MIRASOL RESOURCES LTD.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
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 statements of financial position as at June 30, 2016 and 2015 and the consolidated statements of loss and
comprehensive loss, changes in equity, 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 International Financial Reporting Standards, and for such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our
audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Mirasol
Resources Ltd. as at June 30, 2016 and 2015 and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards.
Vancouver, Canada
October 24, 2016
“DAVIDSON & COMPANY LLP”
Chartered Professional Accountants
Mirasol Resources Ltd.
(An Exploration Stage Company)
Consolidated Statements of Financial Position
Canadian Funds
As at
ASSETS
Current Assets
Cash and cash equivalents
Short-term investments
Receivables and advances (Note 6)
Income taxes recoverable (Note 13)
Equipment and Software (Note 8)
Exploration and Evaluation Assets (Note 9)
LIABILITIES
Current Liabilities
June 30,
2016
June 30,
2015
$
$
17,605,111
459,000
260,501
23,991
18,348,603
19,120,394
1,200,000
486,844
3,032,000
23,839,238
65,265
3,000,762
120,590
2,829,814
$
21,414,630
$
26,789,642
Accounts payable and accrued liabilities (Note 10)
$
784,453
$
923,261
38,393,240
15,418,454
(23,279)
(33,158,238)
37,858,186
15,146,472
2,958
(27,141,235)
20,630,177
25,866,381
$
21,414,630
$
26,789,642
EQUITY
Share Capital (Note 11)
Reserves (Note 11)
Accumulated Other Comprehensive Income (loss)
Deficit
Nature of Business (Note 1)
Commitments (Note 14)
Subsequent Events (Note 15)
On Behalf of the Board:
“ Stephen C. Nano ”
“ Nick DeMare ”
,
,
Director
Director
The accompanying notes are an integral part of these consolidated financial statements
Page 4
Mirasol Resources Ltd.
(An Exploration Stage Company)
Consolidated Statements of Loss and Comprehensive Loss
For the Years Ended June 30
Canadian Funds
Operating Expenses
Exploration costs (Note 9 and 10b)
Management fees (Note 10a)
Office and miscellaneous
Professional fees (Note 10b)
Marketing and investor communications
Share-based payments (Note 11c)
Director’s fees (Note 10a)
Business development
Travel
Transfer agent and filing fees
Depreciation (Note 8)
Interest income
Foreign exchange gain
Realized and unrealized loss on investment (Note 7)
$
2016
2015
4,702,827 $
564,305
572,998
379,423
335,920
316,535
133,500
105,442
42,267
20,644
17,703
6,072,920
189,096
439,176
453,327
239,499
325,635
78,625
387,787
83,769
22,090
18,932
(7,191,564)
(8,310,856)
69,167
1,017,394
-
1,086,561
62,873
3,503,017
(6,381,125)
(2,815,235)
Net Loss for the Year before Income Taxes
Income tax recovery (Note 13)
Net Loss for the Year
(6,105,003)
88,000
(11,126,091)
3,206,940
$
(6,017,003) $
(7,919,151)
Other Comprehensive loss to be Reclassified to Profit or Loss in
Subsequent Periods
Exchange differences on translation of foreign operations
Loss and Comprehensive Loss for the Year
(26,237)
1,353
(6,043,240)
(7,917,798)
Loss per Share (Basic and Diluted)
$
(0.14) $
(0.18)
Weighted Average Number of Shares Outstanding
(Basic and Diluted)
44,334,015
44,245,661
The accompanying notes are an integral part of these consolidated financial statements
Page 5
Mirasol Resources Ltd.
(An Exploration Stage Company)
Consolidated Statement of Changes in Equity
Canadian Funds
Share Capital
Common Shares
Reserves
Number
$
$
Accumulated
Other
Comprehensive
Income (Loss)
$
Deficit
Total
$
$
Balance – June 30, 2014
Share-based payments (Note 11c)
Foreign currency translation
adjustment
Loss for the year
44,245,661
-
37,858,186
-
14,820,837
325,635
1,605
-
(19,222,084)
-
33,458,544
325,635
-
-
-
-
-
-
1,353
-
-
(7,919,151)
1,353
(7,919,151)
Balance – June 30, 2015
44,245,661
37,858,186
15,146,472
2,958
(27,141,235)
25,866,381
Bonus shares issued (Note 10a)
Option exercise (Note 11c)
Share-based payments (Note 11c)
Foreign currency translation
adjustment
Loss for the year
300,000
118,750
-
372,000
163,054
-
-
(44,553)
316,535
-
-
-
-
-
-
372,000
118,501
316,535
-
-
-
-
-
-
(26,237)
-
-
(6,017,003)
(26,237)
(6,017,003)
Balance – June 30, 2016
44,664,411
38,393,240
15,418,454
(23,279)
(33,158,238)
20,630,177
The accompanying notes are an integral part of these consolidated financial statements
Page 6
Mirasol Resources Ltd.
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
For the Years Ended June 30
Canadian Funds
Operating Activities
Net loss for the year
Adjustments for:
Realized and unrealized loss on investments
Income tax recovery
Bonus shares issued
Write-off of mineral property acquisition costs
Share-based payments
Interest income
Depreciation
Depreciation included in exploration expenses
Unrealized foreign exchange
Changes in non-cash working capital items:
Receivables and advances
Due from joint venture partners – receivables and advances
Accounts payable and accrued liabilities
Income taxes received
2016
2015
$
(6,017,003) $
(7,919,151)
-
(88,000)
372,000
58,167
316,535
(69,167)
17,703
38,942
(884,047)
(6,254,870)
(161,660)
385,422
(138,808)
3,097,701
6,381,125
(3,206,940)
-
-
325,635
(62,873)
18,932
42,754
(3,379,764)
(7,800,282)
(25,938)
(383,021)
457,270
977,368
Cash used in operating activities
(3,072,215)
(6,774,603)
Investing Activities
Acquisition of exploration and evaluation assets
Short-term investments redeemed
Proceeds from sale of investment
Interest received
Purchase of equipment and software
Cash provided by investing activities
Financing Activities
Exercise of incentive share purchase options
Cash provided by financing activities
(229,115)
741,000
-
70,056
(1,320)
580,621
118,501
118,501
-
100,000
4,625,381
63,148
(42,092)
4,746,437
-
-
Effect of Exchange Rate Change on Cash and Cash Equivalents
857,810
3,028,250
Change in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of Year
(1,515,283)
19,120,394
1,000,084
18,120,310
Cash and Cash Equivalents - End of Year
$
17,605,111
$
19,120,394
Supplemental Schedule of Non-Cash Investing and Financing
Transactions:
Option payment included in receivables and advances
Fair value of options exercised
Cash and Cash Equivalents Consist of:
Cash
Cash equivalents
$
$
$
$
-
44,553
$
$
2,401
-
757,155
16,847,956
$
$
983,087
18,137,307
The accompanying notes are an integral part of these consolidated financial statements
Page 7
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
1. Nature of Business
Mirasol Resources Ltd. (“Mirasol” or the “Company”) is incorporated under the laws of the Province of British
Columbia, Canada. The Company’s corporate registered and records office is located at 1000 – 840 Howe
Street, Vancouver, British Columbia and the head office is located at 910 – 850 West Hastings Street,
Vancouver, British Columbia.
Mirasol engages in acquiring and exploring mineral properties, principally located in Chile and Argentina, 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
exploration and evaluation assets. The recovery of the Company’s exploration and evaluation assets is
dependent on the discovery of economically recoverable reserves, 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 exploration and evaluation assets. While the Company has been successful in the
past with its financing efforts, there can be no assurance that it will be able to do so in the future.
Management believes that the Company has sufficient working capital to maintain its operations and activities
for the next twelve months.
2. Basis of Presentation
Statement of compliance
The consolidated financial statements of the Company have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”)
and interpretations of the IFRS Interpretations Committee (“IFRIC”). The policies presented in Note 3 were
consistently applied to all periods presented. The Board of Directors approved the consolidated financial
statements on October 24, 2016.
Basis of measurement
These consolidated financial statements have been prepared on a historical cost basis. Financial instruments
classified as financial instruments at fair value through profit or loss are stated at their fair value. In addition,
these consolidated financial statements have been prepared using the accrual basis of accounting except for
the cash flow information.
Page 8
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
3. Significant Accounting Policies
a) Consolidation
These consolidated financial statements include the accounts of the Company (the “Parent”) and its
subsidiaries. The principal subsidiaries of the Company, their activities, and their geographic locations as at
June 30, 2016 were as follows:
Subsidiary
Principal activity
Location
Minera Mirasol Chile Limitada
Cabo Sur S.A.
Australis S.A.
Minera Del Sol S.A.
Nueva Gran Victoria S.A.
Recursos Mirasol Holdings Ltd.
MDS Property Holdings Ltd.
Mineral exploration
Mineral exploration
Mineral exploration
Mineral exploration
Mineral exploration
Holding company
Holding company
Chile
Argentina
Argentina
Argentina
Argentina
British Virgin Islands
British Virgin Islands
Proportion of
interest held
by the
Company
100%
100%
100%
100%
100%
100%
100%
The transactions among the entities in the consolidated group pertain to the transfer of funds and payment of
third party costs. All inter-group balances have been eliminated upon consolidation.
b) Significant Accounting Estimates and Judgments
The preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, profit and
expenses. The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making the judgments about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that period
or in the period of the revision and further periods if the review affects both current and future periods.
Significant accounting estimates and judgments are related to, but are not limited to, the following:
(i)
Impairment of exploration and evaluation assets: The capitalized carrying value of each property group
is reviewed regularly for conditions that are indicators of impairment. This review requires significant
judgment as the Company does not have any proven and probable reserves that enable future cash
flows to be compared to the carrying values. Factors considered in the assessment of asset impairment
include, but are not limited to, whether there has been a significant adverse change in the legal,
regulatory, accessibility, title, environmental or political factors that could affect the claims’ value;
whether there has been an accumulation of costs significantly in excess of the amounts originally
expected for the claims’ acquisition, development or cost of holding; whether exploration activities
produced results that are not promising such that no more work is being planned in the foreseeable
future; and whether the Company has the necessary funds to be able to maintain its interest in the
mineral claims.
The Company has concluded that impairment conditions do not exist as at June 30, 2016.
Ownership of exploration and evaluation assets involves certain risks due to the difficulties of
determining and obtaining clear title to claims as well as the potential for problems arising from the
frequently ambiguous conveyance history characteristics of many exploration and evaluation assets.
Page 9
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
The Company has investigated ownership of its exploration and evaluation assets and, to the best of its
knowledge, ownership of its interests are in good standing.
(ii) Valuation of share purchase options: The Company provides compensation benefits to its employees,
directors and officers through a stock option plan. The fair value of each option award is estimated on
the date of the grant using the Black-Scholes option pricing model. Expected volatility assumption used
in the model is based on the historical volatility of the Company’s share price. The Company uses
historical data to estimate the period of option exercises and their forfeiture rates for use in the valuation
model. The risk-free interest rate for the expected term of the option is based on the yields of
government bonds. Changes in these assumptions, especially the volatility and the expected life
determination could have a material impact on the Company’s profit or loss. All estimates used in the
model are based on historical data which may not be representative of future results.
(iii) Income taxes: The Company is subject to income taxes in numerous jurisdictions. Uncertainties exist
with respect to interpretations of tax regulations. The Company has recognized current tax refundable
based on its interpretations of tax regulations, which may differ from the interpretations of the tax
authorities (Note 13).
Judgment is required in determining whether deferred tax assets are recognized on the statement of
financial position. The recognition of deferred tax assets requires management to assess the likelihood
that the Company will generate taxable income in future periods to utilize the deferred tax assets. Due to
a history of losses deferred tax assets have not be recognized.
(iv) Functional currencies: The functional currency of an entity is the currency of the primary economic
environment in which an entity operates. The determination of an entity’s functional currency requires
judgement based on analysis of relevant factors identified in IAS 21, The Effects of Changes in Foreign
Exchange Rates (“IAS 21”).
Except for the Company’s subsidiaries in the British Virgin Islands (Note 3a) above), the Company has
determined that its subsidiaries in Chile and Argentina incur costs in United States Dollars, Canadian
Dollars, Australian dollars as well as the Chilean and Argentine Pesos and therefore do not indicate a
single primary currency for operating in these jurisdictions. These subsidiaries are financed entirely by
its Canadian Parent and therefore act as its extension. The Company has therefore determined that the
functional currency of all of its subsidiaries in Chile and Argentina is the Canadian Dollar, similar to the
Parent.
c) Foreign Currencies
The functional currency of the Company and its operating subsidiaries, Minera Del Sol S.A., Australis S.A.,
Nueva Gran Victoria S.A., Cabo Sur S.A., and Minera Mirasol Chile Limitada, is the Canadian Dollar (“$”).
The functional currency of its holding subsidiaries, Recursos Mirasol Holdings Ltd., and MDS Property
Holdings Ltd. is the United States Dollar.
Any transactions in currencies other than the functional currency have been translated to the Canadian
Dollar in accordance with IAS 21. Transactions in currencies other than the functional currency are recorded
at the rates of exchange prevailing on dates of transactions. At the end of each reporting period, monetary
assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that
date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are
translated at rates prevailing at the date when the fair value was determined. All gains and losses on
translation of these foreign currency transactions are included in profit or loss. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not retranslated.
Page 10
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
Assets and liabilities of entities with a functional currency other than the Canadian Dollar are translated at
the period end rates of exchange, and the results of their operations are translated at average rates of
exchange for the period. The resulting changes are recognized in accumulated other comprehensive income
(loss) (“AOCI”) in equity as a foreign currency translation adjustment.
The Company’s presentation currency is the Canadian Dollar.
d) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on deposit with banks and short-term interest-bearing
investments with maturities of three months or less at the purchase date. Deposits with banks and short-term
interest-bearing investments with original term to maturity greater than three months but less than one year
are presented as short-term investments.
e) Financial Instruments
All financial instruments are initially recognized at fair value on the statement of financial position. The
Company has classified each financial instrument into one of the following categories: (1) financial assets or
liabilities at fair value through profit or loss (“FVTPL”), (2) loans and receivables, (3) financial assets
available-for-sale, (4) financial assets held-to maturity, and (5) other financial liabilities. Subsequent
measurement of financial instruments is based on their classification.
Financial assets and liabilities at FVTPL are subsequently measured at fair value with changes in those fair
values recognized in profit or loss. Financial assets available-for-sale are subsequently measured at fair
value with changes in fair value recognized in other comprehensive income loss (“OCI”), net of tax. Financial
assets and liabilities held-to-maturity, loans and receivables, and other financial liabilities are subsequently
measured at amortized cost using the effective interest method. Refer to Note 5 for further disclosure.
f)
Impairment of Financial Assets
At each reporting date, the Company assesses whether there is objective evidence that a financial asset is
impaired. If such evidence exists, the Company recognizes an impairment loss as follows:
(i) Financial assets carried at amortized cost: The loss is the difference between the amortized cost of the
asset and the present value of the estimated future cash flows, discounted using the instrument’s
original effective interest rate. The carrying amount of the asset is reduced by this amount either directly
or indirectly through the use of an allowance account.
(ii) Available-for-sale financial assets: The impairment loss is the difference between the original cost of the
asset and its fair value at the measurement date, less any impairment losses previously recognized in
profit or loss. This amount represents the cumulative loss in accumulated OCI that is reclassified to
profit or loss.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the
amount of the loss decreases and the decrease can be related objectively to an event occurring after the
impairment was recognized. Impairment losses on available-for-sale financial assets are not reversed.
g)
Impairment of Non-financial Assets
The carrying amounts of non-financial assets are reviewed for impairment whenever facts and
circumstances suggest that the carrying amounts may not be recoverable. If there are indicators of
impairment, the recoverable amount of the asset is estimated in order to determine the extent of any
impairment. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (“cash-generating units” or “CGUs”).
Page 11
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use (being the
present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is
recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Non-financial assets that have been impaired in prior periods are tested for possible reversal of impairment
whenever events or changes in circumstances indicate that the impairment has reversed. If the impairment
has reversed, the carrying amount of the asset is increased to its recoverable amount but not beyond the
carrying amount that would have been determined had no impairment loss been recognized for the asset in
the prior periods. A reversal of an impairment loss is recognized in profit or loss in the period of such
reversal.
h) Equipment and Software
Equipment and software is stated at cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent
costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Company and the
cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced.
The Company provides for depreciation as follows:
• Exploration equipment: 30% declining balance;
• Computer hardware: 30% declining balance; and
• Computer software: straight-line over the estimated life of three years.
For exploration equipment and computer hardware, the Company applies only one-half of the applicable rate
in the year of acquisition.
The Company allocates the amount initially recognized to each asset’s significant components and
depreciates each component separately. Residual values, depreciation methods and useful lives of the
assets are reviewed periodically and adjusted on a prospective basis as required.
i)
Exploration and Evaluation Assets
The Company capitalizes the direct costs of acquiring mineral property interests as exploration and
evaluation assets. Option payments are considered acquisition costs if the Company has the intention of
exercising the underlying option.
Exploration and evaluation costs are charged to operations in the period incurred until such time as it has
been determined that a property has economically recoverable reserves, and is technically feasible, in which
case subsequent development costs are capitalized. Exploration costs include value-added taxes because
the recoverability of these amounts is uncertain.
The receipt of option payments from the Company’s joint venture partners are applied first towards the
capitalized cost for the acquisition of pertinent mineral property interests. Option payments in excess of the
capitalized acquisition costs are netted against the exploration costs for the period.
j)
Provisions
(i) Decommissioning and restoration provision: Future obligations to retire an asset, including dismantling,
remediation and ongoing treatment and monitoring of the site related to normal operations are initially
recognized and recorded as a liability based on estimated future cash flows discounted at a risk free
rate. The decommissioning and restoration provision is adjusted at each reporting period for changes to
factors including the expected amount of cash flows required to discharge the liability, the timing of such
cash flows and the pre-tax rate for risk specific to the liability.
Page 12
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
The liability is also accreted to full value over time through periodic charges to profit or loss. This
unwinding of the discount is charged to financing expense in profit or loss.
The amount of the decommissioning and restoration provision initially recognized is capitalized as part
of the related asset’s carrying value and depreciated to profit or loss. The method of depreciation follows
that of the underlying asset. The costs related to a decommissioning and restoration provision are only
capitalized to the extent that the amount meets the definition of an asset and can bring about future
economic benefit.
For the years presented, the Company does not have any decommissioning or restoration provisions.
(ii) Other provisions: Provisions are recognized when a current legal or constructive obligation exists, as a
result of past events, and it is probable that an outflow of resources that can be reliably estimated will be
required to settle the obligation. Where the effect is material, the provision is discounted using an
appropriate pre-tax rate for risk specific to the liability.
k)
Income Taxes
Income tax expense (recovery) is comprised of current and deferred tax. Income tax is recognized in profit or
loss except to the extent that it relates to items recognized directly in equity, in which case the income tax is
also recognized directly in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted, at the end of the reporting period, and any adjustment to tax payable in respect of
previous years.
In general, deferred tax is recognized in respect of temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income
tax is determined on a non-discounted basis using tax rates and laws that have been enacted or
substantively enacted at the date of statement of financial position and are expected to apply when the
deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is probable
that the assets can be recovered.
Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates,
except, in the case of subsidiaries, where the timing of the reversal of the temporary difference is controlled
by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are presented as non-current.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities, when they relate to income taxes levied by the same taxation authority
and when the Company intends to settle its current tax assets and liabilities on a net basis.
l)
Share-based Payments
The Company grants share options to buy common shares of the Company to directors, officers, employees
and service providers. The Company recognizes share-based payment expense based on the estimated fair
value of the options. A fair value measurement is made for each vesting instalment within each option grant
and is determined using the Black-Scholes option-pricing model. The fair value of the options is recognized
over the vesting period of the options granted as both share-based payment expense and reserves. This
includes a forfeiture estimate, which is revised for actual forfeitures in subsequent periods. The reserves
account is subsequently reduced if the options are exercised and the amount initially recorded is then
credited to share capital.
Page 13
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
In situations where equity instruments are issued to non-employees and some or all of the goods or services
received by the entity as consideration cannot be specifically identified, they are measured at fair value of
the equity instruments issued. Otherwise, such share-based payments are measured at the fair value of
goods or services received.
m) Loss per Share
Basic loss per share is computed by dividing loss available to common shareholders by the weighted
average number of common shares outstanding during the year. The computation of diluted loss per share
assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise
or issuance would have a dilutive effect on the loss per share. The dilutive effect of convertible securities is
reflected in the diluted loss per share by application of the "if converted" method. For the year presented, this
calculation proved to be anti-dilutive.
n) Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss), and
represents the change in equity which results from transactions and events from sources other than the
Company’s shareholders. The Company’s translation of its subsidiaries which have a functional currency
other than the Canadian Dollar is the only item affecting comprehensive income (loss) for the years
presented.
4. Recent Accounting Pronouncements
Certain new standards, interpretations, amendments and improvements to existing standards were issued by
the IASB or IFRIC.
The following new standards and amendments to standards which are applicable to the Company have been
issued with effective dates into the later fiscal years:
a)
IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets
and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in
IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but
simplifies the mixed measurement model and establishes three primary measurement categories for
financial assets: amortized costs, fair value through OCI and FVTPL. The basis of classification depends on
entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in
equity instruments are required to be measured at FVTPL with the irrevocable option at inception to present
changes in fair value in OCI. There is a new expected credit losses model that replaces the incurred loss
impairment model used in IAS 39. For financial liabilities, there were no changes to classification and
measurement except for the recognition of changes in own credit risk in OCI, for liabilities designated at
FVTPL.
IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness
tests. It requires an economic relationship between the hedged item and hedging instrument and for the
hedged ratio to be the same as the one management actually use for risk management purposes.
Contemporaneous documentation is still required but is different to that currently prepared under IAS 39.
The Standard is effective for accounting periods beginning on or after January 1, 2018. Early adoption is
permitted. The Company is currently evaluating the impact of this Standard.
Page 14
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
b)
IFRS 15 Revenue from Contracts with Customers deals with revenue recognition and establishes principles
of reporting useful information to the users of financial statements about the nature, amount, timing, and
uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is
recognized when the customer obtains control of a good or service and thus has the ability to direct the use
and obtain the benefits from the good or service. The Standard replaces IAS 18 Revenue, and IAS 11
Construction Contracts and related interpretations. It is effective for annual periods beginning on or after
January 1, 2018 with earlier application permitted. The Standard is not expected to have an impact on the
Company in its present form.
c) IFRS 11 Accounting for acquisition of interest in joint operations amends Joint Arrangements to require an
acquirer of an interest in a joint operation in which the activity constitutes a business (as defined in IFRS 3
Business Combinations) to apply all of the business combinations accounting principles in IFRS 3 and other
IFRS, except for those principles that conflict with the guidance in IFRS 11 and to disclose the information
required by IFRS 3 and other IFRS for business combinations. The amended IFRS 11 is applicable to
annual periods beginning on or after July 1, 2016. The Standard is not expected to have an impact on the
Company in its present form.
d) Amendments are made to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in
Associates and Joint Ventures (2011) to clarify the treatment of the sale or contribution of assets from an
investor to its associate or joint venture and requires full recognition in the investor's financial statements of
gains and losses arising on the sale or contribution of assets that constitute a business (as defined in
IFRS 3 Business Combinations) and requires the partial recognition of gains and losses where the assets
do not constitute a business. The amended IFRS 10 and IAS 28 are applicable to annual periods beginning
on or after July 1, 2016. The Standard is not expected to have an impact on the Company in its present
form.
5. Financial Instruments
Categories of financial instruments
Financial assets
Fair Value Through Profit or Loss
Cash and cash equivalents
Short-term investments
Loans and receivables
Receivables and advances (Note 6)
Financial liabilities
Other financial liabilities
June 30,
2016
June 30,
2015
$
17,605,111 $
459,000
19,120,394
1,200,000
253,127
387,325
$
18,317,238 $
20,707,719
Accounts payable and accrued liabilities
$
784,453 $
923,261
Page 15
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
a) Fair Value
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy
according to the relative reliability of the inputs used to estimate the fair values. 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 directly or indirectly observable for the asset or liability;
and,
Level 3 – Inputs that are not based on observable market data;
Level 1
Cash and cash equivalents
Short-term investments
June 30,
2016
June 30,
2015
$
$
17,605,111 $
459,000 $
19,120,394
1,200,000
The fair values of the Company’s other financial instruments approximate their carrying values because of
the short-term nature of these instruments.
b) Management of Capital Risk
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 exploration and evaluation assets 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 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.
In order to maximize ongoing exploration, 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 twelve months 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. There were no changes to the Company’s approach to capital management
during the year.
Page 16
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
c) 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.
(i) 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 United
States (“US”) dollars, Australian dollars and in Argentine and Chilean Pesos. A significant change in the
currency exchange rates between the US and Australian 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, 2016, the Company is exposed to currency risk through the following assets and liabilities
denominated in US and Australian dollars and Argentine and Chilean Pesos:
Cash and cash equivalents
Receivables and advances
Accounts payable and accrued liabilities
US
Dollars
9,930,873
-
(108,949)
Australian
Dollars
1,374,751
-
(125,595)
Argentine
Peso
5,194,976
2,171,933
(4,330,177)
Chilean
Peso
14,863,607
27,871,920
(21,321,319)
Based on the above net exposures as at June 30, 2016, and assuming that all other variables remain
constant, a 10% depreciation or appreciation of the Canadian dollar against the US and Australian dollar
would result in an increase/decrease of $1,277,734 and $120,793, respectively in the Company’s
comprehensive loss. Likewise, a 10% depreciation or appreciation of the Canadian dollar against the
Argentine and Chilean Peso would result in an increase/decrease of $26,435 and $4,231, respectively in
the Company’s comprehensive loss.
(ii) 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 and cash equivalents is held through large financial institutions. The Company’s
receivables primarily consist of refundable sales taxes due from the Federal Government of Canada and
amounts due from the Company’s joint venture partners with established credit worthiness. Management
believes that credit risk concentration with respect to receivables is remote.
(iii) 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, 2016, the Company’s financial liabilities consist of accounts
payable and accrued liabilities totalling $784,453. All of the Company’s obligations are expected to be
paid within 90 days. Management believes the Company has sufficient funds to meet its liabilities as they
become due.
Page 17
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
(iv) 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. The applicable rates of interest on such investments range
between 0.05% and 1.65%.
(v) Price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to
changes in market prices, other than those arising from interest rate risk and foreign currency risk. The
Company is not exposed to significant other price risk.
6. Receivables and Advances
Goods and services tax receivable
Interest receivable
Prepaid expenses and advances
Due from joint venture partners (Note 9(a)(iii), (d))
$
June 30,
2016
7,374
1,014
84,976
167,137
$
$
260,501
$
June 30,
2015
5,587
1,903
93,932
385,422
486,844
7.
Investment
In conjunction with the sale of its Joaquin Property during the year ended June 30, 2013, the Company
received, as partial consideration, 1,310,043 common shares of Coeur Mining Inc. (“Coeur”). A reconciliation of
the movement in the fair value of Coeur’s shares held by the Company is as follows:
Opening balance
Disposed of for cash
Loss from change in fair market value
Exchange differences
June 30, 2016
Quantity
Amount
- $
-
-
-
- $
-
-
-
-
-
June 30, 2015
Quantity
1,087,043 $
(1,087,043)
-
-
Amount
10,653,639
(4,625,381)
(6,381,125)
352,867
- $
-
During the year ended June 30, 2015, the Company sold all of its remaining 1,087,043 shares of Coeur for
gross proceeds of $4,625,381. The Company carried-back the resultant capital loss against capital gains
reported during the year ended June 30, 2013. The Company received from an income tax refund, inclusive of
refund interest, of $3,097,701 on February 9, 2016,
Page 18
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
8. Equipment and Software
Cost
Balance as at June 30, 2014 $
Additions for the year
Balance as at June 30, 2015 $
Additions for the year
Balance as at June 30, 2016 $
Accumulated Depreciation
Balance at June 30, 2014
Depreciation for the year (i)
$
Balance as at June 30, 2015 $
Depreciation for the year (i)
Balance as at June 30, 2016 $
Exploration
Equipment
Computer
Hardware
Computer
Software
388,191 $
10,387
398,578 $
1,320
399,898 $
284,973 $
43,867
328,840 $
35,830
364,670 $
33,002 $
24,881
57,883 $
-
31,010 $
6,824
37,834 $
-
57,883 $
37,834 $
25,323 $
5,397
30,720 $
8,204
38,924 $
1,723 $
12,422
14,145 $
12,611
26,756 $
Total
452,203
42,092
494,295
1,320
495,615
312,019
61,686
373,705
56,645
430,350
Carrying Amounts
As at June 30, 2015
As at June 30, 2016
$
$
69,738 $
35,228 $
27,163 $
18,959 $
23,689 $
11,078 $
120,590
65,265
(i) Allocated between depreciation expense ($17,703) and exploration costs ($38,942) on the statement of
loss and comprehensive loss.
9. Exploration and Evaluation Assets
A reconciliation of capitalized acquisition costs is as follows:
Acquisition Costs
Chile
Atlas - Dos Hermanos
Argentina
Santa Rita and Virginia
Pipeline projects
Chile
Atlas - Dos Hermanos
Argentina
Santa Rita and Virginia
Pipeline projects
Balance at
June 30, 2015
Change during
the year
Balance at
June 30, 2016
171,777 $
-
$
171,777
2,579,704
78,333
229,115
(58,167)
2,829,814 $
170,948
$
2,808,819
20,166
3,000,762
Balance at
June 30, 2014
Change during
the year
Balance at
June 30, 2015
174,178 $
(2,401) $
171,777
2,579,704
78,333
-
-
2,832,215 $
(2,401) $
2,579,704
78,333
2,829,814
$
$
$
$
Page 19
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
Cumulative exploration expenditures per project under active exploration are as follows:
Exploration Costs
Balance at
June 30, 2015
Additions during
the year
Balance at
June 30, 2016
Gorbea Belt – Atlas Project
Gorbea Belt – Titan Project
Gorbea Belt – Other Projects
Gorbea – Joint Venture Management
Rubi
Frontera – Joint Venture
Chile Pipeline Projects
Project Generation
Operation and Management
Value Added and Other Taxes
Total Chile Properties
Claudia
La Curva
Santa Rita and Virginia
Argentina Pipeline Projects
Project Generation
Operation and Management
Value Added and Other Taxes
Total Argentina Properties
Total Exploration Costs
$
$
$
$
$
2,606,219 $
3,025,181
1,844,489
36,381
1,197,571
1,806,442
-
2,550,950
1,061,666
154,504
59,003 $
22,246
24,256
(161,565)
169,425
238,704
857,120
1,361,613
394,907
86,853
2,665,222
3,047,427
1,868,745
(125,184)
1,366,996
2,045,146
857,120
3,912,563
1,456,573
241,357
14,283,403 $
3,052,562 $
17,335,965
5,729,251 $
1,637,801
10,287,816
5,256,796
2,533,081
3,326,770
2,805,837
54,514 $
46,571
136,502
283,229
559,906
559,525
10,018
5,783,765
1,684,372
10,424,318
5,540,025
3,092,987
3,886,295
2,815,855
31,577,352 $
1,650,265 $
33,227,617
45,860,755 $
4,702,827 $
50,563,582
Page 20
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
During the years ended June 30, the Company incurred exploration and evaluation costs on its properties as
follows:
2016
2015
Chile
Gorbea Belt – Atlas Project
Assays and sampling
Camp and general
Consultants and salaries
Geophysics
Mining rights and fees
Travel
Option payment
Recovery of costs
Gorbea Belt – Titan Project
Camp and general
Consultants and salaries
Geophysics
Mining rights and fees
Travel
Option payment
Recovery of costs
Gorbea Belt – Other Projects
Camp and general
Consultants and salaries
Geophysics
Mining rights and fees
Travel
Option payment
Recovery of costs
Gorbea Joint Venture Management
Assays and sampling
Camp and general
Geophysics
Administration
Consultants and salaries
Mining rights and fees
Professional fees
Travel
Recovery of costs
Option payment
$
$
-
134
47,669
2,382
8,509
309
-
-
59,003
1,113
9,641
4,680
6,812
-
-
-
22,246
52
1,184
4,706
18,248
66
-
-
24,256
1,215
2,910
1,089
2,581
136,527
98
-
5,793
(110,714)
(201,064)
(161,565)
1,752
59,059
269,759
86,223
135,831
13,326
(10,073)
(141,695)
414,182
44,279
177,940
47,610
62,609
12,780
(5,925)
(67,305)
271,988
19,843
11,437
75,676
159,666
541
(12,786)
(145,237)
109,140
-
-
-
15,722
8,323
1,539
10,242
555
-
-
36,381
Total – Properties joint ventured to other companies
(56,060)
831,691
Page 21
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
Chile (Cont.)
Rubi
Assays and sampling
Camp and general
Consultants and salary
Geophysics
Mining rights and fees
Travel
Professional fees
Option payment
Recovery of costs
Chile Pipeline Projects
Assays and sampling
Camp and general
Geophysics
Administration
Consultants and salaries
Mining rights and fees
Travel
2016
2015
382
5,054
24,824
5,219
132,538
908
500
-
-
169,425
142,832
52,348
44,113
6,131
375,682
178,380
57,634
857,120
-
40,864
108,827
3,824
126,311
16,725
-
(54,956)
(111,347)
130,248
-
-
-
-
-
-
-
-
Total – 100% owned properties
1,026,545
130,248
Frontera – Joint Venture
Camp and general
Consultants and salary
Geophysics
Mining rights and fees
Travel
Total – Earn-in joint venture on third party projects
Project Generation
Operation and Management
Value Added and Other Taxes
Argentina
Claudia
Assays and sampling
Camp and general
Consultants and salary
Geophysics
Mining rights and access fees
Administration
Travel
Option payment
Recovery of costs
$
$
75
53,889
6,394
175,474
2,872
238,704
146,578
411,840
130,931
301,204
52,158
1,042,711
1,361,613
1,640,741
394,907
86,853
276,808
4,345
Total Chile
3,052,562
3,926,544
8,336
29,417
96,263
-
170,070
7,971
7,921
(135,230)
(130,234)
54,514
-
24,966
86,116
1,985
57,363
-
5,642
-
-
176,072
Page 22
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
Argentina (Cont.)
La Curva
Assays and sampling
Camp and general
Consultants and salary
Geophysics
Mining rights and access fees
Travel
Santa Rita and Virginia
Assays and sampling
Camp and general
Consultants and salary
Mining rights and access fees
Professional fees
Administration
Travel
Argentina Pipeline Projects
Assays and sampling
Camp and general
Consultants and salary
Mining rights and fees
Environmental
Administration
Travel
Total – 100% owned properties
Project Generation
Operation and Management
Value Added and Other Taxes
2016
2015
3,549
7,764
18,933
-
13,291
3,034
46,571
1,707
49,598
39,845
38,172
5,681
200
1,299
136,502
5,382
4,241
52,156
216,883
3,973
170
424
283,229
520,816
559,906
559,525
10,018
$
5,316
8,807
48,210
853
14,683
4,200
82,069
612
60,932
138,340
14,335
-
-
10,772
224,991
-
17,665
43,517
28,042
-
-
8,225
97,449
580,581
891,654
499,002
175,139
$
Total Argentina
1,650,265
2,146,376
Total Exploration and Evaluation Costs
$
4,702,827
$
6,072,920
The Company owns 100% of the mineral exploration rights to a large portfolio of properties focused in two
mining regions, namely the Atacama region in northern Chile and the Santa Cruz Province in southern
Argentina. As well the company holds several other properties in both San Juan and Catamarca provinces of
northern Argentina. The Company also focuses on generative exploration to identify and acquire new
prospects.
Page 23
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
Chile
The Company has a portfolio of gold, silver and copper projects in northern Chile.
a) Gorbea Belt - Properties Joint Ventured to Other Companies:
The Company currently has a 100% interest in nine precious metals properties that define the Gorbea Belt (the
“Gorbea Project”). The Gorbea Project is a reconnaissance program engaged in prospect generation and
exploration of disseminated gold and silver prospects in the region. The Company’s focus along the Gorbea
Belt has been on the advancement of its Atlas and Titan properties.
i. Atlas Property
The Company holds a 100% interest in the Atlas Property in northern Chile, acquired by staking on open
ground Acquisition costs are capitalized with exploration and evaluation assets.
ii. Titan Property
The Company holds a 100% interest in the Titan Property in northern Chile. The property was acquired
through staking on open ground, as part of the Company’s Miocene Arc exploration program.
iii. Letter Agreement with Yamana Gold Inc. (“Yamana”)
On March 25, 2015, the Company entered into a joint venture agreement, granting Yamana the option to
acquire up to a 75% interest in the Gorbea Project (“the Letter Agreement”).
The first phase of the Letter Agreement entitles Yamana to earn a 51% interest on the first earn-in by
incurring, over a period of four years, annual staged expenditures totalling US$10,000,000, and making
annual staged payments totalling US$2,000,000, as follows: US$25,000 upon signing of the Letter
Agreement; US$155,000 (received) by May 2016; US$400,000 by May 2017; and US$1,420,000 by May
2018. The first earn-in includes committed expenditures of US$2,000,000 by the first anniversary of which
US$1,200,000 must be spent on the Atlas Property and US$600,000 on the Titan Property.
After the first earn-in, Yamana may elect to proceed with the second earn-in whereby its interest can be
increased to 65% by completing, within an additional two years, a technical report prepared by an
independent accredited firm in accordance with the NI 43-101 that confirms (on any portion of the Gorbea
Project) an indicated resource estimate and preliminary economic assessment of more than 1.0 million
tonnes of gold, using a 0.3 g/t cut-off grade.
Following the second earn-in, Yamana may elect to proceed with the third earn-in, and thereby further
increase its interest to 75% by completing, within one year of the exercise of the second earn-in, a study
evaluating the feasibility of production on any portion of the Gorbea Project and making a decision to mine.
If requested by Mirasol, Yamana will provide mine financing to Mirasol on commercial terms for its 25%
share of development costs, with interest calculated at LIBOR+3% and repayment of Mirasol’s share of the
mine finance costs to be made from 50% of the cash flow to which Mirasol would be entitled.
The Letter Agreement also provides that Yamana may extend the earn-in periods, subject to certain
limitations, for up to three years by paying Mirasol the sum of US$500,000 per extension year.
The Letter Agreement provides Mirasol the right, exercisable at the 65% or 75% earn-in stages, to convert
up to 9% of its equity position into a 3% net smelter return (“NSR”) royalty, and retain a participating equity
interest in the Gorbea Project. Yamana retains a pre-emptive right to purchase from Mirasol a 0.5% NSR
royalty, leaving Mirasol with 2.5% NSR royalty with the purchase price set by a third-party independent
valuation process.
Page 24
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
Yamana has made all the option payments due as of June 30, 2016. Also in conjunction with the Letter
Agreement, Yamana agreed to reimburse the Company for US$283,980 of costs incurred on the Gorbea
Projects during the year ended June 30, 2015. This amount was included within receivables and advances
as of June 30, 2015, and was received during the year ended June 30, 2016. Further reimbursements in
relation to certain costs were received during the year ended June 30, 2016. As of June 30, 2016 $36,901
of expense reimbursements was receivable.
b) 100% Owned Properties:
Rubi Property
The Company owns a 100% interest in the Rubi property located in Northern Chile.
On August 14, 2014, the Company entered into an option agreement with First Quantum Minerals Ltd.
(“First Quantum”), allowing First Quantum to earn a 55% interest in the Rubi Property. The Company
received $54,956 (US$50,000) upon signing the option agreement.
On April 2, 2015, the Company was advised by First Quantum of relinquishment of its option. As First
Quantum exited prior to the first earn-in point, it retains no equity or royalties in the Rubi Property.
c) Earn-In Joint Venture (“JV”) on Third Party Projects:
Frontera JV
In fiscal 2013, the Company signed a definitive exploration and option agreement (the “Agreement”) with
an arms-length private Chilean company. This agreement, referred to as the Frontera JV, covers a
portfolio of prospective, early-stage mineral properties located within the area of Mirasol’s Miocene Arc
generative program, with some of these properties being adjacent to or contiguous with Mirasol’s Gorbea
Project including Titan and Atlas properties in northern Chile.
The Frontera JV Agreement provides for Mirasol to earn a 51% interest in any, or all, of the exploration
properties by expending US$3 million within a four-year period which commenced on December 26, 2012
($2.04 million spent to date of which the majority is attributable to the Company’s commitment). After
vesting, each party will contribute in proportion to its equity position. Should a discovery be put into
production, a 1.5% NSR is payable by Mirasol to its venture partner from Mirasol’s percentage of
production, capped at 51% of total production. If either party dilutes below 10% interest, ownership will
convert to a 1% NSR.
Argentina
In the Santa Cruz province of Argentina, the Company controls the mineral exploration rights to various
precious metals properties.
d) Claudia Property
The Company owns a 100% interest in the Claudia property situated in south-central part of the Santa
Cruz Mining District, Argentina.
In February 2016 Mirasol signed an exploration and option agreement with Cerro Vanguardia S.A
(“CVSA”). CVSA has been granted the option to acquire up to a 75% interest in the Claudia Project,
exercisable in 3 stages over a six-year, or shorter, earn-in period. The first earn-in option for CVSA to
earn 51% over a maximum 2-year period, requires spending US$5 million on exploration, making US$1
million in payments to Mirasol and executing an exploration program that includes a minimum of 12,000 m
drilling. Mirasol will retain a 25% funded-to-production interest in the Claudia project. The agreement is in
good standing as of June 30, 2016. As of June 30, 2016, $130,236 of expense reimbursements was
receivable.
Page 25
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
e) La Curva Property
The Company owns a 100% interest in mining claims of La Curva gold project in southern Argentina.
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.
During the years ended June 30, 2012 and 2013, the Company purchased certain surface rights
overlaying the Virginia prospect. The total cost incurred for such surface rights was $2,579,704 which was
capitalized and recorded within exploration and evaluation assets.
In June 2016, the Company entered into an agreement to purchase 100% interest in Jazmin property
located adjacent to the Virginia prospect. The purchase cost of $229,511 (US$175,000) capitalized and
recorded with exploration and evaluation assets.
g) Pipeline Projects:
Mirasol carries out exploration programs on a number of projects which are prospective for gold and/or
silver mineralization in Chile and Argentina.
In order to achieve cost efficiencies certain claims without merit were dropped during the year ended June
30, 2016 and $58,167 (June 30, 2015 - $Nil) capitalized at acquisition of these claims were written-off.
The write-off is included in exploration costs on the Statement of Loss and Comprehensive Loss.
Page 26
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
10. Related Party Transactions
Details of the transactions between the Company’s related parties are disclosed below.
a) Compensation of key management personnel
Key management personnel include persons having the authority and responsibility for planning, directing, and
controlling the activities of the Company as a whole.
The remuneration of management and independent directors was as follows:
Management compensation (i)
Share-based payments (ii)
Bonus shares(iii)
Director’s fees (iv)
Year Ended June 30,
$
2016
507,987
191,455
372,000
133,500
$
$
1,204,942
$
2015
494,845
152,271
-
78,625
725,741
(i) Management compensation is included in Management fees (2016 - $187,394; 2015 - $180,702) and in
Exploration costs (2016 - $320,593; 2015 - $314,143) in the Company’s consolidated statements of loss
and comprehensive loss.
(ii) Share-based payments represent the expense for the years ended June 30, 2016 (Note 11c) and 2015.
(iii) In February 2016, the Company signed Consulting Agreements, effective July 2015, with each of Global
Ore consultants (Global Ore”) and Stephen Nano, to perform the duties of President, CEO and Qualified
Person for the Company. Under the terms of the Global Ore agreement, the Company has retained the
services of Global Ore consultants until June 30, 2018, to provide target generation related consulting
services to the Company on an exclusive basis throughout Chile and Argentina. The Company has
agreed to pay for such services at an agreed upon preferential discounted rate but has agreed to a
minimum monthly retainer of Australian Dollar (“AUD”) $35,000. Further, as additional consideration, the
Company has agreed to an incentive grant of 255,000 (Issued April 29, 2016) stock options, subject to
vesting, to key representatives of Global Ore other than Mr. Nano. The Global Ore contract can be
terminated at any time by the Company by paying a fee of AUD $225,000.
The CEO consulting agreement with Mr. Nano is also for a term expiring on June 30, 2018, and provides
for payment of a consulting fee of $25,000 per month, and the issuance of 300,000 Retention Bonus
Shares (the “Bonus Shares”) in consideration for past services. The Bonus Shares were issued, on March
22, 2016 and will be subject to escrow restrictions whereby 100,000 released on March 22, 2016;
100,000 released on July 2, 2016 and 100,000 released on July 2, 2017. The contract with Mr. Nano
contains termination provisions which require payment of one-year’s fees for termination without cause
and two years for termination due to a change of control event, as defined.
(iv) The independent directors of the Company are paid $2,100 per month (2015 - $1,000 per month) while
the Chairman of the Board of Directors receives an additional $3,000 per month for serving in this
capacity (2015 - $nil). The independent directors are also paid for serving on certain special committees
of the Board of Directors.
b) Transactions with other related parties
Certain of the Company’s officers and directors render services to the Company as sole proprietors or through
companies in which they are an officer, director, or partner.
Page 27
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
The following companies are related parties through association of the Company’s directors and officers:
Nature of transactions
Global Ore Discovery
Miller Thomson
Avisar Chartered Accountants(i)
Chase Management Ltd.
Legal fees
Accounting fees
Professional fees
Project generation, exploration management and
GIS services
CFO services, office administration support
services and office sharing
As of March 11, 2016, Avisar ceased to be a related party of the Company.
Evrim Resources Corp. (“Evrim”)
(i)
The Company incurred the following fees and expenses with related parties as follows:
Legal fees
Accounting fees
Professional fees
Other operating expenses
Project generation, exploration expenses and GIS services
CFO services, office sharing and administration
$
Year Ended June 30,
$
2016
177,421
134,150
41,200
-
798,676
52,833
2015
261,553
187,750
32,793
23,150
1,066,151
-
$
1,204,280
$
1,571,397
In March 2016, the Company entered into an agreement with Evrim, a company with common management,
to share CFO services, Administration services and office space. The Agreement will expire in February 28,
2018. Either party can terminate the agreement with six months’ notice.
Included in accounts payable and accrued liabilities at June 30, 2016, is an amount of $148,450 (2015 -
$317,081) owing to directors and officers of the Company and to companies where the directors and officers
are principals.
11. Share Capital
a) Authorized Share Capital
The Company’s authorized share capital consists of an unlimited number of common shares without par value.
All issued common shares are fully paid.
b) Reconciliation of Changes in Share Capital
No equity financings were conducted by the Company during the years ended June 30, 2016 and 2015. During
the year ended June 30, 2016, the Company issued 118,750 shares on exercise of share purchase options for
gross proceeds of $118,501. These options had a fair value of $44,553. The Company issued 300,000 bonus
share, pursuant to the employment contract with the CEO of the Company with a fair value of $372,000 (Note
10 a (iii)).
Page 28
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
c) Share Purchase Options
The Company has established a share purchase option plan whereby the board of directors may, from time to
time, grant options to directors, officers, employees or consultants. Options granted must be exercised no later
than five years from the date of grant or such lesser period as determined by the Company’s board of
directors. The exercise price of an option is equal to or greater than the closing market price on the TSX
Venture Exchange (“TSX-V”) on the day preceding the date of grant. The vesting terms for each grant are set
by the Board of Directors. The option plan provides that the aggregate number of shares reserved for issuance
under the plan shall not exceed 10% of the total number of issued and outstanding shares. At June 30, 2016, a
total of 4,466,441 options were reserved under the option plan with 2,553,750 options outstanding.
(i) Movements in share purchase options during the year
A summary of the Company’s share purchase options and the changes for the year are as follows:
Options outstanding as at June 30, 2014
Granted
Forfeited
Options outstanding as at June 30, 2015
Granted
Exercised
Amended
Expired
Options outstanding as at June 30, 2016
Options exercisable at June 30, 2016
Number of Options
3,227,800
1,232,500
(900,000)
3,560,300
320,000
(118,750)
(460,000)
(747,800)
2,553,750
1,813,750
Weighted Average
Exercise Price
$3.02
$0.88
$2.90
$2.31
$1.38
$1.00
$4.34
$2.52
$2.31
$2.54
(ii) Fair value of share purchase options granted
During the year ended June 30, 2016, the Company and certain holders of its stock options agreed to amend
the terms of 920,000 previously granted stock options as follows:
• A total of 30,000 options granted on December 16, 2010, with an exercise price of $5.55 per share and
due to expire on December 16, 2015, were amended resulting in 15,000 amended options exercisable
at a price of $0.88 per share and with an amended expiration date of December 16, 2018.
• A total of 435,000 options granted on March 23, 2011, with an exercise price of $3.32 per share and
due to expire on March 23, 2016, were amended resulting in 217,500 amended options exercisable at
a price of $0.88 per share and with an amended expiration date of March 23, 2019.
• A total of 455,000 options granted on August 4, 2011, with an exercise price of $5.23 per share and
due to expire on August 4, 2016, were amended resulting in 227,500 amended options exercisable at
a price of $0.88 per share and with an amended expiration date of August 4, 2019.
The above included 585,000 of stock options originally granted to the related parties which were approved by
the Company’s shareholders at the Annual General Meeting held on February 15, 2016.
The incremental fair value of these stock options was estimated to be $147,344 using weighted average
assumptions in the Black-Scholes option pricing model.
On April 29, 2016, the Company granted options to purchase up to 320,000 common shares of the Company
at an exercise price of $1.38, pursuant to the service contract with Global Ore (Note 10a(iii)) and another
consultant. The estimated fair value of these share options was determined to be $176,524 using the Black-
Scholes option pricing model.
Page 29
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
Of the total fair value, $97,405, relating to the vested share purchase options (25% of the grant), was
recognized as share-based payments expense in the Company’s statement of loss, using the graded vesting
method, during the year ended June 30, 2016. Balance will be vested 25% each on July 1, 2016 to 2018.
On April 29, 2015, the Company granted options to purchase up to 1,232,500 common shares of the Company
at an exercise price of $0.88. A total of 300,000 of such stock options were granted to the directors and officers
of the Company. The estimated fair value of these share options was determined to be $567,260 using the
Black-Scholes option pricing model. Of the total fair value, $71,786 (2015 - $325,635), relating to the vested
share purchase options, was recognized as share-based payments expense in the Company’s statement of
loss, using the graded vesting method.
Total share-based payments recognised for the year ended June 30, 2016 amounted to $316,535 (June 30,
2015 - $325,635).
The fair value of options granted and the incremental fair value of the amended options was estimated on the
date of the grant using the Black-Scholes option pricing model, with the following weighted average
assumptions:
Expected dividend yield
Expected share price volatility
Risk-free interest rate
Expected life of options
Fair value of options granted (per share option)
Year Ended June 30,
2016
0.0%
52.99%
0.551%
2.84 years
$0.31
2015
0.0%
63.46%
1.06%
4.67 years
$0.46
(iii) Share purchase options outstanding at the end of the year
A summary of the Company’s options outstanding as at June 30, 2016 is as follows:
Expiry Date
December 16, 2018
March 23, 2019
August 4, 2019
September 26, 2017
May 14, 2018
April 29, 2021
April 29, 2021
Exercise
price $
0.88
0.88
0.88
2.34
1.28
0.88
1.38
Options
Outstanding
10,000
206,250
212,500
62,500
582,500
1,160,000
320,000
2,553,750
Weighted
Average
Remaining Life
of Options
(years)
2.46
2.73
3.10
1.24
1.87
4.83
4.83
3.69
Options
Exercisable
10,000
206,250
212,500
62,500
582,500
660,000
80,000
1,813,750
Page 30
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
12. Segmented Information
The Company’s business consists of a single reportable segment being mineral exploration and development.
Details on a geographical basis are as follows:
Total Non-Current Assets
Canada
Argentina
Chile
13. Income Taxes
$
June 30,
2016
22,449 $
2,847,637
195,941
$
3,066,027 $
June 30,
2015
40,012
2,704,095
206,297
2,950,404
The Company is subject to Canadian federal and provincial tax for the estimated taxable income at a rate of
26.00%. The Company has no taxable income in Canada.
The tax expense at statutory rates for the Company can be reconciled to the reported income taxes per the
statement of loss and comprehensive loss as follows:
Net loss before income taxes
Canadian federal and provincial income tax rates
Expected income tax recovery based on the above
Non-deductible expenses
Difference between Canadian and foreign tax rates
Tax effect of deferred tax assets for which no tax
benefit has been recorded
Foreign exchange and other
Total income tax recovery
Year Ended June
30, 2016
Year Ended June
30, 2015
$
$
(6,105,003)
26.00%
(1,587,301)
442,168
(74,718)
(4,133,264)
5,441,115
$ 88,000
$
$
$
(11,126,091)
26.00%
(2,892,784)
206,689
357,937
379,904
(1,258,686)
(3,206,940)
The Company’s unrecognized deferred tax assets are as follows:
Unrecognized deferred income tax assets:
Non-capital losses
Exploration and evaluation assets
Share issue costs
Other
Total unrecognized deferred income tax assets
June 30,
2016
June 30,
2015
$
$
1,122,984
4,539,560
52,796
6,659
5,721,999
$
$
961,507
8,273,880
52,796
567,080
9,855,263
In assessing the recoverability of deferred tax assets other than deferred tax assets resulting from the initial
recognition of assets and liabilities that do not affect accounting or taxable profit, management considers
whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible.
Page 31
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
Deductible temporary differences, unused tax losses and unused tax credits:
June 30,
2016
June 30,
2015
Expiry date
Range
Non-capital losses
Exploration and evaluation assets
Share issue costs
Other
$
3,776,124 $
13,456,532
203,063
25,554
See below
2,919,210
27,187,224 Not applicable
2036
1,684,094 Not applicable
203,063
As at June 30, 2016, an estimated income tax refund of $23,991 (2015 - $3,032,000) is recognized in the
Company’s statement of financial position. Income taxes recoverable includes a recovery of $23,991 (2015 –
$2,540,471 related to realized capital losses (Note 7) and $Nil (2015 - $491,529) of non-capital losses that
are carried back and applied against capital gains reported during the year ended June 30, 2013.
The Company received $3,097,701 and $977,368 inclusive of interest on February 9, 2016 and February 20,
2015 respectively, for its income tax refund for the years ended June 30, 2014 and 2015.
The Company has non-capital loss carry-forwards of approximately $2,035,604 that may be available for tax
purposes. The loss carry-forwards are principally in respect of Canadian, Argentine and Chilean operations
and expire as follows:
2019
2020
2021
No-expiry
14. Commitments
$
Argentina
112,378 $
521,665
914,154
-
$
1,548,197 $
Chile
-
-
-
487,404
487,404
a. Global Ore contract (Note 10 a (iii)) which expires on June 30, 2018, is subject to an early termination
clause which requires the Company to pay AUD$ 225,000.
b. The contract with Mr. Nano (Note 10 a (iii)) contains termination provisions which require payment of
one-year’s fees for termination without cause and two years for termination due to a change of control
event, as defined.
c. Pursuant to the agreement entered into with Evrim, the company is required give six months’ notice to
terminate the contract (Note 10 a (iv).
Page 32
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2016
Canadian Funds
15. Subsequent Events
a. Rights offering
On September 29, 2016, the Company completed a rights offering for gross proceeds of $10,000,000.
Bonus warrants of 500,000 were issued to the guarantors of the rights offering. Each bonus warrant is
exercisable at $2.40 and expires on March 10, 2017.
b. Share purchase option grant
On August 26, 2016, the Company issued 715,876 incentive share purchase options to certain
directors, officers, employees and consultants of the Company. The options are exercisable at $2.85
for a period of three years from the date of grant.
Page 33
Form 51-102F1
INTRODUCTION
Management Discussion and Analysis
For Mirasol Resources Ltd
The Management Discussion and Analysis (“MD&A”) is prepared as of October 24, 2016 and is
intended to supplement Mirasol Resources Ltd.’s (“Mirasol” or the “Company”) consolidated
financial statements for the year ended June 30, 2016. All financial information, unless otherwise
indicated, has been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”). 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
as of June 30, 2016.
FORWARD-LOOKING INFORMATION
This MD&A contains certain forward-looking statements and information relating to Mirasol that are
based on the beliefs of its management as well as assumptions made by and information currently
available to the Company. 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, the Company’s goals and plans going forward, regulatory
compliance, the sufficiency of current working capital, and 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.
Forward looking statements are based on the beliefs, estimates and opinions of the Company’s
management on the date the statements are made. The Company undertakes no obligation to
update these forward looking statements in the event that management’s beliefs, estimates or
opinions, or other factors, should change.
This MD&A also uses the terms “pit constrained mineral resources estimate” and “indicated
resource”. The Company advises that these terms are recognized by Canadian securities
regulations (under National Instrument 43-101 “Standards of Disclosure for Mineral Projects”),
however the US Securities and Exchange Commission does not recognize these terms. Investors
are cautioned not to assume that any part of or all of the mineral deposits in these categories will
ever be converted into reserves. Stephen Nano, President and CEO for the Company and a
“Qualified Person” under National Instrument 43-101 (“NI 43-101”), has reviewed and approved the
scientific and technical information in this MD&A.
1
CORPORATE AND STRATEGIC OVERVIEW
Mirasol (TSXV-MRZ) is an exploration company focused upon the discovery and/ or acquisition of
prospective gold, silver, and copper properties in the Atacama-Puna region of northern Chile and
Argentina, and the Santa Cruz Province in southern Argentina (Figure 1). In these regions Mirasol
holds 100% of the mineral exploration rights to a large and diverse portfolio of prospective gold,
silver and copper properties, and continues to aggressively prospect, assess and stake or acquire,
new areas and pursue joint-ventures (JVs) in the region. Presently, the Company has three of its
key projects (Claudia – CVSA JV and Atlas –Titan Yamana Gorbea JV) joint-ventured to major
mining companies which are funding all exploration and tenure holding costs – this structure leaves
Mirasol’s treasury available for further generative work. Mirasol believes well-managed and
focused exploration can deliver further discoveries within its regions of generative activities.
Figure 1: Location of Mirasol’s Exploration Projects, Joint Ventures and Generative Programs.
2
Financial Condition
All dollar amounts in the following discussion are Canadian dollars unless otherwise stated. As at
October 24, 2016, Mirasol remains in a strong financial position with approximately $27,000,000 in
the treasury having raised $10,000,000 through a rights-offering that was completed on September
29, 2016.
During the three months ended June 30, 2016 (“the reporting quarter”) and the twelve months
ended June 30, 2016 (“the reporting period”) the Company incurred total company-wide
expenditure of $1,403,736 and $7,191,564, respectively. These amounts include expenditures for
corporate administration, business development, investor relations and regulatory compliance of
$1,075,917 and $2,488,737, respectively. The company-wide expenditures include non-cash
items such as share-based payments, bonus share payment and depreciation amounting to
$128,314 and $745,180, respectively. The total net-expenditure excluding non-cash items was
$1,275,423 and $6,446,384, respectively, including $914,236 and $4,702,827, respectively
incurred for all Chile and Argentine exploration and in-country management and operating costs.
The Company has set off $196,130 and $240,948 respectively of exploration reimbursements and
option payments of $201,064 and $336,294 respectively, against the exploration and in-country
management and operating costs.
Mirasol’s Exploration Focus
Mirasol is a successful prospect generator which maintains a high-quality portfolio of properties
which have the potential to deliver an economic discovery. Mirasol applies innovative concept-
driven prospect generation techniques which are integrated with detailed field geologic follow-up
work which filters and transforms prospects with technical merit into quality, marketable projects.
Mirasol then leverages this geoscientific approach with strong JV earn-in deals with major mining
companies, reducing exploration risk to Mirasol and the use of the Company’s treasury, yet
delivering opportunities for Mirasol shareholder wealth creation through discovery. Mirasol’s
Joaquin and Virginia silver discoveries in Argentina are evidence of successful outcomes of this
progress; Joaquin was monetized through sale to Coeur d’Alene Mines (now Coeur Mining) during
2012.
The Company’s strong working capital position has allowed it to pursue an aggressive exploration
program during a challenging time for the mineral industry. The reduction in exploration activity by
both Mirasol’s peers and by major companies, has created an opportunity for Mirasol by lessening
competition for key exploration ground and exploration resources (experienced geologists and
contractors). The Company has continued to aggressively pursue its counter-cyclic commitment to
project generation as a core, competitive advantage during this reporting period.
Mirasol presently has two active JV agreements in place. In Chile the Gorbea Yamana JV covers a
group of 9 properties including the Atlas and Titan gold projects and in Argentina CVSA (Anglo
Ashanti Gold and Fomicruz) JV covers the Claudia gold project. At these JVs, our partners have
completed a combined 13,500 m of drilling and spent approximately $6.9 million of their money
advancing the projects. Encouraging gold and silver results have been reported from both, and
further exploration is planned at both projects during the 2017 financial year.
3
Generative Programs
The prime focus of the Company’s generative efforts has been the Atacama-Puna Program in
northern Chile. However, in response to the improving investment climate in Argentina, the
Company recently re-initiated generative activities in the Santa Cruz province, staking new claims
to consolidate its position in mineral districts where Mirasol already had key holdings.
Atacama – Puna Generative Region, Chile
The Company’s generative program in the Atacama - Puna region (Figure 2) encompasses a
1,700 km long segment of prolifically mineralized Tertiary-aged volcanic arcs which run through
Chile and Argentina and host many world-class copper and gold mines and deposits. Mirasol is
focusing its activities within two north-south oriented mineral belts within these arcs, within the Mio-
Pliocene and the Paleocene aged belts. Mirasol’s work suggests the best combination of precious
metal prospectivity, access to open ground, and/or under-explored prospects held by third-parties
exists in these areas.
Figure 2: Mirasol’s Atacama - Puna Generative Program.
4
Of these two belts, the Mio-Pliocene belt in-particular has been the focus of recent discoveries of
multi-million-ounce gold occurrences of high sulfidation epithermal (HSE) systems. Major mining
companies have announced the following discoveries:
• Alturas deposit, with an initial Inferred resource of 5.5 M oz Au at 1.25 g/t Au (Barrick
Annual Report, 2015).
• Salares Norte deposit, with an initial Inferred resource 3.3 M oz Au at 3.9 g/t Au and 42.1 M
oz Ag at 48.9 g/t Ag (Gold Fields Mineral Resource and Mineral Reserve Supplement to the
Integrated Annual Review, 31 December 2015).
Each of these occurrences comprise large-tonnage, near-surface oxide gold resources which are
believed to be bulk-minable. Both were concealed beneath a barren cap of altered rock (the
“steam heated cap”) which prevented the recognition of these prospects. Discovery was further
frustrated by their remote location and high-elevation. Mirasol’s Atlas and Titan gold silver projects
lie within this same Mio-Pliocene age belt; however, our prospects have comparatively favourable
access. Atlas and Titan are HSE mineral systems containing many of the key geological and
mineralization features of these recent discoveries, supporting their potential to host large-scale
oxide gold mineralization.
In the Atacama-Puna Generative Region, the Company’s 100% owned portfolio comprises:
• Nine precious metal properties totaling approximately 22,814 ha, including the Atlas and
Titan projects that are subject to the Company’s Gorbea Gold Belt joint venture with
Yamana (the Yamana JV) agreement (news release March 26, 2015). The Yamana JV
grants Yamana Gold Inc. the option to acquire up to a 75% interest in the Gorbea Projects
by completing a series of exploration spends, making US$2 million in staged cash
payments to Mirasol and funding Mirasol’s 25% equity position to production. As the JV
progresses into its second year approximately 6,000 m has been drilled by the JV with
further drilling planned for the new field season.
• The Rubi project, located in the El Salvador copper-gold mining district, Chile, hosts the
Lithocap and Puertozuelo porphyry copper targets. Mirasol has expanded its claims
holdings by 7,300 ha to secure extensions to the Puertozuelo porphyry prospect, resulting
in at total area of approximately 20,700 ha for the Rubi Project. The El Salvador district
hosts large-scale porphyry copper mines operated by Codelco, the Chilean national mining
company.
• Approximately 138,500 ha (100% Mirasol) of granted exploration claims, securing 26 target
areas staked by Mirasol (as of mid September, 2016) in the Atacama - Puna Region of
Chile and Argentina as part of our active project generation efforts.
Additionally, in the Atacama-Puna region Mirasol operates an earn-in JV agreement with a private
Chilean company (“the Frontera JV”). Here, Mirasol is earning-into a controlling interest in a
portfolio of early-stage precious metal projects. In some areas the Frontera JV claims are
contiguous with Mirasol’s 100%-owned Gorbea Projects and have hence expanded Mirasol’s
strategic property position in the Gorbea Belt.
Santa Cruz Province Generative Region, Argentina
In Santa Cruz Province, Argentina, the Company’s portfolio of 100% owned projects in the Jurassic
age volcanic epithermal terrain (Figures 1 and 3) includes:
• The large Claudia gold-silver project with a series of drill-ready prospects which are
contiguous with the world-class Cerro Vanguardia gold – silver district operated by Cerro
Vanguardia S.A. (CVSA), a 92.5 % owned subsidiary of AngloGold Ashanti. In March 2016
Mirasol announced a JV with CVSA (the Claudia - CVSA JV) where it has the option to earn
5
up to 75% of the Claudia project by completing a series of exploration spends, making
US$1 million in staged cash payments to Mirasol and funding Mirasol’s 25% equity position
to production. Since inception of the JV approximately 7,500 m have been drilled.
• The Virginia epithermal silver project where Mirasol has outlined high-grade silver
mineralization in seven separate deposits (as vein shoots) which contain an initial, open pit
constrained NI 43-101 compliant mineral resource estimate comprised of Indicated
resources totalling 11.9 M oz Ag at 310 g/t, and Inferred resources totalling 3.1 M oz Ag at
207 g/t. Mirasol’s claims holding has expanded to 59,747 ha where encouraging
reconnaissance rock float sampling has returned assays up to 1,084 g/t Ag.
• The exploration rights to an additional portfolio of 11 precious metal properties totaling
approximately 170, 800 ha, many with drill-ready targets defined, including the La Curva,
Homenaje, Sascha and Cerro Morro District projects.
For the 2016 financial year Mirasol has spent $4.7 million on exploration compared to costs in-
excess of $6 million during the 2015 financial year. This reduction in spending was achieved by
implementing further exploration efficiencies, adjusting staffing levels and reducing project holding
costs, for example, at the Gorbea and Claudia projects where exploration costs are now carried by
our JV partners. Continued emphasis on reducing in project holding costs via pursuing successful
new joint ventures is ongoing, with Mirasol actively seeking joint venture partners to advance its
drill-ready projects.
6
HIGHLIGHTS FOR THE PERIOD JULY 1, 2015 TO OCTOBER 24, 2016
The Company’s total exploration costs include generative exploration, property retention costs of
the existing exploration project portfolio, costs associated with preparing projects for joint venture,
in-country operation and management, and local value added taxes (VAT). For the reporting
period Mirasol invested $3 million (Table 3) on exploration in Chile and 1.7 Million in Argentina.
During the reporting period Mirasol received two JV payments; payment for start of Year Two of the
Gorbea Joint Venture, $201,064 (US$155,000) and the Claudia-CVSA agreement signing
payment, $135,230 (US$100,000). The Company has also received approximately $240,948 in
cost recoveries for the reporting period; claims fees, salaries of Mirasol employees seconded to the
JV programs and other operational costs that are covered by the JV partners under the terms of
the JV agreements.
Corporate Matters
On November 13, 2015, the Company amended the exercise price and terms of three batches of
outstanding, expiring, incentive stock options. Holders of the affected stock options were offered
the choice to either retain their options unchanged, or to agree to cancel 50% of their options in
consideration for a reduction in the exercise price to $0.88 (from $3.32 to $5.55) per share and a
three-year extension to the term. Total affected options under the amendment agreements were
920,000 of which, 585,000 were held by the insiders of the Company. All holders accepted the
amended terms and the Company, as a result, has cancelled 460,000 of its previously outstanding
incentive stock options.
On February 10, 2016, the Company held its 2015 Annual and Special General Meeting of
shareholders whereby the shareholders of Mirasol re-elected the incumbent board of directors,
consisting of Stephen Nano, Timothy Heenan, Nick DeMare, Borden Putnam III, Dana Prince, and
John Tognetti, as directors of the Company for the ensuing year (news release February 15, 2016).
The shareholders also approved:
(i)
(ii)
(iii)
the re-appointment of Davidson and Company as the Company’s independent
auditor;
ratification of the Company’s stock option plan, and
a resolution of disinterested shareholders concerning the amendment of certain
stock options granted to insiders of the Company.
In February 2016, the Company signed two Consulting Agreements, effective July 2015. The first
agreement is with Stephen Nano to perform the duties of President, CEO and Qualified Person
(“QP”) for the Company. The CEO consulting agreement with Mr. Nano is for a term expiring on
June 30, 2018, and provides for payment of a consulting fee of $25,000 per month, and the
issuance of 300,000 Retention Bonus Shares (the “Bonus Shares”) in consideration for past
services. The Bonus Shares were issued, on March 22, 2016 and will be subject to escrow
restrictions whereby 100,000 released on March 22, 2016; 100,000 released on July 2, 2016 and
100,000 released on July 2, 2017 (news release March 15, 2016). The contract with Mr. Nano
contains termination provisions which require payment of one-year’s fees for termination without
cause and two years for termination due to a change of control event, as defined.
The second consulting agreement was signed with Global Ore Discovery (“Global Ore”) an
Australian based consulting firm of which Mr. Nano is a director and major shareholder. Through
this agreement the Company has retained the services of the Global Ore group of consultants until
June 30, 2018, to provide a range of geoscience, advanced image processing and target
generation services to the Company on an exclusive basis throughout Chile and Argentina.
Industry standard restraint of trade clauses are included in this contract in the event a renewal
contract is not negotiated. The Company and Global Ore have worked together since 2005 and in
7
recent years have been working without a formal contractual relationship. This agreement now
formalizes the working relationship and ensures the Company retains access to these target
generation services on an exclusive basis in its operating areas. The Company has agreed to pay
for such services at a preferential discounted rate subject to a minimum monthly retainer of
Australian Dollar (“AUD”) $35,000. Further, as additional consideration, the Company has agreed
to an incentive grant (as soon as practicable) of 255,000 stock options, subject to vesting, to key
consultants of Global Ore (excluding Mr. Nano). The Global Ore contract can be terminated at any
time by the Company by paying a fee of AUD $225,000.
On March 2, 2016, Mirasol appointed Mahesh Liyanage as CFO (news release March 11, 2016).
Mr. Liyanage is a Chartered Professional Accountant with more than 20 years' experience across
diverse industries. He has served as the Chief Financial Officer for several exploration companies
and prior to that, he controlled audit and assurance functions for a public accounting company.
On August 10, 2016, Mirasol announced a Rights Offering to all shareholders that held common
shares in the Company at the close of business on the record date of August 19, 2016 (“Rights
Offering”). One right was issued for each common share and the exercise of 10 rights allowed
shareholders to purchase 1 Mirasol common share for a Subscription price of $2.40 per share (the
“Subscription Price”). Mirasol offered 4,476,891 common shares under this offering with the goal of
raising approximately $10.7 million.
In connection with the Rights Offering, the Company entered into a standby guarantee agreement
(the "Standby Guarantee") with a group of guarantors led by John Tognetti, including Exploration
Capital Partners 2005 Limited Partnership, Carlo Civelli, EuroPac Gold Fund, and Paul Lee
(collectively, the "Standby Guarantors") to purchase up to 4,166,667 Common Shares if they were
not purchased under the Rights Offering. In consideration for the Standby Guarantee, the
Company has issued share purchase warrants to the Standby Guarantors which will entitle them to
purchase 500,000 Common Shares (the "Bonus Warrants"). The Bonus Warrants are exercisable
at the Subscription Price for a period of six (6) months after that date the Rights Offering is
completed. John Tognetti is a director and the controlling shareholder of the Company.
On August 26, 2016, Mirasol announced the appointment of Patrick Evans to the board of directors
of the Company. Mr. Evans has over 20 years of experience in the mining industry and is the
President and CEO of Mountain Province Diamonds Inc, a director of Archon Minerals and also a
director of the NWT and Nunavut Chamber of Mines. Positions held by Mr. Evans include
President and CEO of Kennady Diamonds, CEO of Norsemont Mining (acquired by Hudbay),
President and CEO of Weda Bay Minerals (acquired by Eramet), President and CEO of Southern
Platinum and Messina Platinum (acquired by Lonmin). Mr. Evans has also held senior roles with
large mining companies including Vice President of Placer Dome Inc.
On August 26, 2016, Mirasol announced the grant of 715,876 incentive stock options under its
incentive stock option plan to certain directors, officers, employees and consultants. A portion of
these options (255,000 options) relate to recent appointments to the Board and the officers, which
will provide greater depth to the Company's management team. The options are exercisable at
$2.85 for a period of three years from the date of grant.
On September 29, 2016, Mirasol announced completion of Rights Offering whereby 4,166,667
common shares were issued for gross proceeds of $10,000,000. A total of 3,379,019 common
shares were purchased pursuant to the exercise of Rights by shareholders, and 787,648 common
shares were purchased by the Standby Guarantors.
The Company currently has 3 million options allocated of the 4.9 million options permissible under
the Company’s options plan. 500,000 Bonus Warrants were issued in relation to the Rights
Offering. These warrants are valid for six months and have an exercise price of $2.40.
8
EXPLORATION ACTIVITIES FOR THE PERIOD JULY 1, 2015 TO OCTOBER 24, 2016
Project Exploration Activities
Gorbea Gold Belt –Yamana JV, northern Chile:
• 10 holes drilled at Atlas for 5,436 m of diamond drill core (DDH) and reverse-circulation
(RC)
Encouraging gold and silver assays in RC drilling with associated HSE alteration
•
• 1,000 m trenching and 600 m of RC drilling completed at Titan, results not received by
Mirasol
• The JV has entered Year Two with exploration anticipated to recommence in October 2016.
Claudia Project – Cerro Vanguardia S.A. (CVSA) JV, Santa Cruz Argentina:
• JV signed in February 2016
• 39 RC holes for 3,500 m drilled at Curahue Trend
• Results from 18 holes (from “Io” vein) have defined narrow high grade and broader low-
grade mineralization
• 22 DDH holes drilled at the at Curahue Trend for 3,450 m
• 3 DDH holes drilled at the Rio Seco Prospect for 560 m
• Assay results are pending for 20 of the RC holes (1 not sampled) and all the DDH drilling
• The results from the drilling with be analyzed to guide further drilling at the project.
Virginia Silver Deposit, Santa Cruz Argentina:
• During March, an amended NI 43- 101 compliant technical report for the Virginia high grade silver
project was filed on SEDAR. The base-case Mineral Resource estimate for the Project
described in the Original Report remains unchanged in the Amended Report
• Mirasol’s claims holding at Virginia have been expanded by 27,017 ha to a district total of
59,747 ha
• Reconnaissance sampling on the new claims has returned high-grade Ag assays from float
samples of epithermal-style alteration
• The new claims may host previously unrecognized soil-covered extensions of Virginia
• Mirasol Resources is actively seeking a Joint Venture partner to advance the Virginia
project.
Project Generation Activities
Mirasol’s generative efforts in the Atacama – Puna region has led to the staking of over 138,500 ha
of new exploration claims securing 100% of exploration rights to prospective precious metal and
copper prospects in the Mio-Pliocene and Paleocene mineral belts.
In Santa Cruz, Mirasol staked an additional 3,500 ha of claims in the Homenaje district and has
under application approximately 8,400 ha adjacent to its Sascha Project. These new claims
consolidate district positions and may host extensions of known precious metal mineralization.
9
Figure 3: Santa Cruz Project Portfolio.
Chile and Argentina – Atacama Puna Project Generation
During the reporting period, Mirasol expended $3 million on project generation activities in Chile
and Argentina focused on the Atacama – Puma generative region.
The Atacama – Puna program (see Figure 2) is primarily focused on the Mio-Pliocene age volcanic
belt and the Paleocene belt of northern Chile and Argentina. The southern segment of this arc
hosts many examples of world-class epithermal precious metal and porphyry-copper mines.
The generally distressed state of the mineral exploration industry over the preceding two to three
years opened up access to quality exploration ground in Chile and Argentina which had been held
by other companies and locked-up for many years. While this situation is now changing due to the
improving precious-metals markets, Mirasol took advantage of this down-turn by executing an
aggressive counter-cyclic generative program, building new portfolios of 100%-owned claims in
two geographic regions of the Mio-Pliocene belt of Chile and Argentina and within the Paleocene
age belt of Chile (Figure 2). The Company is continuing with is aggressive project generative
stance with field teams undertaking reconnaissance mapping and sampling of a range of targets in
the Atacama - Puna region.
In the Mio-Pliocene aged “Southern Porphyry Belt”, Mirasol now holds exploration rights to
approximately 36,800 ha of granted claims and claims applications. In the Mio-Pliocene belt north
of the Maricunga Belt, in addition to the Gorbea JV properties, Mirasol has approximately 49,200
ha of granted exploration claims. In the Paleocene belt of Chile, in addition to the Rubi property
Mirasol holds approximately 52,500 ha of new granted exploration claims. Mirasol will make
further announcements about these claim packages once there has been confirmation of the
granting of tenure and district positions have been consolidated.
10
Acquiring new claims, evaluating the mineral potential, relinquishing areas that prove to be un-
prospective and advancing more prospective areas to the JV stage, is the core process that drives
Mirasol’s project generation process.
Chile – Gorbea Yamana JV: Atlas and Titan Projects
The Gorbea Projects comprises nine 100%-owned claim blocks totalling approximately 22,814 ha
and includes the Titan and Atlas high-sulfidation epithermal (HSE) gold and silver projects and
seven other early-stage exploration prospects covering portions of prospective alteration systems.
In March 2015, Mirasol signed a joint venture agreement with Yamana Gold where the first earn-in
option to 51% requires a spending commitment of US$10,000,000 and cash payments of
US$2,000,000. This includes a first-year spending commitment of US$2,000,000, including
geophysical surveys and 3,000 m of drilling at Atlas and Titan (news release dated March 15, 2016
for information on historical exploration and further details of the Letter Agreement with Yamana).
Exploration at Atlas and Titan is targeting HSE Miocene age gold mineralization similar to recent
discoveries by Barrack Gold Corporation and Gold Fields Ltd at the Alturas and Salares Norte
projects, respectively (refer to Figures 1 and 2).
To-date at Atlas, Yamana has drilled a combined total of 5,436 m of DDH and RC in 10 holes; with
6 holes drilled October to December 2015 (news release March 21, 2016) and an additional four
holes and a diamond drilled tail (Hole 6B) completed during January to March, 2016 (news release
April 25, 2016). Results for the recent diamond tail of hole 6B are pending.
Best intersections from the season’s drilling includes
• 14 m at 0.06 g/t Au and 154.3 g/t Ag (Hole 04).
• 30 m at 0.67 g/t Au and 5.1 g/t Ag, including 18 m at 0.90 g/t Au and 7.4 Ag (Hole 07)
• 40 m at 1.38 g/t Au and 17.9 g/t Ag, including 28 m at 1.82 g/t Au and 22.0 g/t Ag (Hole
07)
• 54 m at 0.35 g/t Au and 5.5 g/t Ag, including 10 m at 1.02 g/t Au and 6.2 g/t Ag (Hole
10)
• 68 m at 0.17 g/t Au and 9.9 g/t Ag (Hole 10).
These intervals are down-hole intersections in angled RC drilling within dominantly oxidized
material and associated HSE styles of alteration, including vuggy silica and silica - alunite
developed in volcanic and brecciated host rocks.
Best results from this season’s drilling are summarized in Table 1 (news release April 25, 2016)
11
Table 1: Atlas Down Hole Intersections – Holes 1-10
Drill Hole
ID
CLATRD0001
CLATRD0002
CLATRD0003
CLATRD0004
CLATRD0007
inc.
inc.
CLATRD0009
CLATRD0010
inc.
From
(m)
108
148
22
190
To
(m)
112
186
46
210
36
377.5
42
382.2
230
440
458
470
556
556
276
468
472
560
244
446
488
488
596
584
302
522
482
628
Down Hole
Intersections
4
38
Gold
*
1.12
0.11
Silver
*
0.7
0.5
AuEq60*
*
1.1
0.1
24
20
6
4.7
14
6
30
18
40
28
26
54
10
68
0.18
0.20
0.14
0.17
13.1
0.7
0.3
0.3
0.06
150.1
0.87
0.67
0.90
1.38
1.82
0.04
0.35
1.02
0.17
1.2
5.1
7.4
17.9
22.0
13.7
5.5
6.2
9.9
0.4
0.2
0.1
0.2
2.6
0.9
0.8
1.0
1.7
2.2
0.3
0.4
1.1
0.3
AuEq60 gm**
(gram x
Reported:
4.5 March 21, 2016
4.5 March 21, 2016
9.5 March 21, 2016
4.2 March 21, 2016
0.8 March 21, 2016
0.8 March 21, 2016
35.9 March 21, 2016
5.3
22.7
18.4
67.3
61.2
April 25, 2016
April 25, 2016
April 25, 2016
April 25, 2016
April 25, 2016
6.9
April 25, 2016
23.9
11.2
22.7
April 25, 2016
April 25, 2016
April 25, 2016
Manually selected intervals typically > 0.1 g/t gold and/or > 10 g/t silver
* Grades reported are length weighted average intersections calculated as
Sum product of grade and length / sum of length
** Gold equivalent (AuEq60) is calculated as
Gold equivalent grammetre (AuEq gm) is calculated as AuEq x Down Hole Intersectionmetre
Reverse circulation sampling intervals were every 2 m and diamond samples
Drilling results to-date confirm the presence of a significantly mineralized HSE precious metal
system at Atlas, with deep oxidation at the project. Geological logging shows significant intervals
of vuggy silica and hydrothermal silicification (Holes 04, 06, 08, 09 and 10) which correspond to IP
geophysical resistivity anomalies. IP coverage of the Atlas system is now expanded to 46.5 sq.
km. Preliminary spectral (PIMA) alteration analysis of the mineralized drill intersections show that
the gold-silver mineralization is associated with vuggy and hydrothermal silica, zones of strong,
advanced argillic (kaolinite-dickie-alunite) alteration, possibly representing mineralizing feeder
zones.
To-date there has been no drilling up-dip of the intersections in hole 07 and 10 to test for shallower
mineralization that maybe accessible via open-pit mining methods. Further surface mapping and
sampling, followed by drilling, will be required to test this concept and determine the geometry of
any mineralization present. A number of similar conductive features, in some cases with
associated surface rock chip gold anomalies, are evident at Atlas and following the receipt of these
drill results are now considered priority targets for future drill testing.
In early 2016 Yamana also completed a 1,000 m trenching and a 600 m RC drilling program at
Titan where previous exploration by Mirasol identified trench intersections of 194 m at 0.41 g/t Au
(news release January 21, 2013), and where a scouting drill program returned shallow oxide
intersections of up to 44 m at 1.21 g/t Au including 10 m at 3.58 g/t Au (news release November
12
25, 2013). Results will be reported once they have been received. Exploration is anticipated to
recommence shortly during the next field season.
Argentina – Claudia Cerro Vanguardia S.A. (CVSA) JV – Claudia Project
The large Claudia Property (approximately 127,000 ha) comprises exploration claims located in the
south-central part of Santa Cruz Province adjoining the southern boundary of AngloGold Ashanti’s
Cerro Vanguardia mining property.
Mirasol’s exploration of the Claudia property has outlined five large-scale epithermal gold - silver
vein prospects at Rio Seco, Laguna Blanca, Ailen, Cilene and Curahue, with a series of drill-ready
targets at Rio Seco, Ailen and the large Curahue zone. At Curahue, six separate vein trends have
been identified; Io, Europa, Ganymede, Callisto, Sinope and Themisto, over a 15 km long corridor
(see news release July 27, 2015).
In February 2016 Mirasol signed an exploration and option agreement with Cerro Vanguardia
where the option has been granted to acquire up to a 75% interest in the Claudia Project,
exercisable in three stages over a six-year or shorter earn-in period (the Claudia - CVSA JV; see
news release March 1, 2016).
The Claudia - CVSA JV has three phases of earn-in:
• First phase: A 51% interest in the project can be earned over a maximum two year period
by spending US$5 million on exploration, making US$1 million in payments to Mirasol and
executing an exploration program that includes a minimum of 12,000 m of drilling. The first
year commitment includes a cash payment of US$100,000, to Mirasol and a minimum
exploration expenditure of US$2 million, with an exploration commitment including 6,000 m
of drilling focused on the Curahue prospect and US$200,000 in geophysical surveys. Cerro
Vanguardia can elect to proceed to a second stage of the 51% earn-in by making a second
payment to Mirasol of US$300,000 and spending another US$3 million on exploration
including an additional 6,000 m of drilling. Following this investment, the 51% earn-in can
be exercised by making a final cash payment of US$600,000 to Mirasol.
• Second phase: Cerro Vanguardia may elect to earn-in to 65% of the Claudia project within
an additional two years from the earn-in date of the 51% vesting by delivering a preliminary
economic assessment with a NI 43-101 compliant resource of not less than 350,000 oz
gold in the Inferred, or higher, resource classification, with grades that support profitable
economic extraction based upon the Cerro Vanguardia Mine cost structure.
• Third phase: Cerro Vanguardia may elect to proceed with a third earn-in, increasing its
interest to 75% within a total of four years of the 51% earn-in date by delivering a technical
and financial evaluation report to NI 43-101 pre-feasibility study standards, demonstrating a
compliant Measured and Indicated resource of not less than 350,000 oz of gold including a
minimum of 175,000 ounces of Measured mineral resources; and delivering to the
Company a decision to proceed with mining operations on the resources defined.
The first phase of RC drilling from May to June 2016, was designed to provide an initial test of a
portion of the Curahue prospect (see news release May 9, 2016). The results from this initial
program were used to prioritize the higher-grade segments of these vein trends for follow-up
diamond core (DD) and additional RC drilling.
The RC program (39 holes totalling 3,543 m) was completed on June 29 (see news release July
26, 2016) and was primarily focused upon the “Io” trend (26 holes) with sections of the Europa (6
holes), Calisto (4 holes) and Sinope (3 holes) trends also tested. Diamond drilling started
immediately and comprised 22 DD holes for 3,450 m at Curahue (two Prospects) and 3 holes for
13
560 m at the Rio Seco Prospect. Results for the outstanding RC and DD drilling will be reported
when results are received.
Assays have been received for 18 of the 26 RC holes that provide a shallow test of the 2 km long
“Io” vein zone. Interpretation of preliminary cross-sections suggest the “Io” vein zone attains
estimated maximum true widths ranging up-to approximately 40 m. RC assay results (Table 2)
have defined both narrow zones of higher-grade and multiple broad zones of lower grade gold-
silver mineralization including:
Down hole intervals exceeding 4 g/t Au (drill hole number):
• 0.5 m at 7.35 g/t Au and 448.9 g/t Ag (IORC38)
• 1.0 m at 5.15 g/t Au and 580.6 g/t Ag (IORC41)
• 1.0 m at 4.58 g/t Au and 180.5 g/t Ag (IORC58)
Lower-grade down hole intervals, at 0.3 g/t AuEq60* cut off (drill hole number):
• 27.5m at 0.56 g/t Au and 48.33 g/t Ag (1.37 g/t AuEq60), including 2.5 m at 1.16 g/t Au
and 165.6 g/t Ag (3.92 g/t AuEq60; IORC27)
• 66.5m at 0.42 g/t Au and 64.74 g/t Ag, (1.50 g/t AuEq60), including 13m at 0.81 g/t Au
and 105.0 g/t Ag (2.56 g/t AuEq60; IORC41)
• 39.5m at 0.70 g/t Au and 74.89 g/t Ag, (1.95 g/t AuEq60), including 12.5 m at 1.38 g/t Au and
102.5 g/t Ag (3.08 g/t AuEq60; IORC58)
* AuEq60 Gold Equivalent (AuEq) is calculated using following formula: assays in g/t Gold + (Silver / 60)
RC drilling has been used by CVSA to provide a rapid test of the Curahue prospect. The majority
of mineralized intervals from reported RC holes were collected from below the water table resulting
in wet samples. “Wet” RC drilling under some circumstances can compromise sampling and may
produce smearing of samples. Given these possible uncertainties, caution in interpreting these
results is advised until confirmation is provided by the diamond drill core results.
14
Table 2: Io Trend- Length weighted average downhole RC drill intersection July 2016
Argentina - Virginia Project, Santa Rita Property
The Virginia high-grade, silver vein zone was discovered by Mirasol in late 2009 on the Santa Rita
property package, following-up on priority exploration targets generated from satellite imagery.
In the 2015 financial year Mirasol reported an initial mineral resource estimate for the Virginia
project. The report presents a conceptual, open-pit constrained, mineral resource estimate
focused exclusively on the high-grade vein/breccia component of the mineralization (Figure 4) as
previously reported (news release February 7, 2013). The mineral resource estimate contains
Indicated resources totalling 11.9 million oz Ag at 310 g/t, and Inferred material totalling 3.1 million
oz Ag at 207 g/t, all contained within seven outcropping veins of high-grade silver mineralization
(see MD&A for the year ended June 30, 2015 for historical exploration and further details on the pit
constrained mineral resource estimate for the Virginia project).
On March 29, 2016 Mirasol filed an amended technical report on SEDAR dated 29th February,
2016. The Amended Report addressed specific technical comments received from the BC
Securities Commission following their routine review of technical disclosure. This review identified
aspects of the original Virginia Mineral Resource Report which were non-compliant with NI 43-101
guidelines. The BCSC has now confirmed that the Amended Report adequately addresses the
comments raised by their review. The base case Mineral Resource estimate for the Virginia Project
described in the Original Report remains unchanged in the Amended Report.
15
Mirasol’s holdings at Virginia were consolidated via open ground staking and the purchase of
mineral rights from a privately owned prospecting company bringing the total area of contiguous
claims controlled by Mirasol to 59,747 ha (news release September 14, 2016). Preliminary
prospecting south of the limit of Mirasol drilling on the newly acquired lands, has identified quartz
vein and vein breccia float scattered along a 2 km trend. The samples of float rock have
epithermal textures which are similar to those which characterize the outcropping Virginia vein
zone. Results from 11 rock float samples collected along this trend include six samples with
assays ranging from 50.0 to 1,084 g/t Ag (average 369 Ag g/t.) Field relationships and assays
received to-date suggest that the new claims may host previously unrecognized soil-covered
extensions of the Virginia silver system.
Mirasol has mobilized geological teams to Virginia to begin systematic exploration of the new
claims. This will include further prospecting, geological mapping, geochemical sampling and
gradient array electrical geophysics. Gradient-array surveys completed by Mirasol’s geophysics
team proved to be an effective predictive tool for mapping covered vein extensions and defining
targets for the original Virginia drill programs (Figure 4). This geophysical technique will again be
used to explore for the potential covered southern extension of the Virginia vein zone in the new
claims.
Mirasol Resources is actively seeking a Joint Venture partner to advance exploration drilling and
evaluate the potential to develop the Virginia Silver project.
Figure 4: Virginia Conceptual Pit Configuration for Initial Mineral Resource Estimate.
16
Argentina - La Curva Project
The La Curva property comprises four exploration claims totalling 36,721 ha, located in the eastern
Deseado Massif, and has year round access from the paved national highway. Four separate gold
and silver prospects have been outlined; Loma Arthur, Cerro Chato, Southwest and Curva West,
and are defined by coincident large geophysical anomalies, gold and silver in rock chip and soil,
and outcropping alteration. Drill targets are defined at Loma Arthur, Cerro Chato and Southwest.
Readers are directed to the Company’s previously filed annual MD&A for the year ended June 30,
2015 for historical exploration discussion on the La Curva property. The Company is actively
seeking a JV partner to advance the La Curva project.
Chile – Frontera JV
In the 2013 financial year, the Company signed a definitive exploration and option agreement (the
Frontera JV) with a private Chilean company, to explore a portfolio of early-stage properties that
fall within the Miocene Volcanic Arc in northern Chile. This section has become the focus of recent
exploration activity following announcements by Mirasol of widespread outcropping gold and silver
mineralization at the Titan and Atlas projects, and the 2014 announcement by Gold Fields of a gold
resource at the Salares Norte project.
The Frontera JV provides for Mirasol to earn a 51% interest in any, or all, of the exploration
properties by expending US$3 million within a four year period which commenced on December
26, 2012 (see MD&A for the year ended June 30, 2015 for information on previous exploration
related to the Frontera JV). To the end of the reporting period Mirasol has spent approximately
US$1.7 million on the Frontera JV.
Mirasol has completed first-pass reconnaissance of claims within the JV package and initiated
follow-up sampling in areas where geochemical anomalies were identified or permissive geology
noted. As of the filling date of this report Mirasol has retained approximately 8,800 ha of claims
within the Gorbea Belt. Mirasol’s 100% owned projects in the Gorbea Belt are under JV with
Yamana Gold Inc.
Other Properties
Mirasol holds a number of additional drill ready and early-stage exploration properties which are
prospective for gold and/or silver mineralization in southern Argentina and northern Chile.
17
RESULTS OF OPERATIONS
Table 3: Exploration expenditures per projects under active exploration
2016
2015
Chile
Gorbea Belt – Atlas Project
Assays and sampling
Camp and general
Consultants and salaries
Geophysics
Mining rights and fees
Travel
Option payment
Recovery of costs
Gorbea Belt – Titan Project
Camp and general
Consultants and salaries
Geophysics
Mining rights and fees
Travel
Option payment
Recovery of costs
Gorbea Belt – Other Projects
Camp and general
Consultants and salaries
Geophysics
Mining rights and fees
Travel
Option payment
Recovery of costs
Gorbea Joint Venture Management
Assays and sampling
Camp and general
Geophysics
Administration
Consultants and salaries
Mining rights and fees
Professional fees
Travel
Recovery of costs
Option payment
$
$
-
134
47,669
2,382
8,509
309
-
-
59,003
1,113
9,641
4,680
6,812
-
-
-
22,246
52
1,184
4,706
18,248
66
-
-
24,256
1,215
2,910
1,089
2,581
136,527
98
-
5,793
(110,714)
(201,064)
(161,565)
1,752
59,059
269,759
86,223
135,831
13,326
(10,073)
(141,695)
414,182
44,279
177,940
47,610
62,609
12,780
(5,925)
(67,305)
271,988
19,843
11,437
75,676
159,666
541
(12,786)
(145,237)
109,140
-
-
-
15,722
8,323
1,539
10,242
555
-
-
36,381
Total – Properties joint ventured to other
companies
(56,060)
831,691
18
Chile (Cont.)
Rubi
Assays and sampling
Camp and general
Consultants and salary
Geophysics
Mining rights and fees
Travel
Professional fees
Option payment
Recovery of costs
Chile Pipeline Projects
Assays and sampling
Camp and general
Geophysics
Administration
Consultants and salaries
Mining rights and fees
Travel
2016
2015
382
5,054
24,824
5,219
132,538
908
500
-
-
169,425
142,832
52,348
44,113
6,131
375,682
178,380
57,634
857,120
-
40,864
108,827
3,824
126,311
16,725
-
(54,956)
(111,347)
130,248
-
-
-
-
-
-
-
-
Total – 100% owned properties
1,026,545
130,248
Frontera – Joint Venture
Camp and general
Consultants and salary
Geophysics
Mining rights and fees
Travel
Total – Earn-in joint venture on third party projects
$
$
75
53,889
6,394
175,474
2,872
238,704
146,578
411,840
130,931
301,204
52,158
1,042,711
Project Generation
1,361,613
1,640,741
Operation and Management
394,907
276,808
Value Added and Other Taxes
86,853
4,345
Total Chile
3,052,562
3,926,544
Argentina
Claudia
Assays and sampling
Camp and general
Consultants and salary
Geophysics
Mining rights and access fees
Administration
Travel
Option payment
Recovery of costs
8,336
29,417
96,263
-
170,070
7,971
7,921
(135,230)
(130,234)
54,514
-
24,966
86,116
1,985
57,363
-
5,642
-
-
176,072
19
Argentina (Cont.)
La Curva
Assays and sampling
Camp and general
Consultants and salary
Geophysics
Mining rights and access fees
Travel
Santa Rita and Virginia
Assays and sampling
Camp and general
Consultants and salary
Mining rights and access fees
Professional fees
Administration
Travel
Argentina Pipeline Projects
Assays and sampling
Camp and general
Consultants and salary
Mining rights and fees
Environmental
Administration
Travel
Total – 100% owned properties
Project Generation
Operation and Management
Value Added and Other Taxes
2016
2015
3,549
7,764
18,933
-
13,291
3,034
46,571
1,707
49,598
39,845
38,172
5,681
200
1,299
136,502
5,382
4,241
52,156
216,883
3,973
170
424
283,229
520,816
559,906
559,525
10,018
$
5,316
8,807
48,210
853
14,683
4,200
82,069
612
60,932
138,340
14,335
-
-
10,772
224,991
-
17,665
43,517
28,042
-
-
8,225
97,449
580,581
891,654
499,002
175,139
$
Total Argentina
1,650,265
2,146,376
Total Exploration and Evaluation Costs
$
4,702,827
$
6,072,920
20
FOR THE YEARENDED JUNE 30, 2016 AS COMPARED TO THE YEAR ENDED JUNE 30, 2015
The Company’s net loss for the year ended June 30, 2016 (“Current Year”) was $6,017,003 or
$0.14 per share compared to $7,917,798 or $0.18 per share for the year ended June 30, 2015
(“Comparative Year”), a decrease of $1,902,148.
Mirasol’s total operating expenses were $7,191,564 compared to $8,310,856 in the Comparative
Year, a decrease in expenses of $1,119,292. As presented in Table 3 above, the Company
incurred exploration costs of $4,702,827 and $6,072,920, respectively. Mirasol renewed its focus
on project generation activities during the Current Year and as a result incurred lower cost on its
current exploration projects. Also during the Current Year, the Company recorded reimbursement
of exploration costs and option payments from its joint venture partners of $577,242 compared to
$549,324 for the comparative period.
Stock-based payments, bonus shares (included under management fees) and depreciation are
non-cash items. Excluding the above and the exploration cost the Company incurred $1,782,499 in
the Current Year compared to $1,893,369 in the Comparative period. The reduction of $110,870 is
mainly due to reduction in professional services, travel and business development.
The above reductions were offset by additional funds expended by the Company to enhance its
investor communication and marketing. Such costs amounted to $335,920 compared to $239,499,
an increase of $96,421. The Company also incurred higher administrative cost such as office and
miscellaneous and directors fees. The Office and miscellaneous increased due to a severance
payment to a staff member and directors fees increased due to formation of special committee to
negotiate the CEO and Global Ore consulting contracts.
The Company also recorded a foreign exchange gain of $1,017,394 during the Current Year
compared to $3,503,017 during the Comparative Year. The period to period variance in foreign
exchange gain or loss recorded by the Company is primarily the result of the movement in the
value of the US dollar relative to the Canadian dollar, due to the significant US dollar asset holding
by the Company. The US dollar exchange rate moved from 1.2474 to 1.3009 Canadian dollars
during the Current Year (a loss of 0.05 Canadian dollars) compared to the exchange rate
movement from 1.0676 at June 30, 2014 to 1.2474 on June 30, 2015 (a gain of 0.18 Canadian
dollars).
The Company recorded an income tax recovery of $88,000, updating its estimate of income taxes
recoverable from the Canada Revenue Agency and also due to its expectations to carry-back the
2015 financial year capital and non-capital losses against the capital gain realized during the 2013
financial year. Mirasol’s recognition of income tax recovery during the Comparative Year
amounted to $3,206,940, a difference of $3,118,940 from the amount during the Current Year,
primarily resulting from the realized loss on the sale of Coeur shares.
FOURTH QUARTER ANALYSIS
The Company carried out its regular generative exploration work during the fourth quarter. On April
29, 2016 the Company granted 320,000 share based options pursuant to consulting contracts in
place for consultants. These options are exercisable at $1.38 with 25% vesting at the grant date
and the rest vesting 25% annually from July 1, 2016 to 2018. During the fourth quarter 118,750
share based options were exercised for gross proceeds of $118,501 with a fair value of $44,553.
21
SELECTED ANNUAL INFORMATION AND SUMMARY OF QUARTERLY RESULTS
The following table sets out selected annual financial information of the Company and is derived
from the Company’s consolidated financial statements for the years ended June 30, 2016, 2015
and 2014.
Sales
Income (loss) for the Year
Earnings (loss) per share – Basic
Earnings (loss) per share – Diluted
Total Assets
Total Long-term Liabilities
Dividends Declared
2016
$
-
(6,017,003)
(0.14)
(0.14)
21,414,630
-
-
2015
$
-
(7,919,151)
(0.18)
(0.18)
26,789,642
-
-
2014
$
-
(12,233,625)
(0.28)
(0.28)
33,924,535
-
-
The following table sets out selected unaudited quarterly financial information of Mirasol and is
derived from unaudited quarterly consolidated financial statements prepared by management in
accordance with IAS 34 and accounting policies consistent with IFRS.
Income (Loss)
from Continued
Operations
$
(1,390,063)
(3,257,207)
(1,358,661)
(11,072)
(2,523,995)
(11,881)
99,987
(5,483,262)
Basic Income
(Loss) per Share
from Continued
Operations
$
(0.03)
(0.07)
(0.03)
(0.00)
(0.06)
(0.00)
0.00
(0.12)
Diluted Income
(Loss) per Share
from Continued
Operations
$
(0.03)
(0.07)
(0.03)
(0.00)
(0.06)
(0.00)
0.00
(0.12)
Revenues
$
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Period
4th Quarter 2016
3rd Quarter 2016
2nd Quarter 2016
1st Quarter 2016
4th Quarter 2015
3rd Quarter 2015
2nd Quarter 2015
1st Quarter 2015
The Company’s quarterly results will vary primarily in accordance with the Company’s exploration
activities. To finance its operations, the Company also grants incentive stock options to its
directors, management, employees, and consultants, which will also cause variation in the
Company’s results from period to period. The movement in the value of the US dollar relative to
the Canadian dollar could also have a significant impact on the Company’s results from one period
to the next as the Company primarily holds its working capital in US dollars.
The income recognized during the 2nd quarter of the 2015 financial year relates primarily to the
recognition of income tax recovery, as described above, pertaining to the carry-back of the capital
losses resulting from the sale of Coeur shares. The Company sold all of its holding in the shares
of Coeur during that quarter. As a result, the loss incurred in the 3rd quarter of 2015 financial year
was considerably lower than the other quarters. During the 3rd quarter of the 2015 financial year,
the Company recognized a gain from foreign exchange of $1,808,458 and a further income tax
recovery of $255,368 due to the factors described above, which significantly reduced the impact of
its loss from operations.
22
Please see above for a discussion comparing the Company’s results during the years ended June
30, 2016 and 2015, respectively.
INVESTING ACTIVITIES
The Company received interest on its guaranteed investment certificates of $70,056 during the
Current Year compared to $63,148 in the Comparative Year. During the Comparative Year, the
Company disposed of 1,087,043 shares of Coeur for gross proceeds of $4,625,381.
FINANCING ACTIVITIES
The Company did not engage in financing activities either during the Comparative Year. During the
Current Year 118,750 options with exercise price of $0.88 to $1.28 were exercised for gross
proceeds of $118,501 by employees and consultants of the Company. Subsequent to the Current
Year the Company completed a rights offering for gross proceeds of $10 Million (please refer to the
Corporate Matters section of this MD&A). Subsequent to the Current Year 200,750 options with
exercise price of $0.88 to $1.28 were exercised for gross proceeds of $208,660.
CAPITAL RESOURCES
In order to finance the Company’s exploration programs and to cover administrative and overhead
expenses, the Company primarily 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.
The Company has no operations that generate cash flow and its long term financial success is
dependent on management’s ability to discover economically viable mineral deposits. Mirasol
applies the Prospect Generator model where it seeks and presents partners with an option to joint
venture Mirasol’s projects, in order to have those partners fund the exploration of the project to earn
an interest. In some agreements, the Company receives cash option payments or common stock of
the joint venture partner, as a portion of the partner’s cost to earn an interest. If any of its exploration
programs are successful and the partners complete their earn-ins, the Company would have to
provide its share of ongoing exploration and development costs in order to maintain its interests, and
if not, reduce its equity interest through a monetization transaction or dilution of its ownership interest
or conversion to a royalty interest. The Company does not anticipate mining revenues from sale of
mineral production in the foreseeable future.
With working capital of approximately $17.6 million on June 30, 2016 and the subsequent rights
offering of $10 million, the Company believes it has more than sufficient funds to conduct its
administrative, business development, and discretionary exploration activities over the next twelve
months. Actual funding requirements may vary from those planned due to a number of factors,
including the Company’s joint venture partners encountering difficulty in financing exploration
programs on the optioned properties. The Company further believes it has the ability to raise equity
capital to meet its foreseeable longer term working capital needs, but recognizes that the ability to
raise capital in the future involves risks beyond its control.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no significant off-balance sheet arrangements.
PROPOSED TRANSACTIONS
The Company has no proposed transactions.
23
TRANSACTIONS WITH RELATED PARTIES
Details of the transactions between the Company’s related parties are disclosed below.
Compensation of key management personnel
Key management personnel include persons having the authority and responsibility for planning,
directing, and controlling the activities of the Company as a whole.
The remuneration of the management and the independent directors was as follows:
Management compensation (i)
Share-based payments (ii)
Bonus shares(iii)
Director’s fees (iv)
Year Ended June 30,
2016
507,987
191,455
372,000
133,500
1,204,942
$
$
2015
494,845
152,271
-
78,625
725,741
$
$
(i) Management compensation is included in Management fees (2016 - $187,394; 2015 - $180,702) and
in Exploration costs (2016 - $320,593; 2015 - $314,143) in the Company’s consolidated statements
of loss and comprehensive loss.
(ii) Share-based payments represent the expense for the years ended June 30, 2016 and 2015.
(iii) In February 2016, the Company signed Consulting Agreements, effective July 2015, with each of
Global Ore consultants (Global Ore”) and Stephen Nano, to perform the duties of President, CEO
and QP for the Company. Under the terms of the Global Ore agreement, the Company has retained
the services of Global Ore consultants until June 30, 2018, to provide target generation related
consulting services to the Company on an exclusive basis throughout Chile and Argentina. The
Company has agreed to pay for such services at an agreed upon preferential discounted rate but
has agreed to a minimum monthly retainer of Australian Dollar (“AUD”) $35,000. Further, as
additional consideration, the Company has agreed to an incentive grant of 255,000 (Issued on April
29, 2016) stock options, subject to vesting, to key representatives of Global Ore other than Mr. Nano.
The Global Ore contract can be terminated at any time by the Company by paying a fee of AUD
$225,000.
The CEO consulting agreement with Mr. Nano is also for a term expiring on June 30, 2018, and
provides for payment of a consulting fee of $25,000 per month, and the issuance of 300,000
Retention Bonus Shares (the “Bonus Shares”) in consideration for past services. The Bonus Shares
were issued, on March 22, 2016 and will be subject to escrow restrictions whereby 100,000 released
on March 22, 2016; 100,000 released on July 2, 2016 and 100,000 released on July 2, 2017. The
contract with Mr. Nano contains termination provisions which require payment of one-year’s fees for
termination without cause and two years for termination due to a change of control event, as defined.
(iv) The independent directors of the Company are paid $2,100 per month (2015 - $1,000 per month)
while the Chairman of the Board of Directors receives an additional $3,000 per month for serving in
this capacity (2015 - $nil). The independent directors are also paid for serving on certain special
committees of the Board of Directors.
24
Transactions with other related parties
Certain of the Company’s officers and directors render services to the Company as sole proprietors
or through companies in which they are an officer, director, or partner.
The following companies are related parties through association of the Company’s directors and
officers:
Nature of transactions
Miller Thomson
Avisar Chartered Accountants(i)
Chase Management Ltd.
Legal fees
Accounting fees
Professional fees
Project generation, exploration management and
GIS services
CFO services, office administration support
services and office sharing
As of March 11, 2016, Avisar ceased to be a related party of the Company.
Evrim Resources Corp.(“Evrim”)(ii)
Global Ore
In March 2016, the Company entered into an agreement with Evrim a company with common
management, to share CFO services, Administration services and office space. The
Agreement expires February 28, 2018. Either party can terminate the agreement with six
months’ notice.
(i)
(ii)
The Company has agreements with all related parties and is charged service fee based on the
related parties’ regular charge-out rates for similar services provided to arm’s length parties.
The Company incurred the following fees and expenses with these related parties:
Legal fees
Accounting fees
Professional fees
Other operating expenses
Project generation, exploration expenses and GIS services
CFO services, office sharing and administration
$
$
$
Year Ended June 30,
2015
261,553
187,750
32,793
23,150
1,066,15
-
1,571,397
2016
177,421
134,150
41,200
-
798,676
52,833
1,204,280
$
Included in accounts payable and accrued liabilities at June 30, 2016, is an amount of $148,450
(June 30, 2015 - $317,081) owing to directors and officers of the Company and to companies
where the directors and officers are principals.
SIGNIFICAN ACCOUNTING POLICIES
The details of the Company’s accounting policies are presented in Note 3 of the Company’s
consolidated financial statements for the year ended June 30, 2016. The following policies are
considered by management to be essential to the understanding of the processes and reasoning
that go into the preparation of the Company’s financial statements and the uncertainties that could
have a bearing on its financial results.
EXPLORATION AND EVALUATION ASSETS
The Company capitalizes the direct costs of acquiring mineral property interests as exploration and
evaluation assets. Option payments are considered acquisition costs if the Company has the
intention of exercising the underlying option.
25
Exploration and evaluation costs are charged to operations in the period incurred until such time as
it has been determined that a property has economically recoverable reserves, in which case
subsequent exploration and development costs are capitalized. Exploration costs include value-
added taxes because the recoverability of these amounts is uncertain.
The receipt of option payments from the Company’s joint venture partners are applied first towards
the capitalized cost for the acquisition of pertinent mineral property interests. Option payments in
excess of the capitalized acquisition costs are netted against the exploration costs for the period.
RECENT ACCOUNTING PRONOUNCEMENTS
Certain new standards, interpretations, amendments and improvements to existing standards
were issued by the IASB or IFRIC.
The following new standards and amendments to standards which are applicable to the
Company have been issued with effective dates into the later fiscal years:
a) IFRS 9 Financial Instruments addresses the classification, measurement and recognition of
financial assets and financial liabilities. The complete version of IFRS 9 was issued in July
2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of
financial instruments. IFRS 9 retains but simplifies the mixed measurement model and
establishes three primary measurement categories for financial assets: amortized costs, fair
value through OCI and FVTPL. The basis of classification depends on entity’s business
model and the contractual cash flow characteristics of the financial asset. Investments in
equity instruments are required to be measured at FVTPL with the irrevocable option at
inception to present changes in fair value in OCI. There is a new expected credit losses
model that replaces the incurred loss impairment model used in IAS 39. For financial
liabilities, there were no changes to classification and measurement except for the recognition
of changes in own credit risk in OCI, for liabilities designated at FVTPL.
IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge
effectiveness tests. It requires an economic relationship between the hedged item and
hedging instrument and for the hedged ratio to be the same as the one management actually
use for risk management purposes. Contemporaneous documentation is still required but is
different to that currently prepared under IAS 39.
The Standard is effective for accounting periods beginning on or after January 1, 2018. Early
adoption is permitted. The Company is currently evaluating the impact of this Standard.
b) IFRS 15 Revenue from Contracts with Customers deals with revenue recognition and
establishes principles of reporting useful information to the users of financial statements
about the nature, amount, timing, and uncertainty of revenue and cash flows arising from an
entity’s contracts with customers. Revenue is recognized when the customer obtains control
of a good or service and thus has the ability to direct the use and obtain the benefits from the
good or service. The Standard replaces IAS 18 Revenue, and IAS 11 Construction Contracts
and related interpretations. It is effective for annual periods beginning on or after January 1,
2018 with earlier application permitted. The Standard is not expected to have an impact on
the Company in its present form.
c) IFRS 11 Accounting for acquisition of interest in joint operations amends Joint Arrangements
to require an acquirer of an interest in a joint operation in which the activity constitutes a
business (as defined in IFRS 3 Business Combinations) to apply all of the business
combinations accounting principles in IFRS 3 and other IFRS, except for those principles that
conflict with the guidance in IFRS 11 and to disclose the information required by IFRS 3 and
other IFRS for business combinations. The amended IFRS 11 is applicable to annual periods
beginning on or after July 1, 2016. The Standard is not expected to have an impact on the
Company in its present form.
26
d) Amendments are made to IFRS 10 Consolidated Financial Statements and IAS 28
Investments in Associates and Joint Ventures (2011) to clarify the treatment of the sale or
contribution of assets from an investor to its associate or joint venture and requires full
recognition in the investor's financial statements of gains and losses arising on the sale or
IFRS 3 Business
that constitute a business (as defined
contribution of assets
Combinations) and requires the partial recognition of gains and losses where the assets do
not constitute a business. The amended IFRS 10 and IAS 28 are applicable to annual periods
beginning on or after July 1, 2016. The Standard is not expected to have an impact on the
Company in its present form.
in
SIGNIFICAN ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities,
profit and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making the judgments about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised if the revision
affects only that period or in the period of the revision and further periods if the review affects both
current and future periods.
Significant accounting estimates and judgments are related to, but are not limited to, the following:
(i)
Impairment of exploration and evaluation assets: The capitalized carrying value of each
mineral claim is reviewed regularly for conditions that are indicators of impairment. This review
requires significant judgment as the Company does not have any proven and probable
reserves that enable future cash flows to be compared to the carrying values. Factors
considered in the assessment of asset impairment include, but are not limited to, whether
there has been a significant adverse change in the legal, regulatory, accessibility, title,
environmental or political factors that could affect the claims’ value; whether there has been an
accumulation of costs significantly in excess of the amounts originally expected for the claims’
acquisition, development or cost of holding; whether exploration activities produced results
that are not promising such that no more work is being planned in the foreseeable future; and
whether the Company has the necessary funds to be able to maintain its interest in the
mineral claims.
The Company has concluded that impairment conditions do not exist as at June 30, 2016.
Ownership of exploration and evaluation assets involves certain risks due to the difficulties of
determining and obtaining clear title to claims as well as the potential for problems arising from
the frequently ambiguous conveyance history characteristics of many exploration and
evaluation assets. The Company has investigated ownership of its exploration and evaluation
assets and, to the best of its knowledge, ownership of its interests are in good standing.
(ii) Valuation of share purchase options: The Company provides compensation benefits to its
employees, directors and officers through a stock option plan. The fair value of each option
award is estimated on the date of the grant using the Black-Scholes option pricing model.
Expected volatility assumption used in the model is based on the historical volatility of the
Company’s share price. The Company uses historical data to estimate the period of option
exercises and their forfeiture rates for use in the valuation model. The risk-free interest rate for
the expected term of the option is based on the yields of government bonds. Changes in these
27
assumptions, especially the volatility and the expected life determination could have a material
impact on the Company’s comprehensive loss. All estimates used in the model are based on
historical data which may not be representative of future results.
(iii) Income taxes: The Company is subject to income taxes in numerous jurisdictions. Uncertainties exist
with respect to interpretations of tax regulations. The Company has recognized current tax refundable
based on its interpretations of tax regulations, which may differ from the interpretations of the tax
authorities.
Judgment is required in determining whether deferred tax assets are recognized on the
statement of financial position. The recognition of deferred tax assets requires management to
assess the likelihood that the Company will generate taxable income in future periods to utilize
the deferred tax assets. Due to a history of losses deferred tax assets have not be recognized.
(iv) Functional currencies: The functional currency of an entity is the currency of the primary
economic environment in which an entity operates. The determination of an entity’s functional
currency requires judgement based on analysis of relevant factors identified in IAS 21, The
Effects of Changes in Foreign Exchange Rates (“IAS21”).
Except for the Company’s subsidiaries in the British Virgin Islands, the Company has
determined that its subsidiaries in Chile and Argentina incur costs in United States Dollars,
Canadian Dollars, Australian dollars as well as the Chilean and Argentine Pesos and therefore
do not indicate a single primary currency for operating in these jurisdictions. These
subsidiaries are financed entirely by its Canadian Parent and therefore act as its extension.
The Company has therefore determined that the functional currency of all of its subsidiaries in
Chile and Argentina is the Canadian Dollar, similar to the Parent.
FINANCIAL INSTRUMENTS
The Company’s financial instruments as at June 30, 2016 consist of cash and cash equivalents,
interest and option payment receivable, and accounts payable and accrued liabilities. The fair
value of cash and cash equivalents, receivable, and accounts payable and accrued liabilities
approximates their carrying value. There are no off-balance sheet financial instruments.
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.
i. 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 US dollars, Australian dollars and in Argentine and Chilean Pesos. A significant
change in the currency exchange rates between the US and Australian 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.
28
At June 30, 2016, the Company is exposed to currency risk through the following assets and
liabilities denominated in US and Australian dollars and Argentine and Chilean Pesos:
Cash and cash equivalents
Receivables and advances
Accounts payable and accrued
US
Dollars
9,930,873
-
(108,949)
Australian
Dollars
1,374,751
-
(125,595)
Argentine
Peso
5,194,976
2,171,933
(4,330,177)
Chilean
Peso
14,863,607
27,871,920
(21,321,319)
Based on the above net exposures as at June 30, 2016, and assuming that all other variables
remain constant, a 10% depreciation or appreciation of the Canadian dollar against the US
and Australian dollar would result in an increase/decrease of $1,277,734 and $120,793,
respectively in the Company’s comprehensive loss. Likewise, a 10% depreciation or
appreciation of the Canadian dollar against the Argentine and Chilean Peso would result in an
increase/decrease of $26,435 and $4,231, respectively in the Company’s comprehensive loss.
ii. 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 financial institutions. The Company’s receivables
primarily consist of refundable sales and income taxes due from the Federal Government of
Canada and amounts due from the Company’s joint venture partners with established credit
worthiness. Management believes that credit risk concentration with respect to receivables is
remote.
iii. 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 below. As at June 30, 2016, the Company’s
financial liabilities consist of accounts payable and accrued liabilities totalling $784,453. All of
the Company’s obligations are expected to be paid within 90 days. Management believes the
Company has sufficient funds to meet its liabilities as they become due.
iv. 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. The applicable rates of
interest on such investments range between 0.05% and 1.65%.
MANAGEMENT OF CAPITAL RISK
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 exploration and evaluation
assets 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 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 and quarterly expenditure budgets that are updated
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as necessary depending on various factors, including successful capital deployment and general
industry conditions.
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 twelve months or less from the original date of acquisition, selected
with regards to the expected timing of expenditures from continuing operations. The Company
does not invest in commercial paper. The Company is not subject to externally imposed capital
requirements.
ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT SIGNIFICANT REVENUE
Additional disclosure concerning Mirasol’s operating expenses and exploration costs is provided
above, in the Company’s consolidated statements of (income) loss and in Note 9 of the Annual
consolidated financial statements for the year ended June 30, 2016 that is available on Mirasol’s
website at www.mirasolresources.com or on its SEDAR company page accessed through
www.sedar.com.
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 and on the
Company’s website at www.mirasolresources.com.
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