MIRASOL RESOURCES LTD.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
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, 2017 and 2016, 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, 2017 and 2016 and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards.
Vancouver, Canada
October 26, 2017
“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 (Note 6)
Receivables and advances (Note 7)
Equipment and Software (Note 8)
Exploration and Evaluation Assets (Note 9)
LIABILITIES
Current Liabilities
June 30,
2017
June 30,
2016
$
4,629,130 $
16,792,765
544,502
17,605,111
459,000
284,492
21,966,397
18,348,603
103,677
3,000,762
65,265
3,000,762
$
25,070,836
$
21,414,630
Accounts payable and accrued liabilities (Note 10)
$
532,649
$
784,453
48,303,568
16,361,942
(23,438)
(40,103,885)
38,393,240
15,418,454
(23,279)
(33,158,238)
24,538,187
20,630,177
$
25,070,836
$
21,414,630
EQUITY
Share Capital (Note 11)
Reserves (Note 11)
Accumulated Other Comprehensive loss
Deficit
Nature of Business (Note 1)
Commitments (Note 14)
Subsequent Event (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)
Share-based payments (Note 11c)
Office and miscellaneous
Marketing and investor communications
Management fees (Note 10a)
Business development
Professional fees (Note 10b)
Director’s fees (Note 10a)
Transfer agent and filing fees
Travel
Depreciation (Note 8)
Interest income
Foreign exchange gain (loss)
$
2017
2016
4,105,942 $
711,454
529,691
489,116
320,473
297,574
197,397
135,623
58,549
42,153
14,490
4,702,827
316,535
572,998
335,920
564,305
105,442
379,423
133,500
20,644
42,267
17,703
(6,902,462)
(7,191,564)
157,577
(200,762)
(43,185)
69,167
1,017,394
1,086,561
Net Loss for the Year before Income Taxes
Income tax recovery
Net Loss for the Year
(6,945,647)
-
(6,105,003)
88,000
$
(6,945,647) $
(6,017,003)
Other Comprehensive loss to be Reclassified to Profit or Loss in
Subsequent Periods
Exchange differences on translation of foreign operations
(159)
(26,237)
Loss and Comprehensive Loss for the Year
(6,945,806)
(6,043,240)
Loss per Share (Basic and Diluted)
$
(0.15) $
(0.14)
Weighted Average Number of Shares Outstanding
(Basic and Diluted)
47,781,853
44,334,015
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, 2015
Bonus shares issued (Note 10a)
Option exercise (Note 11c)
Share-based payments (Note 11c)
Foreign currency translation
adjustment
Loss for the year
44,245,661
300,000
118,750
-
37,858,186
372,000
163,054
-
15,146,472
-
(44,553)
316,535
2,958
-
-
-
(27,141,235)
-
-
-
25,866,381
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
Shares issued – Rights offering
Share issue costs
Option exercise (Note 11c)
Share-based payments (Note 11c)
Foreign currency translation
adjustment
Loss for the year
4,166,667
-
285,000
-
10,000,000
(492,138)
402,466
-
-
339,700
(107,666)
711,454
-
-
-
-
-
-
-
-
10,000,000
(152,438)
294,800
711,454
-
-
-
-
-
-
(159)
-
-
(6,945,806)
(159)
(6,945,806)
Balance – June 30, 2017
49,116,078
48,303,568
16,361,942
(23,438)
(40,104,044)
24,538,028
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:
Share-based payments
Interest income
Depreciation
Depreciation included in exploration expenses
Unrealized foreign exchange
Income tax recovery
Bonus shares issued
Write-off of mineral property acquisition costs
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
Cash used in operating activities
Investing Activities
Short-term investments redeemed/(placed)
Acquisition of exploration and evaluation assets
Interest received
Purchase of equipment and software
Cash provided by (used in) investing activities
Financing Activities
Shares issued, net of issuance costs
Exercise of incentive share purchase options
Cash provided by financing activities
2017
2016
$
(6,945,647) $
(6,017,003)
711,454
(157,577)
14,490
24,431
18,531
-
-
-
316,535
(69,167)
17,703
38,942
(884,047)
(88,000)
372,000
58,167
(6,334,318)
(6,254,870)
(125,909)
-
(251,804)
-
(161,660)
385,422
(138,808)
3,097,701
(6,712,031)
(3,072,215)
(16,333,765)
-
23,476
(77,333)
(16,387,622)
741,000
(229,115)
70,056
(1,320)
580,621
9,847,562
294,800
10,142,362
-
118,501
118,501
Effect of Exchange Rate Change on Cash and Cash Equivalents
(18,690)
857,810
Change in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of Year
(12,975,981)
17,605,111
(1,515,283)
19,120,394
Cash and Cash Equivalents - End of Year
$
4,629,130
$
17,605,111
Supplemental Schedule of Non-Cash Investing and Financing
Transactions:
Fair value of options exercised
Fair value of bonus warrants
Cash and Cash Equivalents Consist of:
Cash
Cash equivalents
$
$
$
$
107,666
339,700
$
$
44,553
-
1,415,944
3,213,186
$
$
757,155
16,847,956
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, 2017
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 estimates that the Company has sufficient working capital to maintain its operations and activities
for at least 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 International Financial Reporting 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 26th, 2017.
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.
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, 2017 were as follows:
Page 8
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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 transactions and 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, 2017.
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.
Page 9
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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.
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.
Page 10
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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”).
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.
Page 11
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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.
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
the balance is tested for impairment and 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.
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.
Page 12
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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.
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.
Page 13
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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.
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.
Page 14
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
c)
IFRS 16 is a new standard that sets out the principles for recognition, measurement, presentation, and
disclosure of leases including guidance for both parties to a contract, the lessee and the lessor. The new
standard eliminates the classification of leases as either operating or finance leases as is required by IAS
17 and instead introduces a single lessee accounting model.
The following new standards and amendments to standards which are applicable to the Company for the current
fiscal year have been adopted:
a) 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 was adopted during
the fiscal year with no impact on the Company in its present form.
b) 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 were adopted during the year, the standard had no 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
Financial liabilities
Other financial liabilities
June 30,
2017
June 30,
2016
$
4,629,130 $
16,792,765
-
396,323
17,605,111
459,000
168,151
$
21,818,218 $
18,232,262
Accounts payable and accrued liabilities
$
532,649 $
784,453
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:
Page 15
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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,
2017
June 30,
2016
$
$
4,629,130 $
16,792,765 $
17,605,111
459,000
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 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 adjusts 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.
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.
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.
Page 16
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
At June 30, 2017, 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
Short-term investments
Receivables and advances
Accounts payable and accrued liabilities
US
Dollars
2,040,840
9,500,000
205,000
(27,859)
Australian
Dollars
921,080
1,974,385
-
(123,631)
Argentine
Peso
3,982,397
Chilean
Peso
17,340,920
1,077,621
(2,576,622)
13,159,755
(8,352,839)
Based on the net exposures as at June 30, 2017, 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 $1,526,068 and $276,601, 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 $20,870 and $4,319, 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 interest receivable due from major financial institutions on short term
investments. 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, 2017, the Company’s financial liabilities consist of accounts payable and
accrued liabilities totalling $532,649. 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 and cash equivalents is limited
because these investments are generally held to maturity. The applicable rates of interest on such
investments range between 0.05% and 1.91%.
(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.
Page 17
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
6. Short-term Investments
Short term investments comprise of cashable and non-cashable Guaranteed Investment Certificates (“GIC”)
placed with reputable Canadian and US financial institutions. Maturity dates of these GIC’s are between three
to twelve months.
7. Receivables and Advances
Goods and services tax receivable
Income taxes recoverable
Interest receivable
Prepaid expenses and advances
Due from joint venture partners
$
$
June 30,
2017
7,961
23,991
129,345
116,227
266,978
June 30,
2016
7,374
23,991
1,014
84,976
167,137
$
544,502
$
284,492
8. Equipment and Software
Cost
Balance as at June 30, 2015 $
Additions for the year
Balance as at June 30, 2016 $
Additions for the year
Balance as at June 30, 2017 $
Accumulated Depreciation
Balance at June 30, 2015
Depreciation for the year
$
Balance as at June 30, 2016 $
Depreciation for the year (i)
Balance as at June 30, 2017 $
Exploration
Equipment
Computer
Hardware
Computer
Software
398,578 $
1,320
399,898 $
77,333
477,231 $
328,840 $
35,830
364,670 $
22,156
386,826 $
57,883 $
37,834 $
-
-
57,883 $
37,834 $
-
-
57,883 $
37,834 $
30,720 $
8,204
38,924 $
5,687
44,611 $
14,145 $
12,611
26,756 $
11,078
37,834 $
Total
494,295
1,320
495,615
77,333
572,948
373,705
56,645
430,350
38,921
469,271
Carrying Amounts
As at June 30, 2016
As at June 30, 2017
$
$
35,228 $
90,405 $
18,959 $
13,272 $
11,078 $
- $
65,265
103,677
(i) Allocated between depreciation expense ($14,490) (2016 - $17,703) and exploration costs ($24,431) (2016
- $38,942) on the statement of loss and comprehensive loss.
Page 18
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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, 2016
Change during
the year
Balance at
June 30, 2017
171,777 $
2,808,819
20,166
3,000,762 $
-
-
-
-
$
$
171,777
2,808,819
20,166
3,000,762
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
$
$
$
$
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.
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 by
staking on open ground, as part of the Company’s Miocene Arc exploration program.
Page 19
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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 (received) 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 (incurred).
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 deciding 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.
Yamana has made all the option payments due as of June 30, 2017.
b) 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. On
March 7, 2017 the Company determined to terminate the agreement.
Page 20
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
Argentina
In the Santa Cruz province of Argentina, the Company controls the mineral exploration rights to various precious
metals properties.
c) 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. On February 10, 2017 the agreement was
terminated. A $266,978 (US$ 205,000) payment included in accounts receivable was received subsequent
to the yearend from CVSA in-lieu of certain uncompleted exploration commitments.
d) La Curva Property
The Company owns a 100% interest in mining claims of La Curva gold project in southern Argentina.
On May 25, 2017, the Company announced signing of an exploration and option agreement with
OceanaGold Corporation (“OGC”) to explore the Company’s 100% owned, La Curva gold project, located in
Santa Cruz Province, Argentina. OGC has been granted the option to acquire up to a 75% interest in the La
Curva Project, exercisable in 5 stages over a eight-year, or shorter, earn-in period. The agreement requires
OGC to make a first-year commitment of US$1.25 million in exploration expenditures, complete 3,000 metres
of drilling, and make a US$100,000 (received) option payment to the Company on signing the Agreement.
The first earn-in option for OGC to earn 51% interest over four years from the date of Agreement requires
spending US$7 million on exploration, making US$1.5 million in payments to Mirasol. Mirasol will serve as
operator for exploration for first year in return for 5% management fee and the Company will retain a 30%
funded-to production interest in the La Curva project. The agreement is in good standing as of June 30,
2017.
e) 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) was capitalized and
recorded with exploration and evaluation assets.
Page 21
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
f) 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, 2017 resulting in a write-off of $Nil (June 30, 2016 - $58,167).
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,
2017
514,369
250,749
-
135,623
$
2016
507,987
191,455
372,000
133,500
$
900,741
$
1,204,942
(i) Management compensation is included in Management fees (2017 - $211,804; 2016 - $187,394) and in
Exploration costs (2017 - $302,565; 2016 - $320,593) in the Company’s consolidated statements of loss
and comprehensive loss.
(ii) Share-based payments represent the expense for the years ended June 30, 2017 ((Note 11c) and 2016.
(iii) In February 2016, the Company signed Consulting Agreements, effective July 2015, with each of Global
Ore Discovery Pty Ltd. (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 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 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.
Page 22
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
(iv) The independent directors of the Company are paid $2,100 per month (2016 - $2,100 per month) while the
Chairman of the Board of Directors receives an additional $3,000 per month for serving in this capacity
(2016 - $3,000). As of June 14, 2017, Dana Prince was appointed Executive Chairman receiving an
additional $4,100 per month. The independent directors are also paid for serving on certain special
committees of the Board of Directors. There were no special committees during the year ended June 30,
2017.
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.
The following companies are related parties through association of the Company’s directors and officers:
Miller Thomson
Avisar Chartered Accountants(i)
Chase Management Ltd.
Global Ore Discovery Pty Ltd.
Evrim Resources Corp. (“Evrim”)
Nature of transactions
Legal fees
Accounting fees
Professional fees
Project generation, exploration management and
GIS services
CFO services, office administration support
services and office sharing
(i)
As of March 11, 2016, Avisar ceased to be a related party of the Company.
The Company incurred the following fees and expenses with related parties as follows:
Legal fees
Accounting fees
CFO services, office sharing and administration
Project generation, exploration expenses and GIS services
$
Professional fees
Year Ended June 30,
$
2017
226,101
72,588
87,316
965,443
-
2016
177,421
134,150
52,833
798,676
41,200
$
1,351,448
$
1,204,280
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, 2017, is an amount of $149,287 (2016 -
$148,450) owing to directors and officers of the Company and to companies where the directors and officers are
principals.
Page 23
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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
(i) Rights offering
The Company completed a rights offering for gross proceeds of $10,000,000 on September 19, 2016. 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 23, 2017 (Expired unexercised). The fair value of these bonus warrants was
estimated to be $339,700 using the following weighted average assumptions in the Black-Scholes option pricing
model.
Expected dividend yield
Expected share price volatility
Risk-free interest rate
Expected life of options
0.0%
73.06%
0.58%
0.5 years
The Company incurred $152,438 of share issuance costs in connection with the rights offering.
(ii) Options exercised
The Company issued 285,000 (2016 -118,750) shares on exercise of share purchase option for gross proceeds
of $294,800 (2016 - $118,501). The options had a fair value of $107,666 (2016 - $44,553).
(iii) Bonus shares
No bonus shares were issued during the year ended June 30, 2017 (2016- 300,000 with a fair value of $372,000).
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, 2017, a total of 4,911,608
options were reserved under the option plan with 2,984,626 options outstanding.
Page 24
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
(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, 2015
Granted
Exercised
Amended
Expired
Options outstanding as at June 30, 2016
Granted
Exercised
Expired
Options outstanding as at June 30, 2017
Options exercisable at June 30, 2017
Number of Options
3,560,300
320,000
(118,750)
(460,000)
(747,800)
2,553,750
740,876
(285,000)
(25,000)
2,984,626
2,324,626
Weighted Average
Exercise Price
$2.31
$1.38
$1.00
$4.34
$2.52
$1.07
$2.81
$1.03
$1.55
$1.50
$1.64
(ii) Fair value of share purchase options granted
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.
The fair value of these stock options was estimated to be $568,113 using the weighted average assumptions in
the Black-Scholes option pricing model noted below.
On December 5, 2016, the Company issued 25,000 options to a consultant with an exercise price of $1.55 for a
period of three years from the date of grant. The fair value of these options was estimated to be $13,102 using
the following weighted average assumptions in the Black-Scholes option pricing model.
Additional share-based payments expense of $130,239 was recognized in the Company’s statement of loss due
to vesting of the stock options granted during previous years.
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.
The incremental fair value of stock options amended during fiscal 2016 was estimated to be $147,344 using
weighted average assumptions in the Black-Scholes option pricing model.
Total share-based payments recognised for the year ended June 30, 2017 amounted to $711,454 (June 30,
2016 - $316,535).
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:
Page 25
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
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,
2017
0.0%
49.19%
0.576%
2.13 years
$0.36
2016
0.0%
52.99%
0.551%
2.84 years
$0.31
(iii) Share purchase options outstanding at the end of the year
A summary of the Company’s options outstanding as at June 30, 2017 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
August 26, 2019
Exercise price
$
0.88
0.88
0.88
2.34
1.28
0.88
1.38
2.85
Options
Outstanding
3,750
190,000
145,000
62,500
472,500
1,075,000
320,000
715,876
2,984,626
* Expired unexercised subsequent to June 30, 2017
d) Warrants
Weighted
Average
Remaining Life
of Options
(years)
1.46
1.73
2.10
0.24
0.87
3.83
3.83
2.15
2.67
Options
Exercisable
3,750
190,000
145,000
62,500
472,500
575,000
160,000
715,876
2,324,626
There were no share purchase warrants outstanding as at June 30, 2017 and 2016. During the year ended
June 30, 2017, 500,000 share purchase warrants were granted with an exercise price of $2.40. The share
purchase warrants were issued in connection with the Company’s Right offering (Note 11 b (i)) and expired on
March 23, 2017.
12. Segmented Information
The Company’s business consists of a single reportable segment being mineral property acquisition and
exploration. Details on a geographical basis are as follows:
Total Non-Current Assets
Canada
Argentina
Chile
$
June 30,
2017
7,959 $
2,842,013
254,467
June 30,
2016
22,449
2,847,637
195,941
$
3,104,439 $
3,066,027
Page 26
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
13. Income Taxes
The Company is subject to Canadian federal and provincial tax for the estimated taxable income at a rate of
26%. 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:
Year Ended June
30, 2017
Year Ended June
30, 2016
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
$
$
(6,945,647)
26.00%
(1,805,868)
220,512
(54,013)
$
$
(6,105,003)
26.00%
(1,587,301)
442,168
(74,718)
2,865,419
(1,226,050)
-
$
(4,133,264)
5,441,115
88,000
$
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,
2017
June 30,
2016
$
$
2,182,224
6,359,253
31,707
14,234
8,587,418
$
$
1,122,984
4,539,560
52,796
6,659
5,721,999
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 27
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
Deductible temporary differences, unused tax losses and unused tax credits:
June 30,
2017
June 30,
2016
Expiry date
Range
Non-capital losses
Exploration and evaluation assets
Share issue costs
Other
$
7,409,201 $
18,824,237
121,950
42,533
See below
3,776,124
13,456,532 Not applicable
2036
203,063
25,554 Not applicable
As at June 30, 2017, an estimated income tax refund of $23,991 (2016 - $23,991) is recognized in receivables
and advances (Note 7). Income taxes recoverable includes a recovery of $23,991 (2016 – $23,991 related to
realized capital losses that are carried back and applied against capital gains reported during the year ended
June 30, 2013 / 2014.
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 $1,982,693 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
116,190 $
503,387
882,125
-
$
1,501,702 $
Chile
-
-
-
480,991
480,991
a. The Company has entered into a three-year consulting agreement with Global Ore for the provision of
geological consulting services. The agreement expires on June 30, 2018 but is subject to early
termination provisions including the right of the Company to terminate the agreement upon payment to
Global Ore of AUD$ 225,000 (Note 10 a (iii)).
b. The Company has entered into a three-year CEO consulting contract with Mr. Nano for the provision of
management services. The agreement expires on June 30, 2018 but is subject to early termination
provisions, including the right of the Company to terminate the agreement upon paying Mr. Nano one
year of consulting fees. The agreement also provides that Mr. Nano is entitled to payment of two years
of consulting fees in the event of a change of control event, as defined (Note 10 a (iii)).
c. The Company entered into a cost-sharing agreement with Evrim Resources Corp. which expires the
earlier of February 28, 2018 or upon the Company giving Evrim six months’ notice of termination.
Page 28
Mirasol Resources Ltd.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
June 30, 2017
Canadian Funds
15. Subsequent Event
On October 20, 2017, the Company announced signing of the definitive agreement with OCG on Claudia
project.
OGC has been granted the option to acquire up to a 75% interest in the Claudia Project, exercisable in 5
stages over a eight-year, or shorter, earn-in period. The agreement requires OGC to make a first-year
commitment of US$1.75 million in exploration expenditures, complete 3,000 metres of drilling, and make a
US$100,000 option payment (received) to the Company on signing the Agreement.
The first earn-in option for OGC to earn 51% interest over four years from the date of Agreement requires
spending US$10.5 million on exploration, making US$1 million in payments to Mirasol. Mirasol will serve as
operator for exploration for first year in return for 5% management fee and the Company will retain a 30%
funded-to production interest in the Claudia project.
Page 29
Form 51-102F1
Management Discussion and Analysis
For Mirasol Resources Ltd.
(“Mirasol” or the “Company”)
INTRODUCTION
The Management Discussion and Analysis (“MD&A”) is prepared as of October 26, 2017 and is
intended to supplement the Company’s annual audited consolidated financial statements for the year
ended June 30, 2017 (“Current Period”). 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
the year ended June 30, 2017.
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. The material factors and assumptions used to develop forward-looking information
include, but are not limited to, the future prices of gold, silver and copper, success of exploration
activities, permitting time lines, currency exchange rate fluctuations, government regulation of mining
operations, environmental risks, the estimation of mineral resources, capital expenditures, costs and
timing of the development of new discoveries, unanticipated reclamation expenses, title disputes or
claims and limitations on insurance coverage, continued availability of capital and financing, and
general economic, market or business conditions.
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, except as may be required by applicable law.
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 occurrences 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 a mineral exploration company focused on the exploration and discovery of
gold, silver and copper (Au, Ag and Cu) deposits in the Atacama-Puna region of northern Chile and
Argentina, and the Santa Cruz Province in southern Argentina. These regions are highly prospective
and host many large-scale precious and base metal mines, operated by some of the world’s largest
mining companies (Figure 1). Mirasol holds 100% of the mineral exploration rights to a large and
diverse portfolio of prospective Au, Ag and Cu properties and continues to prospect and evaluate
this portfolio. The Company currently has 3 projects under joint venture (“JV”) exploration agreement
and is actively seeking additional partnerships to explore and drill test its property portfolio. Under
these agreements, the JV partners fund all exploration and tenure holding costs which leaves
Mirasol’s treasury available for further exploration and business development. Mirasol believes well-
managed and focused exploration can deliver further discoveries within its generative regions,
bringing increases to shareholder value.
Figure 1: Location of Mirasol’s Exploration Projects, Joint Ventures, and Generative Programs.
2
Financial Condition
Mirasol remains in a strong financial position with cash and short-term investment of $21,421,895 as
of June 30, 2017, having raised $10,000,000 through a rights-offering completed on September 19,
2016. The annual level of spending by the Company is largely determined by its ability to secure
financing through the sale of its securities, sales of assets and JV arrangements with its industry
partners.
During the Current Period, Mirasol incurred total company-wide net cash expenditures of
$6,152,087. The financial statements for the Current Period show a total expenditure of $6,902,462
of which non-cash items such as share-based payments and depreciation totalled to $750,375.
For the Current Period, the total net cash expenditure was distributed between head office corporate
spend of $2,070,576 inclusive of: officer’s salaries, board fees, business development, corporate
administration, investor relations and regulatory compliance; and a total exploration expenditure of
$4,105,942. For the Current Period, the Company has accounted for $1,313,721 in option payments
and exploration reimbursements from JV partners, which is offset against the Company’s exploration
and in-country management and operating costs.
Mirasol’s Exploration Focus
Mirasol is a successful project generator and maintains a high-quality portfolio of exploration
properties which have the potential to deliver an economic discovery. Mirasol applies innovative
concept-driven project generation techniques integrated with detailed field geologic follow-up work;
which filters and advances prospects with technical merit into quality, marketable projects. Mirasol
leverages this geoscientific approach with strong JV earn-in deals with major mining companies,
reducing exploration risk to Mirasol while conserving the Company’s treasury, to deliver opportunities
for Mirasol shareholders through the wealth creation from resource discovery. Mirasol’s Joaquin and
Virginia Ag discoveries in Argentina are evidence of successful outcomes of this process: Joaquin
was monetized through sale to Coeur d’Alene Mines (now Coeur Mining) in 2012.
The Company’s strong working capital position allowed it to pursue an aggressive generative
exploration program during the recent challenging times for the resource industry. The reduction in
exploration activity by Mirasol’s peers and by major companies created an opportunity for Mirasol in
reduced competition for exploration ground and exploration resources (experienced geologists and
contractors). Mirasol continued to aggressively pursue this counter-cyclical commitment to project
generation as a core, competitive advantage during this reporting period.
Project Generation and Business Development
The primary focus of the Company’s generative efforts has been the Atacama-Puna Program
focused on the world class Tertiary age mineral belts in northern Chile.
In response to improving investment climate in Argentina, the Company re-initiated project
generation and project exploration activities in the Santa Cruz Province, staking new claims to
consolidate its positions in mineral districts where the Company holds well positioned, key claims.
Mirasol’s business development team is aggressively pursuing additional JV deals to accelerate drill
testing of these projects with the goal of making significant discoveries.
Chile/Argentina: Atacama – Puna Generative Region
The Company’s generative program in the Atacama-Puna region encompasses a 1,700 km-long
segment of three north-south oriented prolific mineral belts, of differing ages (millions of years, Ma),
which run through Chile and Argentina and host many world-class Cu and Au mines and deposits
(Figure 2).
3
Figure 2: Mirasol’s Atacama - Puna Generative Program.
The Company’s exploration is focused on three mineral belts where the Company is targeting
specific deposit types;
• Miocene to Pliocene (Mio-Pliocene, 23-5 Ma): High-sulfidation epithermal (“HSE”) Au+Ag
• Middle Eocene to Early Oligocene (Eocene-Oligocene 40-28 Ma): Porphyry Cu+Mo
• Paleocene to Early Eocene (Paleocene, 66-53 Ma): Low-intermediate-sulfidation epithermal
Au+Ag and porphyry Cu+Mo
4
Mirasol uses proprietary prospectivity analysis techniques to target areas with heightened potential
for discovery of quality mineral deposits. The Company also applies risk filters to minimize exposure
to areas that may have environment and/or community sensitivities.
Mio-Pliocene belt: This belt in-particular has been the focus of recent discoveries of multi-million-
ounce HSE oxide Au deposits;
• Alturas deposit, with an Inferred resource of 6.8 M oz Au at 1.00g/t Au (Barrick Annual Report
2016).
• Salares Norte deposit, with a resource of 3.8 M oz Au at 4.6 g/t Au and 43.8 M oz Ag at 53.1
g/t Ag (Gold Fields Mineral Resource and Mineral Reserve Supplement to the Integrated
Annual Report, 2016).
Alturas and Salares Norte are large-tonnage, near-surface oxide Au resources which are believed
to be bulk-minable. Both are largely concealed beneath geochemically barren, but altered, cap rocks
(the “steam heated cap”) which obscured recognition of these prospects. Discovery was further
complicated by their remote location and high elevation. Mirasol is actively exploring for this type of
Au deposit at its Atlas and Titan projects in the Gorbea JV with Yamana Gold (“YRI”) and recently
announced the first season results from its new Altazor project.
In the Mio-Pliocene belt north of the Maricunga Belt, Mirasol has approximately 67,000 ha of granted
exploration claims. In the Mio-Pliocene aged “Southern Porphyry Belt”, Mirasol holds exploration
rights to approximately 38,000 ha of granted claims and claims applications.
Eocene - Oligocene belt: In 2016, Chile produced 5.5 million metric tonnes of Cu, making it the
world’s largest copper producer. The Eocene-Oligocene belt hosts many giant porphyry Cu mines
such as Escondida, Chuquicamata and Collahuasi that significantly contribute to this annual Cu
production. This Cu belt is considered a “mature exploration terrain” but it is also recognized as
prospective for further Cu discoveries. The continued prospectivity of this belt is attributed to its
extensive post-mineral cover, and in some cases, its “geochemically barren” alteration caps
concealing a substantial proportion of the most productive and logistically accessible segments of
the belt. While Cu has not been considered a core commodity for Mirasol to date, a number of factors
point toward possible supply deficits starting in 2018 and Mirasol considers the potential supply
shortfall as a driver for increased demand for Cu exploration projects. Accordingly, Mirasol has begun
staking new claims and expanding existing claims holdings in this belt to secure quality exploration
ground to build a pipeline of Cu exploration projects.
Mirasol holds approximately 37,000 ha in the Cu-rich Eocene-Oligocene belt, including the Rubi
project, the Odin project and two additional project generation properties.
Paleocene belt: The Paleocene belt hosts significant mines including BHP’s porphyry Cu+Mo
Spence mine and YRI’s high-grade, low sulfidation epithermal (LSE) Au+Ag El Peñón mine. El
Peñón is the largest precious metal mine in the Paleocene belt with a metal endowment (contained
metal reserves, resources and historic production – source SNL Metals & Mining) of 7.8 M oz Au
and 227 M oz Ag. Mirasol is targeting large multi-million ounce epithermal Au+Ag and large porphyry
Cu deposits in this belt.
In the Paleocene belt of Chile, Mirasol holds approximately 55,500 ha of granted exploration claims.
Portfolio of 100% owned projects Atacama-Puna Generative Region:
• Nine precious metal properties totaling approximately 23,084 ha, including the Atlas project
which are subject to the Company’s Gorbea – YRI JV (the “Gorbea-YRI JV”) agreement
5
(news release March 26, 2015), exploring for HSE Au deposits in the Mio-Pliocene age
mineral belt. The JV agreement grants YRI the option to acquire up to a 75% interest in the
Gorbea projects by making US$ 10 million in exploration expenditures, delivering a feasibility
study, a decision to mine and at Mirasol’s request, funding to commercial production for the
Company’s 25% retained project equity. YRI is also required to pay US$ 2 million in staged
option payments to Mirasol over the initial 4 years of the agreement.
• The Altazor project which covers 22,860 ha is HSE gold project located in an underexplored
section of the Mio-Pliocene age mineral belt. Mirasol completed a first pass reconnaissance
sampling over approximately 50% of the project area and reported the results on October 11,
2016. The surface results show comparable ppb level anomalous gold assay in soils and
rock chips to those recorded at surface at the Salares Norte Project.
• The Rubi project, located in the El Salvador Cu-Au mining district, Chile, hosts the Lithocap,
Zafiro and Puertozuelo porphyry Cu targets. Mirasol has continued to expand its claims
holdings to secure possible extensions and new prospect areas, resulting in a total claims
area of 25,980 ha. The El Salvador district hosts large-scale porphyry Cu mines operated by
Codelco, the Chilean national mining company.
• The Odin project is located 20 km north of the giant Escondida Cu mine. The Odin claims
cover a previously unexplored Mirasol-generated conceptual porphyry Cu mineralization
target, concealed by a strongly altered geochemically barren lithocap. In Q3, Mirasol reported
the expansion of claims at Odin from 900 to 5,667 ha (news release July 25, 2017).
• As of late September 2017, in addition to Gorbea, Altazor, Rubi and Odin; approximately
120,000 ha of 100% Mirasol owned Au, Ag, Cu projects in 30 claims areas, “pipeline” projects
that have been staked in alignment with the Company’s active project generation strategy in
the region.
Argentina: Santa Cruz Province Generative Region
The Company’s generative region in Santa Cruz encompasses the Deseado Massif, a 60,000 sq.
km area of upper middle Jurassic age volcanics that are recognized as under-explored terrain for
epithermal Au and Ag deposits.
The Santa Cruz Province hosts four operating multi-million-ounce Au+Ag mines and an additional
large deposit at advanced development stage. These mines are owned and operated by
international, mid-tier to major sized, precious metal producing companies. Mineralization in Santa
Cruz typically occurs in high-grade vein systems with both LSE and intermediate sulfidation
epithermal (ISE) styles. These deposits are exploited via bulk-minable open pit and underground
mining techniques.
6
Figure 3: Santa Cruz Project Portfolio.
Mirasol has been successfully exploring in Santa Cruz for over 10 years and has been involved in
the discovery of two Ag deposits: “Joaquin”, sold to JV partner Coeur Mining in 2012; and the Virginia
project which remains 100% owned by the Company.
The Company’s strategy in Santa Cruz over recent years has been to focus upon consolidating
claims holdings around key mineral districts where Mirasol already has established projects and the
Company’s exploration has confirmed the presence of and potential for, large-sized precious metal
systems. Due to the improved investment climate in Argentina, Mirasol has successfully
recommenced staking new projects in Santa Cruz.
Portfolio of 100% owned projects, Santa Cruz (Figure 3):
• The large Claudia Au+Ag project with a series of drill-ready prospects, which are contiguous
with the world-class Cerro Vanguardia Au+Ag district operated by Cerro Vanguardia S.A.
(CVSA), a 92.5 % owned subsidiary of AngloGold Ashanti. On September 6, 2017, Mirasol
announced the signing of a Letter of Intent (“LOI”) (“Claudia-OGC LOI”) with OceanaGold
(“OGC”) for a JV to explore the Claudia project for LSE Au+Ag mineralization. The definitive
JV option agreement was signed on October 20, 2017, granting OGC the right to earn up to
75% of the project by spending US$ 10.5 million in exploration expenditures, delivering a
feasibility study, a decision to mine and funding Mirasol’s 25% project equity position to
commercial production. If OGC elects to stay in the JV to the 51% earn-in it will pay US$ 1
million in staged cash payments. Further, it will make a one-off payment to Mirasol of US$
250,000 if the ounces of Au+Ag in a non-NI 43-101 compliant mineral inventory, outlined in
the Curahue prospect Io Vein preliminary block model by Mirasol’s previous JV partner
7
CVSA, are included in the PEA or feasibility stage OGC resources. OGC and Mirasol are
preparing a field exploration program, which anticipates to further drill test the project in early
calendar 2018.
• The La Curva Au project, includes three priority drill-ready prospects along the La Castora
trend and a series of other early stage prospects in the Curva West area. On January 30,
2017, Mirasol announced the signing of an LOI (the “La Curva-OGC LOI”) with OGC for a JV
to explore the La Curva project in Santa Cruz Argentina for LSE Au+Ag mineralization. The
definitive JV option agreement was signed on May 18, 2017, granting OGC the right to earn
up to 75% of the project by spending US$ 7.0 million in exploration expenditures, delivering
a feasibility study, a decision to mine and funding Mirasol 25% project equity position to
commercial production. If OGC elects to stay in the JV to the 51% earn-in it will pay US$ 1.5
million in staged cash payments. On October 26, 2017, OGC and Mirasol announced that
they initiated a 2,500m diamond core drill program to test a series of drill targets along the
Castora Gold Trend.
• The Nico project is an ISE Au+Ag target located 85 km from Pan American Silver’s Manantial
Espejo mine. During the Current Period, Mirasol has reported bonanza grade Au+Ag
sampling from the newly discovered Aurora and Resolution vein zones. Best results to date
from surface chip sampling of oxidized typically sub metre vein rock chip samples of 35.09
g/t Au and 2,095.0 g/t Ag from Aurora and 4.79 g/t Au and 6,181.4 g/t Ag from Resolution.
• The Virginia epithermal Ag project, where Mirasol has outlined high-grade Ag mineralization
in seven separate deposits (as vein shoots). Virginia contains an initial, open pit constrained
NI 43-101 mineral resource estimate comprised of Indicated resources totalling 11.9 M oz Ag
@ 310 g/t Ag, and Inferred resources totalling 3.1 M oz Ag @ 207 g/t Ag. Mirasol’s claims
holdings have expanded to 63,282 ha where encouraging reconnaissance rock float sampling
has returned assays up to 1,084 g/t Ag.
• Exploration rights to a portfolio of 9 additional quality precious metal properties totaling
approximately 132,000 ha, a number with drill-ready Au+Ag targets, including the Homenaje,
Sascha and Libanesa projects.
HIGHLIGHTS FOR THE PERIOD JULY 1, 2016 TO OCTOBER 26, 2017
The Company’s total exploration costs include generative exploration, property retention costs of the
exploration project portfolio, costs associated with preparing projects for joint venture, in-country
operation and management, and local value added taxes (VAT). For the Current Period Mirasol
invested $2,371,719 (Table 3) on exploration in Chile and $2,001,201 in Argentina. The Company
received $364,939 in cost recoveries for the Current Period; claims fees, salaries of Mirasol
employees seconded to the JV programs and other operational costs that are covered by the JV
partners under the terms of the JV agreements. Mirasol also received JV option and exit payments
of US$ 805,000 comprised of;
•
•
•
•
In January 2017, a Curva JV signing payment from OGC of US$ 100,000
In May 2017, the 3rd Gorbea JV option payment from YRI of US$ 400,000
In September 2017, a Claudia JV exit payment from CVSA of US$ 205,000
In October 2017, a Claudia JV signing payment from OGC of US$ 100,000
8
Corporate Matters
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
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 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 as a director of the
Company. Mr. Evans has over 20 years of experience in the mining industry and was until recently
the President and CEO of Mountain Province Diamonds Inc. Mr. Evans is a director of Archon
Minerals, and a director of the NWT and Nunavut Chamber of Mines. Positions previously 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), and 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) relates to recent appointments to the Board and the remuneration
of new 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 the completion of its Rights Offering under which
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.
On March 2, 2017, Mirasol held its Annual General Meeting of shareholders. The shareholders of
the Company represented at the Meeting elected Stephen C. Nano, Nick DeMare, Borden R. Putnam
III, Dana H. Prince, John Tognetti and Patrick C. Evans as directors of the Company for the ensuing
year. Dana Prince, the Chairman of the Board, stated that Timothy Heenan, a long-serving director
and co-founder of the Company, did not stand for re-election at the Meeting. Mr. Prince thanked Mr.
Heenan for his devotion and past contributions as a director, and stated that he looked forward to
his continued service to the Company in the role as Country Manager, based in Mendoza, Argentina.
Subsequent to the Meeting, the board appointed the following officers of the Company: Stephen C.
Nano, President and CEO; Dana H. Prince, Chairman; Mahesh Liyanage, CFO; Timothy Heenan,
Country Manager; and Gregory C. Smith, Corporate Secretary (news release March 6, 2017). On
June 14, 2017, Dana H. Prince was appointed executive Chairman and Patrick Evans was appointed
as the Chairman of the compensation committee.
9
On September 12, 2017, the Company granted 385,000 incentive stock options under its incentive
stock option plan to certain officers, employees and consultants. All of the options are exercisable at
$1.80 per share, with 235,000 options being exercisable for a period of three years from the date of
grant, and 150,000 options, which are subject to certain vesting restrictions, being exercisable for a
period of four years from the date of grant.
The Company currently has 3 million options allocated of the 4.9 million options available under the
Company’s Options Plan. 500,000 Bonus Warrants were issued in relation to the Rights Offering.
These warrants expired unexercised as of March 23, 2017.
EXPLORATION AND BUSINESS DEVELOPMENT ACTIVITIES FOR THE PERIOD
APRIL 1, 2017 TO OCTOBER 26, 2017
Joint Venture Activities
Gorbea-YRI JV: Gorbea Au Belt, northern Chile
Business Development
• The JV entered its third year on May 10, 2017, with YRI making the third option payment to
Mirasol of US$ 400,000 and paying the 2017 claims fees of US$ 160,000, signalling they
intend to continue with the JV for another year.
• Since inception, March 2015, through to early June 2017, YRI has reported exploration spend
of approximately US$ 5.2 million against the US$ 10 million spend required to trigger 51%
earn-in.
• YRI advised Mirasol of its plan to increase its 2017 Gorbea JV exploration budget by an
additional US$ 700,000. These funds will be directed to drilling at the Atlas Steam Heated
Zone and other new targets at the project (news release September 11, 2017).
Exploration
• Results from the second season of drilling by YRI (news release September 11, 2017) were
reported, including best down-hole intersection to date from the Atlas project hosted in
oxidized HSE vuggy silica breccia:
o 114.1 m at 1.07 g/t Au and 1.78 g/t Ag, including 36 m at 2.49 g/t Au and 3.08 g/t Ag
(hole 15)
o 45.8 m at 0.32 g/t Au and 0.81 g/t Ag (hole 16)
La Curva-OGC JV: La Curva Au Project, Santa Cruz, Argentina
Business Development
• On May 18, 2017, the Definitive JV Option Agreement with OGC was signed and the 1st JV
option payment of US$ 100,000 was received by Mirasol.
• The JV includes the following principal terms:
o A first-year exploration spend commitment of US$ 1.25 million and completion of
3,000 m drilling.
o Mirasol is the operator for the first year, and will charge a 5% operating fee.
o An earn-in to 51% after an exploration spend of US$ 7 million and US$ 1.5 million
staged cash payments over four years.
o An earn-in to 60% by OGC funding and delivering a Preliminary Economic
Assessment (PEA) in accordance with NI 43-101 on an inferred resource of not less
10
than 500,000 oz Au-equivalent within two years after the first earn-in.
o An earn-in to 65% by OGC funding and delivering a feasibility study in accordance
with NI 43-101 within an extra two years.
o An earn-in to 70% within the two-year Feasibility study period when the Feasibility
Study is suitable to be submitted to a substantial, recognized financial institution as a
basis for securing project finance for the development and operation of mining
activities on the Project and a decision to mine is approved by OGC’s board.
o A 75% interest if Mirasol elects for OGC to provide financing for Mirasol’s share of
mine development.
• La Curva has three priority drill ready prospects along the “La Castora” trend. Mirasol has
designed the first drill program with OGC and announced on October 26, 2017, the start of a
2,500 m diamond core drill program.
Claudia-OGC JV: Claudia Au+Ag Project, Santa Cruz, Argentina
Business Development
• Mirasol signed an LOI, dated August 31, 2017, with OGC with respect to an option joint
venture agreement for the Claudia Project.
• On October 20, 2017, the Definitive JV Option Agreement with OGC was signed and the 1st
option payment of US$ 100,000 was received by Mirasol.
• Key terms include:
o First year exploration spend commitment by OGC of US$ 1.75 million that includes a
minimum 3,000 m drilling.
o OGC option to earn 51% over a 4-year period by making cumulative exploration
investment totaling US$ 10.5 million, plus staged option payments to Mirasol of US$
1 million.
o OGC options to earn 60%, 65% and 70% over two additional 2-year periods
(cumulative 8 years) by delivering a preliminary economic assessment and feasibility
study that is “bankable” and delivering a decision to mine, both prepared in
accordance with NI 43-101.
o Mirasol will receive a one-off payment of US$ 250,000 if the ounces of Au+Ag in a
non-NI 43-101 compliant mineral inventory, outlined in the Curahue prospect Io Vein
preliminary block model by Mirasol’s previous JV partner CVSA, are included in the
PEA or feasibility stage resources.
o At decision to mine, Mirasol can elect to fund its pro-rata 30% share of the mine
development costs or require OGC to finance Mirasol’s proportion of the development
costs for a further 5% of the project, with Mirasol retaining 25% of the project and
OGC owning 75% of the project.
o OGC has the option to extend each of the 60% and 70% earn-in stages by one year
per earn-in stage by making one-off payments to Mirasol.
o Mirasol will operate the JV during the first year and will be paid a 5% fee to cover
administrative and overhead costs.
Claudia-CVSA JV Termination: Claudia Au+Ag Project, Santa Cruz, Argentina
Business Development
• On August 31, 2017, the Company announced completion of the exit process from the JV
agreement with Cerro Vanguardia S.A (“CVSA”). Mirasol received a US $205,000 payment
from CVSA in-lieu of certain uncompleted exploration commitments.
11
• CVSA had notified Mirasol in February 2017 that it was terminating the Claudia - CVSA JV
after only 11 months (initiated February 2016).
• During the 11-month JV period, CVSA spent approximately US$ 1.89 million and drilled 64
holes totalling 7,500 m. The majority of drilling was completed in the Curahue prospect with
39 RC holes (3,500 m) and 22 DDH holes (3,450 m). Much of the property remains untested.
Other Business Development Activities
Mirasol has seen an increase in interest in the Company’s drill-ready projects in Argentina and Chile
from mid-tier to major precious metal producers. This is interpreted to reflect the early signs of
improvement in the metals market. More importantly for Mirasol, the improving investment climate in
Argentina was largely due to the shift to a pro-foreign investment-oriented government in December
2015. Mirasol has been preparing for the improvement in the precious metals market via its counter-
cyclical investment strategy in project generation during the recent downturn and consequently has
a strong portfolio of projects to bring forward for JV. The Company is responding to the increased
interest by focusing more resources into business development activities to secure additional JV’s
for our drill-ready projects.
Since the beginning of January 2017, Mirasol has signed confidentiality agreements, distributed data
sets and conducted field reviews with selected Au and Cu companies to secure potential new JV’s
for a number of its Chilean projects including;
• Paleocene Belt: Indra Ag+Au Project
• Eocene-Oligocene Belt: Odin and Rubi Cu Projects
• Santa Cruz: Nico Au Ag Project
The Company is also focusing its exploration activities on its key “pipeline” properties to advance
them to drill-ready status in preparation for JV.
Project Exploration Activities on 100% owned Mirasol
Exploration: Chile
Odin Cu Project, Atacama Puna
• Mirasol expanded the claims at Odin from 900 to 5,660 ha, securing significant extensions to
the district scale alteration system previously reported at the project (news release July 25,
2017).
• Mirasol expanded reconnaissance rock chip sampling outward from the original Odin target
into the new claims. Initial results have returned encouraging Cu + Mo + Au assays. These
areas will be the focus of future exploration.
• Mirasol identified a conceptual target for large-scale porphyry Cu mineralization which has
not been tested by previous explorers (news release March 2, 2017)
Rubi Cu Project, Atacama Puna
• Mirasol completed field evaluation and targeting programs at Rubi identifying three large-
scale Cu-Mo- Au targets at the Lithocap, Zafiro, and Portezuelo prospects. The targets were
defined by integrated analysis, including re-logging of drill holes and the re-interpretation of
geophysics and geochemistry from previous JV partner exploration at Rubi. This was
combined with recent Mirasol geological mapping, rock chip sampling and target vector
modelling from field-based measurements of alteration minerology (news release July 24,
2017).
12
• The Company has systematically consolidated claims holdings at Rubi over the past 12
months and has expanded the claim area to a total of nearly 26,000 ha (news release July
24, 2017).
Altazor Au Project, Atacama Puna
• Mirasol’s first pass reconnaissance sampling has been completed over approximately 50%
of the project area during the recent exploration season. A total of 216 stream sediment, 395
soil and 933 rock chip samples have been collected and returned low-level but significantly
anomalous Au, Ag, Cu, Pb, Zn and epithermal path finder element assays, from sampling of
the mapped breccia bodies (news release October 11, 2017).
• The Altazor surface results show comparable ppb level anomalous gold assay in soils and
rock chips to those recorded at surface at Gold Field’s Salares Norte Project.
All projects are 100% owned by Mirasol. Odin and Altazor are new projects generated and staked
by Mirasol as a result of its Atacama-Puna Generative program.
Exploration: Argentina
Nico Project, Santa Cruz
• Mirasol completed an exploration program at the Aurora prospect. The work comprised
geological mapping, detailed ground magnetics and rock chip sampling, which defined a
system of structurally-hosted epithermal silica-iron oxide breccias and chalcedonic silica
veinlets, developed in multiple interpreted mineralized trends over a 4.0 by 2.1 km area. A
total of 1,113 rock-chip samples have been collected to-date and with assays ranging up to
35.09 g/t Au and up to 2,095 g/t Ag (news release June 12, 2017 and July 5, 2017).
• Mirasol reported that reconnaissance mapping and sampling at the Nico claims,
approximately 12 km to the east of the Aurora prospect led to the discovery of a new high-
grade epithermal vein at the Resolution prospect where reconnaissance rock chip sampling
returned assays of up to 6,181.4 g/t Ag and up to 4.79 g/t Au. The mineralization reports to
oxidized veins and veinlets of grey chalcedonic silica with localized zones of banded
saccharoidal silica and breccia textures hosted in dacitic subvolcanic (news release August
8, 2017).
• Mirasol also increased and the area of the Nico Project by staking of new claims to secure
extensions of the volcanic complex related to the mineralization, bringing the total project
area to over 53,000 ha (news release August 8, 2017).
MINERAL PROPERTIES
The following is a brief description of the key and most active mineral properties owned by the
Company.
Chile: The Gorbea Au Belt, Gorbea-YRI JV (Atlas and Titan Projects)
The Gorbea - YRI JV comprises nine 100%-owned claim blocks totalling approximately 23,084 ha
and includes the Atlas and Titan HSE Au and Ag projects in the Mio-Pliocene Belt of Northern Chile.
The Atlas and Titan projects contain large precious metal bearing HSE systems which have some
similarities to recent discoveries by Barrick Gold and Gold Fields at the Alturas and Salares Norte
projects, respectively. There are seven other early-stage exploration prospects covering portions of
prospective alteration systems within the Gorbea Belt JV.
In March 2015, Mirasol signed a joint venture agreement with YRI where the first earn-in option to
51% requires a spending commitment of US$ 10 million and cash payments of US$ 2 million over 4
13
years. YRI can earn 65% of the Gorbea projects by delivering an NI 43- 101 compliant preliminary
economic assessment with a resource of +1 million ounces of Au (at a 0.3 g/t Au cut off); and earn
75% interest by delivering a NI 43-101 compliant feasibility study, taking a decision to mine and by
providing Mirasol a loan to production for its 25% equity position (news release dated March 15,
2016 for information on historical exploration and further details of the Letter Agreement with YRI).
During the last drill season (October 2016 to April 2017), YRI completed 2,558 m of diamond core
drilling in seven holes at the Atlas project. Total drilling completed since inception of the Gorbea JV
in May 2015 is over 8,704 m, and YRI’s total exploration spend to June 2017 is approximately US$
5.2M, against the US$ 10 M required to trigger the 51% earn-in milestone over a maximum of 4
years. In addition, on May 12, 2017 YRI made a US$ 400,000 option payment to Mirasol Resources
to continue the JV into its third year (see news release May 30, 2017).
YRI also recently advised Mirasol that it has increased its 2017 Gorbea JV exploration budget by an
additional US$ 700,000. The additional exploration funds will be directed to drilling at the Atlas Steam
Heated Zone and other new targets at the project. YRI is planning to re-commence drilling at Atlas
for the southern hemisphere 2017 spring field season in October.
Drilling to-date at Atlas has outlined a precious metal mineralization (the “Steam Heated Zone”) in
an area of 650 m by 125 m by over a 200 m vertical interval. The Steam Heated Zone may represent
a body of Au+Ag mineralization that as defined to date is open to depth and laterally in all directions
outside the area of current drilling. As currently known, the top of mineralization is located between
approximately 255 to 310 m depth beneath altered cap rocks, which is a characteristic in-common
with other recent, HSE gold discoveries elsewhere on this same mineral belt in Chile.
On September 11, 2017, the Company reported the second season of drilling by YRI at the Atlas
Project. The best results from this drill campaign include:
• 114.1 m at 1.07 g/t Au and 1.78 g/t Ag, including 36 m at 2.49 g/t Au and 3.08 g/t Ag (hole
15)
• 45.8 m at 0.32 g/t Au and 0.81 g/t Ag (hole 16)
The intersection in hole 15 starts from 347 m down hole. Hole 16 is interpreted to have drilled across
the top of this same breccia body. Drill holes 15 and 16 were drilled toward each other (“scissor
holes”) from the NW and SE to cross each other at depth, testing a zone beneath an area of
coincident outcropping breccia, weakly anomalous soil geochemistry and a geophysical anomaly
that lies midway between drill holes 7 and 10 from last season’s drilling. Holes 7 and 10 returned the
best results from the 2015-16 drill campaign including 40 m at 1.38 g/t Au, with 28 m at 1.82 g/t Au.
The mineralization at Atlas is interpreted to be oxidized to depths of more than 400 m downhole.
Deep oxidation is considered a positive feature at Atlas as it may suggest the potential for favourable
metallurgical characteristics of the mineralization at the project.
Gold and silver mineralization in holes 15 and 16 is hosted in a multiphase breccia body
characterized by intense quartz-alunite+/- jarosite alteration with vuggy silica breccia clasts and a
phase of late-stage translucent barite hosting visible gold. This style of mineralization is typical of
HSE Au+Ag deposits elsewhere in the same belt of mineralization in Chile.
Information gathered from this season’s exploration indicates that the mineralization at Atlas is
hosted in a cluster of phreatomagmatic and hydrothermal breccia bodies that when combined outline
a larger breccia complex. Preliminary geological models show mineralization identified at Atlas is
hosted in both the breccia bodies and in stratabound zones of vuggy silica developed in the wall rock
adjoining the breccia.
Results from the 2016-2017 drilling are summarized in Table 1 (news release September 11, 2017).
14
Table 1: Atlas Key Downhole Intersections to Date. September 2017
Hole
Number
Including
interval
CLATDH0015
CLATDH0016
CLATRD0002
CLATRD0004
CLATRD0007
CLATRD0009
inc.
inc.
inc.
CLATRD0010
inc.
To
From
(m)
(m)
305.0 347.0
347.0 461.1
412.0 448.0
430.0 475.8
22.0
46.0
230.0 244.0
440.0 446.0
458.0 488.0
470.0 488.0
556.0 596.0
556.0 584.0
276.0 302.0
468.0 522.0
472.0 482.0
560.0 628.0
Interval
(m)
42.0
114.1
36.0
45.8
24.0
14.0
6.0
30.0
18.0
40.0
28.0
26.0
54.0
10.0
68.0
Silver
Gold
(g/t)
(g/t)
0.42
0.15
1.78
1.07
3.08
2.49
0.81
0.32
0.18
13.09
0.06 150.11
0.87
0.67
0.90
1.38
1.82
0.04
0.35
1.02
0.17
1.17
5.08
7.43
17.88
22.04
13.66
5.46
6.18
9.90
AuEq60
(g/t)
0.16
1.10
2.54
0.33
0.40
2.56
0.89
0.76
1.02
1.68
2.19
0.27
0.44
1.12
0.33
Reported
AuEq60
Gram x Metre
6.7 September 11, 2017
September 11, 2017
September 11, 2017
September 11, 2017
March 21, 2016
March 21, 2016
April 25, 2016
April 25, 2016
April 25, 2016
April 25, 2016
April 25, 2016
April 25, 2016
April 25, 2016
April 25, 2016
April 25, 2016
125.5
91.5
15.1
9.5
35.9
5.3
22.7
18.4
67.3
61.2
6.9
23.9
11.2
22.7
NOTES
1. Manually selected intervals typically > 0.1 g/t gold and/or >10g/t silver
2. Intervals presentated in this table have been limited to those with a Gram Metre interval greater than 5 gm
3. Bolder intervals are those with a Gram Meter interval greater than 50 gm
4. AuEq60 Gram Metre Interval is Calculated using AuEq60 (g/t) x intersection Interval (m)
5. Gold Equivalent grade (AuEq60) is calculated using following formula: Gold + (Silver / 60)
Argentina: La Curva (La Curva-OGC JV)
The La Curva Au project with 36,100 ha was staked in 2006 by Mirasol as part of its regional
generative program. Mirasol has undertaken an extensive exploration and geophysical program at
the property over a number of years and has outlined three priority drill ready prospects, the Cerro
Chato, Loma Arthur and SouthWest prospects (news releases; January 23, 2014, February 24, 2009
and April 11, 2008). These are situated along the 6 km "La Castora" Au trend and are characterized
by coincident large-scale outcropping alteration, IP geophysical anomalies, and wide-spread
anomalous rock chip assays ranging up to 66.8 g/t Au. Additionally, a series of prospects in La Curva
West area warrant further exploration to define additional drill targets.
The geological setting of the La Curva project is prospective for breccia/sheeted veinlet, and high-
grade epithermal vein styles of mineralization.
Mirasol signed an LOI with OGC on January 24, 2017 (see news release January 30, 2017), and the
definitive JV option agreement signed on May 18, 2017 (news release May 25, 2017). On October
26, 2017, the Company announced the start of a 2,500 m diamond core drilling drill program, planned
to deliver an initial shallow, 17 hole test of the Castora Trend targets (news release October 26,
2017).
Mirasol has recently identified a 300 m-long zone of Au+Ag bearing epithermal veinlets which
crosscut a well-developed barren silica cap at the Cerro Chato prospect (news release February 21,
2017). The veinlets assay up to 10.76 g/t Au and 24 g/t Ag, and directly overlie a portion of a 1.2 km-
long IP geophysical resistivity anomaly centred at shallow depths beneath the barren silica cap.
Mirasol’s geologists interpret the veinlets as possible indications of “geochemical leakage” from a
concealed zone of Au+Ag mineralization. Cerro Chato hosts a number of features indicative of the
presence of concealed high-grade vein and bulk mineable stockwork Au+Ag mineralization marking
this as a priority drill target. These include; a large-area of alteration evidenced by the silica cap, the
structural fabric of Au+Ag veinlets, and a large-scale IP resistivity anomaly mapping out a potentially
concealed zone of stockwork and veining.
15
Argentina: Claudia Au Ag Project
The large Claudia project (approximately 106,084 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 Au+Ag 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 (July 27, 2015).
In February 2016, Mirasol signed an exploration and option agreement with CVSA (news release
March 1, 2016). In February 2017, CVSA notified Mirasol it would terminate the Claudia-CVSA JV
(see news release, February 17, 2017). CVSA had completed 7,526 m of drilling and spent $US 1.97
million and developed a preliminary block model for the Io vein structure outlining a small non-NI 43
101 Au+Ag mineral inventory. In August 2017 Mirasol reported the completion of the exit process
from the joint venture option agreement with CVSA. and received the full exploration data (news
release August 31, 2017). In addition, Mirasol has received a US$ 205,000 payment from CVSA in-
lieu of certain uncompleted exploration commitments.
Mirasol subsequently signed an LOI with OGC, dated August 31, 2017 (news release September 6,
2017) with respect to an option joint venture agreement for the Claudia Project, where OCG will have
the right to acquire up to 75% of the Claudia project through a series of exploration and cash payment
commitments. The Definitive agreement was signed on October 20, 2017 (news release October 23,
2017).
During the Claudia-CVSA JV, the vast majority of drilling targeted the Io vein zone at the Curahue
prospect (see news releases May 9, and July 26, 2016). The CVSA RC program (39 holes totalling
3,543 m) was completed on June 29 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 encompassed 22 DDH holes for 3,450 m at Curahue (21 holes at
“Io” and 1 hole at Europa) and 3 holes for 560 m at the Rio Seco Prospect.
Phase I drill results were for 18 of the 26 RC holes that provided a shallow test of the 2 km long “Io”
vein zone (see news release July 26, 2016). RC assay results (Table 2) have defined both narrow
zones of higher-grade and multiple broad zones of lower grade Au+Ag mineralization. RC drilling
was 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 sampling,
which 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.
Phase II drill results included the outstanding RC and all DDH assays from the “Io” trend (see news
release December 16, 2016). At the northwest end of the "Io" vein zone, a 600 m-long body of
mineralization is defined. Preliminary interpretations of the shape of the body suggests mineralization
remains open to the northwest and southeast. Assay results from Phase II drilling (Table 2) show
0.6 to 1.8 m wide zones of higher-grade Au+Ag within a broader zone of lower-grade mineralization
that ranges in width from a few metres to a maximum true width of up to 60 m wide. Mineralization
starts within a few metres of surface, as bedrock is covered by thin, unconsolidated post-mineral
gravel cover, and has been tested to depths of 135 m below surface. The preliminary interpretation
of the "Io" Zone suggests the mineralized body may dip 60° to 80° SW.
The scout drilling at Europa and Rio Seco returned anomalous Au and Ag assays that Mirasol thinks
warrant further exploration work. The Themisto trend and Laguna Blanca, Alien and Cilene prospects
were not drill tested by CVSA. Mirasol remains fully committed to advancing exploration at the
Claudia Project and will undertake a comprehensive review of all new technical information
generated by CVSA before reporting on further plans for the Project.
16
Table 2: Claudia: Curahue prospect, Io Trend- Phase I and II Length-weighted average downhole drill intersections
Table 1: High grade drill hole intervals
(manually chosen)
Table 2: Intervals calculated at 1 g/t AuEq60
cutoff with greater than 5 gram metre product
Table 3: Intervals calculated at 0.3 g/t AuEq60
cutoff with greater than 5 gram meter product
Notes:
1)
2)
3)
4)
Gold Equivalent (AuEq60) is calculated using following formula:
Gold + Silver / 60
AuEq60 Gram Metre interval is calculated using: AuEq60 (g/t) x
intersection length (m)
Intervals presented are selected using the stated combined AuEq60 (g/t)
cut off breaks to calculate length weighted average intersections including
up to 1m with a minimum 0.1 g/t AuEq60 grade
Collar Names
1)
2)
IODDH = Io Diamond Drilling
IORC = Io Reverse Circulation Drilling
17
Argentina: Virginia Project
The Virginia high-grade, Ag vein zone was discovered by Mirasol in late 2009 on the Santa Rita
property package, through follow-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 as previously reported
(Figure 4; and see 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 Ag mineralization (see
news release January 28, 2015).
Figure 4: Virginia expanded Claims and new sampling, September 2016.
On March 29, 2016, Mirasol filed an amended technical report on SEDAR dated February 29, 2016.
The Amended Report addressed specific technical comments received from the BC Securities
Commission (“BCSC”) following their routine review of technical disclosure. The base case Mineral
Resource estimate contained in the Original Report remains unchanged in the Amended Report.
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). This is now expanded by
further claims staking to 63,282 ha. Preliminary prospecting south of the limit of Mirasol drilling on
the newly acquired claims, has identified quartz vein and vein breccia float scattered along a 2 km-
trend. The samples of float rock have epithermal textures, 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 work and
geochemical assays received to date suggest that the new claims may host previously unrecognized
soil-covered extensions of the Virginia Ag system.
18
In October 2016, Mirasol mobilized geological teams to Virginia to begin systematic exploration of
the new claims. The scope of the work included 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.
Other Properties
Mirasol holds a number of additional drill ready and early-stage exploration properties, which are
prospective for Au and/or Ag and Cu mineralization in southern Argentina and northern Chile.
19
RESULTS OF OPERATIONS
Table 3: Exploration expenditures per projects under active exploration
CHILE
Gorbea Belt - Atlas Project
Camp and general
Contractors and consultants
Geophysics
Mining rights and fees
Travel & accommodation
Gorbea Belt - Titan Project
Camp and general
Contractors and consultants
Geophysics
Mining rights and fees
Travel & accommodation
Gorbea Belt - Other Projects
Camp and general
Contractors and consultants
Geophysics
Mining rights and fees
Travel & accommodation
Yamana Gorbea - Joint Venture
Assays and sampling
Administration
Camp and general
Contractors and consultants
Geophysics
Professional fees
Mining rights and fees
Travel & accommodation
Recovery of costs
Option payment
For the Twelve Months Ended June 30,
2016
2017
459
33,422
1,145
97,722
559
133,307
-
6,328
913
43,090
-
50,331
-
10,086
1,198
98,108
-
109,392
-
-
81
58,309
-
361
207
4,130
(209,550)
(545,664)
(692,126)
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
2,581
2,910
136,527
1,089
-
98
5,793
(110,714)
(201,064)
(161,565)
Total - Properties joint ventured to other companies
(399,096)
(56,060)
Rubi
Assays and sampling
Camp and general
Contractors and consultants
Professional fees
Geophysics
Mining rights and fees
Travel & accommodation
7,020
15,154
207,219
-
8,089
225,206
13,333
476,021
382
5,054
24,824
500
5,219
132,538
908
169,425
20
Chile Pipeline Projects
Assays and sampling
Administration
Camp and general
Contractors and consultants
Geophysics
Mining rights and fees
Travel & accommodation
For the Twelve Months Ended June 30,
2016
2017
61,417
-
58,512
383,393
5,469
306,932
51,345
867,068
142,832
6,131
52,348
375,682
44,113
178,380
57,634
857,120
Total - 100% owned properties
1,343,089
1,026,545
Frontera - Joint Venture
Assays and sampling
Camp and general
Contractors and consultants
Environmental
Geophysics
Mining rights and fees
Travel & accommodation
Total - Earn-in joint venture on third party projects
Project Generation
Corporate Operation & Management - Chile
461
-
38,722
-
452
41,380
633
81,648
796,156
549,921
-
75
53,889
-
6,394
175,474
2,872
238,704
1,361,613
481,760
Total Chile
2,371,718
3,052,562
Argentina
Claudia
Assays and Sampling
Camp and general
Contractors and consultants
Environmental
Mining rights and fees
Administration
Professional fees
Travel & accommodation
Recovery of costs
Option payment
La Curva
Assays and Sampling
Camp and general
Contractors and consultants
Option payment
Environmental
Geophysics
Mining rights and fees
Professional fees
Travel & accommodation
21
379
12,494
88,333
9
194,882
-
5,109
9,861
(422,367)
-
(111,300)
9,325
15,352
145,787
(136,140)
5,493
8,825
17,641
42,154
5,344
113,781
8,336
29,417
96,263
-
170,070
7,971
-
7,921
(130,234)
(135,230)
54,514
3,549
7,764
18,933
-
-
-
13,291
-
3,034
46,571
Santa Rita and Virginia
Assays and sampling
Camp and general
Contractors and consultants
Mining rights and fees
Professional fees
Administration
Travel & accommodation
Argentina Pipeline Projects
Assays and sampling
Camp and general
Contractors and consultants
Environmental
Geophysics
Mining rights and fees
Professional fees
Travel & accommodation
Administration
Total - 100% owned properties
Project Generation
Corporate Operation & Management - Argentina
For the Twelve Months Ended June 30,
2016
2017
27,359
83,732
91,312
39,208
-
-
5,300
246,911
66,084
83,552
264,993
1,011
14,140
127,751
133,565
34,374
-
725,470
974,862
18,925
740,437
1,707
49,598
39,845
38,172
5681
200
1,299
136,502
5,382
4,241
52,156
3,973
-
216,883
-
424
170
283,229
520,816
559,906
569,543
Total Argentina
1,734,224
1,650,265
Total Exploration and Evaluation Costs
4,105,942
4,702,827
FOR THE YEAR ENDED JUNE 30, 2017, AS COMPARED TO THE YEAR ENDED JUNE 30, 2016
The Company’s net loss for the year ended June 30, 2017 (“2017”) was $6,945,647 or $0.15 per
share compared to $6,017,003 or $0.14 per share for the year ended June 30, 2016 (“2016”), an
increase of $1,195,622.
The main reason for the increase in net loss during 2017 is the foreign exchange fluctuation primarily
with regards to the US dollar.
Mirasol’s total operating expenses were $6,902,462 in 2017 compared to $7,191,564 in the 2016.
Even though the variance is immaterial there have been material changes in individual expense
categories which were netted off.
As presented in Table 3 above, the Company incurred exploration costs of $4,105,942 in 2017, and
$4,702,827 in 2016. Reduction in generative exploration in Argentina and increase in option
payments received and cost recoveries (2017 - $1,313,701; 2016 - $577,242) during 2017 resulted
in reduction in exploration expenses by $596,885.
Stock-based payments and depreciation are non-cash items. Excluding the above and the
exploration cost, the Company incurred $2,070,576 in 2017 compared to $1,782,499 in 2016. The
increase of $288,077 is attributable to the increase in business development, marketing and investor
communication activities. Increased business development initiatives resulted in an increase of
22
$192,132 in related expense. New website development and shareholder reach increased the
marketing and investor communication by $153,196.
Reductions in professional fees, office and miscellaneous, and management fees in 2017 compared
to 2016, were attributable to reduction in rates and the services obtained, efficient cost management
and non-grant of bonus shares respectively. Increase in transfer agent and filing fees in 2017 was
due to increase in filing fees, activity levels and market capital.
The Company also recorded a foreign exchange loss of $200,762 during 2017 compared to the gain
of $1,017,394 in 2016. The periodic variance in foreign exchange gain or loss recorded by the
Company is primarily the result of the movement in the value of the US dollar relative to the Canadian
dollar, due to the significant US dollar asset holding by the Company.
FOURTH QUARTER ANALYSIS
The Company carried out its regular generative exploration work during the fourth quarter. On May
25, 2017, the Company announced the signing of the La Curva-OCG exploration and option
agreement, and received the initial option payment of US$ 100,000. During the quarter the Company
received US$400,000 option payment from Yamana.
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, 2017, 2016 and
2015.
Sales
Income (loss) for the Year
Earnings (loss) per share – Basic
Earnings (loss) per share – Diluted
Total Assets
Total Long-term Liabilities
Dividends Declared
2017
$
-
(6,945,647)
(0.15)
(0.15)
25,070,836
-
-
2016
$
-
(6,017,003)
(0.14)
(0.14)
21,414,630
-
-
2015
$
-
(7,919,151)
(0.18)
(0.18)
26,789,642
-
-
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.
23
Income (Loss)
from Continued
Operations
$
(1,388,787)
(1,789,281)
(1,669,075)
(2,098,504)
(1,390,063)
(3,257,207)
(1,358,661)
(11,072)
Basic Income
(Loss) per Share
from Continued
Operations
$
(0.03)
(0.04)
(0.03)
(0.05)
(0.03)
(0.07)
(0.03)
(0.00)
Diluted Income
(Loss) per Share
from Continued
Operations
$
(0.03)
(0.04)
(0.03)
(0.05)
(0.03)
(0.07)
(0.03)
(0.00)
Revenues
$
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Period
4th Quarter 2017
3rd Quarter 2017
2nd Quarter 2017
1st Quarter 2017
4th Quarter 2016
3rd Quarter 2016
2nd Quarter 2016
1st Quarter 2016
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.
INVESTING ACTIVITIES
During 2017, the Company invested Canadian, Australian and US dollars in interest bearing financial
instruments maturing up to one year. The total amount invested was CAD$16,792,765. The
Company received interest income of $157,577 during 2017 compared to $69,167 in 2016.
FINANCING ACTIVITIES
During 2017, the Company completed a rights offering for Gross proceeds of $10,000,000. The
Company did not engage in financing activities during 2016.
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 Project 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
24
a royalty interest. The Company does not anticipate mining revenues from sale of mineral production
in the foreseeable future.
With working capital of approximately $21.2 million on June 30, 2017, 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.
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
Bonus shares
Director’s fees (ii)
Year Ended June 30,
2017
514,369
250,749
-
135,623
900,741
2016
$
507,987
191,455
372,000
133,500
$ 1,204,942
$
$
(i) Management compensation is included in Management fees, Business development and Exploration
costs in the Company’s consolidated statements of loss and comprehensive loss.
(ii) The independent directors of the Company are paid, directly or indirectly, $2,100 per month. The
Chairman of the Board of Directors receives an additional $3,000 per month for serving in this capacity.
The independent directors are also paid for serving on special committees of the Board of Directors,
as struck from time-to-time.
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.
25
The following companies are related parties through association of the Company’s directors and
officers:
Miller Thomson
Avisar Chartered Accountants(i)
Chase Management Ltd.
Global Ore Discovery Pty Ltd.
Evrim Resources Corp.(“Evrim”)(ii)
Nature of transactions
Legal fees
Accounting fees
Professional fees
Project generation, exploration management and
GIS services
CFO services, office administration support
services and office sharing
(i)
(ii)
As of March 11, 2016, Avisar ceased to be a related party of the Company.
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 or upon the Company giving Evrim six months’ notice of termination
The Company has agreements with all related parties and is charged service fees 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
CFO services, office sharing and administration
Project generation, exploration expenses and GIS services
Professional fees
Year Ended June 30,
2017
226,101
72,588
87,316
965,443
-
1,351,448
2016
177,421
134,150
52,833
798,676
41,200
1,204,280
$
$
$
$
Included in accounts payable and accrued liabilities at June 30, 2017, is an amount of $149,287
(2016 - $148,450) owing to directors and officers of the Company and to companies where the
directors and officers are principals.
SIGNIFICANT 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, 2017. 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.
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.
26
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 16 is a new standard that sets out the principles for recognition, measurement,
presentation, and disclosure of leases including guidance for both parties to a contract, the
lessee and the lessor. The new standard eliminates the classification of leases as either
operating or finance leases as is required by IAS 17 and instead introduces a single lessee
accounting model.
27
The following new standards and amendments to standards which are applicable to the
Company for the current fiscal year have been adopted:
a) 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 was adopted during the fiscal
year with no impact on the Company in its present form.
b) 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 were adopted during the year, the standard had
no impact on the Company in its present form.
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 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, 2017.
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
28
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
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, 2017, consist of cash and cash equivalents,
interest receivable, and accounts payable and accrued liabilities. The fair value of all these
instruments 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 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.
29
At June 30, 2017, 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
Short-term investments
Receivables and advances
and
Accounts
payable
US
Dollars
2,040,840
9,500,000
205,000
(27,859)
Australia
n Dollars
921,080
1,974,38
-
(123,631)
Argentine
Peso
3,982,397
Chilean
Peso
17,340,920
1,077,621
(2,576,622)
13,159,755
(8,352,839)
Based on the net exposures as at June 30, 2017, 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 $1,526,068 and $276,601, 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 $20,870 and $4,319, 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 interest receivable due from major financial
institutions on short term investments. 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, 2017, the Company’s financial liabilities
consist of accounts payable and accrued liabilities totalling $532,649. All of the Company’s
obligations are expected to be paid within 90 days. Management believes the Company has
sufficient funds to meet its liabilities as they become due.
(iv) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The risk that the Company will realize a
loss as a result of a decline in the fair value of the short-term investments included in cash and
cash equivalents is limited because these investments are generally held to maturity. The
applicable rates of interest on such investments range between 0.05% and 1.91%.
The Company appointed a special treasury committee comprising of three board members to
consider management’s recommendations to mitigate the exposure to foreign currency risk. The
committee accepted the consideration that the management maintain a ratio of 70:15:15 for US$:
CAD$: AUD$ of the treasury whenever practical.
30
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 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 is provided above, in the Company’s
condensed consolidated statements of (income) loss of the audited annual consolidated financial
statements for the period ended June 30, 2017 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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