Midland Exploration Inc.
Annual Report
2014
Midland Exploration Inc.
1, Place Ville Marie, Suite 4000, Montreal, Quebec, H3B 4M4
Tel. : 450.420.5977 Fax : 450.420.5978
Midland Exploration Inc.
Table of Contents
Nature of activities ........................................................................................................................ 3
Overall performance ..................................................................................................................... 3
Selected annual information ......................................................................................................... 4
Net loss ......................................................................................................................................... 4
Investing activities ......................................................................................................................... 5
Financing activities ...................................................................................................................... 25
Working capital ........................................................................................................................... 26
Summary of results per quarter .................................................................................................. 26
Fourth quarter ............................................................................................................................. 27
Related party transactions .......................................................................................................... 27
Subsequent events ..................................................................................................................... 28
Outstanding share data ............................................................................................................... 28
Stock option plan ....................................................................................................................... 28
Off-balance sheet arrangements ............................................................................................... 28
Commitment ................................................................................................................................ 28
Critical accounting estimates ..................................................................................................... 28
Financial instruments ................................................................................................................. 30
Risk factors ................................................................................................................................ 31
Forward looking information ........................................................................................................ 34
Independent Auditor’s Report ..................................................................................................... 35
Statements of Financial Position ................................................................................................. 37
Statements of Comprehensive Loss ........................................................................................... 38
Statements of Change in Equity ................................................................................................. 39
Statements of Cash Flows .......................................................................................................... 40
Notes to Financial Statements .................................................................................................... 41
Corporate Information ................................................................................................................. 67
2
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
The following management discussion and analysis (the “MD&A”) of Midland Exploration Inc. (“Midland”
or “the Corporation”) constitutes management’s review of the factors that affected the Corporation’s
financial and operating performance for the year ended September 30, 2014. This MD&A should be read
in conjunction with the Corporation’s financial statements and related notes as at September 30, 2014,
prepared in accordance with the International Financial Reporting Standards (“IFRS”). All figures are in
Canadian dollars unless otherwise noted.
Further information regarding the Corporation and its operations are filed electronically on the System for
Electronic Document Analysis and Retrieval (SEDAR) in Canada and can be obtained from
www.sedar.com.
The following abbreviations are used to describe the periods under review throughout this MD&A:
Abbreviation
Period
Q1-13
Q2-13
Q3-13
Q4-13
Fiscal 13
Q1-14
Q2-14
Q3-14
Q4-14
Fiscal 14
Fiscal 15
Nature of activities
October 1, 2012 to December 31, 2012
January 1, 2013 to March 31, 2013
April 1, 2013 to June 30, 2013
July 1, 2013 to September 30, 2013
October 1, 2012 to September 30, 2013
October 1, 2013 to December 31, 2013
January 1, 2014 to March 31, 2014
April 1, 2014 to June 30, 2014
July 1, 2014 to September 30, 2014
October 1, 2013 to September 30, 2014
October 1, 2014 to September 30, 2015
The Corporation, incorporated on October 2, 1995 and operating under the Business Corporations Act
(Québec), is a company in the mining exploration business. The Corporation’s operations include the
acquisition and exploration of mineral properties.
Overall performance
Midland has a working capital of $3,137,673 as of September 30, 2014 ($3,343,414 as of September 30,
2013) which will allow the Corporation to execute its exploration program for at least the next two years.
On December 19, 2013, the Corporation completed a private placement by issuing 802,001 units at $0.75
per unit and 833,286 flow-through shares at $0.90 per share, for total gross proceeds of $1,351,460. On
December 3, 2014, the Corporation completed a private placement by issuing 1,100,430 units at $0.70
per unit and 1,036,683 flow-through shares at $0.85 per share, for total gross proceeds of $1,651,481.
On November 19, 2013, Midland signed an option agreement with Sphinx Resources Ltd. (“Sphinx”
previously Donner Metals Ltd.) whereby Sphinx has the option to acquire a 50% interest in the Valmond
property by paying cash $250,000 and funding $2,500,000 in exploration works. On January 21, 2014,
Midland signed an option agreement with Japan Oil, Gas and Metals National Corporation (“JOGMEC”)
whereby JOGMEC has to option to acquire a 50% interest in the Pallas property by funding $2,000,000 in
exploration works. Midland is pleased that these two option agreements follow another option agreement
signed in September 2013 with Teck Resources Ltd (“Teck”) whereby Teck has the option to acquire a
50% interest in the Patris property by funding $10,500,000 exploration works and paying cash $300,000.
Finally, on October 10, 2014, the Corporation signed a letter of intent with SOQUEM INC. ("SOQUEM") to
grant SOQUEM the option to acquire a 50% undivided interest in its Casault and Jouvex properties by
funding $4,500,000 exploration works over 4 years.
3
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Overall performance (Cont’d)
As the operator, Midland incurred exploration expenditures totalling $2,385,109 ($2,331,206 in Fiscal 13),
on its properties of which $1,626,633 was recharged to its partners ($168,510 in Fiscal 13). In addition,
the operating partners incurred exploration expenses of $79,819 ($1,622,184 in Fiscal 13) on Vermillon
and Maritime-Cadillac (Casault and Maritime-Cadillac in Fiscal 13). Also, the Corporation invested
$264,055 ($482,591 in Fiscal 13) in several property acquisitions in Quebec of which $77,717 was
recharged to its partners ($20,030 in Fiscal 13).
The Corporation reported a net loss of $1,974,586 for Fiscal 14 ($688,090 for Fiscal 13).
Selected annual information
Revenues
Loss
Loss per share, basic and diluted
Total assets
Net loss
Fiscal year ended
September 30
2014
$
172,583
(1,974,586)
(0.07)
2013
$
18,870
(688,090)
(0.02)
As at September 30
2013
$
2012
$
9,892,800
9,953,971
Expenses increased to $2,359,597 in Fiscal 14 compared to $1,216,056 in Fiscal 13:
• Conferences and mining industry involvement decreased to $77,477 ($113,646 in Fiscal 13). Midland
reduced its expenses in mining conferences and also reduced its contribution to Minalliance to $5,000
($20,000 in Fiscal 13). Minalliance promotes and protects the interest of the mining industry in
Quebec;
Impairment of exploration and evaluation assets increased to $1,288,721 ($118,450 in Fiscal 13) and
the detailed explanation can be found in the investing activities section, particularly in the Ytterby
section where a $1,230,273 impairment was recorded in Fiscal 14.
•
Project management fees revenues increased to $165,435 ($18,870 in Fiscal 13). In Fiscal 14, Midland
was the operator on the main projects explored with partners (Pallas and Valmond) as opposed to Fiscal
13 where the main projects explored with partners (Casault and Maritime Cadillac) were operated by the
partners.
A $155,863 ($442,353 in Fiscal 13) recovery of deferred income taxes was recognized to record the
amortization, in proportion of the work completed, of the premium related to flow-through shares
renunciation following the December 19, 2013 (December 21, 2012 in Fiscal 13) private placement.
4
Exploration Midland inc.
Management’s Discussion and Analysis
For the year ended September 30, 2014
Investing activities
Abitibi
Grenville-
Appalaches
James Bay
Quebec
Labra-
dor
Northern
Québec
u
A
–
c
a
l
l
i
d
a
C
e
m
i
t
i
r
a
M
$
u
A
-
e
m
m
a
l
f
a
L
$
u
A
-
s
i
r
t
a
P
$
u
A
-
t
l
u
a
s
a
C
$
u
A
-
d
n
o
m
l
a
V
$
u
A
-
x
e
v
u
o
J
$
u
A
-
a
v
e
H
$
u
A
i
b
i
t
i
b
A
$
u
A
–
n
o
s
m
a
S
$
-
u
A
-
n
Z
-
u
C
-
n
o
d
e
e
W
$
u
A
-
s
e
m
a
J
-
e
i
a
B
$
U
–
s
e
m
a
J
-
e
i
a
B
$
n
Z
-
u
a
e
n
i
t
a
G
$
Exploration and
evaluation expenses
Fiscal 2014
Balance beginning
228,787 1,167,804 179,176 214,479 113,507 237,576 16,149
-
- 359,196 28,648 162,521 14,686
e
F
-
u
A
R
T
E
-
-
s
e
m
a
J
-
e
i
a
B
$
949,831 42,158 1,277,720
e
r
o
n
o
é
l
E
$
y
b
r
e
t
t
Y
$
s
t
e
j
o
r
p
e
d
n
o
i
t
a
r
é
n
é
G
$
l
a
t
o
T
$
- 36,125 5,238,531
E
G
P
-
s
a
l
l
a
P
$
210,168
u
A
-
b
o
b
l
l
i
W
$
Geophysics
Geology
Drilling
Geochemistry
Line cutting
Travelling
Stock-based
compensation
Recharge
Net addition
Tax credits
Option payment
Write-off
Net change
-
-
760
- 26,868 256,548 66,982
16,340 48,929 25,590 54,252 15,200 1,520 36,859
-
- 152,345
-
4,876 33,395
-
-
760 139,597 61,988 71,618 534,077 111,080 2,720 36,859
- 1,200
-
-
-
- 14,032 31,453 28,898
-
-
- 111,503
7,516
-
-
-
4,238
-
3,591
9,171
6,084
252
297
-
1,063 19,337
4,560 13,106
-
-
1,548
-
-
-
1,387
-
7,010 33,991
3,418
-
4,112 26,103
(56,178)
6,862 18,366
- (530,277)
-
-
-
-
4,178 143,709 31,913 78,480 22,166 111,080 2,720 36,859
-
-
- (7,010)
-
-
- 33,991
-
-
132 54,323
-
184
-
2,497
132 57,004
-
-
-
-
-
-
-
-
132 57,004
-
-
-
(218)
(2,877)
-
-
-
-
4,178 142,710 29,579 75,603 10,448 108,514 2,414 36,641
(1,528)
(10,190)
-
(2,334)
-
-
(2,566)
-
-
(306)
-
-
(999)
-
-
(5,174)
-
-
-
-
-
- 28,817
(14)
-
-
(2,848)
-
-
118 54,156
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,150
196,398
-
10,671
-
3,094
224,313
16,691
-
241,004
(15,696)
-
-
225,308
-
-
-
-
-
-
-
-
-
-
122
31,759
-
6,825
-
-
156,284
-
713,648 4,770
-
115,055
346
60,175
-
-
-
9,376
38,706 1,054,538 5,116
-
541,354
5,600 1,223,746
383,694
134,707
74,383
27,225
5,600 2,385,109
-
-
-
-
15,501
5,221
(15,063)(1,018,105)
39,144
-
-
41,654 5,116
-
96,274
- (1,626,633)
854,750
5,600
(3,212)
-
-
-
- (1,204,562)
- (1,168,630)
-
(35,734)
-
-
-
-
5,920 5,116
(75,684)
(2,178)
-
(10,190)
- (1,204,562)
(435,686)
3,422
Balance end
232,965 1,310,514 208,755 290,082 123,955 346,090 18,563 36,641
- 388,013 28,766 216,677 14,686 1,175,139 42,158
109,090
216,088 5,116 39,547 4,802,845
5
Exploration Midland inc.
Management’s Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Abitibi
Grenville-
Appalaches
James Bay
Quebec
Labra-
dor
u
A
–
c
a
l
l
i
d
a
C
e
m
i
t
i
r
a
M
$
214,241
-
715
-
-
-
-
715
14,118
-
14,833
(287)
-
-
14,546
Exploration and evaluation
expenses
Fiscal 2013
Balance beginning
Geophysics
Geology
Drilling
Geochemistry
Line cutting
Travelling
Stock-based compensation
Recharge
Net addition
Tax credits
Option payment
Write-off
Net change
u
A
-
e
m
m
a
l
f
a
L
$
u
A
-
s
i
r
t
a
P
$
u
A
-
t
l
u
a
s
a
C
$
592,050
85,044 276,006
156,823
62,261
234,964
33,356
65,620
4,638
557,662
20,906
-
578,568
-
77,431
-
12,143
-
6,054
95,628
6,899
(4,510)
98,017
87,844
9,281
-
-
-
903
98,028
28,310
(98,028)
28,310
u
A
-
d
n
o
m
l
a
V
$
73,139
25,332
5,990
-
236
9,480
-
41,038
-
-
41,038
-
u
A
-
n
Z
-
u
C
-
n
o
d
e
e
W
$
u
A
-
x
e
v
u
o
J
$
u
A
-
a
v
e
H
$
n
Z
-
u
a
e
n
i
t
a
G
$
u
A
-
s
e
m
a
J
-
e
i
a
B
$
U
–
s
e
m
a
J
-
e
i
a
B
$
u
A
-
e
r
o
n
o
é
l
E
$
e
F
-
s
e
m
a
J
-
e
i
a
B
$
R
T
E
-
y
b
r
e
t
t
Y
$
E
G
P
s
a
l
l
a
P
$
s
t
e
j
o
r
p
e
d
n
o
i
t
a
r
é
n
é
G
$
l
a
t
o
T
$
18,957
- 198,458
25,593 111,249
14,686 366,786
59,703 1,171,617
-
34,704 3,242,233
196,285
23,703
-
-
-
-
219,988
-
-
219,988
10,320
-
5,829
-
-
- 126,357
41,440
-
-
18,533
1,526
16,149 187,856
-
-
16,149 187,856
-
-
-
3,913
-
-
-
-
3,913
-
-
3,913
-
53,459
-
5,193
-
1,393
60,045
-
-
60,045
- 114,584
- 494,974
-
-
32,593
-
-
-
-
6,914
- 649,065
2,768
-
-
-
- 651,833
36,305
-
-
236
-
-
36,541
-
-
36,541
-
-
35,306
-
455
-
100,336 201,568
-
13,034
-
12,458
136,097 227,060
-
37,511
(65,972)
-
107,636 227,060
-
-
-
-
-
743,530
1,421 1,086,812
234,964
137,926
93,633
34,341
1,421 2,331,206
110,512
(168,510)
1,421 2,273,208
-
-
(2,814)
-
-
575,754
(3,885)
-
-
94,132
-
(89,837)
-
(61,527)
(670)
-
-
40,368
(1,369)
-
-
218,619
-
-
-
(27,118)
-
-
16,149 160,738
(858)
-
-
(8,773)
-
-
3,055 51,272
(68,788)
-
-
-
-
-
- 583,045
(103)
-
(53,983)
(17,545)
(1,533)
-
-
(16,892)
-
-
106,103 210,168
-
-
-
(133,090)
(89,837)
(53,983)
1,421 1,996,298
Balance end
228,787 1,167,804 179,176 214,479 113,507
237,576
16,149 359,196
28,648 162,521
14,686 949,831
42,158 1,277,720 210,168
36,125 5,238,531
6
Midland Exploration Inc.
Management’s Discussion and Analysis
For the year ended September 30, 2014
Exploration and evaluation expenses
Properties
Midland
$
Budget Fiscal 2014
Partner
$
Total
$
Actual 2014
Midland
Partner
$
$
Total
$
Midland
$
Budget 2015
Partner
$
100% owned by Midland
Valmond Au
Jouvex Au
Abitibi Au
Heva
Casault Au
La Peltrie
Weedon Cu-Zn-Au
Gatineau Zn
Baie James Au
Baie James U
Baie James Fe
Éléonore Au
Willbob
Project generation
With option, operated by Midland
and paid by partner
Patris Au - Teck
Valmond Au - Sphinx
Pallas PGE Jogmec
Samson - Sphinx
Casault - Soquem
Jouvex - Soquem
In joint venture
Maritime-Cadillac Au - Agnico Eagle (operator)
Vermillon – Soquem
Ytterby REE - Jogmec
Laflamme Au - Maudore
50,000
75,000
10,000
50,000
15,000
-
75,000
15,000
55,000
-
20,000
300,000
-
20,000
685,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
300,000
950,000
-
-
-
1,750,000
26,950
-
50,000
88,050
165,000
28,050
-
50,000
-
78,050
50,000
75,000
10,000
50,000
15,000
-
75,000
15,000
55,000
-
20,000
300,000
-
20,000
685,000
500,000
300,000
950,000
-
-
-
1,750,000
55,000
-
100,000
88,050
243,050
-
111,080
36,860
2,720
71,618
-
33,991
132
57,004
-
-
224,313
5,116
5,600
548,434
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
111,080
36,860
2,720
71,618
-
33,991
132
57,004
-
-
224,313
5,116
5,600
548,434
-
-
69,000
25,000
-
200,000
80,000
20,000
56,000
10,000
10,000
311,000
61,000
83,000
925,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
-
-
69,000
25,000
-
200,000
80,000
20,000
56,000
10,000
10,000
311,000
61,000
83,000
925,000
5,810
3,800
36,433
-
-
-
46,043
56,178
530,277
1,018,105
7,010
-
-
1,611,570
61,988
534,077
1,054,538
7,010
-
-
1,657,613
-
-
-
-
-
-
-
445,000
70,000
500,000
500,000
762,000
238,000
2,515,000
445,000
70,000
500,000
500,000
762,000
238,000
2,515,000
760
-
23,642
139,597
163,999
3,619
76,200
15,063
-
94,882
4,379
76,200
38,705
139,597
258,881
25,000
-
10,000
195,000
230,000
25,000
-
10,000
-
35,000
50,000
-
20,000
195,000
265,000
850,000
1,828,050
2,678,050
758,476
1,706,452
2,464,928
1,155,000
2,550,000
3,705,000
7
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
When the work is done and paid by the partners, the expenses are not included in the Midland accounts.
The previous table shows all the work being done on Midland’s properties (excluding stock-based
compensation capitalized).
Gino Roger, geological engineer, President and Director of Midland, qualified person under NI 43-101,
has reviewed the following technical disclosure.
HIGHLIGHTS
• Channel sampling on Pallas confirms several high grade (PGE+Au) showings
• New Option deal with SOQUEM for Casault and Jouvex; drilling programs in preparation
• New Option deal with Sphinx on Samson (Ni-Cu-PGE); Ground TDEM survey commencing
• New high grade gold acquisition in the Labrador Trough – Willbob project
• CPTAQ authorization received for Patris; drilling program in preparation with Teck
• Drilling program in preparation for Valmond
• Ground TDEM follow-up commencing on Laflamme (Ni-Cu-PGE target)
ABITIBI
Maritime-Cadillac (Au) in partnership with Agnico Eagle and operated by Agnico Eagle
Property Description
The property is located in the Abitibi region in Quebec, along the Cadillac break and is composed of
7 claims. The property is subject to a 2% net smelter return (“NSR”) royalty; the Corporation can buy back
half of the royalty for a payment of $1,000,000.
On June 1, 2009, Agnico Eagle Mines Limited (“Agnico Eagle”) fulfilled all its obligations under the June
1, 2006 agreement and has acquired a 50% undivided interest in the Maritime-Cadillac property. Agnico
Eagle paid $100,000 and completed $1,000,000 of exploration work from fiscal 2006 to fiscal 2009.
As permitted in the agreement signed in June 2009 and amended in November 2012 and May 2013,
Agnico Eagle indicated that it wants to increase its undivided interest from 50% to possibly 65% during a
three-year period by financing a bankable feasibility study with respect to the Maritime-Cadillac property
or by assuming all mining operations on the Maritime-Cadillac property. If conditions are met, it will earn
1% additional interest for every $1,000,000 spent on the Maritime-Cadillac property (up to 15% by
spending $15,000,000). In June 2013, Agnico Eagle completed additional work for $1,000,000 and
consequently earned a 51% interest in the property. Agnico Eagle and the Corporation are now in a joint
venture and future work will be shared 51% Agnico Eagle - 49% Midland.
Exploration work on the property
During 2015, Agnico Eagle expects to complete a major compilation of the Lapa and Maritime Cadillac
properties in order to build a Gocad 3D-Model. This compilation aims to generate new drilling targets for
2015 and Agnico Eagle plans to commence this Gocad 3D-Model during Q2-15.
8
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Laflamme (Au-Cu), in partnership with Maudore Minerals Ltd. and operated by Midland
Property Description
In 2009, the Corporation staked claims by map staking about 25 kilometres west of Lebel-sur-Quévillon in
the Abitibi region. The Laflamme property consists at the end of Fiscal 14 of a total of 682 registered
claims covering an area of approximately 35,942 hectares.
On August 17, 2009, the Corporation signed an agreement with North American Palladium Ltd. (“NAP”).
As of July 31, 2011, NAP earned its 50% interest in the Laflamme property following a $100,000 cash
payment and $1,000,000 exploration work completed or credited. In December 2012, NAP decided not to
contribute anymore and therefore its interest will be diluted. Since December 2012, Midland is the
operator. In March 2013, NAP announced the sale of its subsidiary holding the Quebec gold assets to
Maudore Minerals Ltd (“Maudore”). Following the exploration work of $704,744 done since January 2013,
the interest of Midland is 61.6% as at September 30, 2014.
Some claims were dropped therefore the Corporation impaired partially for $2,784 the exploration
property cost ($4,745 in 2013).
Exploration work on the property
So far in Fiscal 14, five (5) drill holes were completed for a total of 881.0 metres. Hole LAF-14-29 targeted
a VTEM anomaly located mid-way between the Midland’s Trafalgar showing and the Maudore’s NW
Comtois showing. The hole explained the VTEM anomaly by the presence of pyrrhotite stringers within
the pillowed basalts. No felsic rocks have been intersected. The hole ended at a final depth of 156.0
metres.
Hole LAF-14-30 aimed to test the Notting Hill showing at approximately 75 metres below hole LAF-13-21,
which had returned 0.34 g/t Au over 25.56 metres, including 3.12 g/t Au over 1.50 metre in 2013. Hole 30
intersected a chlorite breccia at around 230.0 metres followed by a 0.7 metre shear zone with 5% Py at
approximately 253.0 metres. These two zones are surrounded by a biotite alteration which likely
represents the extension of the hole 21 gold-bearing zone. The hole ended at 296.0 metres.
Approximately 100 metres to the north-east of the Notting Hill showing, drill hole LAF-14-31 tested the
same contact which is marked by a sharp magnetic contrast. Right at the targeted area, a wide shear
zone altered with quartz-carbonate veins with local biotite was intersected from 112.5 and 119.0 metres.
Several mineralized zones with 2-3% Py-Po were intersected from 78.2 to 79.0 metres, from 112.63 to
112.88 metres, from 120.14 to 121.90 metres and from 130.0 to 130.25 metres. The hole ended at 156.0
metres.
Hole LAF-14-32 targeted a VTEM anomaly approximately 2 km to the north-east of the Notting Hill
showing. This hole ended at a final depth of 165.0 metres. Several shear zones altered in chlorite;
carbonates and locally biotite as well as several mineralized zones have been intersected:
Hole LAF-14-33 was completed at 108.0 metres and tested a VTEM anomaly located approximately 4 km
to the north-east of the Notting Hill showing. This hole intersected two zones with centimetric stringers of
pyrrhotite at around 51 metres and 99 metres down the hole.
Hole LAF-14-30 returned an interval of 4.43 g/t Au over 0.74 metre between 258.18 to 258.92 metres
comprised within a wider anomalous zone grading 1.71 g/t Au over 2.66 metres from 258.18 to 260.84
metres.
Hole LAF-14-31 returned 0.12 g/t Au over 0.60 metre between 78.0 and 78.6 metres at the upper contact
with a late felsic dyke which could have cut the zone.
9
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Hole LAF-14-33 which tested a VTEM conductor approximately 4 km to the north-east of hole 30,
intersected three anomalous intervals associated with a weak biotite alteration. From 14.74 to 15.74
metres, an interval returned 0.34 g/t Au over 1.0 metre; an interval of 0.33 g/t Au over 0.39 metre was
intersected from 26.61 to 27.00 metres and another interval was intersected between 34.15 to 35.65
metres and returned 0.15 g/t Au over 1.50 metre.
Holes LAF-14-29 and 32 did not returned any anomalous results.
A review of the VTEM anomalies located in the vicinity of the 2011 Ni-Cu-PGE discovery in hole LA-11-08
was completed during the fall 2014. Two (2) VTEM conductors located approximately two kilometres
north of hole LA-11-08 have been selected and a follow-up grid is in preparation for a TDEM survey to be
completed during Q1-15
Patris (Au), in partnership with Teck and operated by Midland
Property Description
The Corporation acquired claims by map staking about 30 kilometres to the north-east of Rouyn-Noranda.
This property consists in 221 claims covering an area of approximately 9,154 hectares. Some claims are
subject to a 1% royalty and the Corporation can buy back this royalty for $500,000 per 0.5% tranche.
The Patris property is located along the Porcupine-Destor fault about 35 km northeast of the town of
Rouyn-Noranda, Québec. Midland purchased twelve (12) claims, subject to a 2% net smelter return
royalty; the Corporation can buy back, in tranches, the entire royalty for $2,000,000.
On November 12, 2012, the Corporation acquired a 100% interest in some claims adjacent to the Patris
property in exchange for a payment of $50,000. Part of the claims are subject to a 2% NSR royalty, the
Corporation may buy back that royalty in total or in two parts upon a payment of $1,000,000 per 1% for a
total of $2,000,000. The other part of the claims is subject to a 1% NSR royalty; the Corporation may buy
back the royalty in total or in two parts upon a payment of $500,000 per 0.5%, for a total of $1,000,000.
On July 24, 2013, the Corporation acquired a 100% interest in some claims adjacent to the Patris property in
exchange for a payment of $5,000. The claims are subject to a 1.5% NSR royalty, the Corporation may buy
back that royalty in total or in three parts upon a payment of $500,000 per 0.5% for a total of $1,500,000.
The Corporation signed an option agreement with Teck Resources Ltd (“Teck”) on September 6, 2013 and
amended it on May 20, 2014 to accommodate the delays in permitting. Under this new agreement, Teck may
earn, in three options, a maximum interest of 65%, by fulfilling the following conditions:
First Option for a 50% initial interest
On or before August 31, 2015 (firm commitment)
On or before August 31, 2016
On or before August 31, 2017
Payments
in cash
$
Work
$
-
-
-
-
500,000
800,000
1,700,000
3,000,000
Second Option for a 10% additional interest
On or before August 31, 2019, $500,000 of exploration work and $60,000
cash payment for each additional 2% interest
300,000
2,500,000
Third Option for a 5% additional interest
On or before August 31, 2021, $1,000,000 of exploration work for each
additional 1% interest
Total, for a 65% maximum interest
-
5,000,000
300,000
10,500,000
10
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Midland will be project operator during the First Option.
Exploration work on the property
Under a new option agreement recently signed with Teck where Midland is the Project Manager of the
initial program (see press release dated September 17, 2013), prospecting, soil geochemistry and
trenching were carried out on the newly identified Rosie showing, which intersected 15.5 grams per ton
gold in a grab sample, to characterize the geological setting of the showing and to prioritize induced
polarization anomalies in preparation for an upcoming drill program. Final assay results from the works
recently completed are pending.
Results from the prospecting program and the channel sampling on Rosie (15.5 g/t Au – grab sample)
have been received. A total of 168 samples, including blanks and standards, had been sent to ALS
Minerals in Val d’Or at mid-October. The best results from the Rosie showing include:
• 0.40 g/t Au over 2.0 m including 0.94 g/t Au over 0.5 m
• 0.46 g/t Au over 0.5 m
• 0.16 g/t Au over 2.5 m including 0.36 g/t Au over 0.5 m
• 0.13 g/t Au over 1.0 m
• 0.11 g/t Au over 0.5 m
• 0.65 g/t Au (grab sample)
These results were returned mainly from the quartz veins crosscutting the carbonatized felsic dyke (1.5 to
2.0 meter thick) and forming a discontinuous envelope of approximately 8.5 metres along the dyke. Two
other gold anomalous zones (77 ppb Au over 2.0 m and 66 ppb Au over 2.0 m) were identified within the
sheared and carbonatized (iron carbonate) basalts. The showing is characterized by a flexure of a felsic
dyke which is altered in iron carbonate with 1-3% pyrite. This dyke is generally oriented NW-SE and
becomes N-S in the showing area with the development of a network of quartz -carbonate veins oriented
N060 crosscutting an older quartz veinlet system oriented N100. A strong shear zone oriented N055-060,
with accompanying iron carbonate alteration, affects the chloritized pillowed basalts.
Prospecting the IP anomalies in the western portion of the Dunn area returned a new showing of 0.3 g/t
Au (grab sample) within a strongly sheared mafic volcanics.
Results of 172 soil samples (including QAQC samples) have been received. During this program
completed in October 2014, a follow-up soil sample (duplicate) was taken near the site that had returned
a soil anomaly of 1.5 g/t Au last summer. This duplicate sample returned a result of 1.2 g/t Au and thus
validate that the area is highly anomalous and that the source of this anomaly remains unexplained. The
area is sub cropping and would require additional mechanical stripping next summer. Another soil sample
returned a result of 0.195 g/t Au approximately 300 metres west of the KE-3 showing which had returned
4.7 g/t Au over 0.4 metre (channel 2011). This soil anomaly remains also opened to the north and
unexplained.
An initial drilling campaign consisting of seven (7) shallow diamond drill holes was planned for total of
about 1,400 metres. This program is designed to test several high-priority induced polarization ("IP")
geophysical targets located along the strike extensions of the Fayolle Prospect held by Typhoon
Exploration Inc. and currently under option by Hecla Quebec Inc. One of these targets, a strong
chargeability anomaly coincident with a resistivity low occurring at the northern contact between Lac
Caste sediments and mafic volcanic rocks, will be tested in two shallow drill holes. Another IP anomaly
located along the southeast strike extension of drill hole PAT-11-15, which intersected an interval grading
0.48 g/t Au over 17.0 metres (see press release dated May 24th 2012), will also be tested during this
campaign. In addition, drill hole PAT-11-16 will be deepened in order to test the gold-bearing zone about
100 metres below drill hole PAT-11-15. That zone is characterized by a hematite alteration zone in a
strongly deformed felsic intrusive.
11
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Since four of the seven planned drill holes totalling 1,400 metres are located on agricultural land, an
authorization from the Commission de la Protection des Terres Agricoles ("CPTAQ") was required. A
preliminary authorization from the CPTAQ was received in June 2014. A meeting was held in August
2014 in order to discuss the conditions to respect during the drilling. Following this meeting, the final
authorization has been received in October. In January 2015, the drilling program will test several high-
quality targets including induced polarization anomalies, as well as the depth extension of a gold-bearing
zone intersected in drill hole PAT-11-15 which graded 0.48 g/t Au over 17.0 metres (see press release
dated May 24, 2012).
Casault (Au) in partnership with SOQUEM and operated by Midland
Property Description
The Corporation acquired claims by map staking about 40 kilometres to the east of the Detour Lake gold
project located north of the city of La Sarre. This property consists in 301 claims covering an area of
approximately 16,562 hectares.
On November 16, 2011, the Corporation signed an agreement with a company formally known as Osisko
Mining Corporation (“Osisko”) whereby Osisko could have acquired 50% of the Casault property subject
to $600,000 ($170,000 completed) cash payments and $6,000,000 ($2,901,629 completed) exploration
works up to October 31, 2016. On October 16, 2013, Osisko terminated the option agreement.
On October 10, 2014, the Corporation signed a letter of intent with SOQUEM INC. ("SOQUEM") to grant
SOQUEM the option to acquire a 50% undivided interest in its Casault and Jouvex properties, and to
create a joint venture once the option has been exercised, under the following conditions.
On or before October 10, 2015 (firm commitment)
On or before October 10, 2016
On or before October 10, 2017
On or before October 10, 2018
Midland will be project operator during the option period.
Works
$
1,000,000
1,000,000
1,000,000
1,500,000
4,500,000
Exploration work on the property
Following the Fiscal 13 drilling program (2,992.0 metres) on Casault, two new gold-prospective areas
were identified. The first one is located about 5 kilometres southwest of the Martinière West gold zone
held by Balmoral Resources Ltd (“Balmoral”) and about 2 kilometres north of the Sunday Lake Fault.
Three of the four holes drilled in this area, characterized by the presence of a folded magnetic signature,
yielded anomalous gold values. These gold-bearing zones exhibit quartz-carbonate-pyrite veining with
local tourmaline and are hosted in basalts and gabbros. Drill hole CAS-13-28A was terminated at a depth
of 201.0 metres, in sheared gabbro exhibiting quartz-carbonate veins with pyrite mineralization that
graded 0.29 g/t Au over 9.0 metres, from 192.0 to 201.0 metres. This new gold-bearing zone thus
remains entirely open in all directions, and the drill hole clearly should be extended. Hole CAS-13-24,
collared about 500 metres southeast of -28A, intersected a few anomalous zones, including an interval
grading 0.50 g/t Au over 3.0 metres from 217.5 to 220.5 metres. About 1.5 kilometres west of hole -28A,
drill hole CAS-13-27 also encountered several sections with anomalous gold values, one of which graded
0.36 g/t Au over 4.5 metres from 90.0 to 94.5 metres.
The second gold-prospective area is located in the western part of the property, about 5 kilometres west
of the first area. Drill hole CAS-13-36, collared near the Sunday Lake Fault, intersected an anomalous
zone with a gold value of 0.17 g/t Au over 7.5 metres from 66.5 to 74.0 metres. This drill hole targeted an
IP anomaly coinciding with an inferred fold nose based on the magnetic survey.
12
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
These new gold-prospective areas, identified during the drilling campaign, remain unexplored and open in
all directions and warrant further investigations to establish exploration vectors leading to higher-grade
zones.
The first drilling program to be conducted in partnership with SOQUEM on the Casault property will be
mainly designed to test the extensions of the most promising gold occurrences discovered in 2012 and
2013, including the extensions of drill hole CAS-12-07, which graded 10.4 g/t Au over 1.45 metres. This
drilling program will also test a series of induced polarization anomalies located near drill hole CAS-13-
28A, which had ended in a gold-bearing zone that graded 0.29 g/t Au over the last 9.0 metres. This new
prospective area is located along the west extension of the Martiniere zone held by Balmoral, who
recently reported drill intersections grading up to 1,138.0 g/t Au over 4.87 metres and 8.25 g/t Au over
14.53 metres in the Bug Lake zone (source: press release by Balmoral dated May 12, 2014). Ground
TDEM surveys are also planned on the East Block to follow-up on new VTEM conductors never tested
before.
Heva (Au), operated by Midland
Property Description
On April 25, 2013, the Corporation signed an agreement with Arianne Resources Inc. to acquire a 100%
interest in the Heva property located along and proximal to the Cadillac Break, less than 5 kilometres
northwest of the town of Malartic. In consideration for the acquisition, the Corporation paid cash $30,000
and issued 60,000 common shares with a fair value of $57,000 which is based on the closing of the
Corporation’s shares on the April 25, 2013. The claims are subject to a 2% NSR royalty to the original
holders; half of the royalty can be bought back for a payment of $1,000,000. The Heva property consists
of 31 claims covering a surface area of 1,325.47 hectares.
The Heva West block consists of 4 contiguous claims adjacent to the west of the Maritime-Cadillac
property, currently a 51% Agnico / 49% Midland joint venture. The Heva West block covers nearly 1
kilometre along the contact between Pontiac Group sediments and mafic volcanic rocks of the Piché
Group and is located less than 1 kilometre south of Agnico Eagle's Lapa gold mine (2.1 million tonnes in
proven and probable reserves at a grade of 6.0 grams per tonne of gold, for 395,000 ounces of gold),
which has been in commercial production since May 2009.
The Heva East block is located about 4 kilometres to the southeast and consists of 27 contiguous claims
largely covering sedimentary rocks of the Cadillac Group just north of the Piché Group. This block
encompasses several historical gold occurrences with grades up to 91.2 g/t Au and 3.12 g/t Au in surface
grab samples, and up to 6.2 g/t Au over 0.9 metre in drill hole. In addition, the Heva East block covers a
4-kilometre segment along an underexplored gold trend that graded 11.7 g/t Au over 0.5 metre in a
historical drill hole located less than 500 metres northwest of the property boundary (Source: MRNF
SIGEOM NTS sheet 32D01).
Exploration work on the property
A compilation of the historical works done on the property was initiated and is still ongoing. So far, the
compilation confirmed the presence of several anomalous gold values within the sediment package which
is composed of graywackes and conglomerates of the Cadillac Group. Exploration works consisting in
geological mapping, prospecting and channel sampling is planned for Q3-15.
Midland is currently seeking a partner for this project.
13
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Valmond (Au), in partnership with Sphinx and operated by Midland
Property Description
The Corporation acquired claims by map staking about 50 kilometres to the west of Matagami. This
property consists in 111 claims covering an area of approximately 6,179 hectares. Some claims were
dropped therefore the Corporation impaired partially for $5,218 the exploration property cost in Fiscal 13.
On November 19, 2013, the Corporation signed an agreement with Sphinx whereby Sphinx can acquire
50% of the Valmond property subject to the following conditions (amended on October 31, 2014):
Upon signing
December 31, 2014 (work completed)
November 19, 2015 ($230,277 work completed)
November 19, 2016
November 19, 2017
Total
Payments
in cash
$
20,000
50,000
50,000
60,000
70,000
250,000
Work
$
-
300,000
700,000
800,000
700,000
2,500,000
•
•
•
The Corporation will be the operator during the option;
Upon acquiring a 50% interest, a joint venture will be formed;
If a party’s interest dilutes to 10% or less, its interest will be converted to a 2% NSR royalty, 1% of
which can be purchased back for $1,500,000.
Exploration work on the property
A pole-dipole IP survey totalling 48.1 line-kilometres was completed during the month of December 2013
in the central part of the Valmond property. A detailed interpretation of the survey results reveals the
presence of a strong anomaly characterized by a sharp drop in resistivity directly caused by the presence
of sulphide mineralization (pyrite-pyrrhotite-chalcopyrite-arsenopyrite) on the principal gold showing. This
anomaly extends toward the northwest over a distance of about 800 metres, whereas toward the
southeast IP profiles indicate that the anomaly is located deeper. Two shallow drill holes are proposed to
test the anomaly at 100 metres vertical depth along the northwest extension of the principal showing, and
one drill hole is proposed to test the southeast plunge at a vertical depth of about 300 metres, i.e. about
100 metres below historical drill hole S86-9, which graded 3.77 g/t Au over 1.5 metres (Source: MRN
SIGEOM NTS sheet 32E09; GM46724).
Further east, in an area that has never been drill-tested, four distinct IP axes characterized by high
chargeability values associated with low resistivity values were detected. These axes are commonly
located along magnetic contacts or near inferred structural intersections. Five additional shallow drill
holes are proposed to test these new targets at about 100 metres vertical depth.
In addition, a property-wide helicopter-borne VTEM-type electromagnetic survey, totalling 900 line-
kilometres, was also completed in December 2013. Several new conductors have been identified along
the favourable Bapst gold-bearing structure.
A drilling program totalling 1,450.2 metres was completed during the quarter ended March 31, 2014. A
total of five (5) holes were completed and three (3) others were abandoned. Target IP-F was cancelled
because the lack of available water in the vicinity. Two holes (Target VTEM-A and B) were abandoned in
the thick overburden which is composed of sand and gravel (esker).
14
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Hole VAL-14-01 (Target H) was designed to test the main showing (quartz-Aspy veins in altered tuffs) at
a vertical depth of 275 metres. The hole intersected a mix of mafic and intermediate tuffs with local
mudstone. Several decimetric massive sulphides (Py-Po +/- Cp-Sp) were intersected at around 220
metres. This hole was stopped at 415.2 metres because of technical problems (broken rods). The best
assay results in hole VAL-14-01 returned 92 ppb Au over 0.88 metre from 198.20 to 199.08 metres
associated with up to 15% pyrrhotite and traces of pyrite within quartz-carbonate veins.
Hole VAL-14-02 (Target I) was targetting the downplunge of the main showing at a vertical depth of
approximately 350 metres. This hole intersected an altered intermediate tuff containing local quartz veins
and veinlets with arsenopyrite between approximately 455 metres and 505 metres. That zone likely
represents the extension at depth of the Valmond showing. This zone is sub-vertical for the first 200
metres but seems to turn and dip north below 200 metres. In the upper portion of this hole, spectacular
nodular pyrite was intersected in a graphitic mudstone and coincides with a regional structure. As for hole
01, several decimetric massive sulphides were intersected. This hole ended at 543.0 metres. Two new
mudstone horizons have returned gold anomalous results at the beginning of hole 02. A first graphitic
mudstone horizon containing massive and nodular pyrite up to 80% returned 0.30 g/t Au over 2.87
metres from 99.0 to 101.87 metres and a second graphitic mudstone containing massive pyrite (90%)
returned 0.41 g/t Au over 0.29 metre from 200.52 to 200.81 metres.
The targeted alteration zone below the main Valmond gold showing returned several gold values over
100 ppb Au associated mainly with centimetric quartz-carbonate veins with 1-3% arsenopyrite. The best
intervals returned:
•
•
•
•
•
0.46 g/t Au over 0.60 m (454.50 to 455.10 m)
0.74 g/t Au over 0.64 m (487.80 to 488.44 m)
0.15 g/t Au over 1.00 m (493.00 to 494.00 m)
0.44 g/t Au over 0.85 m (508.00 to 508.85 m)
0.10 g/t Au over 0.50 m (517.15 to 517.65 m)
Hole VAL-14-03 (Target J) was testing a low resistivity zone approximately 200 metres to the northwest of
the main showing. The hole intersected several massive sulphides horizons as well as graphitic
mudstone and the conductor is well explained. The hole ended at 201.0 metres. From 88.0 to 89.0
metres, this hole intersected a 15 cm quartz vein with 1-2% Py-Po that returned 0.23 g/t Au over 1.0
metre.
Hole VAL-14-04 (Target VTEM-D) was completed at a final depth of 141.0 metres. The VTEM conductor
is well explained by the presence of a graphitic mudstone with a 10 cm interval of massive pyrite. No
significant alteration was noted in that hole. An altered siltstone (sericite) returned 0.25 g/t Au over 0.38
metre from 137.94 to 138.32 metres.
Hole VAL-14-05 (Target VTEM-C) was completed at a final depth of 150.0 metres. This hole intersected a
nice altered and mineralized (5-7% Py, 1-2% Po) shear zone from 66.75 to 71.08 metres followed by a
graphitic and pyritic mudstone containing several quartz veins and silicified breccias. No significant
results have been obtained in this hole.
During October 2014, a second try was made to drill the target VTEM-A. Hole VAL-14-08 was
abandoned in the sand at a depth of 93.0 metres without having reached the bedrock. A second attempt
will also be tried during December 2014 on Target IP-F located east of the main Valmond showing.
Jouvex (Au), in partnership with SOQUEM and operated by Midland
Property Description
The Corporation acquired claims by map staking about 50 kilometres to the southwest of Matagami. This
property consists in 297 claims covering an area of approximately 16,581 hectares. Some claims were
dropped therefore the Corporation impaired partially for $3,150 the exploration property cost.
15
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
See the Casault section for the details on the agreement signed with SOQUEM.
Exploration work on the property
During Fiscal 2014, two follow-up IP grids have been completed over the VTEM anomalies. The south
grid detected a weak chargeability anomaly associated with a low mag and coincident with the three weak
VTEM anomalies. The north grid detected a formational conductor with a second one coincident with a
high mag anomaly. Drilling was proposed to test these two anomalies.
During the summer, two other IP surveys were completed. The surveys covered VTEM anomalies
associated with a structural complexity. On both grids, chargeability anomalies combined with low
resistivity anomalies defined several new drilling targets.
On the Jouvex property, the first drilling program with Soquem will target several newly identified induced
polarization anomalies, as well as some VTEM conductors located near the Casa Berardi-Douay-
Cameron deformation zone. The final selection of drill targets is currently underway and the two parties
intend starting a drilling program early in January 2015.
Samson Ni-Cu-PGE, in partnership with Sphinx and operated by Midland
Property Description
The Corporation acquired claims by map staking 512 claims covering a surface area of about 28,427
hectares about 50 kilometres west of the town of Matagami, in Abitibi, Quebec.
On September 3, 2014, the Corporation signed an agreement with Sphinx whereby Sphinx can acquire
50% of the Samson property subject to the following conditions:
Upon signing (completed)
On or before September 3, 2015 ($350,000 firm commitment)
($7,010 work completed)
On or before September 3, 2016
On or before September 3, 2017
On or before September 3, 2018
Total
Payments
in cash
$
40,000
40,000
Work
$
-
500,000
50,000
70,000
75,000
275,000
700,000
900,000
1 400,000
3,500,000
•
•
•
The Corporation will be the operator during the option;
Upon acquiring a 50% interest, a joint venture will be formed;
If a party’s interest dilutes to 10% or less, its interest will be converted to a 2% NSR royalty, 1% of
which can be purchased back for $1,500,000.
This property is located about 5 kilometres south of the recent Ni-Cu-PGE and gold discovery made by
Balmoral on the Grasset project. Recently, Balmoral announced the discovery of a high-grade Ni-Cu-PGE
zone, with values up to 1.79% Ni, 0.19% Cu, 0.42 g/t Pt, and 1.04 g/t Pd over 45.28 metres including an
interval grading 10.6% Ni, 0.45% Cu, 2.04 g/t Pt, and 5.23 g/t Pd over 1.10 metres (see press release by
Balmoral dated May 20, 2014).
This property covers, over a strike length of more than 20 kilometres, a series of strongly magnetic sills
located just south of the regional Lower Detour Fault, also known for its gold potential. In addition,
lithogeochemistry data from historical drill holes indicate the presence of ultramafic sills, thus confirming
the potential for magmatic Ni-Cu-PGE mineralization on the Samson property. Data from airborne Input
electromagnetic surveys indicate the presence of several conductors coinciding with magnetic sills, which
have never been drill-tested and thus represent potential high-priority targets.
16
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
The Samson property is mainly underlain by tholeiitic basalts with felsic bands intruded by a series of
mafic to ultramafic sills of the Brouillan North Group. A few historical drill holes dating from the year 2000
and bordering the Samson property yielded interesting gold values such as 9.94 g/t Au over 0.20 metre,
2.28 g/t Au over 1.70 metres, and 1.02 g/t Au over 5.90 metres (Source: Sigeom NTS sheet 32E16; GM
55989 and 58259).
Exploration work on the property
During the fall, a major ground-based geophysical program totalling about 50 kilometres and including
both magnetic and electromagnetic surveys will be launched, in an effort to characterize a series of
untested MegaTEM conductors coincident with strong magnetic responses. About a dozen high-priority
MegaTEM targets were selected for this ground follow-up in light of their association with strongly
magnetic units interpreted as ultramafic rocks. The objective is to define high-priority drill targets for the
first campaign that will follow this geophysical program.
La Peltrie, operated by Midland
Property Description
This acquisition, by map designation is a new property with strong gold potential located near the regional
Lower Detour Fault. This new wholly-owned gold property, named La Peltrie, is located about 25
kilometres east of the Lower Detour area, part of the Detour Lake property held by Detour Gold Corp.
("Detour Gold"). Recently, Detour Gold announced a series of significant drill intersections from the Lower
Detour area, which is located about 6 kilometres south of the Detour Lake mine, currently in production
and where mineral reserves total 15.5 Moz Au. Recent drill intersections reported in the Lower Detour
area include significant gold grades reaching 11.82 g/t Au over 32.40 metres and 12.74 g/t Au over 28.0
metres (see press release by Detour Gold dated June 2, 2014).
The La Peltrie property comprises 171 claims covering a surface area of about 9,493 hectares and
encompasses possible subsidiary faults to the south of the regional Lower Detour Fault over a distance of
more than 10 kilometres. In the 1960's, historical drill intersections located about 800 metres east of the
property boundary yielded gold values grading up to 3.0 g/t Au over 2.0 metres and 4.0 g/t Au over
0,30 metre, in felsic breccias with pyrite and chalcopyrite mineralization (Source: SIGEOM NTS sheet
32E14; GM 22497).
This new property is mainly underlain by calc-alkaline mafic to felsic volcanic rocks of the Brouillan Group
and tholeiitic mafic rocks of the Fénélon-Brouillan Group. It is located about 25 kilometres northwest of
the former Selbaie mine, which historically produced 56.5 Mt of ore grading 1.9% Zn, 0.9% Cu, 38.0 g/t
Ag and 0.6 g/t Au. In the western part of the property, tholeiitic mafic to intermediate volcanic rocks of the
Enjalran-Bapst Group are intruded by a series of diabase dykes trending north-south. The granodioritic to
dioritic Carheil syntectonic pluton lies in the central part of the property.
Exploration work on the property
No exploration work was conducted during Fiscal 14. A compilation of the historical works is in progress.
Midland is currently seeking for a partner for this project.
Abitibi Gold (Au) operated by Midland
Property Description and exploration work on the property
The Corporation acquired by map designation 302 claims covering a surface area of about 16,460
hectares. No exploration work was conducted during Fiscal 14. A compilation of the historical works is in
progress on the Adam, Jeremie, Lac Clement, Manthet, Louvicourt and Duparquet claims blocks.
17
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
GRENVILLE-APPALACHES
Weedon (Cu-Zn-Au) operated by Midland
Property Description
This property is located in the Eastern Townships, about 120 km south of Quebec City and is now
comprised of 168 claims covering an approximate area of 8,602 hectares. Some claims are subject to a
1% NSR royalty and the Corporation can buy back the royalty for $500,000 per 0.5%. Some other claims
are subject to a 0.5% NSR royalty and the Corporation can buy back this royalty for $500,000.
On June 14, 2013, the Corporation acquired a 100% interest in a claim adjacent to the Weedon property
in exchange for a 1.5% NSR royalty on metals except gold and silver, the Corporation may buy back that
royalty in total or in three tranches upon a payment of $500,000 per 0.5% tranche for a total of
$1,500,000.
Some claims were dropped in 2014 therefore the Corporation impaired partially for $9,200 ($12,467 in
2013) the exploration property cost.
Exploration work on the property
The final report for the IP surveys completed during December 2013 to the NE of the Weedon Mine and
to the NE of the Lingwick deposit was received. On the Lingwick grid, two (2) IP anomalies associated
with a gravimetric anomaly were identified. In the northeastern extension of the Weedon mine, three (3)
IP anomalies were identified. These IP anomalies are associated with gravimetric anomalies and
represent new drilling targets. A gravimetric survey and an IP survey were also completed respectively to
the west of the Weedon mine and to the southwest of the Solbec mine. The gravimetric survey detected a
strong and large gravimetric anomaly associated with a magnetic anomaly and a VTEM conductor. This
area is located just south of a felsic intrusion near the felsic-mafic contact. A historical grab sample taken
within the basalt had returned 2.6% Cu. The IP survey detected a chargeability (IP) anomaly coincident
with a magnetic anomaly and a gravimetric anomaly. These areas represent new drilling targets.
A ground TDEM survey was completed in December 2013 in the vicinity of the Lingwick deposit. The
TDEM survey identified a conductor at the southern limit of the grid. An extension of the grid towards the
south would be necessary in order to characterize this conductor.
Five days of mapping and lithogeochemical sampling were completed during Q3-14. No significant results
were obtained.
Midland is currently seeking for a partner for this project.
Gatineau Zinc (Zn), operated by Midland
Property Description
Midland owns a 100% interest in a large land position for zinc, including 184 claims covering 10,368.1
hectares distributed in the Gatineau Area, approximately 200 kilometres northwest of the city of Montreal.
Some claims were dropped in 2014 therefore the Corporation impaired partially for $2,693.
Exploration work on the property
Limited work was conducted on the property during 2014.
Midland is currently seeking for a partner for this project
18
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Vermillon (Cu-Au), in partnership with SOQUEM and operated by SOQUEM
Property Description
The Vermillon property is located some 90 km southwest of the town of La Tuque, Quebec and consists
of 16 contiguous claims covering a total surface area of 934 hectares in joint venture with SOQUEM. The
property is subject to a 1% NSR royalty on specific claims, which can be purchased back for 500 000 $
per each 0.5%.
Exploration work on the property
An IP survey was completed over the Cu-Au showing and its possible lateral extensions. Several
chargeability anomalies have been detected and prospecting is proposed to try to explain these
anomalies. Midland did not participate to the IP survey with a $70,000 budget and has been diluted to
48%, with Soquem holding 52%.
JAMES BAY
James Bay Gold (Au), operated by Midland
Property Description
Midland owns a 100% interest on 511 claims covering 26,285 hectares in the James Bay Area, an area
that has the potential to soon become a significant new gold producer in Quebec after the Abitibi Belt.
Some claims were dropped therefore the Corporation impaired partially for $8,686 the exploration
property cost in 2014 ($22,303 in 2013).
Exploration work on the property
During Fiscal 14, a thorough compilation of the most recent works completed by competitors in the area
was completed. As a result, 4 claims were staked to cover a new gold showing grading 1.18 g/t Au.
Midland is currently seeking for a partner for this project.
James Bay Uranium (U) operated by Midland
Property Description
The property is located in the James Bay region and was composed of 8 claims. Since it acquisition in
2007 the property has been reduced due in part to lack of credit for their renewal.
On September 2009, three new claims were staked adjacent to the Midland Ganiq Property near LG-3. The
new claims cover the Ganiq South and North deposits. The Ganiq North deposit is formed of two lenses 60
and 100 meter long. The lens thickness varies from 4 to 7 metres. Percussion and diamond drilling, not
deeper than 50 meters, defined a resource of 150,000 tonnes at 0.05% U or 165,000 pounds of U. The
Ganiq South deposit varies in thickness from 1 to 8.5 meters and has been traced by shallow (12 to 25
meters deep) drilling over 270 metres. Non-compliant NI-43-101 resource estimate stands at 115,000 tonnes
at 0.035% U or 126,500 pounds U. Both deposits are structurally controlled formed of dissemination of
pitchblend in veins cutting through Archean mafic metavolcanics. Another mineralized zone named Ganiq
South Extension has been historically drilled tested by 4 drill holes at the contact between the Archean
basement and the Proterozoic Sakami Formation. Two of the drill holes returned 0.062% U3O8/ 0.3 m and
0.086% U3O8/0.6 m respectively near 110 meters deep. This contact is considered very prospective for
unconformity related uranium deposit.
Exploration work on the property
No work conducted on the property during Fiscal 14.
19
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Éléonore Gold Properties (Au) operated by Midland
Property Description
The Éléonore new property is divided in three distinct blocks with two of them within 25 kilometres from
the Éléonore gold discovery of Goldcorp and one southeast 30 km further along strike. It encompasses a
group of 246 claims covering an area of approximately 12,889 hectares. The property selection was
made following a comprehensive geological and geochemical compilation combined with proven regional-
scale targeting concepts. They are located close to a major collisional environment between the
volcanogenic-plutonic units of the La Grande Sub-province and the meta-sedimentary units of the
Opinaca Sub-province and include portions of several broad gold (Au) geochemical anomalies derived
from lake bottom sediments collected by the MRNF.
The West Éléonore properties cover more than 10 kilometres of strike length in a WSW-ENE magnetic
trend located immediately south of the favourable La Grande and the Opinaca contact. Airborne
geophysical signatures and regional mapping appear to indicate the presence of poly-deformed
metasediments and mafic volcanic units. Few first order Au and As lake bottom sediment (LBS)
anomalies (31 and 94 ppb Au and 23 ppm As) are found 10 km down iced southwest from the Midland
Property where the source may originated.
The Center Éléonore property acquired in Fiscal 2010 is located 25 km southwest of the Éléonore
Deposit within the contact zone between the La Grande and Opinaca Sub-provinces. Adjacent east and
north of the property, two new gold zones have been found on Virgina Mines Inc. (“Virginia”) Éléonore
Regional Property. The first zone, 4 kilometres north of the Midland property, consists of quartz-
tourmaline veins yielding 1.85 g/t, 2.09 g/t and 2.95 g/t Au hosted within a dioritic intrusion in the midst of
metasediments. The second zone consists of a 500 m² mineralized boulder field found 1000 meters NE.
Up to 9 g/t Au has been found in greywacke boulders with 2-3% disseminated pyrite which may originated
from a recently mapped metasedimentary unit striking south into the Midland Property.
Some claims were dropped therefore the Corporation impaired partially for $29,162 the exploration
property cost in 2014 ($88,341 in 2013).
Exploration work on the property
During Fiscal 14, an airborne magnetic survey contracted to GeoData Solutions Inc. was completed over
the uncovered portion of the Éléonore Centre property. Two week prospection and geological mapping
campaign was conducted on the Éléonore Centre property to follow-up on the newly acquired magnetic
survey and also to follow-up IP anomalies identified by the 2013 survey on the grid south of Lake Ukaw.
The 2014 prospecting program on Eleonore Centre property led to the discovery of several new gold
anomalies. Also, channel samples were added on the Golden Gun West and Golden Gun East trenches.
On the total of 275 selected grab and 19 channel samples, respectively 19 and 9 samples returned more
than 50 ppb Au. The best result returned 0.39 g/t Au on a selected grab sample in the middle of the
property at the boundary of a high magnetic anomaly. On the southern IP grid where strong IP anomalies
were identified, a new showing named the Sean Connery Showing was discovered. This new showing is
characterized by tourmaline-arsenopyrite-quartz veins in a deformed mafic metavolcanic. Grab samples
returned up to 0.08 g/t Au while the channel completed on this zone returned 0.05 g/t over 5.68 metres,
including 0.11 over 0.75 metres. In the surrounding area, two other grab samples returned 0.11 and 0.13
g/t Au. In the southern part of the property, a granitic intrusion was identified with local potassic alteration.
A total of three samples in that intrusion returned 0.18, 0.13 and 0.12 g/t Au.
20
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
The new channel samples added on the Golden West trench returned 0.40 g/t Au over 4.30 metres,
including 0.55 over 1.00 metres. The channel sample on the Golden Gun trench did not return significant
values.
The 2013 trenches were also revisited in Q3-14. Marked by abundant quartz-tourmaline veinlets over
several hundred square meters, these results confirm that a sizeable auriferous hydrothermal system is
present on the Éléonore Centre property.
Bay James Fe (Fe) operated by Midland
Property Description
The Montagne-du-pin and Guyer properties consist in a total of 207 wholly owned claims covering 10,459
hectares and are located along the Trans-Taiga road, James Bay. They are approximately respectively
located 116 and 160 kilometres east of the Duncan iron deposit, south of Radisson, which is currently in
joint venture between Century Iron Mines Corp. and Augyva Mining Resources. Using a cut-off grade of
16% iron, the Duncan property contains, NI 43-101 compliant, 852 Mt at 24.56% iron (Measured: 5.7 Mt
at 23.29% Fe, Indicated: 25.6 Mt at 23.48% Fe and Inferred: 821.1 Mt at 24.56% Fe) (Source: Century
Iron Mine web site, January 2012). Other iron deposits in the James Bay area include the Great Whale
property, owned by Niocan Inc. and located southeast of Kuujjuarapik (about 250 kilometres north of
Radisson), and contains historic mineral resources (None NI 43-101 compliant) of 941.9 Mt at 36% Fe
(Source: Niocan Inc. November 2006 press-release).
The Guyer property consisted in two main claim blocks covering up to 40 kilometres of strong magnetic
high anomaly east of the La-Grande 3 reservoir. The Montagne-du-pin claims blocks are located north of
the La-Grande 3 Hydroelectric Complex and also cover more than 25 kilometres of strong magnetic high
anomaly showing important structural folding.
The Guyer property and some claims from the Montagne-du-pin were dropped and therefore the
Corporation partially impaired its exploration and evaluation asset for $73,717 in September 2013.
Exploration work on the property
No exploration work conducted during Fiscal 14 on the property.
QUEBEC / LABRADOR
Ytterby (REE), in partnership with JOGMEC and operated by Midland
Property Description
The Ytterby Project comprises 213 claims in Quebec and 1,108 claims in Labrador located between 200
and 230 kilometres east and northeast of Schefferville. The property was staked primarily for potential
REE, zircon, yttrium, niobium, beryllium mineralization based on its proximity to the Strange Lake and B-
Zone discovery announced by Quest Rare Minerals Ltd (“Quest”) in September 2009.
The Strange Lake deposit has been found in the 1979 by Iron Ore Corporation of Canada (“IOC”) while
investigating fluorine in water and uranium lake sediment anomalies. IOC has estimated a non-compliant
resource of 52 million tonnes grading 3.25% ZrO2, 0.56% Nb2O5, 0.66% Y2O3, 0.12% BeO and 1.30%
TREO.
Ytterby 1 main claim block is located 5 kilometres south of Strange Lake and the B-Zone REE deposits
and surrounds to the east, south and west the Quest property. With this position, Midland controls almost
entirely the Napeu Kainiut Pluton (23 x 25 km) which hosts the Strange Lake Peralkaline Complex.
21
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Based on compilation of Provincial and Federal Government lake sediment geochemistry, geological
maps, mineral occurrences and airborne geophysical surveys, all four properties are marked by extensive
strong unsourced yttrium, uranium, lanthanum and fluorine lake bottom sediment anomalies combined
with uranium (eU) and thorium (eTh) airborne radiometric anomalies.
On February 23, 2010, the Corporation signed a memorandum of agreement (and on July 29, 2011 a
definitive agreement) with JOGMEC whereby JOGMEC acquired a right to acquire a 50% interest in the
Ytterby property, by funding $2,700,000 exploration work.
The Corporation is the operator during the farm-in period. A party which declines to participate in an
approved program will be diluted in its participation interest. If a party’s interest dilutes to 10% or less, its
interest will be converted to a 1.5% NSR royalty and the other party may purchase such royalty by paying
$1,500,000. A party may give notice to the other party that it wishes to operate through a joint venture
company. Once a joint venture company is formed, each party has the right to purchase any mineral in
proportion of its shareholding in the joint venture company. JOGMEC shall have the first right of refusal to
purchase at the prevailing market prices any mineral that is equivalent to the proportionate shareholding
of the joint venture company. Until a joint venture company is formed, any mineral production derived
from the property shall be taken in kind in proportion of the party’s interest.
As of the date of the present MD&A, JOGMEC has not yet given its notice of exercise of option.
The claims on the main bloc were kept and the ones on the other blocs were dropped, therefore the
Corporation impaired partially the project for $1,230,273 in 2014.
Exploration work on the property
Discussions with JOGMEC to plan the next exploration campaign are underway with the objective to
further evaluate the economic potential to extract the mineralized boulders from the Strange Lake glacial
dispersal train. No exploration work conducted during Fiscal 14.
NORTHERN QUEBEC
Pallas (PGE), in partnership with JOGMEC and operated by Midland
Property Description
During Q2-13, the Corporation acquired by map staking several mining titles located some 80 kilometers
west of Kuujjuak in Nunavik. All claim blocks together, the project totals 494 claims covering
approximately 22,469 hectares in the Labrador Trough.
On January 21, 2014, the Corporation signed an option agreement with JOGMEC whereby JOGMEC has
the option to acquire 50% interest in the Pallas project prior to March 31, 2016 by funding $2,000,000 in
expenditures spread as following:
On or before March 31, 2014 (completed)
On or before March 31, 2015 (completed)
On or before March 31, 2016 ($68,105 completed)
Total
Works
$
250,000
700,000
1,050,000
2,000,000
Midland will be operator as long as it will hold an interest equal to or higher than 50% in the project.
22
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Exploration work on the property
Following the option agreement signature with JOGMEC, a detail airborne magnetic survey has been
completed. A total of 3,201 line-kilometers has been completed on Juno-Ceres, Itokawa, Gaspar and
Palladin grids respectively. In the meantime, Midland has acquired four high-resolution colored satellite
images (50 centimetres per pixel) covering the same areas.
During the summer exploration program, a total of 730 grab samples were collected over all of the Ceres,
Itokawa, Gaspar and Palladin claim blocks. More than 20% of the samples have returned very anomalous
PGE + Au values including 149 grabs > 0.1 g/t PGE + Au, including 92 > 0.2 g/t PGE + Au, including 40
> 0.5 g/t PGE + Au, including 27 > 0.75 g/t PGE + Au, including 15 > 1.0 g/t PGE + Au, including 9 > 2.0
g/t PGE + Au, including 3 > 4.0 g/t PGE + Au and including 1 ≥ 12.6 g/t PGE + Au. In general, the grab
samples are gabbro with trace to 5% combined disseminated chalcopyrite and pyrrhotite.
The best results come from the Gaspar claim blocks with a grab sample returning 12.6 g/t PGE + Au and
another one, few meters apart, returning 2.76 g/t PGE + Au (Athena Showing). Five hundred meters
north, 3 other grabs, from the Triton Showing, returned 3.2, 0.92 and 0.9 g/t PGE + Au respectively.
Another 500m NW, and requiring additional follow up work, 3 grabs from 3 distinct mineralized zones
have returned 0.79, 0.55 and 0.46 g/t PGE + Au. On the Ceres claim block, the best results come from a
new showing located 5600m NNO from the Ceres Showing and returning 4.3 g/t PGE + Au. Other
interesting results, coming from another new mineralised zone 4200m SSW of the Ceres Showing, have
returned, form grab samples, 4.94, 2.93, 2.85 and 0.93 g/t PGE + Au. On the Itokawa claim block, the
best results are 2.69 and 2.46 g/t PGE + Au still from grab samples. Most of these above mentioned
showing were further investigated by prospecting and/or channel sampling.
In the meantime, a total of 1220 channel samples, about a meter in length in general, was cut and have
returned several PGE + Au anomalies including 268 channels > 0.1 g/t PGE + Au, including 86 > 0.25 g/t
PGE + Au, including 39 > 0.5 g/t PGE + Au, including 29 > 0.75 g/t PGE + Au, including 21 > 1.0 g/t PGE
+ Au, including, 6 > 2.0 g/t PGE + Au including, 2 > 3.0 g/t PGE + Au and a ≥ 4.52 g/t PGE + Au.
The best channels assay results come from, 125m SSE in the extension of the Palladin Showing (Osisko,
2000 and returning 5.5 g/t PGE + Au). Discontinuous channels along a NNW-SSE mineralized trend,
have returned, over 90m, 1.57 g/t PGE + Au over 0.58m open to the west; 2.24 g/t PGE + Au over
1.34m; 1.53 g/t PGE + Au over 0.54m and open on both sides; 2.9 g/t PGE + Au over 1.76m, including
4.5 g/t over 0.80m and open on both sides; 0.73 g/t PGE + Au over 1.07m and open on both sides; 1.23
g/t PGE + Au over 0.43m; and 1.94 g/t Au over 2.1m including 2.65 g/t over 0.75m and open on both
sides. This NNW trending mineralized zone, open on both sides, has been traced over 260m with a
ending channel returning 1.4 g/t PGE + Au over 0.82m.
On the Itokawa claim block, and testing a showing found in 2013 returning 1.73 g/t PGE + Au, a channel
trough the mineralized zone has returned 1.32 g/t PGE + Au over 2.83m including 3.5 g/t PGE + Au over
0.35m. More than hundred thirty meters NNW, along the same mineralized corridor, another channel
returned 1.12 g/t PGE + Au over 2.0m. Farther north, another mineralized zone called Itokawa North and
cut by 2 channels have returned 1.29 g/t PGE + Au over 0.6m and 1.21 g/t PGE + Au over 0.36m
respectively.
On the Ceres and Gaspar claim blocks, additional channel have returned interesting assay results varying
between 0.5 to 1.0 g/t PGE + Au over sub-metric lengths.
Based on those very encouraging results, Midland has completed a following up exploration this fall
including further prospecting, channel sampling and diamond drilling to further evaluate our best identified
targets.
23
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
A total of 88 grab samples has been collected and has returned very interesting results with a grab
sample, located about 100m south of the Enish Est Showing, returning 7.12 g/t PGE + Au. As well, 700m
NNW of the Triton Showing on the Gaspar claim block, 3 grabs from the Herculina area, have returned
1.12, 0.81 and 0.48 g/t PGE + Au respectively. Five hundred meters south of the Athena Showing,
another grab has returned 0.89 g/t PGE + Au. Finally, 2700m NNW of the Triton showing, in an area
named Olympus, 5 grabs returned 0.95, 0.77, 0.76, 0.59 and 0.58 g/t PGE + Au respectively. All these
new occurrences deserved additional works follow-up in the next field season.
In the meantime, a total of 262 channel samples was cut, among other, on the Athena, Triton, Enish East
and Palladin Showings. On Palladin, testing a channel returning 4.5 g/t PGE + Au over 0.8m, a new
channel has returned 1.58 g/t PGE + Au over 1.7m including 2.0 g/t PGE + Au over 0.55m. On Athena, 2
adjacent channels have returned 2.5 g/t PGE + Au over 1.68m and 1.52 g/t PGE + Au over 4.35m
including 2.33 g/t PGE + Au over 1.15m. About 30m NNW, along the same mineralized corridor, another
channel has returned 1.13 g/t PGE + Au over0.5m. On the Triton Showing, 4 channels have returned 0.77
g/t PGE + Au over 1.23m, and few meters south 1.7 g/t PGE + Au over 0.42m and adjacent 1.56 g/t PGE
+ Au over 1.09m and, 8m south 0.67 g/t PGE + Au over 0.8m. Finally, on Enish East, over a series of 10
channels along the same 230m long mineralized corridor, 1.29 g/t PGE + Au over 0.55m, and 47m south,
0.62 g/t PGE + Au over 0.58m and, 33m south, 0.41 g/t PGE + Au over 1.31m, and 135m south 0.68 g/t
PGE + Au over 0.75m, and 8m south, 1.04 g/t PGE + Au over 0.75m, and adjacent 2.47 g/t PGE + Au
over 1.42m including 4.1 g/t over 0.65m, and 4m south 2.17 g/t PGE +Au over 0.74m.
By diamond drilling, Midland has tested the Ceres and Palladin Showing with 2 drill holes each, while one
hole was completed on Enish East, Athena and Triton Showings. A total of 767 core samples, for 950m of
drilling, was cut and send for analysis. The assay results are pending.
Overall during this exercise, the exploration results have been very interesting and clearly justified further
works in the near future.
Willbob (Au), operated by Midland
The Corporation acquired by staking map designated claims on a new 100% owned gold ("Au") and
platinum group elements ("PGE") property, located in the Labrador Trough (Québec). This new property
consists of a total of 51 claims covering about 23.2 square kilometres, and is located approximately 66
kilometres west-southwest of Kuujjuaq (Québec), near and in a geological environment similar to
Midland’s Pallas Project which is currently being worked in partnership with JOGMEC.
This new property, named Willbob, covers a series of gabbro sills, where numerous gold showings were
historically discovered, over more than 8 kilometres. Exploration work conducted by the Nunavik Mineral
Exploration Fund ("NMEF") from 2004 to 2006 reported several gold showings that returned up to 31.3 g/t
Au on selected grab samples. Visible gold was reported at the Kuni Showing which returned 19.8 g/t Au.
Another sample returned 9.5 g/t Au at about 120 metres to the north-west of the Kuni Showing. The
Lafrance Showing, located about 6.5 kilometers north of the Kuni Showing, returned up to 21.9 g/t Au on
selected grab samples and gold values are traced over 130 metres surface length. Historical channel
sampling on the Lafrance Showing returned 3.0 g/t Au over 2.90 metres and 2.6 g/t Au over 3.90 metres
in a second channel located about 40 metres north. About 3.5 kilometres from and along the Lafrance
mineralized zone trend, the NMEF reported the Polar Bear Showing with values up to 6.4 g/t Au. There,
the NMEF reports a gold anomalous corridor that can be traced over 330 metres in the area. (Source:
Nunavik Mineral Exploration Fund 2006 Activity Report).
24
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Investing activities (Cont’d)
Midland 2014 grab resampling along the Lafrance auriferous corridor returned up to 5.4 g/t Au and more
sample assays are pending. Several gold showings on the Willbob property are associated to a felsic unit
intruding the gabbro sills. Moreover, an important deformation corridor hosts the mineralized zones.
Strong ankerite-fuschite-calcite alterations are associated with the arsenopyrite-rich gold mineralizations
observed on the property (Kuni, Polar Bear and Lafrance Showings). These showings remain open in all
directions and remain untested by drilling.
The NMEF also reported the presence of two PGE anomalous zones on this new property. The first is
located about 1 kilometre north of the Lafrance Showing and returned 0.4 g/t PGE + Au, while the second
one consists of four (4) samples spread along 75 metres which returned 0.5, 0.3, 0.3 and 0.3 g/t PGE +
Au (Source: Nunavik Mineral Exploration Fund 2006 Activity Report). These anomalous values confirm
that the property also has a potential for PGE mineralization, a plus value over its gold potential.
Project Generation
Midland continued some geological compilation programs in Quebec for the acquisition of new strategic
gold, uranium and base metal properties. The Corporation dropped certain claims and wrote off the
related exploration and evaluation assets for $2,773 in 2014.
Other Activities
For Fiscal 2015, Midland intends to be pro-active in the acquisition of new mineral exploration properties
in Quebec. Management is currently reviewing other opportunities and other projects to improve the
portfolio of the Corporation.
Acquisition opportunities outside of Quebec will also be considered. Midland prefers to work in
partnership and fully intends to secure new partnerships for these new properties and its 100% owned
properties.
Financing activities
The Corporation finances itself mainly through share issuance.
On December 3, 2014, the Corporation completed a private placement by issuing 1,100,430 units at
$0.70 per unit and 1,036,683 flow-through shares at $0.85 per share, for total gross proceeds of
$1,651,481. Each unit is comprised of one common share and one-half of a warrant. Each whole warrant
will entitle the holder to purchase one additional common share at $0.95 until December 2, 2016.
On December 19, 2013, the Corporation completed a private placement by issuing 802,001 units at $0.75
per unit and 833,286 flow-through shares at $0.90 per share, for total gross proceeds of $1,351,460.
Each unit is comprised of one common share and one-half of a warrant. Each whole warrant will entitle
the holder to purchase one additional common share at $1.00 until June 19, 2015. As at September 30,
2014, the Corporation completed $638,449 over the $749,959 flow-through exploration to be completed
before December 31, 2014.
On December 21, 2012, the Corporation completed a brokered private placement by issuing 769,264
units at $1.30 per unit and 1,105,882 flow-through shares at $1.65 per share, for total gross proceeds of
$2,824,748. Each unit is comprised of one common share and one-half of a warrant. Each whole warrant
would have entitled the holder to purchase one additional common share at $1.75 until June 21, 2014.
The Corporation paid the broker a cash fee of $150,735 and issued 85,342 broker warrants that would
have entitled them to acquire 85,342 shares at $1.30 per share until June 21, 2014. As of September 30,
2013, the Corporation has completed the $1,824,705 exploration work relating to this flow-through private
placement.
Also, 125,000 options were exercised for a total cash consideration of $81,250 in Fiscal 13 (non in Fiscal
14).
25
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Working capital
The Corporation has a working capital of $3,137,673 as at September 30, 2014 compared to $3,343,414
as at September 30, 2013.
Cash flow required
Operating expenses, excluding non-cash items
Project management fees and interest income
Exploration budget paid by Midland (covering the exploration work requirements
following the December 2013 flow-through private placement of $749,959)
Staking and property maintenance
Total
Annualized
$
852,000
(252,000)
1,155,000
75,000
1,830,000
Management is of the opinion that it will be able to meet its current exploration obligations and to keep its
properties in good standing for at least the next two years with the actual working capital. Advanced
exploration of some of the mineral properties would require substantially more financial resources. In the
past, the Corporation has been able to rely on its ability to raise funds in the capital markets. There is no
assurance that such financing will be available when required, or under terms that are favourable to the
Corporation. The Corporation aims to advance the exploration and development of its mineral assets
through joint-venture participation.
Summary of results per quarter
For the eight most recent quarters:
Revenues
Loss
Loss per share, basic and diluted
Total assets
Revenues
Loss
Loss per share, basic and diluted
Total assets
September 30,
2014
$
74,204
(1,397,949)
(0.05)
9,892,800
September 30,
2013
$
2,536
(106,783)
-
9,953,971
June 30
2014
$
27,059
(141,146)
-
10,741,442
June 30,
2013
$
1,194
(110,868)
-
9,897,527
March 31
2014
$
35,856
(248,268)
(0.01)
10,959,546
December 31
2013
$
35,464
(187,223)
(0.01)
10,869,758
March 31,
2013
$
5,518
(225,479)
(0.02)
10,041,598
December 31,
2012
$
9,622
(244,960)
(0.01)
10,343,353
26
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Fourth quarter
The Corporation reported a loss of $1,397,949 for Q4-14 compared to a loss of $106,783 for Q4-13.
The Corporation earned project management fees of $67,056 in Q4-14 ($2,536 in Q4-13). In Q4-14, the
main project with a partner, Pallas, was operated by Midland whereas in Q4-13, the main project explored
with partners, Casault, was operated by the partner.
Total expenses increased to $1,555,803 in Q4-14 compared to $330,455 in Q4-13:
• During Q4-14, some claims were dropped and the Corporation impaired partially Ytterby for
$1,230,273. During Q4-13 James Bay Fe and James Bay Au properties were partially impaired for
$73,717 and $17,615 respectively.
The Corporation incurred $945,234 ($1,042,342 in Q4-13) in exploration expenses of which $661,776
($24,805 in Q4-13) was recharged to the partners. The exploration expenses incurred in Q4-14 were
mostly executed on Bay James Eleonore whereas in Q4-13 the exploration work was mostly done on the
James Bay Au and Jouvex properties. The Corporation acquired properties for $50,566 net mostly on Lac
Musset, Samson, La Peltrie and Jouvex ($55,079 in Q4-13 for James Bay Au, Jouvex and Laflamme).
Compensation to key management and related party transactions
Compensation to key management
The Corporation’s key management personnel are members of the Board of Directors, as well as the
president, the vice-president exploration and the chief financial officer. Key management remuneration is
as follows:
Short-term benefits
Salaries including bonuses and benefits
Professional fees
Salaries including bonuses and benefits capitalized in exploration and
evaluation expenses
Long-term benefits
Stock-based compensation
Stock-based compensation capitalized in exploration and evaluation expenses
Total compensation
Related party transactions
2014
$
2013
$
281,875 253,406
48,031
57,857
125,400
165,240
170,451 187,933
30,594
663,831 685,204
28,248
In the normal course of operations, in addition to the amounts listed above in the compensation to key
management:
♦
75,000 shares options were exercised at a price between of $0.60 and $0.65 by key management
in Fiscal 13;
A firm in which René Branchaud (director and corporate secretary) is a partner charged
professional fees amounting to $49,624 ($91,935 in Fiscal 13) of which $34,819 ($58,548 in
Fiscal 13) was expensed and $14,804 ($33,387 in Fiscal 13) was recorded as share issue
expenses;
A company controlled by Ingrid Martin (chief financial officer) charged professional fees of
$48,368 ($45,690 in Fiscal 13) for her staff;
In December 2013, directors and officers of the Corporation participated in a private placement of
flow-through shares for a total consideration of $103,600 ($97,598 in December 2012).
♦
♦
♦
As at September 30, 2014, the balance due to the related parties amounted to $7,394 ($5,393 in
September 30, 2013).
27
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Subsequent events
See investing activities section for the Casault and Jouvex properties as well as the financing activities
section.
Outstanding share data
Common shares
Options
Warrants
Stock option plan
As of
December 10,
2014
Number
32,443,625
1,780,000
951,216
35,174,841
As of
September 30,
2014
Number
30,306,512
1,780,000
401,001
32,487,513
The purpose of the stock option plan is to serve as an incentive for the directors, officers and service
providers who will be motivated by the Corporation’s success as well as to promote ownership of common
shares of the Corporation by these people. There is no performance indicator relating to profitability or
risk attached to the plan.
The number of common shares granted is determined by the Board of Directors. On December 20, 2012,
the board of directors approved an increase in the number of common shares reserved for issuance
under the Corporation's fixed number stock option plan from 3,000,000 to 4,000,000. Such amendment to
the plan was approved by the Corporation’s shareholders during the annual meeting held on February 19,
2013. The exercise price of any option granted under the plan shall be fixed by the Board of Directors at
the time of grant and shall not be lower than the closing price on the day preceding the grant. The term of
the option will not exceed ten years from the date of grant. The options normally vest 1/6 per 3 months
from the grant date, or otherwise as determined by the Board of Directors.
Off-balance sheet arrangements
During Fiscal 14, the Corporation did not set up any off-balance sheet arrangements.
Commitment
In September 2012, an amendment was signed to extend the lease for office space for five years, from
March 2013 to February 2018. The rent was $21,875 for the first year and thereafter will be indexed
annually at the highest of the increase of the consumer price index or 2.5%.
Critical accounting estimates
When preparing the financial statements, management undertakes a number of judgments, estimates
and assumptions about recognition and measurement of assets, liabilities, income and expenses. The
actual results could differ from the judgments, estimates and assumptions made by management, and will
seldom equal the estimated results. Information about the significant judgments that have the most
significant effect on the recognition and measurement of assets, liabilities, income and expenses are
discussed below.
28
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Critical accounting estimates (Cont’d)
Judgements
Impairment of exploration and evaluation (“E&E”) assets
Determining if there are any facts and circumstances indicating impairment loss or reversal of impairment
losses is a subjective process involving judgment and a number of estimates and interpretations in many
cases.
Determining whether to test for impairment of E&E assets requires management’s judgment, among
others, regarding the following: the period for which the entity has the right to explore in the specific area
has expired during the period or will expire in the near future, and is not expected to be renewed;
substantive expenditure on further E&E of mineral resources in a specific area is neither budgeted nor
planned; exploration for and evaluation of mineral resources in a specific area have not led to the
discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue
such activities in the specific area; or sufficient data exists to indicate that, although a development in a
specific area is likely to proceed, the carrying amount of the E&E asset is unlikely to be recovered in full
from successful development or by sale.
When an indication of impairment loss or a reversal of an impairment loss exists, the recoverable amount
of the individual asset must be estimated. If it is not possible to estimate the recoverable amount of the
individual asset, the recoverable amount of the cash-generating unit to which the asset belongs must be
determined. Identifying the cash-generating units requires considerable management judgment. In testing
an individual asset or cash-generating unit for impairment and identifying a reversal of impairment losses,
management estimates the recoverable amount of the asset or the cash-generating unit. This requires
management to make several assumptions as to future events or circumstances. These assumptions and
estimates are subject to change if new information becomes available. Actual results with respect to
impairment losses or reversals of impairment losses could differ in such a situation and significant
adjustments to the Corporation’s assets and earnings may occur during the next period.
The total impairment loss of the E&E assets is $1,288,721 for Fiscal 14 ($118,450 for Fiscal 13). No
reversal of impairment losses has been recognized for the reporting periods.
Deferred taxes
The assessment of availability of future taxable profits involves judgment. A deferred tax asset is
recognized to the extent that it is probable that taxable profits will be available against which deductible
temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilized.
Judgment is also involved in the determination of the expected manner of realisation or settlement of the
carrying amount of the Corporation's assets and liabilities which is expected to be through the sale of the
Corporation's assets.
Valuation of credit on duties refundable for loss and the refundable tax credit for resources
Refundable credit on mining duties and refundable tax credit related to resources for the current and prior
periods are measured at the amount expected to be recovered from the taxation authorities using the tax
rates and tax laws that have been enacted or substantively enacted at the statement of financial position
date. Uncertainties exist with respect to the interpretation of tax regulations, including credit on mining
duties and tax credit related to resources for which certain expenditures could be disallowed by the
taxation authorities in the calculation of credits, and the amount and timing of their collection. The
calculation of the Corporation’s credit on mining duties and tax credit related to resources necessarily
involves a degree of estimation and judgment in respect of certain items whose tax treatment cannot be
finally determined until notice of assessments and payments have been received from the relevant
taxation authority. Differences arising between the actual results following final resolution of some of
these items and the assumptions made, or future changes to such assumptions, could necessitate
adjustments to credit on mining duties and tax credit related to resources, exploration and evaluation
assets and expenses, and income tax expense in future periods.
29
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Critical accounting estimates (Cont’d)
The amounts recognized in the financial statements are derived from the Corporation’s best estimation
and judgement as described above. However, the inherent uncertainty regarding the outcome of these
items means that eventual resolution could differ from the accounting estimates and therefore impact the
Corporation’s financial position and its financial performance and cash flows.
Financial instruments
Description
Financial assets and financial liabilities are recognized when the Corporation becomes a party to the
contractual provisions of the financial instrument.
Financial assets are derecognized when the contractual rights to receive the cash flows from the financial
asset have expired, or when the financial asset and all substantial risks and rewards have been
transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or when it
expires.
Financial assets and financial liabilities are measured initially at fair value plus transactions costs, except
for financial assets and financial liabilities carried at fair value through profit or loss, which are measured
initially at fair value. Financial assets and financial liabilities are measured subsequently as described
below.
The category of financial instruments determines subsequent measurement and whether any resulting
income and expense is recognized in profit or loss or in other comprehensive income. All income relating
to financial instruments that are recognized in profit or loss are presented within interest income.
Financial assets
The Corporation’s cash and cash equivalents and accounts receivable fall into the loans and receivables
category. The Corporation’s investments fall into the held-to-maturity category.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. After initial recognition these are measured at amortized cost using the
effective interest method, less provision for impairment. Discounting is omitted where the effect of
discounting is immaterial.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and
fixed maturity other than loans and receivables. Investments are classified as held-to-maturity if the
Corporation has the intention and ability to hold them until maturity.
Held-to-maturity investments are measured subsequently at amortized cost using the effective interest
method. If there is objective evidence that the investment is impaired, determined by reference to external
credit ratings, the financial asset is measured at the present value of estimated future cash flows. Any
changes to the carrying amount of the investment, including impairment losses, are recognized in profit or
loss.
Impairment of financial assets
All financial assets are subject to review for impairment at least at each reporting date. Financial assets
are impaired when there is any objective evidence that a financial asset or a group of financial assets is
impaired.
Objective evidence of impairment could include:
– Significant financial difficulty of the issuer or counterparty;
– Default or delinquency in interest or principal payments; or
– It becoming probable that the borrower will enter bankruptcy or financial reorganization.
30
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Financial instruments (Cont’d)
Individually significant accounts receivable are considered for impairment when they are past due or
when other objective evidence is received that a specific counterparty will default.
Financial liabilities
The accounts payable and accrued liabilities and the advance received for exploration work fall into the
Financial liabilities measured at amortized cost category.
Financial liabilities measured at amortized cost
Accounts payable and accrued liabilities and advance received for exploration work are measured at
amortized cost using the effective interest method.
Financial risk management
The Corporation is exposed to various financial risks resulting from both its operations and its
investments activities. The Corporation’s management manages financial risks. The Corporation does not
enter into financial instrument agreements including derivative financial instruments for speculative
purposes. The Corporation’s main financial risk exposure and its financial risk management policies are
as follows:
Interest rate fair value risk
The Corporation’s interest rate risk is the risk that the fair value of future cash flows of a financial
instrument will fluctuate due to changes in market interest rates. The investments included in cash and
cash equivalents and also investments bear interest at a fixed rate and the Corporation is, therefore,
exposed to the risk of changes in fair value resulting from interest rate fluctuations. Interest rates 1%
higher (lower) would have decreased (increased) the fair value of these by $7,048 as of September 30,
2014 ($7,639 as of September 30, 2013). The Corporation’s other financial assets and liabilities do not
comprise any interest rate risk since they do not bear interest.
Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause
the other party to incur a financial loss. The Corporation is subject to concentrations of credit risk through
cash and cash equivalents, investments and accounts receivable. The Corporation reduces its credit risk
by maintaining part of its cash and cash equivalents in financial instruments guaranteed held with a
Canadian chartered bank and the other part in financial instruments held with an independent investment
dealer member of the Canadian Investor Protection Fund. In Fiscal 14 and 13, the investments are
composed of guaranteed investment certificates issued by Canadian banks. The Corporation aims at
signing partnership agreements with established companies and follows closely their cash position to
reduce its credit risk on accounts receivable.
Liquidity risk
Liquidity risk is the risk that the Corporation will not be able to meet the obligations associated with its
financial liabilities. As of September 30, 2014, the Corporation had enough funds available to meet its
financial liabilities and future financial liabilities from its commitments for the Fiscal 15.
Fair value
The carrying value of cash and cash equivalents, accounts receivable, investments, accounts payable
and accrued liabilities and advance received for exploration work are considered to be a reasonable
approximation of their fair value because of the short-term maturity and contractual terms of these
instruments.
Risk factors
The following discussions review a number of important risks which management believes could impact
the Corporation’s business. There are other risks, not identified below, which currently, or may in the
future exist in the Corporation’s operating environment.
31
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Risk factors (Cont’d)
Exploration and Mining Risks
The business of exploration for minerals and mining involves a high degree of risk. Few properties that
are explored are ultimately developed into producing mines. Currently, there are no known bodies of
commercial ore on the mineral properties of which the Corporation intends to acquire an interest and the
proposed exploration program is an exploratory search for ore. Unusual or unexpected formations,
formation pressures, fires, power outages, labor disruptions, flooding, cave-ins, landslides and the
inability to obtain suitable or adequate machinery, equipment or labor are other risks involved in the
conduct of exploration programs. The Corporation, from time to time, increases its internal exploration
and operating expertise with due advice from consultants and others as required. The economics of
developing gold and other mineral properties is affected by many factors including the cost of operations,
variation of the grade of ore mined and fluctuations in the price of any minerals produced. There are no
underground or surface plants or equipment on the Corporation’s mineral properties.
Titles to Property
While the Corporation has diligently investigated title to the various properties in which it has interest, and
to the best of its knowledge, title to those properties are in good standing, this should not be construed as
a guarantee of title. The properties may be subject to prior unregistered agreements or transfer, or native
or government land claims, and title may be affected by undetected defects.
Permits and Licenses
The Corporation’s operations may require licenses and permits from various governmental authorities.
There can be no assurance that the Corporation will be able to obtain all necessary licenses and permits
that may be required to carry out exploration, development and mining operations at its projects.
Metal Prices
Even if the Corporation's exploration programs are successful, factors beyond the control of the
Corporation may affect marketability of any minerals discovered. Metal prices have historically fluctuated
widely and are affected by numerous factors beyond the Corporation's control, including international,
economic and political trends, expectations for inflation, currency exchange fluctuations, interest rates,
global or regional consumption patterns, speculative activities and worldwide production levels. The effect
of these factors cannot accurately be predicted.
Competition
The mining industry is intensely competitive in all its phases. The Corporation competes with many
companies possessing greater financial resources and technical facilities than itself for the acquisition of
mineral interests as well as for recruitment and retention of qualified employees.
Environmental Regulations
The Corporation's operations are subject to environmental regulations promulgated by government
agencies from time to time. Environmental legislation provides for restrictions and prohibitions of spills,
release or emission of various substances produced in association with certain mining industry
operations, such as seepage from tailing disposal areas, which could result in environmental pollution. A
breach of such legislation may result in imposition of fines and penalties. In addition, certain types of
operations require submissions to and approval of environmental impact assessments. Environmental
legislation is evolving in a manner, which means stricter standards, and enforcement, fines and penalties
for non-compliance are more stringent. Environmental assessments of proposed projects carry a
heightened degree of responsibility for companies and directors, officers and employees. The cost of
compliance with changes in governmental regulations has a potential to reduce the profitability of
operations. The Corporation intends to fully comply with all environmental regulations.
32
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Risk factors (Cont’d)
Conflicts of Interest
Certain directors and officers of the Corporation are also directors, officers or shareholders of other
companies that are similarly engaged in the business of acquiring, developing and exploiting natural
resource properties. Such associations may give rise to conflicts of interest from time to time. The
directors or officers of the Corporation are required by law to act honestly and in good faith with a view to
the best interests of the Corporation and to disclose any interest, which they may have in any project or
opportunity of the Corporation. If a conflict of interest arises at a meeting of the board of directors, any
director in a conflict will disclose his interest and abstain from voting on such matter. In determining
whether or not the Corporation will participate in any project or opportunity, the directors will primarily
consider the degree of risk to which the Corporation may be exposed and its financial position at that
time.
Stage of Exploration
The Corporation's properties are in the exploration stage and to date none of them have a proven ore
body. The Corporation does not have a history of earnings or return on investment, and there is no
assurance that it will produce revenue, operate profitably or provide a return on investment in the future.
Industry Conditions
Mining and milling operations are subject to government regulations. Operations may be affected in
varying degrees by government regulations such as restrictions on production, price controls, tax and
mining duty increases, expropriation of property, pollution controls or changes in conditions under which
minerals may be mined, milled or marketed. The marketability of minerals may be affected by numerous
factors beyond the control of the Corporation, such as government regulations. The Corporation
undertakes exploration in areas that are or could be the subject of native land claims. Such claims could
delay work or increase exploration costs. The effect of these factors cannot be accurately determined.
Uninsured Hazards
Hazards such as unusual geological conditions are involved in exploring for and developing mineral
deposits. The Corporation may become subject to liability for pollution or other hazards, which cannot be
insured against or against which the Corporation may elect not to insure because of high premium costs
or other reasons. The payment of any such liability could result in the loss of Corporation assets or the
insolvency of the Corporation.
Capital Needs
The exploration, development, mining and processing of the Corporation’s properties will require
substantial additional financing. The only current source of future funds available to the Corporation is the
sale of additional equity capital. There is no assurance that such funding will be available to the
Corporation or that it will be obtained on terms favourable to the Corporation or will provide the
Corporation with sufficient funds to meet its objectives, which may adversely affect the Corporation’s
business and financial position. Failure to obtain sufficient financing may result in delaying or indefinite
postponement of exploration, development or production on any or all of the Corporation’s properties or
even a loss of property interest.
Key Employees
Management of the Corporation rests on a few key officers, the loss of any of whom could have a
detrimental effect on its operations. The Corporation has a key man insurance covering the President of
the Corporation.
Canada Revenue Agency and provincial agencies
No assurance can be made that Canada Revenue Agency and provincial agencies will agree with the
Corporation's characterization of expenditures as Canadian exploration expenses or Canadian
development expense or the eligibility of such expenses as Canadian exploration expense under the
Income Tax Act (Canada) or any provincial equivalent.
33
Midland Exploration Inc.
Management's Discussion and Analysis
For the year ended September 30, 2014
Forward looking information
This management’s discussion and analysis contains forward looking statements reflecting Midland’s
objectives, estimates and expectations. These statements are identified by the use of verbs such as
‘’believe’’, ‘’anticipate’’, ‘’estimate’’, and ‘’expect’’. As well as the use of the future or conditional tense. By
their very nature, these types of statements involve risk and uncertainty. Consequently, results could
differ materially from the Corporation’s projections or expectations. The Corporation does not undertake
to update any forward-looking statements except to the extent required by securities regulations.
December 10, 2014
(s) Gino Roger
Gino Roger
President and CEO
(s) Ingrid Martin
Ingrid Martin
CFO
34
December 10, 2014
Independent Auditor’s Report
To the shareholders of
Midland Exploration Inc.
We have audited the accompanying financial statements of Midland Exploration Inc., which comprise the
statements of financial position as at September 30, 2014 and 2013 and the statements of comprehensive
loss, changes in equity and cash flows for the years then ended, and the related notes, which comprise a
summary of significant accounting policies and other explanatory information.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the 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.
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
1250 René-Lévesque Boulevard West, Suite 2800, Montréal, Quebec, Canada H3B 2G4
T: +1 514 205 5000, F: +1 514 876 1502, www.pwc.com/ca
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
35 Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Midland Exploration Inc. as at September 30, 2014 and 2013 and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards.
1 CPA auditor, CA, public accountancy permit No. A123642
(2)
36 Midland Exploration Inc.
Statements of Financial Position
As at September 30, 2014 and 2013
Assets
Current assets
Cash and cash equivalents (note 5)
Investments (note 6)
Accounts receivable
Sales tax receivable
Tax credits and mining rights receivable
Prepaid expenses
Non-current assets
Exploration and evaluation assets (note 7)
Exploration properties
Exploration and evaluation expenses
Total assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Advance received for exploration work
Liability related to the premium on flow-through share
Total liabilities
Equity
Capital stock (note 8)
Warrants
Contributed surplus
Deficit
Total equity
As at
September 30,
2014
$
As at
September 30,
2013
$
1,667,402
2,060,000
62,983
118,335
66,578
24,168
3,999,466
1,262,538
2,060,000
68,955
120,910
149,699
22,366
3,684,468
1,090,489
4,802,845
5,893,334
1,030,972
5,238,531
6,269,503
9,892,800
9,953,971
464,004
370,329
27,460
861,793
341,054
-
-
341,054
17,270,485
30,818
1,959,018
(10,229,314)
9,031,007
16,133,166
52,542
1,639,751
(8,212,542)
9,612,917
Total liabilities and equity
9,892,800
9,953,971
The accompanying notes are an integral part of these financial statements.
On behalf of the Board
(s) Jean-Pierre Janson
Jean-Pierre Janson
Director
(s) Gino Roger
Gino Roger
President, Director
37
Midland Exploration Inc.
Statements of Comprehensive Loss
For the years ended September 30, 2014 and 2013
Revenues
Project management fees
Residual gain on option payments on mining assets
Operating Expenses
Salaries
Stock-based compensation
Travel
Rent and insurance
Office expenses
Regulatory fees
Conferences and mining industry involvement
Press releases and investors relations
Professional fees
General exploration
Impairment of exploration and evaluation assets (note 7)
Operating expenses
Other gains or losses
Interest income
Loss before income taxes
2014
$
165,435
7,148
172,583
328,600
170,451
54,310
48,074
87,593
31,368
77,477
63,896
197,048
12,059
1,288,721
2,359,597
2013
$
18,870
-
18,870
310,293
187,933
44,083
48,601
80,383
38,185
113,646
67,333
197,329
9,820
118,450
1,216,056
56,565
66,743
(2,130,449)
(1,130,443)
Recovery of deferred income taxes (note 11)
155,863
442,353
Loss and comprehensive loss
(1,974,586)
(688,090)
Basic and diluted loss per share (note 10)
(0.07)
(0.02)
The accompanying notes are an integral part of these financial statements.
38
Midland Exploration Inc.
Statements of Change in Equilty
For the years ended September 30, 2014 and 2013
Number of
shares
outstanding
Balance at Oct. 1, 2013
Loss and comprehensive loss
Private placement
28,671,225
-
802,001
Capital
stock
$
16,133,166
-
570,683
Warrants
$
52,542
-
30,818
Contributed
surplus
$
1,639,751
-
-
Deficit
$
Total
equity
$
(8,212,542) 9,612,917
(1,974,586)
(1,974,586)
601,501
-
Flow-through private placement
Less: premium
833,286
-
833,286
749,959
(183,323)
566,636
-
-
-
-
-
-
-
-
-
749,959
(183,323)
566,636
Stock-based compensation
Warrants expired
Share issue expenses
Balance at Sept. 30, 2014
-
-
-
30,306,512
-
-
-
17,270,485
-
(52,542)
-
30,818
266,725
52,542
-
1,959,018
-
-
(42,186)
266,725
-
(42,186)
(10,229,314) 9,031,007
Number of
shares
outstanding
Balance at Oct. 1, 2012
Loss and comprehensive loss
Private placement
26,611,079
-
769,264
Capital
stock
$
13,592,641
-
965,423
Warrants
$
-
-
34,620
Contributed
surplus
$
1,395,806
-
-
Deficit
$
Total
equity
$
(7,254,782) 7,733,665
(688,090)
1,000,043
(688,090)
-
Flow-through private placement
Less: premium
1,105,882
-
1,105,882
1,824,705
(442,353)
1,382,352
Acquisition of a mining property
Options exercised
Stock-based compensation
Issuance of broker warrants
Share issue expenses
Balance at Sept. 30, 2013
60,000
125,000
-
-
-
28,671,225
57,000
135,750
-
-
-
16,133,166
-
-
-
-
-
-
17,922
-
52,542
-
-
-
- 1,824,705
(442,353)
-
- 1,382,352
-
(54,500)
298,445
-
-
1,639,751
-
-
-
(17,922)
(251,748)
57,000
81,250
298,445
-
(251,748)
(8,212,542) 9,612,917
The accompanying notes are an integral part of these financial statements.
39
Midland Exploration Inc.
Statements of Cash Flows
For the years ended September 30, 2014 and 2013
Operating activities
Loss
Adjustment for:
Residual gain on option payments on mining assets
Stock-based compensation
Impairment of exploration and evaluation assets
Recovery of deferred income taxes
Changes in non-cash working capital items
Accounts receivable
Sales tax receivable
Tax credits and mining rights receivable
Prepaid expenses
Accounts payable and accrued liabilities
Advance received for exploration work
Financing activities
Private placement
Flow-through private placement
Exercise of options
Share issue expenses
Investing activities
Additions to investments
Disposals of investments
Additions to exploration properties
Disposals of exploration properties
Additions to exploration and evaluation expenses
Tax credits and mining rights received
Net change in cash and cash equivalents
Cash and cash equivalents – beginning
Cash and cash equivalents - ending
2014
$
2013
$
(1,974,586)
(688,090)
(7,148)
170,451
1,288,721
(155,863)
(678,425)
5,972
2,575
(3,534)
(1,802)
258,827
370,329
632,367
(46,058)
601,501
749,959
-
(42,186)
1,309,274
-
-
(178,896)
60,000
(901,795)
162,339
(858,352)
404,864
1,262,538
1,667,402
-
187,933
118,450
(442,353)
(824,060)
58,511
42,892
-
11,425
18,933
-
131,761
(692,299)
1,000,043
1,824,705
81,250
(251,748)
2,654,250
(2,060,000)
2,527,000
(407,891)
90,000
(2,034,375)
125,488
(1,759,778)
202,173
1,060,365
1,262,538
See note 15
The accompanying notes are an integral part of these financial statements.
40
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
1. Statute of incorporation and nature of activities
Midland Exploration Inc. (“the Corporation”), incorporated on October 2, 1995 and operating under the
Business Corporations Act (Québec), is a company in the mining exploration business. The
Corporation’s operations include the acquisition and exploration of mining properties. The address of
its head office is 1, Place Ville Marie, suite 4000, Montreal, Quebec, H3B 4M4. The Corporation’s
shares are listed on the TSX Venture Exchange (the “Exchange”) under the MD ticker.
Until it is determined that properties contain mineral reserves or resources that can be economically
mined, they are classified as exploration properties. The recoverability of exploration and evaluation
assets is dependent upon: the discovery of economically recoverable reserves and resources; securing
and maintaining title and beneficial interest in the properties; the ability to obtain the necessary financing
to complete exploration and the profitable sale of the assets. The Corporation will periodically have to
raise additional funds to continue operations, and while it has been successful in doing so in the past,
there can be no assurance it will be able to do so in the future.
Although the Corporation has taken steps to verify title to mineral properties in which it has an interest,
in accordance with industry standards for the current stage of exploration of such properties, these
procedures do not guarantee the Corporation's title. Property title may be subject to unregistered prior
agreements and non-compliance with regulatory requirements.
2. Summary of significant accounting policies
Basis of presentation
The accompanying financial statements have been prepared in accordance with the International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”). The accounting policies, method of computation and presentation applied to these financial
statements are consistent with those of the previous financial year. These financial statements were
approved and authorized for issue by the Board of Directors on December 10, 2014.
Basis of measurement
These financial statements have been prepared on a historical cost basis.
Functional and presentation currency
The financial statements are presented in Canadian dollars, which is the Corporation’s functional
currency.
Jointly controlled assets and exploration activities
A jointly controlled asset involves joint control and offers joint ownership by the Corporation and other
venturers of assets contributed to or acquired for the purpose of the joint venture, without the formation
of a corporation, partnership or other entity.
Where the Corporation’s activities are conducted through jointly controlled assets and exploration
activities, the financial statements include the Corporation’s share in the assets and the liabilities as
well as in the income and the expenses from the joint operations.
Financial instruments
Financial assets and financial liabilities are recognized when the Corporation becomes a party to the
contractual provisions of the financial instrument.
Financial assets are derecognized when the contractual rights to receive the cash flows from the
financial asset have expired, or when the financial asset and all substantial risks and rewards have
been transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or
when it expires.
41
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
2. Summary of significant accounting policies (Cont’d)
Financial assets and financial liabilities are measured initially at fair value plus transactions costs,
except for financial assets and financial liabilities carried at fair value through profit or loss, which are
measured initially at fair value. Financial assets and financial liabilities are measured subsequently as
described below.
The category of financial instruments determines subsequent measurement and whether any resulting
income and expense is recognized in profit or loss or in other comprehensive income. All income
relating to financial instruments that are recognized in profit or loss are presented within other gains or
losses.
Financial assets
The Corporation’s cash and cash equivalents and accounts receivable fall into the loans and
receivables category. The Corporation’s investments fall into the held-to-maturity category.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. After initial recognition these are measured at amortised cost using the
effective interest method, less provision for impairment. Discounting is omitted where the effect of
discounting is immaterial.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and fixed maturity other than loans and receivables. Investments are classified as held-to-maturity if
the Corporation has the intention and ability to hold them until maturity.
Held-to-maturity investments are measured subsequently at amortised cost using the effective interest
method. If there is objective evidence that the investment is impaired, determined by reference to
external credit ratings, the financial asset is measured at the present value of estimated future cash
flows. Any changes to the carrying amount of the investment, including impairment losses, are
recognised in profit or loss.
Impairment of financial assets
All financial assets are subject to review for impairment at least at each annual reporting date. Financial
assets are impaired when there is any objective evidence that a financial asset or a group of financial
assets is impaired.
Objective evidence of impairment could include:
– Significant financial difficulty of the issuer or counterparty;
– Default or delinquency in interest or principal payments; or
– It becoming probable that the borrower will enter bankruptcy or financial reorganization.
Individually significant accounts receivable are considered for impairment when they are past due or
when other objective evidence is received that a specific counterparty will default.
Financial liabilities
The accounts payable and accrued liabilities and the advance received for exploration work fall into the
Financial liabilities measured at amortized cost category.
Financial liabilities measured at amortized cost
Accounts payable and accrued liabilities and advance received for exploration work are measured at
amortized cost using the effective interest method.
42
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
2. Summary of significant accounting policies (Cont’d)
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank balances and short-term liquid investments
with original maturities of three months or less or cashable at any time without penalties.
Taxes credits and mining rights receivable
The Corporation is entitled to a refundable tax credit on qualified exploration expenditures incurred and
a refundable credit on duties for losses under the Mining Tax Act. These tax credits are recognized as
a reduction of the exploration and evaluation expenses incurred. As management intends to realize the
carrying value of its assets and settle the carrying value of its liabilities through the sale of its exploration
and evaluation assets, the related deferred tax has been calculated accordingly.
Exploration and evaluation assets
Exploration and evaluation (“E&E”) assets are comprised of exploration properties and E&E expenses.
All costs incurred prior to obtaining the legal rights to undertake E&E activities on an area of interest
are expensed as incurred.
E&E assets include rights in exploration properties, paid or acquired through a business combination
or an acquisition of assets, and costs related to the initial search for mineral deposits with economic
potential or to obtain more information about existing mineral deposits.
Mining rights are recorded at acquisition cost or at fair value in the case of a devaluation caused by an
impairment of value. Mining rights and options to acquire undivided interests in mining rights are
depreciated only as these properties are put into commercial production.
E&E expenses for each separate area of interest are capitalized (net from E&E expenses recharged to
partners) and include costs associated with prospecting, sampling, trenching, drilling and other work
involved in searching for ore like topographical, geological, geochemical and geophysical studies. They
also reflect costs related to establishing the technical and commercial viability of extracting a mineral
resource identified through exploration or acquired through a business combination or asset acquisition.
E&E expenses include the cost of:
♦ establishing the volume and grade of deposits through drilling of core samples, trenching and
sampling activities in an ore body;
♦ determining the optimal methods of extraction and metallurgical and treatment processes;
♦ studies related to surveying, transportation and infrastructure requirements;
♦ permitting activities; and
♦ economic evaluations to determine whether development of the mineralized material is
commercially justified, including scoping, prefeasibility and final feasibility studies.
When a mine project moves into the development phase, E&E expenses are capitalized to mine
development costs in property and equipment. An impairment test is performed before reclassification
and any impairment loss is recognized in the statement of comprehensive loss.
E&E expenses include overhead expenses directly attributable to the related activities.
43
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
2. Summary of significant accounting policies (Cont’d)
Cash flows attributable to capitalized E&E costs are classified as investing activities in the statement
of cash flows.
From time to time, the Corporation may acquire or dispose of a property pursuant to the terms of an
option agreement. Due to the fact that options are exercisable entirely at the discretion of the option
holder, the amounts payable or receivable are not recorded. Option payments are recorded when they
are made or received. Proceeds on the sale of exploration properties are applied by property in
reduction of the exploration properties, then in reduction of the E&E expenses and any residual is
recorded in the statement of comprehensive loss unless there is contractual work required in which
case the residual gain is deferred and will reduce the contractual disbursements when done.
Funds received from partners on certain properties where the Corporation is the operator in order to
perform exploration work as per agreements, are accounted for in the statement of financial position
as advances received for upcoming exploration work. These advances are reduced gradually when the
exploration work is performed. The project management fees received when the Corporation is the
operator are recorded in the statement of comprehensive loss when the E&E expenses are charged
back to the partner. When the partner is the operator, the management fees are recorded in the
statement of financial position as E&E expenses.
Operating lease agreements
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Payments under an operating lease are charged to the statement of
comprehensive loss or capitalized in the E&E expenses on a straight-line basis over the period of the
lease. Related expenses, such as maintenance and insurance expenses, are charged as incurred.
Impairment of non-financial assets
E&E assets are reviewed for impairment, by area of interest, if there is any indication that the carrying
amount may not be recoverable. If any such indication is present, the recoverable amount of the asset
is estimated in order to determine whether impairment exists. Where the asset does not generate cash
flows that are independent from other assets, the Corporation estimates the recoverable amount of the
cash generating unit (“CGU”) to which the asset belongs.
An asset’s recoverable amount is the higher of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value, using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific
to the asset for which estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the
carrying amount is reduced to the recoverable amount. Impairment is recognized immediately in the
statement of comprehensive loss. Where an impairment subsequently reverses, the carrying amount
is increased to the revised estimate of recoverable amount but only to the extent that this does not
exceed the carrying value that would have been determined if no impairment had previously been
recognized. A reversal is recognized as a reduction in the impairment charge for the period.
Income taxes
Income tax on the profit or loss for the periods presented comprises 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 it is recognized in equity.
44
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
2. Summary of significant accounting policies (Cont’d)
Current tax expense is the expected tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards
to previous years. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences
between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Temporary differences are not provided for if they arise from the initial recognition of goodwill or the
initial recognition of an asset or liability in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit or loss. The amount of deferred tax
provided is based on the expected manner of realization or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the financial position reporting date.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilized.
Deferred income tax assets and liabilities are presented as noncurrent and are offset when there is a
legally enforceable right to offset current tax assets against current tax liabilities and when deferred tax
assets and liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an intention to settle the balances on a net
basis.
Equity
Capital stock represents the amount received on the issue of shares. Warrants represent the allocation
of the amount received for units issued as well as the charge recorded for the broker warrants relating
to financing. Contributed surplus includes charges related to stock options until they are exercised and
the warrants that are expired and not exercised. Deficit includes all current and prior period retained
profits or losses and share issue expenses.
Proceeds from unit placements are allocated between shares and warrants issued on a pro-rata basis
of their value within the unit using the Black-Scholes pricing model.
Flow-through shares
The Corporation finances some E&E expenses through the issuance of flow-through shares. The
resource expenditure deductions for income tax purposes are renounced to investors in accordance
with the appropriate income tax legislation. The difference between the amount recorded as common
share and the amount paid by the investors for the shares (the “premium”), measured with the residual
value method, is accounted for as flow-through share premium, which is reversed to income as recovery
of deferred income taxes when the eligible expenses are incurred. The Corporation recognizes a
deferred tax liability for flow-through shares and a deferred tax expense, at the moment the eligible
expenditures are incurred.
Share and warrant issue expenses
Share and warrant issue expenses are accounted for in the year in which they are incurred and are
recorded as a deduction to equity in the deficit in the year in which the shares are issued.
45
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
2. Summary of significant accounting policies (Cont’d)
Stock-based compensation
The Corporation operates an equity-settled share-based remuneration plan (share options plan) for its
eligible directors, officers, employees and consultants. The Corporation's plan does not feature any
options for a cash settlement.
An individual is classified as an employee when the individual is an employee for legal or tax purposes
(direct employee) or provides services similar to those performed by a direct employee, including
directors of the Corporation. The expense is recorded over the vesting period for employees and over
the period covered by the contract for non-employees.
All goods and services received in exchange for the grant of any share-based payment are measured
at their fair values, unless that fair value cannot be estimated reliably. If the Corporation cannot estimate
reliably the fair value of the goods or service received, the Corporation shall measure their value
indirectly by reference to the fair value of the equity instruments granted. Where employees are
rewarded using share-based payments, the fair values of employees' services are determined indirectly
by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant
date using the Black Scholes option pricing model and excludes the impact of non-market vesting
conditions.
All equity-settled share-based payments (except warrants to brokers) are ultimately recognized as an
expense in the statement of comprehensive loss or capitalized as an E&E expenses on the statement
of financial position, depending on the nature of the payment with a corresponding credit to contributed
surplus, in equity. Warrants to brokers, in respect of an equity financing are recognized as share issue
expense reducing the equity in the deficit with a corresponding credit to warrants.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period,
based on the best available estimate of the number of share options expected to vest. Non-market
vesting conditions are included in assumptions about the number of options that are expected to
become exercisable. Estimates are subsequently revised if there is any indication that the number of
share options expected to vest differs from previous estimates.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs
are recorded as capital stock. The accumulated charges related to the share options recorded in
contributed surplus are then also transferred to capital stock.
Loss per share
Loss per share is calculated using the weighted average number of shares outstanding during the year.
Diluted loss per share is calculated using the weighted average number of shares outstanding during
the year for the calculation of the dilutive effect of warrants and stock options unless they have an anti-
dilutive effect.
Revenue recognition
The project management fees received when the Corporation is the operator are recorded in the
statement of comprehensive loss when the exploration work recharged to the partners are incurred.
Segment disclosures
The Corporation currently operates in a single segment – the acquisition, exploration and evaluation of
exploration properties. All of the Corporation’s activities are conducted in Canada.
46
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
3. Accounting standards issued but not yet effective
The most relevant standards, amendments and interpretations issued but not yet effective up to the
date of the issuance of these financial statements are listed below.
IFRS 9, Financial Instruments, (“IFRS 9”)
In July 2014, the IASB issued IFRS 9 – Financial Instruments. The IASB has previously published
versions of IFRS 9 that introduced new classification and measurement requirements (in 2009 and
2010) and a new hedge accounting model (in 2013). The July 2014 publication represents the final
version of the Standard, replaces earlier versions of IFRS 9 and completes the IASB’s project to replace
IAS 39 – Financial Instruments: Recognition and Measurement.
This standard replaces the current multiple classification and measurement models for financial assets
and liabilities with a single model that has only two classification categories: amortized cost and fair
value. The basis of classification depends on the entity’s business model and the contractual cash flow
characteristics of the financial asset or liability and own credit. The standard introduces a new, expected
loss impairment model that will require more timely recognition of expected credit losses. Specifically,
the new Standard requires entities to account for expected credit losses from when financial
instruments are first recognised and it lowers the threshold for recognition of full lifetime expected
losses. The new standard also introduces a substantially-reformed model for hedge accounting with
enhanced disclosures about risk management activity and aligns hedge accounting more closely with
risk management. The new standard is effective for annual periods beginning on or after January 1,
2018 with early adoption permitted. The extent of the impact of adoption of IFRS 9 has not yet been
determined.
IFRIC 21, Levies (“IFRIC 21”)
In May 2013, the IASB issued IFRIC 21, Levies. IFRIC 21 is effective for annual periods beginning on
or after January 1, 2014, and is to be applied retrospectively. IFRIC 21 provides guidance for levies in
accordance with IAS 37, Provision, Contingent Liabilities and Contingent Assets. The interpretation
defines a levy as an outflow from an entity imposed by a government in accordance with legislation and
confirms that an entity recognizes a liability for a levy only when the triggering event specified in the
legislation occurs. The Corporation will adopt IFRIC 21 in its financial statements for the fiscal year
beginning October 1, 2014. The Corporation does not expect to have a material impact on its financial
statements following the adoption of IFRIC 21.
IAS 36 Impairment of Assets (“IAS 36”)
IAS 36 Impairment of Assets has been revised to incorporate amendments issued by the IASB in May
2013. The amendments more accurately reflect the IASB's previous decision to require: the disclosure
of the recoverable amount of impaired assets; and additional disclosures about the measurement of
the recoverable amount of impaired assets when the recoverable amount is based on fair value less
costs of disposal, including the discount rate when a present value technique is used to measure the
recoverable amount. The amendments are effective for annual periods beginning on or after January
1, 2014 and have been early adopted by the Corporation for the fiscal year beginning October 1, 2013.
47
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
4. Critical accounting estimates, judgments and assumptions
When preparing the financial statements, management undertakes a number of judgments, estimates
and assumptions about recognition and measurement of assets, liabilities, income and expenses. The
actual results could differ from the judgments, estimates and assumptions made by management, and
will seldom equal the estimated results. Information about the significant judgments that have the most
significant effect on the recognition and measurement of assets, liabilities, income and expenses are
discussed below.
Judgements
Impairment of E&E assets
Determining if there are any facts and circumstances indicating impairment loss or reversal of
impairment losses is a subjective process involving judgment and a number of estimates and
interpretations in many cases.
Determining whether to test for impairment of E&E assets requires management’s judgment, among
others, regarding the following: the period for which the entity has the right to explore in the specific
area has expired during the period or will expire in the near future, and is not expected to be renewed;
substantive expenditure on further E&E of mineral resources in a specific area is neither budgeted nor
planned; exploration for and evaluation of mineral resources in a specific area have not led to the
discovery of commercially viable quantities of mineral resources and the entity has decided to
discontinue such activities in the specific area; or sufficient data exists to indicate that, although a
development in a specific area is likely to proceed, the carrying amount of the E&E asset is unlikely to
be recovered in full from successful development or by sale.
When an indication of impairment loss or a reversal of an impairment loss exists, the recoverable
amount of the individual asset must be estimated. If it is not possible to estimate the recoverable amount
of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs
must be determined. Identifying the cash-generating units requires considerable management
judgment. In testing an individual asset or cash-generating unit for impairment and identifying a reversal
of impairment losses, management estimates the recoverable amount of the asset or the cash-
generating unit. This requires management to make several assumptions as to future events or
circumstances. These assumptions and estimates are subject to change if new information becomes
available. Actual results with respect to impairment losses or reversals of impairment losses could differ
in such a situation and significant adjustments to the Corporation’s assets and earnings may occur
during the next period.
The total impairment loss of the E&E assets recognized is $1,288,721 for the year ended September
30, 2014 ($118,450 for 2013). No reversal of impairment losses has been recognized for the reporting
periods.
Deferred taxes
The assessment of availability of future taxable profits involves judgment. A deferred tax asset is
recognized to the extent that it is probable that taxable profits will be available against which deductible
temporary differences and the carry-forward of unused tax credits and unused tax losses can be
utilized. Judgment is also involved in the determination of the expected manner of realisation or
settlement of the carrying amount of the Corporation's assets and liabilities which is expected to be
through the sale of the Corporation's assets.
48
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
4. Critical accounting estimates, judgments and assumptions (Cont’d)
Valuation of credit on duties refundable for loss and the refundable tax credit for resources
Refundable credit on mining duties and refundable tax credit related to resources for the current and
prior periods are measured at the amount expected to be recovered from the taxation authorities using
the tax rates and tax laws that have been enacted or substantively enacted at the statement of financial
position date. Uncertainties exist with respect to the interpretation of tax regulations, including credit on
mining duties and tax credit related to resources for which certain expenditures could be disallowed by
the taxation authorities in the calculation of credits, and the amount and timing of their collection. The
calculation of the Corporation’s credit on mining duties and tax credit related to resources necessarily
involves a degree of estimation and judgment in respect of certain items whose tax treatment cannot
be finally determined until notice of assessments and payments have been received from the relevant
taxation authority. Differences arising between the actual results following final resolution of some of
these items and the assumptions made, or future changes to such assumptions, could necessitate
adjustments to credit on mining duties and tax credit related to resources, exploration and evaluation
assets and expenses, and income tax expense in future periods.
The amounts recognized in the financial statements are derived from the Corporation’s best estimation
and judgement as described above. However, the inherent uncertainty regarding the outcome of these
items means that eventual resolution could differ from the accounting estimates and therefore impact
the Corporation’s financial position and its financial performance and cash flows.
5. Cash and cash equivalents
Cash
Guaranteed investment certificate bearing interest of 1.20%,
maturing February 20, 2014
Guaranteed investment certificate bearing interest between 1.15%
and 1.25%, maturing between December 22, 2014 and
February 23, 2015
As at
September 30,
2014
$
664,362
As at
September 30,
2013
$
315,538
-
947,000
1,003,040
1,667,402
-
1,262,538
The instruments that compose cash and cash equivalents are cashable any time without any penalties.
6.
Investments
Guaranteed investment certificates, not cashable before the
expiry date, between 1.90% and 2.05% interest, maturing
between November 26, 2014 and December 18, 2014, with a
maturity value of $2,142,129
As at
September 30,
2014
$
As at
September 30,
2013
$
2,060,000
2,060,000
2,060,000
2,060,000
As of September 30, 2014, the balance on flow-through financing not spent according to the restrictions
imposed by this financing represents $111,510 (none as of September 30, 2013) and is included in the
investments. The Corporation has to dedicate these funds to Canadian mining properties exploration.
49
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
7. Exploration and evaluation assets
The following tables disclose the acquisition costs of exploration properties:
Undivided
interest
%
As at
Sept. 30,
2013
$
Additions
$
Option
payments
$
Impair-
ment
$
Acquisition costs
Abitibi
Maritime-Cadillac
Laflamme
Patris
Casault
Valmond
Jouvex
Heva
Samson
La Peltrie
Abitibi Or
Grenville-Appalaches
Weedon
Gatineau
James Bay
James Bay Au
James Bay U
James Bay Fe
Eleonore
Northern Quebec
Pallas PGE
Willbob
Quebec Labrador
Ytterby
Project Generation
Acquisition costs
Abitibi
Maritime-Cadillac
Laflamme
Patris
Casault
Valmond
Jouvex
Heva
Grenville-Appalaches
Weedon
Gatineau
James Bay
James Bay Au
James Bay U
James Bay Fe
Eleonore
Northern Quebec
Pallas PGE
Quebec Labrador
Ytterby
Project Generation
49
61.6
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
49
60
100
100
100
100
100
100
100
100
100
100
100
100
50
100
290,437
61,867
88,996
3,628
8,346
29,978
89,591
-
-
-
-
10,010
(1,924)
13,089
1,464
17,416
5,612
32,852
9,362
77,521
-
-
-
-
(9,810)
-
-
(32,852)
-
-
43,810
19,209
2,828
2,172
160,854
9,828
44,917
88,372
28,023
-
2,891
18,520
59,540
-
(48,239)
1,130
-
-
-
-
-
-
-
290,416
16,894
16,637
-
11,822
16,877
-
21
49,718
72,359
3,791
1,742
13,101
89,591
41,115
7,272
15,162
11,937
109,744
4,459
35,145
66,312
73,413
5,369
29,506
22,060
-
59,540
-
-
-
(163)
-
-
-
-
-
-
-
-
-
-
As at
Sept. 30,
2014
$
290,437
69,093
87,072
16,717
-
44,244
95,203
-
9,362
77,521
37,438
18,688
180,191
9,828
47,808
77,730
-
(2,784)
-
-
-
(3,150)
-
-
-
-
(9,200)
(2,693)
(8,686)
-
-
(29,162)
-
-
11,301
1,130
As at
Sept. 30,
2013
$
290,437
61,867
88,996
3,628
8,346
29,978
89,591
-
(4,745)
-
-
(5,218)
-
-
(12,467)
-
43,810
19,209
(22,303)
-
(19,734)
-
160,854
9,828
44,917
88,372
-
59,540
11,388
4,961
633,042
13,919
1,331
462,560
-
-
(163)
-
-
25,307
6,292
(64,467) 1,030,972
25,307
6,292
1,030,972
1,916
11,695
186,338
-
-
(42,662)
(25,711)
(2,773)
1,512
15,214
(84,159) 1,090,489
Undivided
interest
%
As at
Sept. 30,
2012
$
Additions
$
Option
payments
$
Impair-
ment
$
50
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
7. Exploration and evaluation assets (Cont’d)
The following two tables disclose details of exploration and evaluation expenses:
E&E expenses
Undivided
interest
As at
Sept. 30,
2013
$
Additions
$
Option
payments
$
Tax
credits
$
Impair-
ment
$
As at
Sept. 30,
2014
$
- 232,965
- 1,310,514
- 208,755
- 290,082
- 123,955
- 346,090
18,563
-
36,641
-
- 388,013
28,766
-
- 216,677
14,686
-
-
42,158
- 1,175,139
216,088
5,116
-
As at
Sept. 30,
2013
$
- 228,787
- 1,167,804
- 179,176
- 214,479
- 113,507
- 237,576
16,149
-
- 359,196
28,648
-
228,787
1,167,804
179,176
214,479
113,507
237,576
16,149
-
4,178
143,709
31,913
78,480
22,166
111,080
2,720
36,859
-
-
-
-
(10,190)
-
-
-
359,196
28,648
33,991
132
162,521
14,686
42,158
949,831
57,004
-
-
241,004
210,168
-
41,654
5,116
-
-
-
-
-
-
-
-
-
(999)
(2,334)
(2,877)
(1,528)
(2,566)
(306)
(218)
(5,174)
(14)
(2,848)
-
-
(15,696)
(35,734)
-
Abitibi
Maritime-Cadillac
Laflamme
Patris
Casault
Valmond
Jouvex
Heva
Abitibi Au
Grenville-Appalaches
Weedon
Gatineau
James Bay
James Bay Au
James Bay U
James Bay Fe
Eleonore
Northern Quebec
Pallas PGE
Willbob
Quebec Labrador
Ytterby
Project Generation
%
49
61.6
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
Abitibi
Maritime-Cadillac
Laflamme
Patris
Casault
Valmond
Jouvex
Heva
Grenville-Appalaches
Weedon
Gatineau
James Bay
James Bay Au
James Bay U
James Bay Fe
Eleonore
Northern Quebec
Pallas PGE
Quebec Labrador
Ytterby
Project Generation
%
49
60
100
100
100
100
100
100
100
100
100
100
100
100
50
100
1,277,720
36,125
5,238,531
39,144
5,600
854,750
-
-
(10,190)
(3,212)
(2,178)
(1,204,562) 109,090
39,547
-
(75,684) (1,204,562) 4,802,845
E&E expenses
Undivided
interest
As at
Sept. 30,
2012
$
Additions
$
Option
payments
$
Tax
credits
$
Impair-
ment
$
(287)
(2,814)
(3,885)
-
(670)
(1,369)
-
(27,118)
(858)
214,241
592,050
85,044
276,006
73,139
18,957
-
14,833
578,568
98,017
28,310
41,038
219,988
16,149
-
-
-
(89,837)
-
-
-
198,458
25,593
187,856
3,913
111,249
14,686
59,703
366,786
60,045
-
36,541
651,833
-
227,060
-
-
-
-
-
-
-
(8,773)
-
(103)
(68,788)
- 162,521
14,686
-
42,158
(53,983)
- 949,831
(16,892)
- 210,168
1,171,617
34,704
107,636
1,421
3,242,233 2,273,208
-
-
(89,837)
(1,533)
-
(133,090)
- 1,277,720
36,125
-
(53,983) 5,238,531
51
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
7. Exploration and evaluation assets (Cont’d)
a) Maritime-Cadillac
The Corporation holds 49% of the Maritime-Cadillac property located south of the Lapa mine, along
the Cadillac-Lardner fault, subject to a 2% net smelter return (“NSR”) royalty; half of the royalty can
be bought back for a payment of $1,000,000.
As permitted in the agreement signed in June 2009 and amended in November 2012 and May
2013, Agnico Eagle Mines Limited (“Agnico Eagle”) indicated that it wants to increase its undivided
interest from 50% to possibly 65% during a three-year period by financing a bankable feasibility
study with respect to the Maritime-Cadillac property or by assuming all mining operations on the
Maritime-Cadillac property. If conditions are met, it will earn 1% additional interest for every
$1,000,000 spent on the Maritime-Cadillac property (up to 15% by spending $15,000,000). In June
2013, Agnico Eagle completed additional work for $1,000,000 and consequently earned a 51%
interest in the property. Agnico Eagle and the Corporation are now in a joint venture and future
work will be shared 51% Agnico Eagle - 49% Midland.
b) Abitibi Au
The Corporation staked claims in the Abitibi region.
c) Laflamme Au-Cu
The Corporation holds 61.6% of the Laflamme property located west of Lebel-sur-Quévillon in the
Abitibi region.
On August 17, 2009, the Corporation signed an agreement with North American Palladium Ltd.
(“NAP”). As of July 31, 2011, NAP earned its 50% interest in the Laflamme property following a
$100,000 cash payment and $1,000,000 exploration work completed or credited. In December
2012, NAP decided not to contribute anymore and therefore its interest was diluted. Since
December 2012, Midland is the operator. In March 2013, NAP announced the sale of its subsidiary
holding the Quebec gold assets to Maudore Minerals Ltd. Following the exploration work of
$704,744 done since January 2013, the interest of Midland is 61.6% as at September 30, 2014.
Some claims were dropped therefore the Corporation impaired partially for $2,784 the exploration
property cost ($4,745 in 2013).
d) Patris
The Corporation holds the Patris property located northeast of Rouyn-Noranda. The Patris property
now includes the claims of the old Dunn property.
Some claims are subject to the following NSR royalties:
• 1%, the Corporation can buy it back for $500,000 per 0.5% tranche;
• 2%, the Corporation can buy it back for $1,000,000 per 1% tranche.
On November 12, 2012, the Corporation acquired a 100% interest in some claims adjacent to the
Patris property in exchange for a payment of $50,000. Part of the claims are subject to a 2% NSR
royalty, the Corporation may buy back that royalty in total or in two parts upon a payment of
$1,000,000 per 1% for a total of $2,000,000. The other part of the claims is subject to a 1% NSR
royalty; the Corporation may buy back the royalty in total or in two parts upon a payment of
$500,000 per 0.5%, for a total of $1,000,000.
52
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
7. Exploration and evaluation assets (Cont’d)
On July 24, 2013, the Corporation acquired a 100% interest in some claims adjacent to the Patris
property in exchange for a payment of $5,000. The claims are subject to a 1.5% NSR royalty, the
Corporation may buy back that royalty in total or in three parts upon a payment of $500,000 per
0.5% for a total of $1,500,000.
The Corporation signed an option agreement with Teck Resources Ltd (“Teck”) on September 6,
2013 and amended it on May 20, 2014 to accommodate the delays in permitting. Under the
agreement, Teck may earn, in three options, a maximum interest of 65%, by fulfilling the following
conditions:
First Option for a 50% initial interest
On or before August 31, 2015 (firm commitment)
On or before August 31, 2016
On or before August 31, 2017
Payments
in cash
$
Work
$
-
-
-
-
500,000
800,000
1,700,000
3,000,000
Second Option for a 10% additional interest
On or before August 31, 2019, $500,000 of exploration work and
$60,000 cash payment for each additional 2% interest
300,000
2,500,000
Third Option for a 5% additional interest
On or before August 31, 2021, $1,000,000 of exploration work for
each additional 1% interest
-
5,000,000
Total, for a 65% maximum interest
300,000
10,500,000
Midland will be project operator during the First Option.
e) Casault
The Corporation holds claims north of the city of LaSarre.
On November 16, 2011, the Corporation signed an agreement with a company formally known as
Osisko Mining Corporation (“Osisko”) whereby Osisko could have acquired 50% of the Casault
property subject to $600,000 ($170,000 completed as of September 30, 2013) cash payments and
$6,000,000 ($2,901,629 completed) exploration works up to October 31, 2016. On October 16,
2013, Osisko terminated the option agreement.
53
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
7. Exploration and evaluation assets (Cont’d)
f) Valmond
The Corporation holds claims west of Matagami. On November 19, 2013, the Corporation signed
an agreement with Sphinx Resources Ltd. (“Sphinx”) (previously Donner Metals Ltd.) whereby
Sphinx can acquire 50% of the Valmond property subject to the following conditions (amended on
October 31, 2014):
Upon signing (completed)
On or before December 31, 2014 (work completed)
On or before November 19, 2015 ($230,277 work completed)
On or before November 19, 2016
On or before November 19, 2017
Total
Payments
in cash
$
20,000
50,000
50,000
60,000
70,000
250,000
Work
$
-
300,000
700,000
800,000
700,000
2,500,000
• The Corporation will be the operator during the option;
• Upon acquiring a 50% interest, a joint venture will be formed;
•
If a party’s interest dilutes to 10% or less, its interest will be converted to a 2% NSR royalty,
1% of which can be purchased back for $1,500,000.
Some claims were dropped in 2013 therefore the Corporation impaired partially for $5,218 the
exploration property cost.
g) Jouvex
The Corporation owns claims southwest of Matagami. Some claims were dropped in 2014 therefore
the Corporation impaired partially for $3,150 the exploration property cost.
h) Heva
On April 25, 2013, the Corporation signed an agreement with Arianne Resources Inc. to acquire a
100% interest in the Heva property located along and proximal to the Cadillac Break, less than 5
kilometres northwest of the town of Malartic. In consideration for the acquisition, the Corporation
paid cash $30,000 and issued 60,000 common shares with a fair value of $57,000 which is based
on the closing of the Corporation’s shares on April 25, 2013. The claims are subject to a 2% NSR
royalty to the original holders; half of the royalty can be bought back for a payment of $1,000,000.
54
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
7. Exploration and evaluation assets (Cont’d)
i) Samson
The Corporation acquired by map staking several mining claims locate north of the city of La Sarre.
On September 3, 2014, the Corporation signed an agreement with Sphinx whereby Sphinx can
acquire 50% of the Samson property subject to the following conditions:
Upon signing (completed)
On or before September 3, 2015 ($350,000 firm commitment)
($7,010 work completed)
On or before September 3, 2016
On or before September 3, 2017
On or before September 3, 2018
Total
Payments
in cash
$
40,000
40,000
Work
$
-
500,000
50,000
70,000
75,000
275,000
700,000
900,000
1 400,000
3,500,000
• The Corporation will be the operator during the option;
• Upon acquiring a 50% interest, a joint venture will be formed;
•
If a party’s interest dilutes to 10% or less, its interest will be converted to a 2% NSR royalty,
1% of which can be purchased back for $1,500,000.
j) La Peltrie
The Corporation acquired by map designation several mining claims locate east of the Lower
Detour area.
GRENVILLE-APPALACHES
k) Weedon
The Corporation holds the Weedon property situated south of Quebec City. Some claims are
subject to a 1% NSR royalty and the Corporation can buy back the royalty for $500,000 per 0.5%.
Some other claims are subject to a 0.5% NSR royalty and the Corporation can buy back this royalty
for $500,000.
On June 14, 2013, the Corporation acquired a 100% interest in a claim adjacent to the Weedon
property in exchange for a 1.5% NSR royalty on metals except gold and silver, the Corporation
may buy back that royalty in total or in three tranches upon a payment of $500,000 per 0.5% tranche
for a total of $1,500,000.
Some claims were dropped therefore the Corporation impaired partially for $9,200 ($12,467 in
2013) the exploration property cost.
l) Gatineau Zn
The Corporation owns claims located in the Gatineau region. Some claims were dropped in 2014
therefore the Corporation impaired partially for $2,693.
55
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
7. Exploration and evaluation assets (Cont’d)
JAMES BAY
m) James Bay Au
The Corporation owns claims in the James Bay region in the sub-provinces of La Grande and
Opinaca. Some claims were dropped therefore the Corporation impaired partially for $8,686 the
exploration property cost in 2014 ($22,303 in 2013).
n) James Bay U
The Corporation owns claims in the James Bay region.
o) James Bay Fe
The Corporation owns claims east of the Duncan deposit in the James Bay region. Some claims
were dropped and therefore the Corporation partially impaired its exploration and evaluation asset
for $73,717 in 2013.
p) Eleonore
The Corporation staked claims near the Éléonore gold discovery of Goldcorp, in the James Bay
region. Some claims were dropped therefore the Corporation impaired partially for $29,162 the
exploration property cost in 2014 ($88,341 in 2013).
NORTHERN QUEBEC
q) Pallas PGE
The Corporation acquired by map staking several mining claims located west of Kuujjuak in
Nunavik.
On January 21, 2014, the Corporation signed an option agreement with Japan Oil, Gas and Metals
National Corporation (« JOGMEC ») whereby JOGMEC has the option to acquire 50% interest in
the Pallas project prior to March 31, 2016 by funding $2,000,000 in expenditures spread as
following:
On or before March 31, 2014 (completed)
On or before March 31, 2015 (completed)
On or before March 31, 2016 ($68,105 completed)
Total
Works
$
250,000
700,000
1,050,000
2,000,000
Midland will be operator as long as it will hold an interest equal to or higher than 50% in the project.
r) Willbob
The Corporation acquired by map designation several mining claims locate in the Labrador Trough.
56
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
7. Exploration and evaluation assets (Cont’d)
QUEBEC / LABRADOR
s) Ytterby
The Corporation staked claims northeast of Schefferville.
On February 23, 2010, the Corporation signed a memorandum of agreement (and on July 29, 2011
a definitive agreement) with JOGMEC whereby JOGMEC acquired a right to acquire a 50% interest
in the Ytterby property byfunding $2,700,000 exploration work.
The Corporation is the operator during the farm-in period. A party which declines to participate in
an approved program will be diluted in its participation interest. If a party’s interest dilutes to 10%
or less, its interest will be converted to a 1.5% NSR royalty and the other party may purchase such
royalty by paying $1,500,000. A party may give notice to the other party that it wishes to operate
through a joint venture company. Once a joint venture company is formed, each party has the right
to purchase any mineral in proportion of its shareholding in the joint venture company. JOGMEC
shall have the first right of refusal to purchase at the prevailing market prices any mineral that is
equivalent to the proportionate shareholding of the joint venture company. Until a joint venture
company is formed, any mineral production derived from the property shall be taken in kind in
proportion of the party’s interest.
In August 2011, JOGMEC completed all the farm-in requirements and earned its 50% interest. As
of the date of these financial statements, JOGMEC has not yet given its notice of exercise of option.
The claims on the main bloc were kept and the ones on the other blocs were dropped, therefore
the Corporation impaired partially the project for $1,230,273 in 2014.
PROJECT GENERATION
t) Project generation
The Corporation continued geological compilation programs and staking in Quebec for the
acquisition of strategic gold, uranium and base metal properties. Some claims were dropped and
the Corporation wrote off the related exploration properties costs and E&E expenses for $2,773 in
2014.
8. Equity
Authorized
Unlimited number of common shares without par value, voting and participating.
a) Private placements
2013
On December 21, 2012, the Corporation completed a brokered private placement by issuing
769,264 units at $1.30 per unit and 1,105,882 flow-through shares at $1.65 per share, for total
gross proceeds of $2,824,748. Each unit is comprised of one common share and one-half of a
warrant. Each whole warrant will entitle the holder to purchase one additional common share at
$1.75 until June 21, 2014. The Corporation paid the broker a cash fee of $150,735 and issued
85,342 broker warrants entitling them to acquire 85,342 shares at $1.30 per share until June 21,
2014.
57
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
8. Equity (Cont’d)
From the total compensation received from the units, $34,620 has been allocated to warrants and
$965,423 to common shares, according to a pro rata allocation of the estimated fair value of each
of the two components. The estimated fair value of the warrants was determined using the Black-
Scholes pricing model based on the following assumptions: no expected dividend yield, an
expected volatility of 35.89%, a risk free interest rate of 1.06% and an expected life of the warrants
of 18 months.
The total broker warrants cost amounted to $17,922 and was recorded as share issue cost. This
$17,922 fair value was estimated using the Black-Scholes model with the same assumptions as
the warrants.
On December 21, 2012, the Corporation’s share closed at $1.25 on the TSX Venture, therefore the
residual value attributed to the benefit related to flow-through shares renunciation is $0.40 for a
total value of $442,353 credited to other liabilities. As of September 30, 2013, the Corporation has
completed the $1,824,705 exploration work relating to this flow-through private placement.
2014
On December 19, 2013, the Corporation completed a private placement by issuing 802,001 units
at $0.75 per unit and 833,286 flow-through shares at $0.90 per share, for total gross proceeds of
$1,351,460. Each unit is comprised of one common share and one-half of a warrant. Each whole
warrant will entitle the holder to purchase one additional common share at $1.00 until June 19,
2015.
From the total compensation received from the units, $30,818 has been allocated to warrants and
$570,683 to common shares, according to a pro rata allocation of the estimated fair value of each
of the two components. The estimated fair value of the warrants was determined using the Black-
Scholes pricing model based on the following assumptions: no expected dividend yield, an
expected volatility of 44.8%, a risk free interest rate of 1.02% and an expected life of the warrants
of 18 months.
On December 19, 2013, the Corporation’s share closed at $0.68 on the Exchange, therefore the
residual value attributed to the benefit related to flow-through shares renunciation is $0.22 for a
total value of $183,323 credited to other liabilities. As of September 30, 2014, the Corporation
completed $638,449 of exploration work relating to this flow-through private placement and
therefore the other liabilities account was reduced to $27,460.
b) Warrants
Changes in the Corporation’s number of outstanding warrants were as follow:
2014
2013
Number
Amount
Number
Amount
Balance – Beginning of year
Issued following a private
placement (note 8a)
Expired
Balance – End of year
469,975
401,001
(469,975)
401,001
$
52,542
30,818
(52,542)
30,818
-
469,975
-
469,975
$
-
52,542
-
52,542
58
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
8. Equity (Cont’d)
Warrants outstanding as at September 30, 2014 are as follows:
Number of
warrants
401,001
401,001
Exercise
price
$
1.00
Expiry date
June 19, 2015
c) Policies and processes for managing capital
The capital of the Corporation consists of the items included in equity of $9,031,007 as of
September 30, 2014 ($9,612,917 as of September 30, 2013). The Corporation’s objectives when
managing capital are to safeguard its ability to continue its operations as well as its acquisition and
exploration programs. As needed, the Corporation raises funds in the capital markets. The
Corporation does not use long term debts since it does not generate operating revenues. There is
no dividend policy. The Corporation does not have any externally imposed capital requirements
neither regulatory nor contractual requirements to which it is subject, unless the Corporation closes
a flow-through private placement in which case the funds are reserved in use for exploration
expenses (and the Corporation was in compliance during the year).
9. Employee remuneration
a) Salaries
Salaries
Benefits
Less : salaries and benefits capitalized in E&E assets
Salaries disclosed on the statement of comprehensive loss
b) Stock-based compensation
Stock-based compensation
Less : stock-based compensation capitalized in the E&E assets
Stock-based compensation disclosed on the statement of
comprehensive loss
2014
$
663,032
79,403
742,435
(413,835)
328,600
2013
$
669,300
75,828
745,128
(434,835)
310,293
2014
$
266,725
(96,274)
2013
$
298,445
(110,512)
170,451
187,933
The Corporation has a stock option plan (the “Plan”). The number of common shares granted is
determined by the Board of Directors. On December 20, 2012, the board of directors approved an
increase in the number of common shares reserved for issuance under the Corporation's fixed
number stock option plan from 3,000,000 to 4,000,000. Such amendment to the plan was approved
by the Corporation’s shareholders during the annual meeting held on February 19, 2013. The
exercise price of any option granted under the plan shall be fixed by the Board of Directors at the
time of grant and shall not be lower than the closing price on the day preceding the grant. The term
of the option will not exceed ten years from the date of grant. The options normally vest 1/6 per 3
months from the grant date, or otherwise as determined by the Board of Directors.
59
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
9. Employee remuneration (Cont’d)
On February 19, 2013, the Corporation granted to its directors, officers, employees and consultants
345,000 options exercisable at $1.25, valid for 10 years. Those options were granted at an exercise
price equal to the closing market value of the shares the previous day of the grant. Total stock-
based compensation costs amount to $251,850 for an estimated fair value of $0.73 per option. The
fair value of the options granted was estimated using the Black-Scholes model with no expected
dividend yield, 63% expected volatility, 1.78% risk-free interest rate and 6 years options expected
life. This expected life was estimated by benchmarking comparable situations for companies that
are similar to the Corporation. The expected volatility was determined by calculating the historical
volatility of the Corporation’s share price back from the date of grant and for a period corresponding
to the expected life of the options.
On February 20, 2014, the Corporation granted to its directors, officers, employees and consultants
605,000 options exercisable at $0.85, valid for 10 years. Those options were granted at an exercise
price equal to the closing market value of the shares the previous day of the grant. Total stock-
based compensation costs amount to $272,250 for an estimated fair value of $0.45 per option. The
fair value of the options granted was estimated using the Black-Scholes model with no expected
dividend yield, 55% expected volatility, 1.81% risk-free interest rate and 6 years options expected
life. This expected life was estimated by benchmarking comparable situations for companies that
are similar to the Corporation. The expected volatility was determined by calculating the historical
volatility of the Corporation’s share price back from the date of grant and for a period corresponding
to the expected life of the options.
A summary of changes in the Corporation’s common share purchase options is presented below:
2014
2013
Weighted
average
exercise
price
$
1.31
0.85
-
0.70
1.27
1.40
Weighted
average
exercise
price
$
1.26
1.25
0.65
-
1.31
1.32
Number of
options
1,300,000
345,000
(125,000)
-
1,520,000
1,290,000
Number of
options
1,520,000
605,000
-
(345,000)
1,780,000
1,376,668
Balance – Beginning of year
Granted
Exercised
Expired
Balance – End of year
Balance – End of year exercisable
The weighted average price of the Corporation’s share on the TSX Venture when exercised was
$1.08 in 2013.
60
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
9. Employee remuneration (Cont’d)
The following table summarizes information about common share purchase options outstanding
and exercisable as at September 30, 2014:
Number of
options
outstanding
Number of
options
exercisable
20,000
215,000
260,000
315,000
20,000
345,000
605,000
1,780,000
20,000
215,000
260,000
315,000
20,000
345,000
201,668
1,376,668
Exercise
price
$
1.40
1.48
1.76
1.54
1.61
1.25
0.85
Expiry date
December 15, 2014
March 8, 2015
February 17, 2021
February 16, 2022
February 27, 2022
February 19, 2023
February 20, 2024
10. Loss per share
The calculation of basic loss per share is based on the loss for the year divided by the weighted average
number of shares in circulation during the year. In calculating the diluted loss per share, potential
common shares such as share options and warrants have not been included as they would have the
effect of decreasing the loss per share. Decreasing the loss per share would be antidilutive. Details of
share options and warrants issued that could potentially dilute earnings per share in the future are given
in Notes 8 and 9.
Loss
Weighted average number of basic and diluted outstanding shares
Basic and diluted net loss per share
2014
$
(1,974,586)
29,948,093
(0.07)
2013
$
(688,090)
28,140,398
(0.02)
11. Income taxes
The income tax expense is made up of the following component:
Recovery of deferred income taxes
Premium on flow-through share issuance
Total recovery of deferred income taxes
2014
$
2013
$
155,863
155,863
442,353
442,353
61
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
11. Income taxes (Cont’d)
The provision for income taxes presented in the financial statements is different from what would have
resulted from applying the combined Canadian Statutory tax rate as a result of the following:
Loss before income taxes
Combined federal and provincial income tax at 26.90%
Non-deductible expenses
Tax effect of renounced flow-through share expenditures
Amortization of flow-through share premiums
Unrecognized temporary differences
Other elements
Recovery of deferred income taxes
2014
$
(2,130,449)
2013
$
(1,130,443)
(573,091)
85,412
171,743
(155,863)
315,525
411
(155,863)
(304,089)
54,743
481,327
(442,353)
(254,903)
22,922
(442,353)
The ability to realize the tax benefits is dependent upon a number of factors, including the sale of
properties. Deferred tax assets are recognized only to the extent that it is probable that sufficient taxable
profits will be available to allow the asset to be recognized. Accordingly, some deferred tax assets have
not been recognized; these deferred tax assets not recognized amount to $940,000.
As at September 30, 2014 and 2013, significant components of the Corporation’s deferred income tax
assets and liabilities are as follows:
Deferred income tax assets
Non-capital losses
Donations
Share and warrant issue expenses
Total deferred income tax assets
Deferred income tax liabilities
E&E assets
Total deferred income tax liabilities
Deferred income tax assets not recognized
2014
$
2013
$
1,458,000
14,000
50,000
1,522,000
1,263,000
10,000
71,000
1,344,000
582,000
582,000
730,000
730,000
940,000
614,000
62
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
11. Income taxes (Cont’d)
As of September 30, 2014, expiration dates of losses available to reduce future years’ income tax are:
2015
2026
2027
2027
2028
2029
2030
2031
2032
2033
2034
Federal
$
96,000
84,000
126,000
177,000
540,000
645,000
726,000
677,000
748,000
906,000
753,000
Provincial
$
103,000
69,000
112,000
183,000
514,000
631,000
713,000
663,000
736,000
891,000
741,000
12. Compensation to key management and related party transactions
a) Compensation to key management
The Corporation’s key management personnel are members of the Board of Directors, as well as
the president, the vice-president exploration and the chief financial officer. Key management
remuneration is as follows:
Short-term benefits
Salaries including bonuses and benefits
Professional fees
Salaries including bonuses and benefits capitalized in E&E expenses
Long-term benefits
Stock-based compensation
Stock-based compensation capitalized in E&E expenses
Total compensation
2014
$
2013
$
281,875 253,406
48,031
125,400 165,240
57,857
170,451 187,933
30,594
663,831 685,204
28,248
b) Related party transactions
In the normal course of operations, in addition to the amounts listed above in the compensation to
key management (Note 12a):
♦ 75,000 shares options were exercised at a price between of $0.60 and $0.65 by key
management in 2013;
♦ A firm in which an officer is a partner charged professional fees amounting to $49,624 ($91,935
in 2013) of which $34,819 ($58,548 in 2013) was expensed and $14,805 ($33,387 in 2013)
was recorded as share issue expenses;
♦ A company controlled by an officer charged professional fees of $48,368 ($45,690 in 2013);
♦
In December 2013, directors and officers of the Corporation participated in a private placement
of flow-through shares (Note 8a) for a total consideration of $103,600 ($97,598 in December
2012).
As at September 30, 2014, the balance due to the related parties amounted to $7,394 ($5,393 in
September 30, 2013).
63
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
13. Operating lease
The Corporation's future minimum operating lease payments are as follows (assuming that the
consumer price index will be the same as the one published October 2014 by Statistic Canada for a
12-month period which was 2.0%):
Within 1 year
1 to 5 years
After 5 years
Total
As of
September 30,
2014
$
23,304
58,674
-
81,978
In 2010, the Corporation rented premises and had committed for three years until February 2013 with
an annual rent of $20,154 for the first year, $20,467 for the second year and $20,779 for the third year
ending February 2013. The Corporation was also responsible for its proportionate share of the non-
residential surtax and the water surtax representing 163$ per month in 2014.
In September 2012, an amendment was signed to extend the lease for five years, from March 2013 to
February 2018. The rent will be $21,875 for the first year and thereafter will be indexed annually at the
highest of the increase of the consumer price index or 2.5%. The Corporation had the option to
terminate the lease on February 28, 2014 and chose not to.
Lease payments recognized as an expense during the reporting period amounted to $24,256 ($22,551
in 2013). This amount consists of minimum lease payments.
14. Financial instruments
The Corporation is exposed to various financial risks resulting from both its operations and its
investment activities. The Corporation’s management manages financial risks. The Corporation does
not enter into financial instrument agreements including derivative financial instruments for speculative
purposes. The Corporation’s main financial risk exposure and its financial risk management policies
are as follows:
Interest rate fair value risk
The Corporation’s interest rate risk is the risk that the fair value of future cash flows of a financial
instrument will fluctuate due to changes in market interest rates. The investments included in cash and
cash equivalents and also investments bear interest at a fixed rate and the Corporation is, therefore,
exposed to the risk of changes in fair value resulting from interest rate fluctuations. Interest rates 1%
higher (lower) would have decreased (increased) the fair value of these by $7,048 as of September 30,
2014 ($7,639 as of September 30, 2013). The Corporation’s other financial assets and liabilities do not
comprise any interest rate risk since they do not bear interest.
64
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
14. Financial instruments (Cont’d)
Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and
cause the other party to incur a financial loss. The Corporation is subject to concentrations of credit risk
through cash and cash equivalents, investments and accounts receivable. The Corporation reduces its
credit risk by maintaining part of its cash and cash equivalents in financial instruments held with a
Canadian chartered bank and the other part in financial instruments held with an independent
investment dealer member of the Canadian Investor Protection Fund. In 2014 and 2013, the
investments are composed of guaranteed investment certificates issued by Canadian banks. The
Corporation aims at signing partnership agreements with established companies and follows closely
their cash position to reduce its credit risk on accounts receivable. All receivable amounts are current.
Liquidity risk
Liquidity risk is the risk that the Corporation will not be able to meet the obligations associated with its
financial liabilities. As of September 30, 2014, the Corporation had enough funds available to meet its
financial liabilities and future financial liabilities from its commitments for the year 2015. All accounts
payable and accrued liabilities terms are less than 31 days.
Fair value
The carrying value of cash and cash equivalents, accounts receivable, investments and accounts
payable and accrued liabilities and advance received for upcoming exploration work are considered to
be a reasonable approximation of their fair value because of the short-term maturity and contractual
terms of these instruments.
The carrying amounts and fair values of financial instruments presented in the statement of financial
position are as follows:
Financial assets
Loans and receivables
Cash and cash equivalents
Accounts receivable
Held to maturity investments
Investments
September 30, 2014
Carrying
amount
$
Fair
Value
$
September 30, 2013
Carrying
amount
$
Fair
value
$
1,667,402
62,983
1,667,402
62,983
1,262,538 1,262,538
68,955
68,955
2,060,000
2,060,000
2,060,000 2,060,000
Financial liabilities
Financial liabilities measured at amortized cost
Accounts payable and accrued liabilities
Advance received for exploration work
464,004
370,329
464,004
370,329
341,054
-
341,054
-
Fair value estimates are made at the statement of financial position date, based on relevant market
information and other information about financial instruments.
65
Midland Exploration Inc.
Notes to Financial Statements
September 30, 2014 and 2013
15. Additional information on cash flows
Stock-based compensation included in E&E expenses
Additions of exploration properties and E&E expenses included in accounts
payable and accrued liabilities
Tax credits receivable applied against E&E expenses
Exercise of options credited to capital stock
Interest received
2014
$
96,274
2013
$
110,512
74,559
47,469
-
55,245
210,436
133,090
54,500
62,382
16. Subsequent event
a) Casault and Jouvex
On October 10, 2014, the Corporation signed a letter of intent with SOQUEM INC. ("SOQUEM") to
grant SOQUEM the option to acquire a 50% undivided interest in its Casault and Jouvex properties,
and to create a joint venture once the option has been exercised, under the following conditions.
On or before October 10, 2015 (firm commitment)
On or before October 10, 2016
On or before October 10, 2017
On or before October 10, 2018
The Corporation will be project operator during the option period.
b) Private placement
Works
$
1,000,000
1,000,000
1,000,000
1,500,000
4,500,000
On December 3, 2014, the Corporation completed a private placement by issuing 1,100,430 units at
$0.70 per unit and 1,036,683 flow-through shares at $0.85 per share, for total gross proceeds of
$1,651,481. Each unit is comprised of one common share and one-half of a warrant. Each whole
warrant will entitle the holder to purchase one additional common share at $0.95 until December 2,
2016.
66
Midland Exploration Inc.
Corporate Information
Directors
Jean-Pierre Janson, Chairman of the board 1) 2)
Gino Roger
Germain Carrière 1) 2) 3)
Robert I. Valliant 1) 3)
René Branchaud 3)
Notes:
1) Member of the Audit committee
2) Member of the Compensation Committee
3) Member of the Corporate Governance Committee
Officers
Gino Roger, President and Chief Executive Officer
Mario Masson, Vice-president Exploration
Ingrid Martin, Chief Financial Officer
René Branchaud, Secretary
Head Office
1 Place Ville Marie, Suite 4000
Montreal, Quebec, H3B 4M4
Exploration Office
132 Labelle Blvd, Suite 220
Rosemere, Quebec, J7A 2H1
Tel. : (450) 420-5977
Fax : (450) 420-5978
Email : info@midlandexploration.com
Website : www.midlandexploration.com
Auditors
PricewaterhouseCoopers, L.L.P.
1250 René-Lévesque Blvd West, Suite 2800
Montreal, Quebec, H3B 2G4
Legal counsel
Lavery, de Billy, L.L.P.
1 Place Ville Marie, Suite 4000
Montreal, Quebec, H3B 4M4
Transfer Agent
Computershare Investor Services Inc.
1500 University, Suite 700
Montreal, Quebec, H3A 3S8
Tel.: (514) 982-7888
67