00%
145.98%
1.31%
2 years
June 30, 2011
June 30,2010
$
$
2,259,578
5,958,127
1,945,690
371,005
(347,485)
(1,036,308)
$
9,150,607 $
1,469,648
-
909,128
202,384
(307,163)
(14,419)
2,259,578
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.
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, 2011 and the changes for the year are as follows:
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2011 and 2010
Canadian Funds
Options outstanding at June 30, 2009
Exercised
Cancelled
Options outstanding at June 30, 2010
Granted
Exercised
Options outstanding at June 30, 2011
Options vested as at June 30, 2011
Number of
Options
2,941,000
(1,167,500)
(50,000)
1,723,500
1,835,000
(653,200)
2,905,300
2,382,650
Weighted Average
Exercise Price
$0.49
$0.38
$0.65
$0.56
$4.40
$0.66
$2.96
$2.45
At June 30, 2011, the following stock options are outstanding:
Expiry date
February 28, 2013
May 21, 2014
October 5, 2015
December 16, 2015
March 23, 2016
Exercise Price
$0.63
$0.25
$2.90
$5.55
$6.25
Options
Outstanding
732,500
345,000
992,800
60,000
775,000
2,905,300
Options
Exercisable
732,500
345,000
847,650
27,500
430,000
2,382,650
During the year ended June 30, 2011, the Company granted 1,835,000 stock options having a
total fair value of $6,078,528 and a weighted average grant-date fair value of $3.31. The
Company recorded stock-based compensation expense of $5,958,127 for the vested options.
The fair value of options granted was estimated on the date of the grant using the Black-Scholes
option pricing model, with the following weighted average assumptions:
Risk-free interest rate
Expected dividend yield
Expected stock price volatility
Expected life
June 30, 2011
1.79% -
NIL%
121% - 123%
3.5 years
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2011 and 2010
Canadian Funds
d) Warrants
A summary of the Company’s share purchase warrants and broker warrants at June 30, 2011 and
the changes for the year are as follows:
Warrants outstanding at June 30, 2009
Issued - private placement warrants *
Issued - broker warrants
Exercised - private placement warrants
Exercised - broker warrants
Warrants outstanding at June 30, 2010
Issued - private placement warrants
Issued - broker warrants
Exercised - private placement warrants
Exercised - broker warrants
Balance at June 30, 2011
Warrants
Outstanding
Weighted Average
Exercise Price
1,400,000
222,720
(12,500)
(3,800)
1,606,420
1,500,000
179,100
(1,274,500)
(172,520)
1,838,500
$1.50
$1.50
$1.50
$1.50
$1.50
$4.00
$3.10
$1.51
$1.91
$3.65
* These warrants were exercisable at $1.50 for the first 12 months from closing of the private
placement. After 12 months at December 4, 2010 these warrants were exercisable at $1.75.
At June 30, 2011, the following warrants are outstanding:
Expiry Date
Private placement warrants * December 4, 2011
December 4, 2011
Broker warrants
December 7, 2011
Private placement warrants
December 7, 2011
Broker warrants
Exercise Price Warrants Outstanding
113,000
91,040
1,500,000
134,460
1,838,500
$1.75
$1.50
$4.00
$3.10
* These warrants were exercisable at $1.50 for the first 12 months from closing of the private
placement. After 12 months at December 4, 2010 these warrants were exercisable at $1.75.
During the year ended June 30, 2011, the Company had 1,274,500 private placement warrants
and 172,520 broker warrants exercised for total proceeds of $2,257,016.
e) Share Bonus Plan
The Company has established a share bonus plan for senior management. The Company can
issue 500,000 shares for each initial 500,000 ounces of gold or gold equivalent of “Indicated
Mineral Resource”, for an individual project, as defined in National Instrument 43-101, up to
1,000,000 shares in total under the plan on any Company property in which the Company retains
an interest that is not less than 20%. In 2011, the share bonus plan was modified and approved
by the TSX Venture Exchange to define the types of included resources.
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended June 30, 2011 and 2010
Canadian Funds
11. 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:
2011
$ (12,784,936)
$
2010
(2,227,798)
27.50%
29.25%
(3,515,857)
(651,631)
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)
$
1,896,700
(221,286)
1,832,815
7,628
-
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
2011
$
$
1,792,515
2,772,960
271,069
4,836,544
(4,836,544)
-
156,267
(2,051)
500,063
(2,648)
-
2010
1,214,195
1,495,169
171,657
2,881,021
(2,881,021)
-
$
$
$
The Company has non-capital loss carry-forwards of approximately $6,210,622 that may be
available for tax purposes. The loss carry-forwards are principally in respect of Canadian and
Argentinean operations and expire as follows:
2012
2013
2014
2015
2026
2027
2028
2030
2031
No expiry
$
$
2,319
647,202
1,078,753
387,901
1,087,160
768,034
409,303
645,238
935,110
249,602
6,210,622
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, 2011 and 2010
Canadian Funds
12. 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
For the Years Ended June 30
Net Income (Loss)
Canada
Argentina
Chile
Total
13. Commitments
2011
2010
9,115,556 $
1,319,244
75,092
10,509,892 $
5,034,786
276,651
11,851
5,323,288
2011
2010
8,532 $
96,930
41,581
147,043 $
1,710
36,468
2,166
40,344
2011
2010
(6,675,069) $
(5,461,636)
(648,231)
(12,784,936) $
(617,917)
(1,411,809)
(198,072)
(2,227,798)
$
$
$
$
$
$
The Company has signed an 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.
14. Subsequent events
a) The Company issued 15,000 common shares on the exercise of warrants for gross proceeds of
$26,250.
b) The Company issued 20,000 common shares on the exercise of stock options for gross proceeds
of $12,600.
c) The Company granted 800,000 incentive stock options to certain directors, officers, employees
and consultants. The options are exercisable at $5.23 per common share for a period of five
years from the date of grant.
d) The Company received $75,000 from Pan American pursuant to the letter of intent in relation to
the Espejo property (Note 8b).
Form 51-102F1
Management Discussion and Analysis
For Mirasol Resources Ltd
Introduction
The Management Discussion and Analysis (“MD&A”) is prepared as of October 27, 2011 for the
year ended June 30, 2011. 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, 2011. 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
This 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 to identify forward-looking statements.
This MD&A contains 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.
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, Minera Del Sol S.A., Cabo Sur S.A, Australis S.A., and Gran
Nueva Victoria S.A., 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-one 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 17, 2011, the Company announced the commencement of a major diamond drilling
program of over 90 holes and 12,000 metres of drilling at the Joaquin Silver Project.
On September 7, 2011, the Company announced final results from the 2010-2011 diamond
drilling campaigns at the Virginia Silver Project.
1
On September 2, 2011, the Company announced the appointment of Mr. Bernie Zacharias, CA,
as Chief Financial Officer.
On August 8, 2011, the Company announced results from its infill drilling at the La Negra
deposit, Joaquin Silver Project.
On August 3, 2011 the Company announced the grant of 800,000 incentive stock options under
its incentive stock option plan to certain directors, officers, employees and consultants. The
options are exercisable at $5.23 per option for a period of five years from the date of grant.
On July 18, 2011, the Company announced results from six holes drilled on previously undrilled
vein targets on the Virginia Silver project, and additional assays from the Julia and Naty veins.
On June 28, 2011, the Company announced the filing of a NI 43-101 compliant Technical
Report describing the initial resource estimate for the Joaquin Silver Project on Sedar website.
On June 16, 2011, the Company announced a new phase of drilling being undertaken to test
new exploration targets at the Joaquin Silver Project.
On June 9, 2011, the Company announced the assay results from 15 additional drill holes from
Phase 2 drilling at its 100% owned Virginia project in Santa Cruz province, Argentina.
On May 12, 2011, the Company announced the assay results from 14 additional drill holes from
Phase 2 drilling at its 100% owned Virginia project in Santa Cruz province, Argentina.
On May 9, 2011, the Company announced the 43-101 compliant, in-pit resource estimates of
19.6 million ounces of silver in the indicated category and 47.9 million ounces of silver in the
inferred category at its Joaquin project, in joint venture with Coeur d’Alene Mines (“Coeur”).
On April 27, 2011, the Company announced it signed a Letter of Intent with Pan American Silver
Corp. to explore the Company’s 100% owned Espejo project.
On April 19, 2011, the Company announced the assay results from the initial 21 drill holes from
Phase 2 drilling at its 100% owned Virginia project.
On March 14, 2011, the Company announced, the Company’s joint venture partner, Coeur
d’Alene Mines has elected to proceed to take the Joaquin project through feasibility stage,
which will allow Coeur to earn a 61% interest.
On February 15, 2011, the Company announced that Phase 2 diamond drilling has commenced
on its 100% owned Virginia project. Phase 2 drilling is designed to further explore the Julia Vein
and possibly other targets identified through surface exploration.
On January 18, 2011, the Company announced the results from an infill drilling at the La Negra
silver-gold deposit at the Joaquin project.
On January 13, 2011 and December 16, 2010, the Company announced assay results from its
diamond drilling program at the Julia Vein at its 100% owned Virginia project.
On December 7, 2010, the Company closed a non-brokered private placement consisting of
3,000,000 units at a price of $3.10 per unit for gross proceeds of $9.3 million. Each unit
consisted of one common share and one-half of one share purchase warrant. One whole
warrant entitles the holder to purchase one common share for a period of one year at a price of
2
$4.00 per share. The Company paid finder’s fees of $555,210 equal to 6% of the value of
2,985,000 units, and issued 179,100 broker warrants exercisable for one year at $3.10 per
share.
On November 19, 2010, the Company announced that Phase 1 diamond drilling has
commenced on its 100% owned Virginia project. The Company previously announced that it
received approval of environmental permits to allow initial drilling (news release dated
November 8, 2010).
On November 3, 2010, the Company announced the final results from Phase 5 exploration
diamond drilling at the 100% owned Joaquin project which include results from the infill drilling
at the La Negra prospect. Mirasol's joint venture partner, Coeur d'Alene Mines, has
commenced geological modeling for the purpose of an initial inferred resource calculation.
On October 18, 2010, the Company announced initial results from Phase 5 drilling at its 100%
owned Joaquin project, including hole DDJ-100 at the La Morocha prospect. DDJ-100 contains
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.
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.
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.
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 budgeted US$3.3 million in exploration at Joaquin in 2010.
Activities on Mineral Projects
Activities during the year ended June 30, 2011 were focused on exploration activities on the
Company’s gold-silver prospects and acquisition evaluations in Santa Cruz Province, Argentina,
and northern Chile.
As of June 30, 2011, through its subsidiaries, the Company held 21 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 carries out “grass-roots” exploration for gold and silver in Argentina, Chile, and
elsewhere in Latin America. To the present time, properties are advanced through exploration
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. The Company plans to continue drilling at
the Virginia Project, and potentially other properties, during the 2012 fiscal year. In addition, the
Company re-activated its generative and reconnaissance precious metals exploration program
in northern Chile.
3
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 $134,641 for the year ended June 30, 2011, an increase from $37,889
incurred for the same period in 2010. 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 consulting and contractors and field supplies.
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 joint venture with Coeur d’Alene Mines (“Coeur”); they are the project operator and are
responsible for funding 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.
To date, Coeur has completed more than 23,000 metres of diamond drilling at Joaquin. Multiple
prospects, including the La Negra, La Morocha, La Morena and Joaquin Main prospects, have
been drilled. Coeur holds a vested 51% interest in the project and has recently elected to
proceed to increase its equity to 61% by funding all expenditures through to the delivery of full
feasibility study. An initial resource was published for the La Morocha and La Negra targets in a
news release published April 27, 2011.
A 43-101 compliant resource estimate was published for the Joaquin project on June 28, 2011.
The calculated resource includes:
Table 1. Resources - Joaquin Project (100% of Project)
Mineral Type
and Category
Contained
Koz Silver
Contained
Koz Gold
Silver
g/t
Gold
g/t
Ktonnes
Oxides
Indicated
Inferred
Sulphides
Indicated
Inferred
6,785
11,128
77.7 16,952
86.6 30,989
0.16
0.09
419
2,667
203.5 2,741
197.8 16,963
0.16
0.12
Total of Oxides & Sulphides
Indicated
Inferred
7,204
13,794
85.0 19,693
108.1 47,952
0.16
0.10
34
32
2
10
36
43
Metal prices used were US$20 /oz Ag and US$1,300 oz/Au.
Oxide mineral resources estimated using a cutoff grade of 33 g/t Ag Eq and sulphide mineral resources with a cut-off of
51.9 g/t Ag Eq. within Whittle® surface mine designs.
Ag Eq (silver equivalent) = Ag grade in grams per tonne + Au grade in grams per tonne x 65.
Mineral resources estimated by the consulting firm of NCL Ingeniería y Construcción Ltda. in Santiago, Chile.
Mineral resources that are not mineral reserves have not demonstrated economic viability.
4
Additional detailed information is available on Mirasol’s website www.mirasolresources.com.
Expenses during the year ended June 30, 2011 for the Joaquin property were $223,175 which
included $156,562 for consultants and salaries, $40,282 for camp and general, $11,608 for
travel and the remaining $14,723 for mining rights and fees and assays and sampling. The
company received an option payment during the year of $75,008 (US$75,000) (2010 = $78,331;
US$75,000) for the Coeur Joint Venture.
Santa Rita Property- Virginia Zone
In the second quarter of fiscal 2010, 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 from
the Julia Vein. 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.
Sawn channel samples (March 4, 2010) from all 58 Julia vein channels averaged 805 g/t Ag.
Ground geophysical surveys, including ground magnetic and gradient array IP have been
completed.
Additional press releases in May and June, 2010, confirmed significant silver values from
additional veins parallel and surrounding the Julia vein called the Ely, Naty, Margarita and
Roxane veins. Outlying veins were discovered east and northwest of the principal vein zone.
The Virginia discovery now has more than 9 kilometres of exposed or interpreted vein length.
On December 13, 2010 the Company announced initial Phase 1 drilling results from the 2.2
kilometre long Julia Vein. Best intersections from the first seven holes were from holes VG-006
with a true width of 22.7 metres grading 474 g/t (grams/tonne) silver, including 5.7 metres of
1,403 g/t silver; and hole VG-007 with 14.6 metres of 483 g/t silver, including 6.5 metres at 937
g/t silver. Final Phase 1 drilling results announced January 13, 2011 reported high grade vein
intersections at the Julia North and Central sectors, including 5.05 metres averaging 1,152 g/t
silver, within broad widths of oxidized, mineralized wall rock reaching 9.33 metres’ total
mineralized width of 348 g/t silver, at Julia North. Phase 2 drilling commenced February 15,
2011.
Drilling in 2010 and 2011 systematically tested 1,780 metres of strike length of the 9,600 metres
of veining outlined to date at the Virginia Silver District, in 115 holes totaling 9,266 metres.
Drilling has defined four silver deposits at Julia North, Julia Central, Julia South and Naty Vein
with potentially economic silver grades and widths, at a nominal drill spacing of 50 by 50 metres
or closer. Results from the final 14 re-drilled holes include significant silver intersections with
excellent core recovery, among them hole VG-6A containing 24.27 metres of 326 grams per
tonne (g/t) silver with 96 percent core recovery, including 5.48 metres of 1,038 g/t silver with 98
percent recovery from the Julia North deposit. At Julia Central, VG-50A contains 28.25 metres
of 220 g/t silver with 98 percent recovery including 18.11 metres of 303 g/t silver with 96%
recovery. In addition, recent scout holes at Naty Extension, Ely South and Martina (news
release July 18, 2011) are examples of zones that are a high priority for follow-up drilling in a
planned 2011-2012 campaign.
The Santa Rita property comprises “manifestaciones de descubrimiento” and exploration
“cateos”, located in the northern sector of the Deseado Massif volcanic terrane.
5
During the year ended June 30, 2011, the Santa Rita and Virginia Zone incurred costs of
$2,925,155, of which $1,396,255 related to drilling, $451,543 was for consultants and salaries,
$678,218 for camp, drill contractors and general costs, $261,378 for travel expenses, $136,077
for assays and sampling costs and remaining costs for mining rights and fees.
Sascha Property
The Sascha Project hosts a gold and silver mineralized epithermal quartz vein system of low-
sulphidation style which comprises
two M.D.s(“manifestaciones de
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. Additional mapping and new and interpretation of drill
results have defined a number of new prospective exploration targets at Sascha. The project is
available for joint venture.
During the year ended June 30, 2011 the Company incurred costs of $15,497, primarily for
camp general costs.
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 which has not been drill
tested. 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 is available for joint venture.
During the year ended June 30, 2011, the Nico property incurred costs of $4,468, primarily for
camp and general costs.
6
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.
During the year ended June 30, 2011, the Claudia property incurred costs of $616,488. Of this
total, $313,635 was for consultants and salaries, $230,273 for camp and general costs, $63,020
for travel expenses, and the remaining for assays and sampling costs and mining rights and
fees.
Espejo Property
Exploration work
The Espejo property was staked in April 2006 and adjoins Pan American 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 and production at the Manantial
Espejo mine. Additional exploration cateos were staked in 2008 which expand the property to
the south (news release June 26, 2008).
includes remote sensing (satellite
The Company signed a letter of intent on April 27, 2011 with Pan American Silver which permits
Pan American Silver to earn a 51% interest in the property by expending US$4 million over 4
years, and then to reach a 61% interest by completing a 43-101 compliant feasibility study, at
which time Mirasol can retain its equity interest in the project or request Pan American to
finance project development, to be repaid through cash flow.
La Curva Property
The La Curva property, comprising two exploration cateos, is located in the eastern Deseado
Massif and has year round access from the paved national highway and secondary roads.
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
7
veins and silicified breccias, and additional targets exist on the property. The dome-vein setting
is seen elsewhere in productive mining districts and at the Dos Calandrias gold discovery
located fifteen kilometers to the west. (See news releases of April 1, 2008 and February 24,
2009).
During the year ended June 30, 2011, the La Curva property incurred costs of $90,142. Of this
total, $42,794 was for consultants and salaries, $21,379 for camp and general costs, $12,497
for travel expenses, and remaining for assays and sampling costs and mining rights and fees.
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. An AMT geophysical survey was also completed which
confirmed multiple drill targets.
During the year ended June 30, 2011, the La Libanesa property incurred costs of $199,223. Of
this total, $108,175 was for consultants and salaries, $53,461 for camp and general costs,
$22,587 for travel expenses, and remaining for assays and sampling costs and mining rights
and fees.
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 will be
available for joint venture in 2012.
During the year ended June 30, 2011, the Rubi property incurred costs of $188,831. This mainly
consisted of $137,684 for mining rights and fees and $39,646 for assays and sampling costs.
Remaining costs were for consultants and salaries, camp and other general administrative
items.
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.
8
Mirasol’s Results of Operations
For the Year Ended June 30, 2011 as compared to the Year Ended June 30, 2010
The Company’s net loss for the year ended June 30, 2011 was $12,784,936 or $0.35 per share
compared to a net loss of $2,227,798 or $0.07 per share for prior year, an increase in loss of
$10,557,138.
Total operating expenses for the year ended June 30, 2011 were $12,659,192 compared to
$2,158,520 for the prior year, an increase of $10,500,672. The increase in costs is primarily
due to an increase in stock-based compensation expense ($NIL in 2010 compared to
$5,958,127 in 2011) due to additional incentive stock options being granted/vested and an
increase in exploration costs ($5,843,196 in 2011compared to $1,459,581 in 2010).
Management fees increased ($272,375 in 2011 compared to $210,758 in 2010) due to
increased exploration activity and professional fees increased ($184,501 in 2011 compared to
$107,657 in 2010) primarily due to legal consultations in relation to the letter of intent with Pan
American Silver and internal reorganization. All other costs remained consistent with 2010.
For the Three Months Ended June 30, 2011 as compared to the Three Months Ended
June 30, 2010
Net Loss and Operating Expenses
For the period, the Company experienced a net loss of $4,506,321 compared to a net loss of
$661,197 for the comparative period in 2010, an increase of $3,845,124.
Total operating expenses for the period were $4,638,813 compared to $758,039 for the
comparative period in 2010, an increase of $3,880,774. The increase primarily results from an
increase in exploration costs ($3,276,686 in 2011 compared to $537,028 in 2010) due to
increased exploration activity and an increase in stock-based compensation ($1,137,497 in
2011 compared to $NIL in 2010) due to an increased number of incentive stock options granted
and vested during the period.
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,
2011, 2010 and 2009.
2011
2010
2009
Sales
$
- $
- $
-
Loss for the Period
$ (12,784,936) $
(2,227,798) $
(2,048,718)
Loss per Share - Basic and Diluted $
(0.35) $
(0.07) $
(0.07)
Total Assets
Total Long-term Liabilities
Dividends Declared
$
$
$
10,509,892 $
5,323,288 $
3,835,332
- $
NIL $
- $
NIL $
-
NIL
9
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 2011
3rd Quarter 2011
2nd Quarter 2011
1st Quarter 2011
4th Quarter 2010
3rd Quarter 2010
2nd Quarter 2010
1st Quarter 2010
Revenues
$
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Loss from
Continued
Operations and
Net Loss
$
(4,506,321)
(4,352,462)
(3,371,011)
(555,142)
(661,197)
(708,357)
(400,744)
(457,500)
Basic and Fully Diluted
Loss per Share from
Continued Operations
and Net Loss
$
(0.12)
(0.11)
(0.10)
(0.02)
(0.02)
(0.02)
(0.01)
(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, 2011 was $9,504,483 compared to a net
working capital of $5,043,431 at June 30, 2010. The cash balance at June 30, 2011 was
$10,114,703 compared to $5,147,280 at June 30, 2010. As at June 30, 2011 current liabilities
were $780,033 compared to $161,180 at June 30, 2010.
On October 27, 2011, the Company had 38,377,201 issued shares. The Company had
3,685,300 options and 1,823,500 warrants outstanding. The weighted average exercise price is
$2.96 and $3.65, respectively.
Investing Activities
During the year ended June 30, 2011, the Company purchased equipment for $137,411.
Financing Activities
During the year ended June 30, 2011, the Company received cash proceeds of $433,330 from
the exercise of 653,200 options and $2,257,016 from the exercise of 1,447,020 warrants.
Financing activities provided $8,704,214 from the net proceeds received for shares issued
pursuant to a private placement which closed on December 7, 2010. Terms of the private
placement were 3 million units priced at $3.10. Each unit consists of one common share and
one-half common share purchase warrant. One whole warrant entitles the holder to purchase a
common share of the Company for 1 year at a price of $4.00 per share.
10
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 options and 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 $9,504,483, 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, 2011, the Company incurred $805,624 (June 30, 2010 -
$414,163) in consulting fees to a company where an officer of the Company is a principal. As at
June 30, 2011 $79,560 (2010 - $18,143) of the fee remains unpaid and is included in accounts
payable and accrued liabilities. Consulting fees of $701,472 (2010 - $350,852) have been
included in Exploration costs and $104,152 (2010 - $63,311) have been included in
Management fees in the Company’s statement of loss.
Included in accounts payable and accrued liabilities at June 30, 2011 is an amount of $10,310
(2010 - $393) 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$12,500 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$625 per day for the days worked.
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
11
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.
Any option payments received are first credited to the cost of the property, with any excess
included in income.
Changes in Accounting Policies
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 elected to
adopt this policy effective July 1, 2010. The adoption of this standard did not have an impact on
the Company’s consolidated financial position, earnings or cash flows.
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 elected to early adopt this policy effective July 1, 2010. The adoption of this
standard did not have an impact on the Company’s consolidated financial position, earnings or
cash flows.
Consolidated Financial Statements
the CICA
issued Handbook section 1601, “Consolidated Financial
In January 2009,
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 has
elected to early adopt this policy effective July 1, 2010. The adoption of this standard did not
have an impact on the Company’s consolidated 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. The
Company has elected to early adopt this policy effective July 1, 2010. The adoption of this
standard did not have an impact on the Company’s consolidated financial position, earnings or
cash flows.
12
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 consists 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 includes 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.
The Company has completed an initial scoping and diagnostic assessment. This assessment
identified, at a high level, the key areas for more detailed consideration that may give rise to
potential difference upon conversion.
The Company will engage 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.
13
Currently the Company has no significant assets for which impairment testing is required.
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.
All options granted by the Company which vest in the comparative year for IFRS have been
valued in compliance with IFRS. A forfeiture rate will 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 as exploration
expenditures are expensed and are capitalized 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 decided to elect a cost model. Currently, the Company has
exploration equipment and computer hardware capitalized as property, plant and equipment and
as a result there will be not significant impact on the adoption of IFRS 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 account for each component separately when the components have
14
different useful lives or the components provide benefits to the entity in a different pattern. This
requirement is not expected to have a significant impact on the Company’s consolidated
financial statements.
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, Minera Del Sol S.A., Cabo Sur S.A, Australis S.A., and Gran
Nueva Victoria S.A. and Chilean Pesos for Minera Mirasol Chile Limitada but a detailed analysis
will need to be completed.
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
15
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.
Commitments
The Company has signed an 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.
Financial Instruments
The Company’s financial instruments consist of cash, accounts receivable, 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.
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, 2011, the Company is exposed to currency risk through the following assets and
liabilities denominated in US dollars and Argentine and Chilean Pesos:
June 30, 2011
Cash and cash equivalents
Accounts receivable
Accounts payable and accrued liabilities
US Dollars
6,420,986
2,000
(58,308)
Argentine
Peso
4,235,879
568,742
(2,298,615)
Chilean Peso
11,604,844
3,573,504
(15,314,286)
Based on the above net exposures as at June 30, 2011, 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 $621,702 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 $59,668 and $28, respectively in the
Company’s net earnings.
16
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 harmonized sales 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, 2011 the Company was holding cash
and cash equivalents of $10,114,703 to settle current liabilities of $780,033. 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 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, enter into joint ventures or obtain debt financing. 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.
17
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, 2011 and June 30, 2010 that is available on Mirasol’s website
at www.mirasolresources.com or on
through
www.sedar.com.
its SEDAR company page accessed
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.
18