Annual Report
2016
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
Message to Shareholders
Management’s discussion and Analysis
Nature of Activities ........................................................................................................................................ 4
Overall Performance ..................................................................................................................................... 4
Results of Operations .................................................................................................................................... 5
Investing Activities ......................................................................................................................................... 6
Financing Activities ..................................................................................................................................... 23
Working Capital ........................................................................................................................................... 24
Summary of Results per Quarter ................................................................................................................ 25
Fourth Quarter ............................................................................................................................................. 25
Related Party Transactions ......................................................................................................................... 26
Subsequent Events ..................................................................................................................................... 26
Outstanding Share Data .............................................................................................................................. 26
Stock Option Plan ....................................................................................................................................... 26
Off-balance Sheet Arrangements ............................................................................................................... 27
Commitment ................................................................................................................................................ 27
Critical Accounting Estimates...................................................................................................................... 27
Financial Instruments .................................................................................................................................. 28
Risk Factors ................................................................................................................................................ 28
Foward Looking Information........................................................................................................................ 31
Financial Statement
Independant Auditor’s Report ..................................................................................................................... 32
Statements of Financial Position ................................................................................................................. 34
Statements of Comprehensive Loss ........................................................................................................... 35
Statements of Change in Equity ................................................................................................................. 36
Statements of Cash Flows .......................................................................................................................... 37
Notes to Financial Statements .................................................................................................................... 38
Corporate Information ................................................................................................................................. 63
- 2 -
Midland Exploration Inc.
Message to Shareholders
For the fiscal year ended September 30, 2016
Dear shareholders,
It is a sincere pleasure for me to present Midland Exploration Inc.’s 2016 annual report.
Midland is a dynamic and pro-active mineral exploration company that is led by a highly-respected
management and technical team with a proven mine-finding track record. During the year 2016, we further
improved our exploration team by hiring new and very talented geologists. Midland targets the excellent
mineral potential and the favourable investment climate of Quebec to discover new world-class deposits of
gold, platinum group elements (“PGE”) and base metals. Midland is proud to count on reputable partners
such as Agnico Eagle Mines Limited, Teck Resources Limited, Osisko Exploration James Bay Inc.
(“Osisko”), SOQUEM Inc., Japan Oil, Gas and Metals National Corporation and Abcourt Mines Inc.
Midland continues to pursue its strategy of exploring in partnership across Quebec and achieved
significant progress in 2016. Midland discovered new mineralized zones on its various projects, signed a
new partnership agreement with Osisko, and continued to generate and acquire new gold properties with
very strong potential for discoveries (in the Detour and Eleonore areas). In addition, we also increased
Midland’s visibility and exposure in 2016, taking part in a number of major promotional events throughout
the year, which enabled us to attract new and important shareholders. Here are the highlights of the past
year:
•
Several new high-grade gold occurrences discovered on Heva, grading up to 24.1 g/t Au over
0.50 m (in channel sample)
Several new high-grade gold showings discovered on Willbob
•
• Discovery of the Copernick Ni-Cu-PGE zone on Laflamme
•
Formation of a JV with SOQUEM on Casault and Jouvex
•
First exploration program completed on the James Bay JV project following execution of an
important agreement with Osisko
First drilling program completed in the Labrador Trough on Pallas and Willbob
•
• Drilling program approved on Patris with Teck
• Drilling program approved on Maritime Cadillac with Agnico Eagle
• More than 15,000 metres drilled over the past year
•
Flow-through financing closed at more than $1.7 million, and more than 1 million warrants
exercised
Midland intends to continue aggressively exploring its gold, PGE and base metal projects in 2017, to
discover world-class deposits. An ambitious exploration program ─ the most important since the Company
was founded ─ is currently in preparation and will be deployed on the Company’s best projects. Midland
will continue to generate several new projects and seek to rapidly conclude additional partnership
agreements for properties recently acquired in 2015 and 2016. Midland also intends to continue assessing
interesting business opportunities as they arise in 2017. Midland has a very strong financial position, with
an adjusted working capital of more than $15 million and no debt.
On behalf of the management team and the Board of Directors, I would like to express our most sincere
acknowledgements for your confidence, your patience and your renewed support throughout the year. I
would also like to take this opportunity to welcome the new shareholders who joined us during 2016.
Midland is a company that counts on a dynamic and talented technical team who will spare no effort in
2017 to make one or many significant discoveries in Quebec.
(s) Gino Roger
Gino Roger, P.Eng.
President and CEO
- 3 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
The following discussion and analysis (the “MD&A”) of the financial condition and results of the operations
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, 2016.
This MD&A should be read in conjunction with the Corporation’s audited financial statements as at
September 30, 2016 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.
Abbreviation
Fiscal 14
Q1-15
Q2-15
Q3-15
Q4-15
Fiscal 15
Q1-16
Q2-16
Q3-16
Q4-16
Fiscal 16
Fiscal 17
Period
October 1, 2013 to September 30, 2014
October 1, 2014 to December 31, 2014
January 1, 2015 to March 31, 2015
April 30, 2015 to June 30, 2015
July 1, 2015 to September 30, 2015
October 1, 2014 to September 30, 2015
October 1, 2015 to December 31, 2015
January 1, 2016 to March 31, 2016
April 30, 2016 to June 30, 2016
July 1, 2016 to September 30, 2016
October 1, 2015 to September 30, 2016
October 1, 2016 to September 30, 2017
1. NATURE OF ACTIVITIES
Midland, 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 Corporation’s shares are listed on the TSX
Venture Exchange (the “Exchange”) under the MD ticker.
2. OVERALL PERFORMANCE
Midland has an adjusted working capital of $13,787,092 as of September 30, 2016 ($16,495,139 as
of September 30, 2015) which includes $3,078,910 ($6,496,000 as of September 30, 2015) of
investments in guaranteed investment certificates with expiry dates over 1 year, which will allow the
Corporation to execute its exploration program for at least the next three years (note: adjusted working
capital is a non-IFRS financial performance measure which has no standard definition under IFRS.
See section 6: Working Capital).
On November 20, 2015, the Corporation completed private placements by issuing 835,365 flow-
through shares respectively at $0.85 per share, for total gross proceeds of $710,060. On November
17 and 24, 2016, the Corporation completed a private placement by issuing 1,284,354 flow-through
shares at $1.35 per share, for total gross proceeds of $1,733,876.
On June 13, 2016, a joint-venture agreement (50%-50%) was signed with Osisko Exploration James
Bay Inc. (“Osisko”) whereby Osisko and the Corporation will cooperate and combine their efforts to
explore the JV Eleonore property recently staked by the two corporations. The property is located 12
kilometres southeast and northwest of Goldcorp’s Eleonore deposit.
- 4 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
2. OVERALL PERFORMANCE (CONT’D)
As operator, Midland incurred exploration expenditures totalling $4,869,973 ($5,229,029 in Fiscal 15),
on its properties of which $1,924,414 was recharged to its partners ($4,035,663 in Fiscal 15). The
operating partners incurred $370,439 of exploration expenses ($767,880 in Fiscal 15). Also, the
Corporation invested $443,316 ($350,195 in Fiscal 15) to complete several property acquisitions in
Quebec of which $55,608 was recharged to its partners ($53,152 in Fiscal 15).
The Corporation reported a loss of $807,158 in Fiscal 16 compared to $629,098 for Fiscal 15.
Selected annual information
Revenues
Loss
Loss per share, basic and diluted
Fiscal 16
$
107,423
(807,158)
(0.01)
Fiscal 15
$
301,452
(629,098)
(0.02)
Fiscal 14
$
172,583
(1,974,586)
(0.07)
Total assets
24,456,678
24,407,655
2016
$
As at September 30,
2015
$
2014
$
9,892,800
3. RESULTS OF OPERATIONS
Operating expenses increased to $1,332,206 for Fiscal 16 compared to $1,291,084 in Fiscal 15:
•
Salaries increased to $456,275 ($348,858 in Fiscal 15). Bonuses based on objectives for $93,166
were paid ($47,000 in Fiscal 15). Since January 2016, the Corporation paid $34,875 for directors’
fees (nil in Fiscal 15).
Stock-based compensation increased to $96,951 ($66,913 in Fiscal 15). 605,000 options were
granted in Fiscal 14, 475,000 in Fiscal 15 and 500,000 in Fiscal 16. Their fair value was estimated
at $272,250, $123,500 and $250,000 respectively. This fair value was accounted for according to
its vesting period (up to 18 months) or the period in which the services were rendered. Part of this
fair value was recorded in the statement of earnings as stock-based compensation ($170,451 in
Fiscal 14, $66,913 in Fiscal 15 and $96,951 in Fiscal 16) and the other part was capitalized within
the deferred exploration expenses ($96,274 in Fiscal 14, $32,035 in Fiscal 15 and $16,162 in
Fiscal 16). The grant of options occurred in February in Fiscal 14, while it occurred in August for
Fiscal 15 and Fiscal 16.
Conference and mining industry involvement increased to $127,278 ($99,544 in Fiscal 15). More
employees from Midland participated to the conferences and also this year the New Orleans
conference was added to its agenda.
Impairment of exploration and evaluation assets
to
$82,174 ($225,826 in Fiscal 15) and the explanations can be found in the investing activities
section found later in this MD&A.
items) decreased
(non-cash
•
•
•
Project management fees decreased to $107,423 ($299,418 in Fiscal 15). Exploration on Pallas,
Casault and Jouvex in Fiscal 16 generated less fees than exploration on Pallas, Casault, Jouvex,
Samson and Adam in Fiscal 15. Interest income increased to $225,491 ($121,237 in Fiscal 15) due
to additional funds invested following the $14.4 million private placement closed in May 2015.
A $192,134 ($239,297 in Fiscal 15) 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 November 20, 2015 private placement (December 3 and 17, 2014 private
placements in Fiscal 15).
- 5 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES
Deferred
exploration
expenses
Fiscal 16
e
c
n
a
l
a
B
i
g
n
n
n
g
e
b
i
l
y
g
o
o
e
G
$
s
c
i
s
y
h
p
o
e
G
$
g
n
i
l
l
i
r
D
$
-
o
e
G
y
r
t
s
i
m
e
h
c
$
g
n
i
t
t
u
c
e
n
L
i
$
l
a
t
o
t
b
u
S
$
d
e
s
a
b
-
k
c
o
t
S
n
o
i
t
a
s
n
e
p
m
o
c
$
e
g
r
a
h
c
e
R
$
5,736
72,290
9,395
98,395
30,921
148,663
-
10,499
26,148
3,602
18,752
-
88,123
1,093
171,736
-
305,091
4,068
1,066,313
-
19,263
-
115,092
113,208
167,340
-
-
74,791
276,334
32,037
47,813
-
-
519
247,159
-
-
15,543
21,227
-
576
15,384
-
-
-
6,352
-
32,287
-
900
-
-
63,480
11,625
6,875
5,736
491,119
14,556
1,483,823
327,012
170,790
-
86,385
628,505
47,264
73,440
-
2,591
2,503
-
-
(14,556)
15,548 (1,427,271)
3,509 (327,012)
-
-
-
-
-
-
503
-
1,932
3,541
-
347
$
232,965
1 507,229
219,143
298,888
348,457
35,133
120,742
439
118,209
-
117,841
484,279
14,845
28,892
132
248,057
1,527,352
-
15,049
136,269
192,846
172,054
6,144
-
-
168
-
-
-
29,445
594
-
-
-
-
-
-
2,043
15,615
22,164
5,385
269,391
111,951
265,441
336,606
-
90,828
932
314,881
44,812
29,313
59,390
17,831
-
-
-
-
-
-
-
-
-
-
-
-
44,884
347
132
-
17,260
151,884
215,010
-
2,430
3,627
11,529
-
-
-
-
-
-
-
311,185
771,628
17,831
4,229 (155,575)
-
4,069
(59,730)
(322,377)
-
-
(3,152)
s
t
i
d
e
r
c
x
a
T
$
(2,611)
(107,086)
-
(18,280)
-
(49,350)
-
(10,553)
(97,771)
(4,423)
(17,984)
(6,280)
-
(3,431)
(52,363)
(93,945)
-
n
o
i
t
p
O
t
n
e
m
y
a
p
f
f
o
-
e
t
i
r
W
e
g
n
a
h
c
t
e
N
d
n
e
e
c
n
a
l
a
B
6
1
l
a
c
s
i
F
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,125
386,624
2,503
53,820
3,509
121,943
-
77,764
534,275
42,841
55,803
236,090
1,893,853
221,646
352,708
351,966
157,076
120,742
78,203
652,484
42,841
173,644
38,951
523,230
132
29,024
13,829
101,951
124,692
261,886
1,629,303
124,692
11,529
183,583
100,109
453,320
14,679
369,500
565,271
74,069
Abitibi
Maritime Cadillac
Laflamme Au
Patris Au
Casault Au
Jouvex Au
Heva Au
Valmond Au
Samson Au
La Peltrie
Adam
Abitibi Au
Grenville-
Appalaches
Weedon Cu Zn
Au
Gatineau Zn
Bay-James
Bay-James Au
Eleonore Au
JV Eleonore AU
Québec Labrador
Ytterby ETR
Northern Quebec
Pallas PGE
Willbob Au
Projects
generation
TOTAL
5,900,412
1,409,564
896,131 2,135,748
307,011 121,519 4,869,973
45,176 (1,924,414)
(849,336)
-
-
2,141,399
8,041,811
- 6 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CON’T)
Abitibi
Maritime
Cadillac
Laflamme Au
Patris Au
Casault Au
Jouvex Au
Heva Au
Valmond Au
Samson Au
La Peltrie
Adam
Abitibi Au
Grenville-
Appalaches
Weedon Cu Zn
Au
Gatineau Zn
Bay-James
Bay-James Au
Eleonore Au
Bay-James U
Bay-James Fe
Quebec
Labrador
Deferred
exploration
expenses
Fiscal 15
e
c
n
a
l
a
B
i
g
n
n
n
g
e
b
i
l
y
g
o
o
e
G
$
-
20,540
8,870
88,122
30,124
12,012
3,700
57,258
4,700
4,610
21,033
s
c
i
s
y
h
p
o
e
G
$
g
n
i
l
l
i
r
D
$
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o
e
G
y
r
t
s
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e
h
c
$
g
n
i
t
t
u
c
e
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L
i
$
g
n
i
l
l
e
v
a
r
T
$
l
a
t
o
t
b
u
S
$
-
k
c
o
t
S
d
e
s
a
b
-
n
e
p
m
o
c
i
t
$
e
g
r
a
h
c
e
R
$
s
t
i
d
e
r
c
x
a
T
$
n
o
i
t
p
O
t
n
e
m
y
a
p
$
f
f
o
-
e
t
i
r
W
$
-
-
-
-
-
-
-
-
-
-
24,499
-
161,205
139,704
-
-
147,106
83,047
152,750
60,248
25,525
7,258
1,565,884
282,385
-
66,107
216,491
-
-
-
119,290
-
132,650
12,166
1,967
1,063
18,896
-
-
460
5,460
-
47,502
49,085
-
-
49,530
30,000
-
-
4,417
651
13,916
8,256
2,591
2,018
2,852
-
-
1,815
199,731
246
16,779 10,388
3,425
847
-
6,787
439
462
-
-
2,009,279
521,720
16,570
72,888
492,133
117,747
157,360
83,556
-
(16,779)
(2,003,898)
(520,200)
-
(72,888)
(492,133)
-
(157,360)
-
(3,262)
-
-
-
-
-
-
-
-
(2,356)
-
-
-
-
-
(10,000)
-
-
-
-
$
232,965
1,310,514
208,755
290,082
346,090
18,563
123,955
-
-
-
36,641
388,013
10,440
97,870
28,766
126
-
216,677
1,175,139
14,686
42,158
-
249,812
-
-
37,758
95,972
-
-
Ytterby ETR
109,090
61,843
Northern
Quebec
Pallas PGE
Willbob Au
Projects
generation
216,088
5,116
434,673
108,829
39,547
19,373
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,764
-
-
787
307,100
-
55,401
8,934
-
-
-
-
-
-
-
-
-
-
-
-
458
108,768
-
126
-
-
-
16,548
-
-
37,758
371,096
-
-
-
6,340
-
-
235
62,865
99
-
-
-
-
-
-
-
(12,502)
-
(6,378)
(25,223)
-
-
-
25,873
-
823,047
117,763
2,817
185
(772,405)
-
(156)
(11,113)
470
19,843
-
-
-
-
-
-
-
-
-
-
-
-
-
e
g
n
a
h
c
t
e
N
$
-
196,715
10,388
8,806
2,367
16,570
(3,213)
439
118,209
-
81,200
e
c
n
a
l
a
B
d
n
e
5
1
l
a
c
s
i
F
$
232,965
1,507,229
219,143
298,888
348,457
35,133
120,742
439
118,209
-
117,841
96,266
484,279
126
28,892
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(14,686)
(42 158)
31,380
352,213
(14,686)
(42,158)
248,057
1,527,352
-
-
-
-
-
-
62,964
172,054
53,303
106,835
19,843
269,391
111,951
59,390
TOTAL
4,802,845
1,136,065
1,000,159
2,470,750
360,378
181,577
80,100
5,229,029 32,035
(4,035,663)
(60,990)
(10,000)
(56,844)
1,097,567
5,900,412
- 7 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CON’T)
Expenses Exploration and evaluation
Actual Fiscal 15
Actual Fiscal 16
Budget Fiscal 16
Budget Fiscal 17
Midland Partners
$
$
Total
$
Midland
$
Partners
$
Total
$
Midland Partners
Total
Midland Partners
$
$
$
$
$
Properties
100% owned by Midland
Abitibi Au
Heva
Valmond
La Peltrie
Weedon Cu-Zn-Au
Gatineau Zn
James Bay Au
Eleonore Au
Willbob
Samson
Adam
Project generation
83,556
16,570
-
-
-
72,888
117,747
108,768
126
37,758
371,096
117,763
-
-
-
-
-
-
-
-
492,133
157,360
19,843
-
83,556
16,570
72,888
117,747
108,768
126
37,758
371,096
117,763
492,133
157,360
19,843
73,440
170,790
-
628,505
44,884
132
17,260
151,884
771,628
86,385
47,264
17,997
873,227
722,381
1,595,608
2 ,010,169
-
-
-
-
-
-
-
-
-
-
-
-
-
73,440
100,000
170,790
-
80,000
15,000
628,505
550,000
44,884
100,000
132
17,260
20,000
50,000
151,884
100,000
771,628
400,000
86,385
47,264
17,997
50,000
50,000
40,000
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
255,000
400,000
5,000
150,000
100,000
35,000
50,000
250,000
100,000
255,000
80,000
400,000
15,000
5,000
550,000
150,000
100,000
100,000
20,000
50,000
35,000
50,000
100,000
250,000
-
-
-
-
-
-
-
-
400,000 1,000,000
- 1,000,000
30,000
50,000
40,000
50,000
50,000
30,000
-
-
-
30,000
50,000
30,000
With option, 100% owned and operated by Midland and paid by partner
Pallas PGE Jogmec
13,514
809,533
823,047
13,514
809,533
823,047
With option, 100% owned by Midland, operated and paid by the partner
Patris Au – Teck
781,224
781,224
155,610
155,610
155,575
155,575
311,185
225,000
225,000
450,000
150,000
150,000
300,000
311,185
225,000
225,000
450,000
150,000
150,000
300,000
-
155,155
155,155
-
300,000
300,000
-
700,000
700,000
2,010,169 1,555,000
- 1,555,000 2,355,000
- 2,355,000
In joint venture
Maritime-Cadillac-Agnico Eagle
(operator) at 51%
Vermillon- Soquem at 52.5%
Ytterby REE-Jogmec at 49.5%
Laflamme Au – Aurbec at 35.1%
Casault – Soquem
Jouvex - Soquem
JV Eleonore
-
-
-
-
-
-
5,736
5,086
10,822
25,000
25,000
50,000
100,000
100,000
200,000
3,434
62,865
3,434
62,865
16,887
11,529
199,731
-
199,731
491,119
16,476
-
-
33,363
11,529
-
20,000
491,119
100,000
-
-
-
-
10,000
10,000
20,000
5,000
5,000
20,000
10,000
100,000
150,000
-
150,000
5,381 2,003,898
2,009,279
56,552
1,427,271
1,483,823
- 1,345,000 1,345,000
335,000
350,000
685,000
1,520
520,200
521,720
-
327,012
327,012
-
510,000
510,000
48,000
50,000
98,000
-
-
206,632 2,590,397
1,093,373 4,903,535
-
2,797,029
5,996,908
215,010
796,833
2,962,612
208,278
1,984,123
2,294,853
- 8 -
423,288
300,000
600,000
815,000 1 763,000
2,780,956
5,257,465 1,925,000 2,405,000 4,330,000 3,453,000 1,665,000 5,118,000
-
145,000 1,880,000 2,025,000
300,000
948,000
-
-
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
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 including work
done and paid by operating partners. This table excludes stock-based compensation that has been
capitalized.
Gino Roger, geological engineer, president and director of Midland, qualified person under NI 43-101,
has reviewed the following technical disclosure.
HIGHLIGHTS
•
Several new high grade gold showings found on Heva up to 24.1 g/t Au over 0.50 m
(channel)
• Discovery of several new high grade gold showings on Willbob
• Discovery of the Copernick Zone (Ni-Cu-PGE) on Laflamme
•
Formation of a JV with SOQUEM for Casault and Jouvex
•
First exploration program completed with Osisko on James Bay JV
• Drilling programs completed on Pallas and Willbob in the Labrador Trough
• Drilling program approved on Patris with Teck
• Drilling program approved on Maritime Cadillac with Agnico Eagle
• A total of 12,351.0 metres were drilled during Fiscal 16 (13,913.7 metres during Fiscal
15). Moreover, an additional 1,239.0 metres were drilled on Pallas in October 2016.
ABITIBI
4.1 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-Larder break and is
composed of 7 claims. The Corporation holds 49% of the Maritime-Cadillac property located south of
the Lapa mine. This property is 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 per the agreement signed in June 2009 and amended in November 2012 and May 2013,
Agnico Eagle Mines Limited (“Agnico Eagle”) and the Corporation are in a joint venture and future work
are shared 51% Agnico Eagle - 49% the Corporation.
Exploration work on the property
During Q1-16, Agnico Eagle completed a 3D-Model which includes all the historical data from the Lapa
and Maritime-Cadillac areas. Currently, a series of requests are being performed on the model in order
to generate the next drilling targets on the Maritime-Cadillac property along the Cadillac break.
A technical meeting was held with Agnico Eagle at the end of May (Q3-16) in order to review the results
of the 3D-Model in Leapfrog. During Q4-16, Agnico Eagle submitted a drilling proposal consisting in
a minimum of two holes totalling 600 metres. One hole will test the intersection of a NW-SE gold-
bearing structure (Dyke East) with the Maritime Contact and another hole will test the historical
Maritime Cadillac zone near surface. Other possible drilling targets are being defined and this drilling
program is expected to begin during Q2-17.
- 9 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
4.2 Laflamme (Au-Ni-Cu-PGE), in partnership with Abcourt Mines Inc. 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. As at September 30, 2016, the Laflamme property consists of a total of 626 claims
covering an area of approximately 33,218 hectares. As of September 30, 2016, Midland holds 70%
of the property.
On August 17, 2009, the Corporation signed an agreement with Aurbec Mines Inc., (previously a
subsidiary of North American Palladium Ltd.). As of July 31, 2011, Aurbec earned its 50% interest in
the Laflamme property but no longer contributed in the exploration programs and therefore was diluted.
On June 17, 2016, Abcourt Mines Inc. acquired the property following the bankruptcy of Aurbec.
Some claims were dropped in Fiscal 16, therefore the Corporation impaired partially for $7,147 the
exploration property cost ($14,690 in Fiscal 15).
Exploration work on the property
During Q2-16, a borehole electromagnetic survey (BHEM) using two different loops was completed in
order to locate an off-hole anomaly that had been detected in hole LA-11-08 which discovered a new
Ni-Cu-PGE zone in 2011 grading 0.66% Ni, 0.35% Cu, 0.17 ppm Pt and 0.16 ppm Pd over 8.0 metres,
including a higher grade interval of 1.55% Ni, 0.53% Cu, 0.26 ppm Pt and 0.28 ppm Pd over 1.60
metre. These surveys have positioned the conductor at approximately 60 metres below hole LA-11-
08 at a vertical depth of about 350 metres.
While following up this new BHEM target, a new Ni-Cu-PGE zone was discovered in hole LAF-16-38.
Drill hole LAF-16-38 intersected a new Ni-Cu-PGE zone with disseminated, locally semi-massive and
net-textured mineralization grading 0.45% Ni, 0.33% Cu, 0.15 g/t Pt and 0.24 g/t Pd over 42.60 metres
from 446.50 to 489.10 metres depth (Note: True thickness is not known at this time with the available
geological information). Within this wide mineralized envelope, two zones with higher nickel and
copper grades respectively yielded 1.11% Ni, 0.47% Cu, 0.21 g/t Pt and 0.79 g/t Pd over 3.50 metres
from 449.00 to 452.50 metres, and 0.44% Ni, 0.88% Cu, 0.21 g/t Pt and 0.27 g/t Pd over 4.05 metres
from 458.95 to 463.00 metres. The mineralization is hosted in ultramafic intrusive rocks that contain
variable amounts of pyrrhotite ("Po"), pentlandite ("Pn"), and chalcopyrite ("Cp"), mainly occurring as
disseminations but locally forming semi-massive and net-textured zones.
Following this discovery, two additional drill holes (LAF-16-39 and 40) were completed to test the
Copernick zone respectively at 175 metres below and 65 metres above hole LAF-16-38. Both holes
intersected altered ultramafic rocks mineralized with various amounts of Po-Pn and Cp.
Drill hole LAF-16-39: The ultramafics weakly mineralized with some sulphides (trace-1% Po-Cpy) were
intersected from 593 to 714 meters. Here are the best Ni-Cu results:
593.80 to 594.30 (0.50 m) 0.29% Ni, 0.28% Cu
595.50 to 597.00 (1.50 m) 0.26% Ni, 0.15% Cu
634.45 to 636.00 (1.55 m) 0.41% Ni, 0.20% Cu, 0.11 g/t Au, 0.06 g/t Pt, 0.06 g/t Pd
638.50 to 639.50 (1.00 m) 0.30% Ni, 0.09% Cu, 0.04 g/t Au, 0.03 g/t Pt, 0.03 g/t Pd
639.50 to 641.00 (1.50 m) 0.47% Ni, 0.26% Cu, 0.16 g/t Au, 0.07 g/t Pt, 0.08 g/t Pd
643.70 to 644.50 (0.80 m) 0.48% Ni, 0.23% Cu, 0.12 g/t Au, 0.06 g/t Pt, 0.07 g/t Pd
661.00 to 662.00 (1.00 m) 0.32% Ni, 0.12% Cu, 0.07 g/t Au, 0.04 g/t Pt, 0.04 g/t Pd
663.00 to 664.10 (1.10 m) 0.31% Ni, 0.11% Cu, 0.07 g/t Au, 0.03 g/t Pt, 0.03 g/t Pd
668.50 to 670.00 (1.50 m) 0.26% Ni, 0.07% Cu, 0.04 g/t Au, 0.02 g/t Pt, 0.02 g/t Pd
- 10 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
Drill hole LAF-16-40 has been stopped at 545m. The ultramafics weakly mineralized with some
sulphides (1-2% Po-Cpy) were intersected at around from 345 to 435m. Again the ultramafic rocks
seem to be cut by the gabbroic rock which has for effect to reduce the thickness of the ultramafic by
about a 100m. Two mineralized zones were intersected and returned:
Zone 1 :
357.50 to 383.50 m ; 0.21% Ni, 0.13% Cu, 0.04 g/t Au, 0.12 g/t Pt, 0.14 g/t Pd over 26.00 m
Incl. : 364.65 to 379.50 m ; 0.26% Ni, 0.17% Cu, 0.06 g/t Au, 0.17 g/t Pt, 0.19 g/t Pd over
14.85m
Zone 2 :
401.60 to 426.00 m ; 0.26% Ni, 0.16% Cu, 0.06 g/t Au, 0.14 g/t Pt, 0.18 g/t Pd over 24.40 m
Incl. : 402.90 to 410.30 m ; 0.42% Ni, 0.28% Cu, 0.11 g/t Au, 0.30 g/t Pt, 0.34g/t Pd over 7.40 m
A detailed ground magnetic survey along with a magnetic inversion was completed in the vicinity of
the Copernick discovery. The inversion showed a well-defined strongly magnetic unit similar to
Copernick that trends north-south over a 2 km east of Copernick. A stratigraphic program consisting
in two holes was completed during Q3-16. Both holes (41 and 42) have identified ultramafic rocks.
Hole LAF-16-41 was terminated at a depth of 630m. After 18 meters of over burden, the drilling
encountered Volcanogenic sediment up to 163.60m; that units was mildly to strongly altered in
carbonate but no mineralization is present. Following that up to 287,75m a sequence of siltstone and
mudstone weakly mineralized in pyrite up to 0.5% was intersected. The ultramafic was intercepted
from 287.75m to 502.05m with mineralization in pyrite and chalcopyrite in trace with the interval from
460.45m to 465.95m with 1-2 % pyrite inside an quartz-carbonate injection zone and automorphous
amphibolite crystals. From 502.05m to 620.30m, a siltstone unit without any mineralization was
encountered with the exception of several contacts of mafic dykes (7) where 0.5 to 1% pyrite was
observed. The hole ended in the ultramafic dyke from 620.30m to 630.00m, the superior contact with
the siltstone was mineralized over 35cm with 1% pyrite. No significant results have been obtained.
Drill hole LAF-16-42 was stopped at 198m due to technical conditions. After 60m of overburden, the
drilling encountered siltstone/sediment up to 137.50m where they present a medium to strong
carbonate alteration with intense quartz veinlets network with minor stringer mineralization in pyrite
and pyrrhotite. From 137.5 to 198m the drilling encountered ultramafic with minor alteration in
carbonate and minor mineralization in pyrite locally. No significant results have been received.
4.3 Patris (Au), in partnership with Teck and operated by Teck
Property Description
The Corporation acquired claims by map staking about 30 kilometres to the north-east of Rouyn-
Noranda. As at September 30, 2016, this property consists in 263 claims covering an area of
approximately 10,899 hectares. Some claims are subject to the following NSR royalties:
• 1%, the Corporation can buy it back for $500,000 per 0.5% tranche for a total of $1,000,000;
• 1.5%, the Corporation can buy it back for $500,000 per 0.5% tranche for a total of $1,500,000.
• 2%, the Corporation can buy it back for $1,000,000 per 1% tranche for a total of $2,000,000;
• 2%, the Corporation can buy it back for $1,000,000 per 1% tranche for a total of $2,000,000;
• 2%, the Corporation can buy it back for $500,000 the first 1% tranche and for $1,000,000 for the
second 1% tranche, for a total of $1,500,000.
- 11 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
The Corporation signed an option agreement with Teck Resources Ltd (“Teck”) on September 6, 2013
and amended it on May 20, 2014 and on May 30, 2016 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)(completed)
On or before August 31, 2017
On or before August 31, 2018
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
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
Teck will be project operator during the First Option.
Payments in cash
$
Work
$
-
-
-
-
500,000
800,000
1,700,000
3,000,000
300,000
2,500,000
-
300,000
5,000,000
10,500,000
Exploration work on the property
During Q1-16, an induced polarization (15 km) and a magnetic survey were completed in the lateral
extensions of the alteration zone intersected in hole PAT-15-05 over more than 100 metres.
The CPTAQ authorization has been received during Q4-16. A drilling program consisting in five (5)
holes, including two contingent holes and totalling 1,200 metres has been approved and will start
during Q1-17. The targets consist in magnetic lows along strike with the large alteration zone
intersected in 2015 in holes PAT-15-03, 04 and 05.
4.4 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, Abitibi. As at September 30, 2016, this property
consists in 315 claims covering an area of approximately 17,338 hectares.
On October 10, 2014, the Corporation signed a letter of intent with SOQUEM to grant SOQUEM the
option to acquire a 50% undivided interest in its Casault and Jouvex properties. By October 10, 2016,
SOQUEM completed the $4,500,000 work commitment, acquired a 50% undivided interest in the
Casault Jouvex property and is now in joint venture with Midland.
Midland is the project operator during the option period.
Exploration work on the property
During the course of the first quarter, eight (8) drill holes totalling 3,069 metres were completed on
Casault in partnership with SOQUEM. Two main areas were drilled including the northern contact of
the Turgeon pluton and the QFP area. Two other drill holes tested IP anomalies to the south of the
Sunday Lake deformation zone.
- 12 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
Turgeon Pluton area
Three (3) holes were completed near the northern contact of the Turgeon pluton where gold-bearing
quartz-carbonate veins had been identified in hole CAS-15-53. This program confirmed the presence
of at least three sets of quartz-carbonate veins oriented at N340 with a dip of 50 degrees to the east.
Drill hole CAS-15-68, drilled about 150 metres below hole CAS-15-53, cut a zone of 2.90 g/t Au over
0.40 metre between 271.40 and 271.80 metres and other intervals of 0.87 g/t Au over 0.56 metre from
311.30 to 311.86 metres and 0.38 g/t Au over 0.38 metre from 312.72 and 313.10 metres.
Drill hole CAS-15-69 completed 100 metres to the north of CAS-15-53 returned two zones with veins
grading 0.67 g/t Au over 0.55 metre from 136.10 to 136.65 metres and another zone of 0.11 g/t Au
over 0.40 metre between 137.35 and 137.75 metres.
At about 110 metres to the west of hole CAS-15-53, hole CAS-15-70 intersected three sets of veins
with the best values returning:
•
•
•
3.34 g/t Au over 0.40 metre (90.10 to 90.50 m)
0.78 g/t Au over 0.50 metre ( 170.9 to 171.40 m)
0.87 g/t Au over 2.85 metres (293.80 to 296.65 m)
Incl.: 2.32 g/t Au over 0.65 metre ( 294.80 to 295.45 m)
o
QFP Area
During 2015, some drill holes had intersected gold-bearing mineralization within a felsic porphyritic
intrusion (QFP) at the contact between the conglomerates and the mafic volcanics. During the Q1-16
drilling program, two holes tested the southern contact of the QFP and a third one tested a north-south
oriented magnetic lineament.
Drill hole CAS-15-71 returned a strongly anomalous gold-bearing zone of 0.31 g/t Au over 12.30
metres (76.20 to 88.50 metres) including a value of 1.22 g/t Au over 0.40 metre. This gold anomalous
zone which is mineralized with pyrite remains open in all directions.
Approximately 500 metres further west, drill hole CAS-15-72 intersected the QFP which is strongly
altered in hematite but weakly mineralized. A composite value of 0.39 g/t Au over 5.50 metres (386.50
to 392.00 m) was obtained from the sheared and silicified mafic volcanics.
Following the winter 2016 geophysics program (mag and IP Orevision), a drilling program consisting
in eight (8) holes totalling 3,120 metres as well as a 20 km IP Orevision surveys were completed. The
best anomalous results obtained from that summer drilling program were:
CAS-16-76
CAS-16-79
CAS-16-80
0.13 g/t Au over 1.00 m ( 133.0 to 134.0 m)
0.50 g/t Au over 1.50 m ( 221.5 to 223.0 m)
0.13 g/t Au over 1.50 m ( 132.5 to 134.0 m)
0.13 g/t Au over 0.80 m ( 141.2 to 142.0 m)
0.15 g/t Au over 0.50 m ( 395.45 to 395.95 m)
0.37 g/t Au over 1.50 m ( 646.0 to 647.5 m)
CAS-16-82
0.29 g/t Au over 1.00 m ( 176.0 to 177.0 m)
Drillholes CAS-16-77, 81 and 83 did not return any results over 0.1 g/t Au.
- 13 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
A technical meeting was held with SOQUEM during Q1-17 and a drilling program and a geophysical
IP survey were proposed for Q3-17.
4.5 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.
As at September 30, 2016, this property consists in 362 claims covering an area of approximately
20,207 hectares.
See the Casault section for the details on the agreement signed with SOQUEM.
Exploration work on the property
During Q1-16, three (3) drill holes totalling 924.0 metres were completed on Jouvex in partnership with
SOQUEM. These holes tested new Orevision IP anomalies identified near the Casa Berardi fault zone.
These holes explained the anomalies with the presence of sulphides (Py) accompanied by strong
alteration in sericite and iron carbonate. However, no significant gold result was obtained.
Following the compilation of several gold showings, an airborne Mag-EM survey was completed in the
northern portion of the Jouvex property in order to cover most of the historical gold showings as defined
in the compilation. The survey identified several formational as well as more punctual conductors.
Two (2) IP grids totalling 20 km were proposed at the last technical meeting held during Q1-17 with
SOQUEM. These surveys are expected to begin during Q3-17.
4.6 Heva (Au), operated by Midland
Property Description
The Heva West block consists of 4 contiguous claims adjacent to the west of the Maritime-Cadillac
property, currently a 49% Midland / 51% Agnico Eagle. The Heva East block is located about
4 kilometres to the southeast and consists of 33 contiguous claims largely covering sedimentary rocks
of the Cadillac Group just north of the Piché Group.
Exploration work on the property
During the fall of 2015, Midland’s exploration team completed a soil geochemical survey (B-horizon)
in the western part of the Heva East block where several interesting gold results were obtained during
the 2015 summer exploration program. Following these recent works, the best results returned values
of 18.0 g / t Au and 5.1 g / t Au from sampling of an old blasted trench and dating back more than
twenty years which was found during reconnaissance work and a value of 5.6 g / t Au obtained in
sampling mineralized ore masses found near the old Dempsey-Cadillac showing from 1930.
On top of detecting the two main gold-bearing horizons already known in this area, the soil
geochemical survey identified two (2) new axes that are anomalous in gold and in arsenic on hundreds
meters of extension and parallel to the known gold-bearing horizons. Moreover, these two new axes
coincide largely with still unexplained historic induced polarization anomalies.
Midland announced the discovery of several new gold showings following recent trenching and
prospecting on its Heva gold projet.
- 14 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
During this program, nine (9) new mechanical trenches (16-01 to 16-09) as well as prospecting were
completed and a total of 133 selected grab samples were collected in the western part of the Heva
East property. This program’s main objective was to follow-up the source of several gold and arsenic
soil anomalies identified during the 2015 program. The trenching and prospection campaign
highlighted five (5) new auriferous quartz veins systems directly associated with soil gold anomalies.
These new showings returned 19.9 g/t Au, 6.5 g/t Au, 5.4 g/t Au, 3.5 g/t Au, 2.7 g/t Au, and several
other values higher than 0.1 g/t Au on selected grab samples and over surface distances varying
between 50 to 150 metres. All these new gold showings remain open laterally and in depth (Note that
the values of selected grab samples might not be representative of the mineralized zones).
Prospection also took place and was successful in identifying another important auriferous quartz vein
system about 1.2 kilometres to the east of the trenches and was followed over a minimum distance of
150 metres (open in all directions). This new area returned up-to 9.1 g/t Au and 3.8 g/t Au on selected
grab samples.
The table below lists the grade and position (UTM Nad83 Zone 17) of selected grab samples that
returned greater than 2.0 g/t Au:
Sample
g/t Au
East
North
Description
S433057
19,9
S433086
S433011
S433053
S433083
S433116
S433131
S433022
S433088
9,1
6,5
5,4
3,8
3,5
2,7
2,2
2,1
*
*
*
*
*
*
*
706986
5341564
Vein #100W40 ; Trench 16-08EXT
708172
5341163
Vein #20E45 ; Prospection
706370
5341661
Vein #160W25 ; Trench 16-02
706996
5341559
Vein #100W40 ; Trench 16-08EXT
706922
5341587
Vein #20E45 ; Prospection
706985
5341490
Vein #100W25 ; Trench 16-06
706972
5341559
Vein #100W35 ; Trench 16-08
706380
5341680
Vein #160W45 ; Trench 16-02
706619
5341661 Vein #140W35 ; Prospection
Note: * Re-analysis by fire assay with gravimetric finish, else by atomic absorption 30 g (AA23).
g/t Au = grams per tonne of gold
On the 133 selected grab samples collected during this campaign, close to 60% (79 samples) returned
gold values greater than 0.1 g/t Au, including 18 that returned gold values greater than 1.0 g/t Au
including 9 for which the values are greater than 2.0 g/t Au.
The majority of the auriferous quartz veins are mineralized in arsenopyrite, sometimes in pyrite, and
commonly have sericitic and biotite alteration. Albite alteration is observed locally. These gold-bearing
quartz veins are often present along sericite altered shear zones in contact between different layers of
deformed polygenic conglomerate and massive wackes which belongs to the Timiskaming Group.
Locally, the veins lightly cross-cut the schistosity and are hosted by the conglomerates and/or the
wackes.
- 15 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
Following stripping and prospecting work carried out in the early summer of 2016, which led to the
discovery of five (5) new auriferous quartz veining systems grading up to 19.9 g/t Au, 6.5 g/t Au, 5.4 g/t
Au, 3.5 g/t Au and 2.7 g/t Au (see Midland press release dated July 5, 2016), a channel sampling
program was completed on these new auriferous veins in August 2016. Best results were obtained in
vein #100W40, which contained visible gold grains and which graded 24.1 g/t Au over 0.50 metre. In
addition, a grab sample collected about 5 metres west of the latter channel sample returned a gold
grade of 38.5 g/t Au.
Out of a total of 118 channel samples ranging from 0.40 to 0.75 metre in length, 64 samples yielded
gold values above 0.1 g/t Au, including 18 samples with grades higher than 0.5 g/t Au, 9 of which were
above 1.0 g/t Au. These include the following: 24.1 g/t Au over 0.50 metre; 3.3 g/t Au over 0.50 metre;
1.3 g/t Au over 2.10 metres including 3.4 g/t Au over 0.50 metre; 1.2 g/t Au over 1.50 metres including
2.3 g/t Au over 0.50 metre; 1.9 g/t Au over 0.50 metre; 1.7 g/t Au over 0.50 metre and 1.2 g/t Au over
0.75 metre (note that the true thickness of these is unknown and cannot be determined at this time
with the information available).
In parallel to this channel sampling program, twenty-four (24) grab samples were also collected during
a prospecting campaign. This work led to the discovery of a new auriferous quartz vein (Central area)
located 250 metres west of the sample grading 38.5 g/t Au, and where samples returned values
reaching 6.1 g/t Au, 2.8 g/t Au, 1.8 g/t Au and 1.5 g/t Au (note that gold values from grab samples
collected during this campaign may not be representative of the mineralized zones).
Near the end of August 2016, a soil sampling program was carried out (195 samples) and three new
trenches were excavated, including one in the East area (vein #20E45) where grades reaching 9.1 g/t
Au and 3.8 g/t Au were previously obtained in grab samples. The second trench was excavated
between trenches HEV-16-005 and HEV-16-006, in an attempt to explain a new Orevision-type
induced polarization anomaly, whereas the third trench was excavated north of trench HEV-16-007
over a gold and arsenic soil geochemistry anomaly. Trench HEV-16-11) was mainly designed to
explain a strong OreVision-type induced polarization anomaly identified during a recent test survey.
Preliminary sampling in this trench, which exposed sedimentary rocks with silica and biotite alteration,
led to the discovery of a new showing with grades reaching up to 13.7 g/t Au in grab sample. This
sample was collected in a quartz vein exhibiting visible gold grains. These encouraging results thus
confirm the excellent potential of this new OreVision target, which was only partly explained by the
trench because of the presence of thicker overburden above the geophysical anomaly. (Note that gold
values from grab samples may not be representative of the mineralized zones).
Sampling completed in another trench (HEV-16-10) in the East area, where grades reaching 9.1 g/t
Au were previously obtained (see Midland press release dated July 5, 2016), returned values reaching
4.28 g/t Au, 3.26 g/t Au, 3.25 g/t Au, 2.50 g/t Au, 2.48 g/t Au, 2.14 g/t Au, 1.82 g/t Au, and 1.38 g/t Au
in grab samples.
During Q1-17, a prospecting program as well as a detailed magnetic survey will be completed.
.
4.7 Valmond (Au), operated by Midland
Property Description
The Corporation acquired claims by map staking about 50 kilometres to the west of Matagami. As at
September 30, 2016, this property consists in 111 claims covering an area of approximately 6,179
hectares.
- 16 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
On November 19, 2013, the Corporation signed an agreement with Sphinx Resources Ltd. (“Sphinx”)
whereby Sphinx could have acquired 50% of the Valmond property subject to $250,000 payments in
cash ($30,000 completed) and $2,500,000 exploration work ($670,350 completed). In August 2015,
Sphinx terminated the agreement on the Valmont property.
4.8 Samson Ni-Cu-PGE operated by Midland
Property Description
As at September 30, 2016, the Samson property consists of 283 claims covering a surface area of
about 15,710 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 could have
acquired 50% of the Samson property subject to $275,000 payments in cash ($40,000 completed) and
$3,500,000 exploration work ($555,854 completed). On December 11, 2015, Sphinx terminated the
agreement on the Samson property.
4.9 La Peltrie (Au), operated by Midland
Property Description
As at September 2016, the La Peltrie property comprises 405 claims covering a surface area of about
22,334 hectares and encompasses possible subsidiary faults to the south of the regional Lower Detour
Fault over a distance of more than 10 kilometres.
Exploration work on the property
A ground geophysics survey (IP) was completed during Q2-16. This survey totalling about 160 km (2
grids) covered a series of NW-SE structures as well as several unexplained MegaTEM conductors.
During Q2-16, a diamond drilling program consisting in three (3) drill holes totalling 1,098 metres was
completed in order to test three IP targets selected following the interpretation. No significant assay
was received but the IP anomalies were well explained with sulphides (Py-Po) with traces of Cpy.
4.10 Adam (Cu-Au), operated by Midland
Property Description
The Adam property was acquired by map designation and is a property with strong gold and copper
potential located about 15 kilometres east of the B26 zone held by SOQUEM and about 20 kilometres
east of the former Selbaie mine, which historically produced 56.5 Mt grading 1.9% Zn, 0.9% Cu, 38.0
g/t Ag and 0.6 g/t Au.
The Adam property is wholly owned by Midland and is located about 65 kilometres west of the town of
Matagami. As at September 30, 2016, it consists of 190 cells covering a surface area of about 10,571
hectares in the Abitibi region of Quebec.
On December 12, 2014, the Corporation signed an agreement with Sphinx whereby Sphinx could have
acquired 50% of the Adam property subject to $250,000 payments in cash ($20,000 completed) and
$3,000,000 exploration work ($174,449 completed). On December 11, 2015, Sphinx terminated the
agreement on the Adam property.
Exploration work on the property
A TDEM survey was completed on four grids during the Q2-16. These surveys cover several new
VTEM conductors identified just north of the regional contact between the Enjalran and Brouillan
Groups. The final interpretation of the TDEM results during Q3-16 showed that the airborne conductors
were validated in the ground TDEM surveys.
- 17 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
4.11 Abitibi Gold (Au) operated by Midland
Property Description and exploration work on the property
The Corporation acquired by map designation 506 claims covering a surface area of about 27,991
hectares. Some claims were dropped therefore the Corporation impaired partially for $37,220.
Exploration work on the property
A TDEM survey was completed on the Jeremie property during Q2-16. The interpretation of the results
identified a good conductor associated with a magnetic anomaly.
An airborne Mag-EM survey was flown during Q3-16 over the Manthet block and several new isolated
conductors were identified.
GRENVILLE-APPALACHES
4.12 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 as at
September 30, 2016 is comprised of 127 claims covering an approximate area of 7,013 hectares.
Some claims are subject to NSR royalties of:
• 1%, the Corporation can buy it back the royalty for $500,000 per 0.5% tranche for a total of
$1,000,000;
• 0.5%, the Corporation can buy it back this royalty for $500,000;
• 1.5% on all metals except gold and silver, the Corporation can buy it back for $500,000 per 0.5%
tranche for a total of $1,500,000.
Some claims were dropped therefore the Corporation impaired partially for $7,756 ($13,100 in Fiscal
2015) the exploration property cost.
Exploration work on the property
Two short drill holes totalling 165 metres were completed during Q1-16 on the Weedon property. These
holes targeted the extension at depth of the 2006 massive sulphide showing discovered south of
Lingwick.
Hole WEE-15-07 intersected a sulphide zone (Py-Cp) over a few metres that returned 0.26% Cu over
0.50 metre (70.75 to 71.25 m); 0.16% Cu over 1.05 metre (71.65 to 72.70 m) and 0.16% Cu over 0.60
metre (72.70 to 73.30 m).
A small till survey was completed during Q4-16 on Weedon and a weak Cu-Au anomaly was identified
north-west of the Weedon mine.
4.13 Gatineau Zinc (Zn), operated by Midland
Property Description
Midland owns a 100% interest in a land position for zinc, including as at September 30, 2016, 57 claims
covering 3,271 hectares distributed in the Gatineau Area, approximately 200 kilometres northwest of
the city of Montreal. Some claims were dropped therefore the Corporation impaired partially for 7,344
($9,344 in Fiscal 15).
- 18 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
4.14 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 as at September 30, 2016 of 16 contiguous claims covering a total surface area of 934
hectares in joint venture 53.4% SOQUEM/ 46.6% Midland
JAMES BAY
4.15 James Bay Gold JV (Au), operated by Osisko
Property Description
On June 13, 2016, a joint-venture agreement (50%-50%) was signed with Osisko whereby Osisko and
the Corporation will cooperate and combine their efforts to explore the JV Eleonore property recently
staked by the two corporations. The property is located 12 kilometres southeast and northwest of
Goldcorp’s Eleonore deposit. The property regroups several properties for a total of 1,827 claims
covering a surface area of about 952.9 square kilometres.
Exploration work on the property
During Q3-16 and Q4-16, a till survey, a lake bottom sediments sampling program as well as a follow-
up prospecting program were completed on the JV properties. Final and complete results for this
program are still pending.
4.16 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 660 claims covering an area of approximately 34,039 hectares as at
September 30, 2016. Some claims were dropped therefore the Corporation impaired partially for
$9,932.
Exploration work on the property
During Q4-16, the team completed a 12 day prospection campaign on the Eleonore Centre property.
The objective was prospecting where the major N-S structure in the north shifts to a SW-NE direction
in the centre-south portion of the property.
A total of two days of prospection was done near the Golden Gun area and the northeastern part of
the property. More felsic tuff rock units with quartz-tourmalines veins were observed (traces of pyrite
sometimes) and give way to basalts toward the east to the property’s boundary. In the Northern
section, silicate and sheared metabasalts and graphite-pyrite exhalites (sediment host) horizons were
observed. Prospection also occurred in the Sean Connery (arsenopyrite-quartz-tourmaline veins) area
that is located south of Lake Ukaw. Prospection and hand small-scale trenching highlighted the
presence of disseminated pyrrhotite in sheared meta-basalts.
Finally, the remaining prospection days of prospection were done in the southern part of the property
where a granite intrusion occurs as well as volcanosedimentary sequences (southern isles). The
reservoir water height was lower than usual which offered great outcrop exposures. This permitted,
among others, to resample the 2014 quartz-chalcopyrite-molybdenite-bornite tourmaline vein present
in the granite near the shoreline.
- 19 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
On the southern islands shoreline, several highly deformed shear zones were identified. Quartz veining
occurs in the shear zones and typically contains traces to 0.5% pyrite. Quartz-tourmaline veins occur
locally in metasediments and granitic rocks in these shear zones. A 30 cm quartz vein was observed
to contain 1-2% chalcopyrite at one outcrop.
A total of 316 samples (including QAQC samples, typically a blank or standard alternating at each 20
samples) were collected The best result is 1.98 g/t Au on a selected grab sample which comes from
resampling of the Cu-Mo quartz-tourmaline vein area. A total of six (6) other samples returned between
grades > 0.10 g/t Au (between 0.15 to 0.70 g/t Au).
4.17 James Bay Gold (Au), operated by Midland
Property Description
Midland owns a 100% interest on 313 claims as at September 30, 2016 covering 16,179 hectares in
the James Bay Area. Some claims were dropped therefore the Corporation impaired partially for
$5,613 the exploration property cost ($66,293 in Fiscal 15).
Exploration work on the property
No fieldwork was conducted on the James Bay Gold project during Fiscal 16, however, a geological
compilation work including regional targeting continued. Midland is currently seeking for a partner.
4.18 James Bay Uranium (U) operated by Midland
Property Description
The property is located in the James Bay region and is composed of 8 claims as at September 30,
2015 (none as at September 30, 2016). The Company wrote off the property in September 2015 for
$24,577 since no exploration program had been planned for the near future.
4.19 Bay James Iron (Fe) operated by Midland
Property Description
As at September 30, 2016, the Montagne-du-pin property consist in a total of 51 wholly owned claims
covering 2,601 hectares and are located along the Trans-Taiga road, James Bay. The Company wrote
off the property in September 2015 for $97,822 since no exploration program had been planned for
the near future.
NORTHERN QUEBEC
4.20 Pallas (PGE), in partnership with JOGMEC and operated by Midland
Property Description
As at September 30, 2016, the property totals 636 claims covering approximately 28,910 hectares in
the Labrador Trough («Trough») some 80 kilometres west of Kuujjuak, Québec.
On January 21, 2014, the Corporation signed an option agreement with Japan Oil, Gas and Metals
National Corporation (« JOGMEC »). In September 2015, JOGMEC has funded the $2,000,000
commitment of exploration work and now has the right to exercise its option to acquire a 50% interest
in the Pallas PGE property. The Corporation is the operator as long as it will hold an interest equal to
or higher than 50% in the project.
- 20 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
Exploration work on the property
During Fiscal 16, Midland in partnership with JOGMEC completed an important exploration program
and the results follow.
On the Ceres claim block, best channels on Patientia, Palma, Elijah, Alauda, Cynthia, Hektor, Ceres
South, Ida, Davida, Diatoma, Enish NE and Enish South showings are: 0.8 g/t PGE+Au over 1.4m incl.
1.4 g/t over 0.5m; 0.62 g/t over 0.9m, 0.66 g/t PGE+Au over 2m incl. 0.94g/t PGE+Au over 1.35m
(open); 0.55 g/t PGE+Au over 3.6m incl. 0.88 g/t PGE+Au over 1m; 0.34 g/t PGE+Au over 4.8m incl.
0.57 g/t PGE+Au over 2.5m and 0.28 g/t PGE+Au over 2m incl. 0.48 g/t PGE+Au over 1m on Patientia.
On Palma, best channels are 1.23g/t PGE+Au over 1.34m (open) and 0.46g/t PGE+Au over 2.15m;
on Elijah they are 1.19 g/t PGE+Au over 1.15m, 0.68 g/t PGE+Au over 2.5m incl. 0.8 g/t over 2m et
1.1 g/t over 0.5m (open), 0.95 g/t PGE+Au over 0.5m, 0.91 g/t PGE+Au over 0.5m (open), 0.85 g/t
PGE+Au over 1m, 0.49 g/t PGE+Au over 4.5m incl. 0.73 g/t PGE+Au over 2m, 0.50 g/t PGE+Au over
1.5m and 0.20 g/t PGE+Au over 9m incl. 0.4 g/t PGE+Au over 1m.
On Alauda, best channels are 1.0 g/t PGE+Au over 1.0m, 1.1 g/t PGE+Au over 2.0m, and 0.6 g/t
PGE+Au over 0.5m. Farther south on the Cynthia Showing best channels are 1.2 g/t PGE+Au over
0.5m, 0.9 g/t PGE+Au over 0.5m, 1.0 g/t PGE+Au over 1.0m, 2.0 g/t PGE+Au over 0.5m, 0.5 g/t
PGE+Au over 1.0m, 1.1 g/t PGE+Au over 0.5m, 0.7 g/t PGE+Au over 1.0m and 1.1 g/t PGE+Au over
0.5m.
On the Hektor showing, there are 2.4 g/t PGE+Au over 1.0m, 0.8 g/t PGE+Au over 0.5m and 0.8 g/t
PGE+Au over 0.5m. On Ceres South, the best channels area 2.7 g/t PGE+Au over 1.0m and 3.0 g/t
PGE+Au over 0.5m; on Ida to the south west from Ceres South 2.0 g/t PGE+Au over 0.46m.
On the Enish corridor farther west they are Davida with 0.85 g/t PGE+Au over 1.5m, 0.8 g/t PGE+Au
over 1.0m, 0.7 g/t PGE+Au over 1.5m, 1.2 g/t PGE+Au over 1.0m. On the Diotima Shwoing there are
0.71 g/t PGE+Au over 0.5m and 0.6 g/t PGE+Au over 0.5m. Farther north from Davida there is the
Diatoma showing with 1.7 g/t PGE+Au over 1.0m, 0.8 g/t PGE+Au over 0.5m, 0.64 g/t PGE+Au over
0.5m, 1.2 g/t PGE+Au over 1.0m, 0.8 g/t PGE+Au over 0.5m ND 1.1 g/t PGE+Au over 0.5m.
On Enish northeast extension there are 0.82 g/t PGE+Au over 0.5m and on Enish south extension 1.1
g/t PGE+Au over 0.5m
On the Itokawa claim block, best channels on the 1.45 g/t Au over 0.5m and 0.96 g/t PGE+Au over
0.5m on Iris; 1.92 g/t PGE+Au over 0.5m on Doris and 0.75 g/t PGE+Au over 0.5m and 0.56 g/t
PGE+Au over 0.5m on Metis. On the Gaspar claim block, best channels are on 0.75 g/t PGE+Au over
0.5m on the Herculina Showing and 1.11 g/t PGE+Au over 0.5m on the Egeria Showing.
During Q4-16, a prospecting campaign and a channel sampling programs took place prior to a drilling
program. The highlight of the phase 1 prospecting campaign is the discovery of a new mineralized
corridor, named Apophis, which returned selected grab values up-to 4.1 g/t PGE + Au (= 3.1 g/t Pd,
0.9 g/t Pt and 0.1 g/t Au) on the Ceres property (note, again, that the grades of the selected grab
samples may be not representative of the mineralized zones). The Apophis corridor extends over 3.0
kilometres remains open laterally and consist of 28 selected grab samples that returned > 0.5 g/t
PGE+Au out of a total of 67 taken (including 15 samples > 1.0 g/t PGE+Au). Further channel sampling
on the Hektor showing confirmed the presence of PGE mineralization with two 0.5 metre channels
returning 10.2 g/t PGE+Au (= 1.5 g/t Pd, 1.6 g/t Pt and 7.2 g/t Au) and 2.1 g/t PGE+Au (= 0.9 g/t Pd,
1.0 g/t Pt and 0.2 g/t Au). Other new showings on the Ceres property include the Fortuna Showing
with a grade of 3.4 g/t PGE+Au (= 2.5 g/t Pd, 0.8 g/t Pt and 0.1 g/t Au) on a selected grab sample and
the Enish West showing which returned 3.3 g/t PGE+Au (= 2.5 g/t Pd, 0.7 g/t Pt and 0.1 g/t Au).
- 21 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
The second phase of this exploration program completed in Q1-17 consisted in a 1,239 metres drilling
campaign consisting of six drill holes planned on the Ceres property. The drill holes tested at different
depths the Apophis, Ida and Hektor showings and were completed in late October 2016. Assays are
pending.
4.21 Willbob (Au), operated by Midland
Property Description
The Willbob property in the Labrador Trough consists of 337 claims covering about 15 105 hectares,
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.
Exploration work on the property
Midland received the assay results for the channel sampling completed on the Polar Bear (6.9 g/t PGE
+ Au) and Golden Tooth (25.2 g/t PGE + Au) showings. On Golden Tooth four of the seven channels
returned the following results; 1.6 g/t Au over 3.0m including 2.1 g/t Au over 2.0m and 3.49 g/t Au over
1,0m; on the second 0.53 g/t Au over 1.0m; on the third 1.45 g/t Au over 0.80m and on the forth one
1.14 g/t Au over 3.0m. On Polar Bear, the best two channels returned 4.0 g/t and 0.51 g/t Au over
about half a meter long.
The team mobilized during June 2016 on Willbob in order to complete prospecting and a channel
sampling program prior to a first drilling program that started in early October 2016.
The new Golden Tooth North showing is located 600 metres north-northwest of the Golden Tooth
showing (25.2 g/t Au) and returned gold values up to 12.15 g/t Au. The Golden Tooth North zone was
traced over more than 300 metres strike length and also yielded gold values of 7.34 g/t Au, 3.52 g/t
Au, 2.50 g/t Au, 2.11 g/t Au, 1.65 g/t Au, 1.24 g/t Au, 1.14 g/t Au, 1.04 g/t Au, as well as 16 other
samples grading between 0.117 and 0.848 g/t Au. These grab samples were collected in a diorite unit
showing albite-chlorite alteration and quartz-calcite veining with pyrrhotite-arsenopyrite mineralization.
Another significant alteration zone with ankerite-albite-chlorite, named the Sunshine showing
(“Sunshine”) (see Midland press release dated July 21, 2016), returned gold grades up to 7.27 g/t Au.
The Sunshine zone is located 550 metres east of the Kuni South showing (77.6 /t Au) and was traced
over more than 150 metres strike length. This zone also returned new gold values of 3.95 g/t Au, 3.18
g/t Au, 2.72 g/t Au, 1.79 g/t Au, 1.27 g/t Au, as well as 8 other gold values between 0.185 g/t Au and
0.64 g/t Au (Note that gold values from selected grab samples on the new Golden Tooth North and
Sunshine showings may not be representative of the mineralized zones).
During the first phase of the 2016 exploration program, over a short period of 28 days, a total of 619
grab samples were collected mainly in the north part of the property between the Dessureault and Kuni
South showings. The first phase of the 2016 summer program also included systematic mapping of
quartz-ankerite-albite-chlorite alteration halos surrounding gold-bearing systems on the Willbob
property. Assay results confirm that 28 samples yielded gold values above 1.0 g/t Au, and 63 samples
graded between 0.1 g/t Au and 1.0 g/t Au.
During Q4-16 and Q1-17, a drilling program consisting in eight (8) holes totalling 1,300 metres was
completed. These holes tested the extensions of the Lafrance and Golden Tooth surface showings.
Complete and final assays are pending.
- 22 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
4.
INVESTING ACTIVITIES (CONT’D)
QUEBEC / LABRADOR
4.22 Ytterby (REE), in partnership with JOGMEC and operated by Midland
Property Description
As at September 30, 2016, the Ytterby Project comprises 118 claims in Labrador and 31 claims in
Québec, located between 200 and 230 kilometres east and 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 by funding $2,700,000 exploration work. As of September 30, 2016, JOGMEC
has not yet given its notice of exercise of option. In spring 2015, JOGMEC indicated that it would not
participate in the exploration program and its interest has now been diluted to 49.4%. Some claims
were dropped therefore the Corporation impaired partially for $7,162 the exploration property cost.
Exploration work on the property
No exploration work conducted during Fiscal 16. Midland and JOGMEC are monitoring the activities
for the Strange Lake (B-Zone) project.
PROJECTS GENERATION
Midland continued some geological compilation programs in Quebec for the acquisition of new
strategic gold, uranium and base metal properties.
Other Activities
Midland is pro-active in the acquisition of new mineral exploration properties in Quebec. Management
is constantly 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 its properties and its 100% owned
properties.
5.
FINANCING ACTIVITIES
The Corporation finances itself mainly through share issuance.
On November 20, 2015, the Corporation completed a private placement by issuing 835,365 flow-
through shares at $0.85 per share, for total gross proceeds of $710,060. On that date, the
Corporation’s share closed at $0.62 on the Exchange, therefore the residual value attributed to the
benefit related to flow-through shares renunciation is $0.23 for a total value of $192,134 credited to
the liability related to the premium on flow-through shares. In connection with the private placement,
the Corporation paid finder’s fees of $26,208. Directors and officers of the Corporation participated in
this placement for a total consideration of $96,050. As of September 30, 2016, the Corporation had
completed all the exploration work relating to this flow-through placement.
Subsequent to September 30, 2016, the Corporation completed on November 17 and 24, 2016 a
private placement by issuing 1,284,354 flow-through shares at $1.35 per share, for total gross
proceeds of $1,733,876.
- 23 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
6. WORKING CAPITAL
6.1 Non-IFRS Financial Performance Measure
Midland has included a non-IFRS measure, “Adjusted working capital”, to supplement its financial
statements, which are presented in accordance with IFRS.
Midland believes that this measure, together with measures determined in accordance with IFRS,
provide investors with an improved ability to evaluate the underlying performance of the Corporation.
Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore
they may not be comparable to similar measures employed by other companies. The data is intended
to provide additional information and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS.
Midland has an adjusted working capital of $13,787,092 as of September 30, 2016 ($16,495,139 as
of September 30, 2015) which is calculated as follow:
Current assets
Investments – non-current portion
Current liabilities
Adjusted working capital
6.2 Cash flow required
Fiscal 16
$
11,369,712
3,078,910
(661,530)
13,787,092
Fiscal 15
$
10,810,659
6,496,000
(811,520)
16,495,139
Management is of the opinion that it will be able to maintain the status of its current exploration
obligations and to keep its properties in good standing. 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 financing in privately negotiated equity offerings. There is no assurance
that such financing will be available when required, or under terms that are favourable to the
Corporation. The Corporation may also elect to advance the exploration and development of mineral
properties through joint-venture participation.
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 November 2016 flow-through private placement of $1,733,876)
Mining credits of preceding year (Fiscal 2016)
Staking and property maintenance
Total
Annualized
$
1,050,000
(35,000)
3,453,000
(861,000)
250,000
3,857,000
- 24 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
7. SUMMARY OF RESULTS PER QUARTERS
For the eight most recent quarters:
Q4-16
$
Q3-16
$
Q2-16
$
Q1-16
$
Revenues
Net loss
Loss per share
Total assets
37,257
(291,829)
(0.01)
24,456,678
3,889
(183,150)
-
24,273,206
23,937
(136,778)
-
24,548,029
42,340
(195,401)
-
24,315,888
Q4-15
$
Q3-15
$
Q2-15
$
Q1-15
$
Revenues
Net loss
Loss per share
Total assets
62,401
(184,764)
(0.01)
24,407,655
42,672
(155,960)
-
25,078,324
98,516
(185,672)
(0.01)
11,044,082
-
97,863
(102,702)
11,187,994
8. FOURTH QUARTER
The Corporation reported a loss of $291,829 for Q4-16 compared to a loss of $184,764 for Q4-15.
The Corporation earned project management fees of $37,257 in Q4-16 ($62,401 in Q4-15). In Q4-16,
the most active projects with partners were mainly Casault and to a lesser extent Pallas. In Q4-15, the
most active projects with partners were Pallas and Casault and to a lesser extent Jouvex.
Total expenses decreased to $382,449 in Q4-16 compared to $432,550 in Q4-15:
•
Impairment of exploration and evaluation assets (non-cash items) decreased to $61,261 ($127,844
in Fiscal 15). During Q4-16, some claims were dropped and the following properties were partially
impaired: Abitibi Au for $26,239, Gatineau for $7,344, Ytterby for $7,162, Laflamme for $7,147,
Weedon for $7,756 and James Bay Au for $5,613. During Q4-15, some claims were dropped and
the following properties were partially impaired: BJ Au for $22,146, Laflamme for $7,981 and
Gatineau for $6,728. On the other hand, the following properties were written off since no
exploration program is planned in the near future: BJ Fe for $66,412, BJ U for $24,577.
In Fiscal 15, a $126,437 (nil in Fiscal 16) 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 3 and 17, 2014 private placements. All the exploration work
relating to the November 20, 2015 private placement was completed before March 31, 2016 and
therefore there was no recovery of deferred income taxes recognized during Q4-16.
The Corporation incurred $1,656,615 ($1,461,481 in Q4-15) in exploration expenses of which
$628,486 ($856,730 in Q4-15) was recharged to the partners. The exploration expenses incurred in
Q4-16 were mostly executed on Casault, Willbob, JV Eleonore, Pallas and Heva whereas in Q4-15
the exploration work was mostly done on the Casault, Jouvex and Pallas. The Corporation acquired
properties for $141,993 net mostly on Abitibi Au ($126,573 net in Q4-15 mostly on Pallas, La Peltrie
and Willbob ).
- 25 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
9. RELATED PARTY TRANSACTIONS
The following are the related party transactions that occurred in Fiscal 16:
In the normal course of operations:
• A firm in which René Branchaud (director and corporate secretary) is a partner charged legal fees
amounting to $63,568 ($125,932 in Fiscal 15);
• A company controlled by Ingrid Martin (chief financial officer) charged accounting fees totaling
$145,310 ($137,918 in Fiscal 15) of which $69,620 ($57,660 in Fiscal 15) relates to her staff;
• As at September 30, 2016, the balance due to the related parties amounted to $16,300 ($21,563
in September 30, 2015).
Out of the normal course of operations:
• Directors and officers of the Corporation participated in the flow-through private placement of
November 2015 for $96,050 (December 2014 for $79,050) and in the units private placement of
May 2015 for $15,400. The directors and officers subscribed to the units private placement and the
flow-through private placement under the same terms and conditions set forth all subscribers.
10. SUBSEQUENT EVENTS
On November 23, 2016, the Corporation granted to an employee 50,000 options exercisable at $1.13,
valid for 10 years.
See section 5 on financing activities.
11. OUTSTANDING SHARE DATA
Common shares
Options
Warrants
12. STOCK OPTION PLAN
As at
December 8, 2016
Number
56,547,557
2,545,000
20,622,569
79,715,126
As at
September 30, 2016
Number
54,674,417
2,495,000
21,254,213
78,423,630
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 10,
2015, 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 4,000,000 to 5,400,000. Such
amendment to the plan was approved by the Exchange. 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.
- 26 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
13. OFF-BALANCE SHEET ARRANGEMENTS
The Corporation does not have any off-balance sheet arrangements.
14. 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%.
15. 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.
JUDGMENTS
15.1
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 $82,174 for Fiscal 16 ($255,826 for Fiscal 15). No
reversal of impairment losses has been recognized for the reporting periods.
- 27 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
15. CRITICAL ACCOUNTING ESTIMATES (CONT’D)
15.2 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. The amounts
recognized in the financial statements are derived from the Corporation’s best estimation and judgment
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.
16. FINANCIAL INSTRUMENTS
For a description of the financial instruments and the risk associated, please refer to notes 2.5 and 14
of the September 30, 2016 financial statements.
17. 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.
17.1 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.
- 28 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
17. RISK FACTORS (CONT’D)
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.
17.2 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.
17.3 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.
17.4 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.
17.5 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.
17.6 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.
- 29 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
17. RISK FACTORS (CONT’D)
17.7 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.
17.8 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.
17.9
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.
17.10 Uninsured Hazard
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.
17.11 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.
- 30 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2016
17. RISK FACTORS (CONT’D)
17.12 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.
17.13 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.
18. FORWARD LOOKING INFORMATION
Some statements contained in this MD&A, specially the opinions, the projects, the objectives, the
strategies, the estimates, the intent and the expectations of Midland that are not historical data, are
forward looking statements. Such statements can be recognized by the terms “forecast”, “anticipate”,
“consider”, “foresee” and other terms and similar expressions. These statements are based on
information available at the time they are made, on assumptions established by the management and
on the management expectation, acting in good faith, concerning future events and concerning, by
their nature, known and unknown risks and uncertainties mentioned herein (see the section 17 Risks
factors). The real results for Midland could differ in an important way of those which state or that these
forward looking statements show the possibility for. Consequently it is recommended not to trust unduly
these statements. These statements do not reflect the potential incidence of special events which
could be announced or take place after the date of this MD&A. These statements speak only as of the
date of this MD&A. Midland undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, other than as required
by applicable law.
December 8, 2016
(s) Gino Roger
Gino Roger
President and CEO
(s) Ingrid Martin
Ingrid Martin
CFO
- 31 -
December 8, 2016
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, 2016 and 2015 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 2500, Montréal, Quebec, Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502, www.pwc.com/ca
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
- 32 -
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Midland Exploration Inc. as at September 30, 2016 and 2015 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
- 33 -
Midland Exploration Inc.
Statements of Financial Position
As at September 30, 2016 and 2015
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
Investments - non-current portion (note 6)
Tax credits and mining rights receivable – non-current portion
Advance paid for exploration work
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
Total liabilities
Equity
Capital stock
Warrants (note 8)
Contributed surplus
Deficit
Total equity
Total liabilities and equity
As at September 30
2016
$
2015
$
1,467,414
8,729,000
97,433
257,650
755,105
63,110
11,369,712
3,078,910
115,503
344,624
1,506,118
8,041,811
9,547,929
5,862,953
4,535,807
99,057
183,942
73,713
55,187
10,810,659
6,496,000
-
-
1,200,584
5,900,412
7,100,996
13,086,966
13,596,996
24,456,678
24,407,655
646,494
15,036
661,530
670,350
141,170
811,520
32,332,811
1,997,093
2,224,411
(12,759,167)
23,795,148
31,288,335
2,113,643
2,088,784
(11,894,627)
23,596,135
24,456,678
24,407,655
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
- 34 -
Midland Exploration Inc.
Statements of Comprehensive Loss
For the years ended September 30, 2016 and 2015
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
Fiscal 16
$
Fiscal 15
$
107,423
-
107,423
299,418
2,034
301,452
456,275
96,951
77,029
50,095
83,856
34,282
127,278
61,643
243,980
18,543
82,174
1,332,206
348,858
66,913
62,415
50,664
92,225
44,301
99,544
60,601
236,859
2,878
225,826
1,291,084
225,491
121,237
(999,292)
(868,395)
Recovery of deferred income taxes (note 11)
192,134
239,297
Loss and comprehensive loss
Basic and diluted loss per share (note 10)
(807,158)
(629,098)
(0.01)
(0.02)
The loss and comprehensive loss are solely attributable to Midland Exploration Inc. shareholders.
The accompanying notes are an integral part of these financial statements.
- 35 -
Midland Exploration Inc.
Statements of Changes in Equity
For the years ended September 30, 2016 and 2015
Number of
shares
outstanding
Capital
stock
$
Warrants
$
Contributed
surplus
$
Deficit
$
Balance at Oct. 1, 2015
Loss and comprehensive loss
53,259,052
-
31,288,335
-
2,113,643 2,088,784 (11,894,627)
(807,158)
-
-
Total
equity
$
23,596,135
(807,158)
Flow-through private placement
Less: premium
835,365
-
835,365
710,060
(192,134)
517,926
-
-
-
-
-
-
-
-
-
710,060
(192,134)
517,926
-
(116,550)
-
-
-
-
-
(57,382)
1,997,093 2,224,411 (12,759,167)
(6,500)
-
142,127
-
15,000
388,500
142,127
(57,382)
23,795,148
Options exercised
Broker warrants exercised
Stock-based compensation
Share issue expenses
Balance at Sept. 30, 2016
25,000
555,000
-
-
54,674,417
21,500
505,050
-
-
32,332,811
Number of
shares
outstanding
Capital
stock
$
Balance at Oct. 1, 2014
Loss and comprehensive loss
Private placements
30,306,512
-
21,885,857
17,270,485
-
-
13,323,007 1,997,093
Contributed
surplus
$
Warrants
$
30,818 1,959,018
-
-
Deficit
$
Total
equity
$
(10,229,314)
(629,098)
-
9,031,007
(629,098)
15,320,100
Flow-through private placement
Less: premium
1,066,683
-
1,066,683
906,680
(211,837)
694,843
-
-
-
-
-
-
-
-
-
906,680
(211,837)
694,843
Stock-based compensation
Warrants expired
Broker warrants
Share issue expenses
Balance at Sept. 30, 2015
-
-
-
-
53,259,052
98,948
30,818
-
-
31,288,335 2,113,643 2,088,784
-
-
- (30,818)
116,550
-
-
-
-
-
(116,550)
(919,665)
(11,894,627)
98,948
-
-
(919,665)
23,596,135
The accompanying notes are an integral part of these financial statements.
- 36 -
Midland Exploration Inc.
Statements of Cash Flows
For the years ended September 30, 2016 and 2015
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 placements
Flow-through private placement
Exercise of options
Exercise of warrants
Share issue expenses
Investing activities
Additions to investments
Disposals of investments
Additions to exploration properties
Disposals of exploration properties
Advance paid for exploration expenses
Additions to exploration and evaluation expenses
Tax credits and mining rights received
Net change in cash and cash equivalents
Cash and cash equivalents – beginning (note 5)
Cash and cash equivalents – ending (note 5)
Additional disclosure (see note 15)
Fiscal 16
$
Fiscal 15
$
(807,158)
(629,098)
-
96,951
82,174
(192,134)
(820,167)
1,624
(73,708)
(5,320)
(7,923)
(81,163)
(126,134)
(292,624)
(1,112,791)
-
710,060
15,000
388,500
(57,382)
1,056,178
(5,311,910)
4,535,807
(340,618)
-
(344,624)
(2,941,722)
64,141
(4,338,926)
(4,395,539)
5,862,953
1,467,414
(2,034)
66,913
225,826
(239,297)
(577,690)
(36,074)
(65,607)
(6,650)
(31,019)
(58,608)
(229,159)
(427,117)
(1,004,807)
15,320,100
906,680
-
-
(919,665)
15,307,115
(11,031,807)
2,060,000
(300,840)
30,000
-
(924,615)
60,505
(10,106,757)
4,195,551
1,667,402
5,862,953
The accompanying notes are an integral part of these financial statements.
- 37 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
1. STATUTE OF INCORPORATION AND NATURE OF ACTIVITIES
Midland Exploration Inc. (“the Corporation”), incorporated in Canada 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. Its head office is
located at 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
2.1 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 8, 2016.
2.2 Basis of measurement
These financial statements have been prepared on a historical cost basis except for certain assets at
fair value.
2.3 Functional and presentation currency
The financial statements are presented in Canadian dollars, which is the Corporation’s functional
currency.
2.4 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.
2.5 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.
- 38 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
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.
a)
Financial assets
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. Loans and receivables are recognized initially at the amount
expected to be received, less, when material, a discount to reduce the loans and receivables to fair
value. After initial recognition these are measured at amortised cost using the effective interest method,
less provision for impairment.
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.
As of September 30, 2016, the Corporation had no investments classified as held-to-maturity.
Impairment of financial assets
All financial assets are subject to review for impairment periodically. Financial assets are impaired only
if there is 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.
b) Financial liabilities
Financial liabilities measured at amortized cost
Accounts payable and accrued liabilities and advance received for exploration work are initially
measured at the amount required to be paid, less, when material, a discount to reduce the payables
to fair value. Subsequently, financial liabilities are measured at amortized cost using the effective
interest method.
- 39 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
c) Classification
The Corporation has classified its financial instruments as follows:
Category
Loans and receivables
Financial liabilities measured at amortized cost
Financial instruments
Bank balance and cash on hand
Guaranteed investment certificates
In trust deposits
High interest savings account
Accounts receivable
Accrued interest receivable
Advance paid for exploration work
Accounts payable and accrued liabilities
Advance received for exploration work
2.6 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.
2.7 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.
2.8 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 less accumulated impairment losses. 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.
- 40 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
E&E expenses include overhead expenses directly attributable to the related activities.
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.
2.9 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.
2.10 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.
- 41 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.11
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.
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.
2.12 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.
2.13 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.
2.14 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.
- 42 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.15 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.
2.16 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.
2.17 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.
2.18 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.
- 43 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
3. ACCOUNTING STANDARDS ISSUED RECENTLY
The most relevant standards, amendments and interpretations issued up to the date of the issuance
of these financial statements are listed below.
3.1 Accounting standards issued but not yet effective
IFRS 9, Financial Instruments, (“IFRS 9”)
a)
In November 2009 and October 2010, the IASB issued the first phase of IFRS 9, Financial Instruments.
In November 2013, the IASB issued a new general hedge accounting standard, which forms part of
IFRS 9. The final version of IFRS 9 was issued in July 2014 and includes a third measurement category
for financial assets (fair value through other comprehensive income) and a single, forward-looking
‘expected loss’ impairment model.
This standard is part of a wider project to replace IAS 39, Financial Instruments: Recognition and
Measurement (“IAS 39”). IFRS 9 replaces the current multiple classification and measurement models
for financial assets and liabilities with a single model that has only three classification categories:
amortized cost, fair value through other comprehensive income and fair value through profit and loss.
The basis of classification depends on the entity’s business model and the contractual cash flow
characteristics of the financial asset or liability. It also introduces additional changes relating to financial
liabilities 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. Management is currently reviewing the impact that this standard will have on its
financial statements.
IFRS 16 Leases
b)
In January 2016, the IASB issued IFRS 16. IFRS 16 sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both parties to a contract, which is the
customer (“lessee”) and the supplier (“lessor”). IFRS 16 replaces IAS 17, Leases (“IAS 17”), and
related interpretations. All leases result in the lessee obtaining the right to use an asset at the start of
the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16
will eliminates the classification of leases as either operating leases or finance leases as is required
by IAS 17 and, instead, introduces a single lessee accounting model. Applying that model, a lessee is
required to recognize:
•
•
assets and liabilities for all leases with a term of more than 12 months, unless the underlying
asset is of low value; and
depreciation of lease assets separately from interest on lease liabilities in the statement of loss
and comprehensive loss.
The new standard is effective for annual periods beginning on or after January 1, 2019 with an early
adoption permitted if IFRS 15 Revenue from contracts with customers is also applied. Management
has not yet evaluated the impact that this new standard will have on its consolidated financial
statements.
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.
- 44 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
4. CRITICAL ACCOUNTING ESTIMATES, JUDGMENTS AND ASSUMPTIONS (CONT’D)
JUDGMENTS
4.1 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 $82,174 for the year ended September 30,
2016 (“Fiscal 16”) ($225,826 for the year ended September 30, 2015 (“Fiscal 15”)). No reversal of
impairment losses has been recognized for the reporting periods.
4.2 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.
4.3 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.
- 45 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
4. CRITICAL ACCOUNTING ESTIMATES, JUDGMENTS AND ASSUMPTIONS (CONT’D)
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 judgment 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 1.41%,
maturing June 5, 2017
Guaranteed investment certificates bearing interest between
1.05% and 1.25%, maturing between December 4, 2015 and
June 8, 2016
As at September 30
2015
2016
$
$
794,026
467,414
1,000,000
-
-
1,467,414
5,068,927
5,862,953
All the exploration work imposed by the December 2014 and November 2015 flow-through financing
was completed before September 30, 2015 and September 30, 2016 respectively.
6.
INVESTMENTS
Current
Guaranteed investment certificates, not cashable before the expiry
date, between 1.40% and 1.95% interest payable annually,
maturing between December 8, 2016 and July 17, 2017, with a
maturity value of $8,867,188
Guaranteed investment certificates, not cashable before the expiry
date, between 1.40% and 1.60% interest payable annually,
maturing between November 27, 2015 and July 15, 2016, with a
maturity value of $4,602,894
Non-current
Guaranteed investment certificates, not cashable before the expiry
date, between 1.45% and 1.95% interest payable annually,
maturing between July 14, 2018 and July 23, 2018, with a
maturity value of $3,130,844
Guaranteed investment certificates, not cashable before the expiry
date, between 1.60% and 1.95% interest payable annually,
maturing between June 5, 2017 and July 16, 2018, with a maturity
value of $6,608,312
As at September 30
2015
2016
$
$
8,729,000
-
4,535,807
3,078,910
-
-
11,807,910
6,496,000
11,031,807
- 46 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
7. EXPLORATION AND EVALUATION ASSETS
The following tables disclose the acquisition costs of exploration properties:
Acquisition
costs
Undivided
interest
%
As at
Sept. 30,
2015
$
Net
Additions
$
Option
payments
$
Impairment
$
As at
Sept. 30,
2016
$
Abitibi
Maritime-Cadillac
Laflamme
Patris
Casault
Jouvex
Heva
Valmond
La Peltrie
Adam
Samson
Abitibi Or
Grenville-
Appalaches
Weedon
Gatineau
James Bay
James Bay Au
Eleonore
JV Eleonore
Northern
Quebec
Pallas PGE
Willbob
Quebec
Labrador
Ytterby
Project
Generation
49
70
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
100
50.6
100
290,440
82,195
87,072
17,649
44,244
100,502
3,666
69,999
-
-
69,230
31,993
13,155
164,821
102,512
-
61,301
34,552
75
22,352
-
(111)
754
5,507
3,593
33,594
11,975
17,406
117,892
5,779
2,538
19,673
12,652
96,217
11,142
21,290
7,791
1,413
19,462
1,200,584
3,967
387,708
1)
Some claims were dropped and the Corporation impaired partially the property.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,147)1)
-
-
-
-
-
-
-
-
(37,220)1)
(7,756)1)
(7,344)1)
(5,613)1)
(9,932)1)
-
290,515
97,400
87,072
17,538
44,998
106,009
7,259
103,593
11,975
17,406
149,902
30,016
8,349
178,881
105,232
96,217
-
-
72,443
55,842
(7,162)1)
2,042
-
(82,174)
23,429
1,506,118
- 47 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
Acquisition
costs
Abitibi
Maritime-
Cadillac
Laflamme
Patris
Casault
Jouvex
Heva
Valmond
La Peltrie
Adam
Abitibi Or
Grenville-
Appalaches
Weedon
Gatineau
James Bay
James Bay Au
Eleonore
James Bay U
James Bay Fe
Northern
Quebec
Pallas PGE
Willbob
Quebec
Labrador
Ytterby
Project
Generation
Undivided
interest
%
As at
Sept. 30,
2014
$
Net
Additions
$
Option
payments
$
Impairment
$
As at
Sept. 30,
2015
$
49
64.9
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
50.5
100
290,437
3
69,093
87,072
16,717
44,244
95,203
-
9,362
-
77,521
37,438
18,688
180,191
77,730
9,828
47,808
11,301
1,130
27,792
-
932
-
5,299
3,666
60,637
17,966
(8,291)
7,655
3,811
50,923
24,782
63
7,856
50,000
33,422
1,512
6,279
15,214
1,090,489
4,248
297,043
-
-
-
-
-
-
-
-
(17,966)
-
-
-
-
-
-
-
-
-
-
-
(17,966)
-
290,440
(14,690)1)
-
-
-
-
-
-
-
-
(13,100)1)
(9,344)1)
(66,293)1)
-
(9,891)2)
(55,664)2)
-
-
-
82,195
87,072
17,649
44,244
100,502
3,666
69,999
-
69,230
31,993
13,155
164,821
102,512
-
-
61,301
34,552
7,791
-
(168,982)
19,462
1,200,584
1)
2)
Some claims were dropped and the Corporation impaired partially the property.
The Company wrote off the property since no exploration program are planned for the near future.
- 48 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
The following two tables disclose details of exploration and evaluation expenses:
E&E expenses
Undivided
interest
%
Net
Additions
$
Option
payments
$
Tax
credits Impairment
$
$
As at
Sept. 30,
2016
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,611)
(107,086)
-
(18,280)
-
(49,350)
-
(10,553)
(97,771)
(4,423)
(17,984)
(6,280)
-
(3,431)
(52,363)
(93,945)
(59,730)
(322,377)
-
(3,152)
(849,336)
-
236,090
- 1,893,853
221,646
-
352,708
-
351,966
-
157,076
-
120,742
-
78,203
-
628,505
-
42,841
-
173,644
-
-
-
523,230
29,024
-
261,886
- 1,629,303
124,692
-
-
-
-
369,500
565,271
183,583
74,069
-
- 8 041,811
49
70
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
100
Abitibi
Maritime-Cadillac
Laflamme
Patris
Casault
Jouvex
Heva
Valmond
Samson
La Peltrie
Adam
Abitibi Au
Grenville-
Appalaches
Weedon
Gatineau
James Bay
James Bay Au
Eleonore
JV Eleonore
Northern
Quebec
Pallas PGE
Willbob
Quebec
Labrador
Ytterby
Project
Generation
As at
Sept. 30,
2015
$
232,965
1,507,229
219,143
298,888
348,457
35,133
120,742
439
118,209
-
117,841
5,736
493,710
2,503
72,100
3,509
171,293
-
88,317
632,046
47,264
73,787
484,279
28,892
45,231
132
248,057
1,527,352
-
17,260
154,314
218,637
269,391
111,951
159,839
775,697
50.6
172,054
11,529
100
59,390
17,831
5,900,412 2,990,735
- 49 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
E&E
expenses
Undivided
interest
%
As at
Sept. 30,
2014
$
Net
Additions
$
Option
payments Tax credits Impairment
$
$
$
As at
Sept. 30,
2015
$
Abitibi
Maritime-
Cadillac
Laflamme
Patris
Casault
Jouvex
Heva
Valmond
Samson
La Peltrie
Adam
Abitibi Au
Grenville-
Appalaches
Weedon
Gatineau
James Bay
James Bay
Au
Eleonore
James Bay
U
James Bay
Fe
Northern
Quebec
Pallas PGE
Willbob
Quebec
Labrador
Ytterby
Project
Generation
49
64.9
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
50.5
100
232,965
-
-
-
-
232,965
1,310,514
208,755
290,082
346,090
18,563
123,955
-
-
-
36,641
199,977
10,388
8,806
2,367
16,570
6,787
439
118,209
-
83,556
-
-
-
-
-
(10,000)
-
-
-
-
388,013
28,766
108,768
126
216,677
37,758
1,175,139
14,686
377,436
-
42,158
-
216,088
5,116
53,459
117,948
109,090
62,964
-
-
-
-
-
-
-
-
-
(3,262)
-
-
-
-
-
-
-
-
(2,356)
(12,502)
-
(6,378)
- 1,507,229
219,143
-
298,888
-
348,457
-
-
35,133
120,742
-
-
439
118,209
-
-
-
117,841
-
-
-
-
484,279
28,892
248,057
(25,223)
-
(14,686)1)
- 1,527,352
-
-
(42,158)1)
-
(156)
(11,113)
-
-
-
-
269,391
111,951
172,054
39,547
19,843
4,802,845 1,225,401
-
(10,000)
-
(60,990)
-
59,390
(56,844) 5,900,412
1)
The Company wrote off the property since no exploration program are planned for the near future.
- 50 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
ABITIBI
7.1 Maritime-Cadillac
The Corporation holds 49% of the Maritime-Cadillac property. The property is 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
per the agreement signed in June 2009 and amended in November 2012 and May 2013, Agnico Eagle
Mines Limited (“Agnico Eagle”) and the Corporation are in a joint venture and future work are shared
51% Agnico Eagle - 49% the Corporation.
7.2 Laflamme Au-Cu
On August 17, 2009, the Corporation signed an agreement with Aurbec Mines Inc. (“Aurbec”),
(previously a subsidiary of North American Palladium Ltd.) that was sold to Maudore Minerals Ltd in
March 2013. As of July 31, 2011, Aurbec earned its 50% interest in the Laflamme property but no
longer contributes in the exploration programs since December 2012 and is therefore being diluted.
The Corporation holds 70.0% of the Laflamme property. On June 17, 2016, Abcourt Mines Inc.
acquired the property following the bankruptcy of Aurbec.
7.3 Patris
The Corporation holds the Patris property and some claims are subject to the following NSR royalties:
• 1%, the Corporation can buy it back for $500,000 per 0.5% tranche for a total of $1,000,000;
• 1.5%, the Corporation can buy it back for $500,000 per 0.5% tranche for a total of $1,500,000.
• 2%, the Corporation can buy it back for $1,000,000 per 1% tranche for a total of $2,000,000;
• 2%, the Corporation can buy it back for $1,000,000 per 1% tranche for a total of $2,000,000;
• 2%, the Corporation can buy it back for $500,000 the first 1% tranche and for $1,000,000 for the
second 1% tranche, 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 and May 30, 2016 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)(completed)
On or before August 31, 2017
On or before August 31, 2018
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
Payments in
cash
$
Work
$
-
-
-
-
500,000
800,000
1,700,000
3,000,000
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
-
300,000
5,000,000
10,500,000
Teck will be project operator during the First Option.
- 51 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
7.4 Casault et 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.
By October 10, 2016, SOQUEM completed the $4,500,000 work commitment, acquired a 50%
undivided interest in the Casault Jouvex property and is now in joint venture with the Corporation. The
Corporation is the operator during the option period.
7.5 Heva
The Corporation owns the Heva property and some 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.
7.6 Valmond
On November 19, 2013, the Corporation signed an agreement with Sphinx Resources Ltd. (“Sphinx”)
whereby Sphinx could have acquired 50% of the Valmond property subject to $250,000 payments in
cash ($30,000 completed) and $2,500,000 exploration work ($670,350 completed). In August 2015,
Sphinx terminated the agreement on the Valmont property.
7.7 Samson
On September 3, 2014, the Corporation signed an agreement with Sphinx whereby Sphinx could have
acquired 50% of the Samson property subject to $275,000 payments in cash ($40,000 completed) and
$3,500,000 exploration work ($555,854 completed). On December 11, 2015, Sphinx terminated the
agreement on the Samson property.
7.8 Adam
On December 12, 2014, the Corporation signed an agreement with Sphinx whereby Sphinx could
have acquired 50% of the Adam property subject to $250,000 payments in cash (20,000 completed)
and $3,000,000 exploration work ($174,449 completed). On December 11, 2015, Sphinx terminated
the agreement on the Adam property.
GRENVILLVE-APPALACHES
7.9 Weedon
The Corporation holds the Weedon property and some claims are subject to NSR royalties of:
• 1%, the Corporation can buy it back for $500,000 per 0.5% tranche for a total of $1,000,000;
• 0.5%, the Corporation can buy it back for $500,000;
• 1.5%, on all metals except gold and silver the Corporation can buy it back for $500,000 per 0.5%
tranche for a total of $1,500,000.
JAMES BAY
7.10 James Bay Gold JV (Au), operated by Osisko
On June 13, 2016, a joint-venture agreement (50%-50%) was signed with Osisko Exploration James
Bay Inc. (“Osisko”) whereby Osisko and the Corporation will cooperate and combine their efforts to
explore the JV Eleonore property recently staked by the two corporations. The property is located 12
kilometres southeast and northwest of Goldcorp’s Eleonore deposit.
- 52 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
NORTHERN QUEBEC
7.11 Pallas PGE
On January 21, 2014, the Corporation signed an option agreement with Japan Oil, Gas and Metals
National Corporation (« JOGMEC »). In September 2015, JOGMEC has funded the $2,000,000
commitment of exploration work and now has the right to exercise its option to acquire a 50% interest
in the Pallas PGE property. The Corporation is the operator as long as it will hold an interest equal to
or higher than 50% in the project.
QUEBEC / LABRADOR
7.12 Ytterby
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 in a 50% interest in the Ytterby
property by funding $2,700,000 exploration work. As of September 30, 2015, JOGMEC has not yet
given its notice to exercise its right. In spring 2015, JOGMEC indicated that it would not participate in
the exploration program and its interest has now been diluted to 49.4%.
8. EQUITY
Authorized
Unlimited number of common shares without par value, voting and participating.
8.1 Private placements
a) December 2014
Units
On December 3 and 17, 2014, the Corporation completed private placements by issuing 1,100,430
and 162,858 units respectively at $0.70 per unit for total gross proceeds of $884,302. 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 and 16, 2016 respectively.
From the total compensation received from the units, $75,062 has been allocated to warrants and
$809,240 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 55.1% for the units issued December 3, 2014 and 56.2% for the units issued December 17, 2014,
a risk free interest rate of 1.04% and an expected life of the warrants of 24 months.
Flow-through
On December 3 and 17, 2014, the Corporation completed private placements by issuing 1,036,683
and 30,000 flow-through shares respectively at $0.85 per share, for total gross proceeds of $906,680.
On December 3 and 17, 2014, the Corporation’s share closed at $0.65 and $0.70 on the Exchange,
therefore the residual value attributed to the benefit related to flow-through shares renunciation is $0.20
and $0.15 respectively for a total value of $211,837 credited to the liability related to the premium on
flow-through shares. As of September 30, 2015, the Corporation had completed all the exploration
work relating to these flow-through placements.
In connection with the December 2014 private placements, the Corporation paid finder’s fees of
$29,274.
- 53 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
8. EQUITY (CONT’D)
b) May 2015
Units
On May 4 and 12, 2015, the Corporation completed a private placement of 20,622,569 units at a price
of $0.70 per unit for total gross proceeds of $14,435,798. Each unit consisted of one common share
and one warrant. Each warrant entitles the holder to purchase one common share at a price of $1.15
until May 3, 2018.
From the total compensation received from the units, $1,922,031 has been allocated to warrants and
$12,513,767 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 49.8%, a risk free interest rate of 0.51% and an expected life of the warrants of 3 years.
In connection with the private placement, the Corporation paid finder’s fees of $457,980 and issued
compensation warrants entitling the finders to acquire 555,000 common shares of the Corporation at
a price of $0.70 per share until May 3, 2017. The total compensation warrants cost amounted to
$116,550 and this fair value was estimated using the Black-Scholes model with the same assumptions
as the warrants except for an expected life of 2 years.
Share issue expenses, including the finder’s fees and compensation warrants, totalled $952,790 of
which $825,883 was allocated to capital stock and $126,907 to warrants.
c) November 2015
Flow-through
On November 20, 2015, the Corporation completed a private placement by issuing 835,365 flow-
through shares at $0.85 per share, for total gross proceeds of $710,060. On that date, the
Corporation’s share closed at $0.62 on the Exchange, therefore the residual value attributed to the
benefit related to flow-through shares renunciation is $0.23 for a total value of $192,134 credited to
the liability related to the premium on flow-through shares. In connection with the private placement,
the Corporation paid finder’s fees of $26,208. As of September 30, 2016, the Corporation had
completed all the exploration work relating to these flow-through placements.
8.2 Warrants
Changes in the Corporation’s number of outstanding warrants were as follow:
Fiscal 16
Fiscal 15
Number
1,997,093
Amount
$
Amount
$
30,818
- 21,254,213 1,997,093
(30,818)
- (401,001)
1,997,093 21,254,213 1,997,093
401,001
Number
Balance – Beginning of year
Issued following private placements (note 8.1)
Expired
Balance – End of year
21,254,213
-
-
21,254,213
- 54 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
8. EQUITY (CONT’D)
Warrants outstanding as at September 30, 2016 are as follows:
Number of warrants
550,215
81,429
20,622,569
21,254,213
Exercise
price
$
0.95
0.95
1.15
Expiry date
December 2, 2016 (507,357 exercised before expiry)
December 16, 2016 (81,429 exercised before expiry)
May 3, 2018
8.3 Broker warrants
Changes in the Corporation’s number of outstanding broker warrants were as follow:
Fiscal 16
Fiscal 15
Number
Amount Number Amount
Balance – Beginning of year
Issued following a private placement (note 8.1)
Exercised
Balance – End of year
555,000
-
(555,000)
-
$
116,550
(116,550)
-
- 555,000
-
- 555,000
$
-
116,550
-
116,550
8.4 Policies and processes for managing capital
The capital of the Corporation consists of the items included in equity of $23,759,148 as of September
30, 2016 ($23,596,135 as of September 30, 2015). 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
9.1 Salaries
Salaries
Director fees
Benefits
Less : salaries and benefits capitalized in E&E assets
Salaries disclosed on the statement of comprehensive loss
Fiscal 16
$
892,546
34,875
73,634
1,001,055
(544,780)
456,275
Fiscal 15
$
755,900
-
68,111
824,011
(475,153)
348,858
- 55 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
9. EMPLOYEE REMUNERATION (CONT’D)
9.2 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
Fiscal 16
$
142,127
(45,176)
Fiscal 15
$
98,948
(32,035)
96,951
66,913
The Corporation has a stock option plan (the “Plan”). The number of common shares granted is
determined by the Board of Directors. On December 10, 2015, 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 4,000,000 to 5,400,000. Such amendment to the plan was approved by the
Exchange. 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.
On August 13, 2015, the Corporation granted to its directors, officers, employees and consultants
475,000 options exercisable at $0.60, 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 $123,500 for an estimated fair value of $0.26 per option. The fair value
of the options granted was estimated using the Black-Scholes model with no expected dividend yield,
45% expected volatility, 1.12% 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 August 11, 2016, the Corporation granted to its directors, officers, employees and consultants
500,000 options exercisable at $1.10, 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 $250,000 for an estimated fair value of $0.50 per option. The fair value
of the options granted was estimated using the Black-Scholes model with no expected dividend yield,
48% expected volatility, 0.87% 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.
- 56 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
9. EMPLOYEE REMUNERATION (CONT’D)
A summary of changes in the Corporation’s common share purchase options is presented below:
Fiscal 16
Fiscal 15
Balance – Beginning of year
Granted
Exercised
Expired
Balance – End of year
Balance – End of year exercisable
Weighted
average
exercise
price
$
1.18
1.10
0.60
-
1.10
1.14
Number of
options
1,780,000
475,000
-
(235,000)
2,020,000
1,545,000
Weighted
average
exercise
price
$
1.27
0.60
-
1.47
1.18
1.24
Number of
options
2,020,000
500,000
(25,000)
-
2,495,000
1,836,666
The following table summarizes information about common share purchase options outstanding and
exercisable as at September 30, 2016:
Number of options
outstanding
Number of
options
exercisable
260,000
315,000
20,000
345,000
605,000
425 000
500,000
2,495,000
260,000
315,000
20,000
345,000
605,000
291,666
-
1,836,666
Exercise
price
$
1.76
1.54
1.61
1.25
0.85
0.60
1.10
Expiry date
February 17, 2021
February 16, 2022
February 27, 2022
February 19, 2023
February 20, 2024
August 13, 2025
August 11, 2026
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.
Fiscal 16
$
Fiscal 15
$
Loss
Weighted average number of basic and diluted outstanding shares
Basic and diluted net loss per share
- 57 -
(807,158)
(629,098)
54,001,374 40,639,071
(0.02)
(0.01)
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
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
Fiscal 16
$
Fiscal 15
$
192,134
192,134
239,297
239,297
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
Expired tax attributes
Recovery of deferred income taxes
Fiscal 16
$
(999,292)
Fiscal 15
$
(868,395)
(268,810)
33,247
191,006
(192,134)
41,479
3,077
-
(192,135)
(233,598)
22,917
266,610
(239,297)
(76,376)
(6,195)
26,642
(239,297)
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 $1,201,000.
As at September 30, 2016, 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
Fiscal 16
$
Fiscal 15
$
1,848,000
22,000
199,000
2,069,000
1,648,000
18,000
259,000
1 925 000
868,000
868,000
782,000
782,000
Deferred income tax assets not recognized
1,201,000
1,143,000
- 58 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
11.
INCOME TAXES (CONT’D)
As of September 30, 2016, expiration dates of losses available to reduce future years’ income tax are:
Federal
$
84,000
126,000
177,000
540,000
645,000
726,000
677,000
748,000
906,000
760,000
820,000
1,044,000
Provincial
$
69,000
112,000
183,000
514,000
631,000
713,000
663,000
736,000
891,000
749,000
811,000
1,026,000
2026
2027
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
12. COMPENSATION TO KEY MANAGEMENT AND RELATED PARTY TRANSACTIONS
12.1 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
Professional fees recorded in share issue expenses
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
Fiscal 16 Fiscal 15
$
$
359,210
72,427
3,263
129,450
288,781
67,534
12,724
132,260
96,969
16,162
677,481
65,050
10,842
577,191
On January 1, 2015, the Corporation entered into amended employment agreements with members
of the senior management which, among other things, provide that in the event of a termination without
cause or of a change of control, a compensation equivalent to between 12 to 18 months of salary will
be paid. Also, on January 1, 2015, the Corporation entered into a consulting agreement with another
member of senior management, which provides that in the event of a termination without cause or of
a change of control, a compensation equivalent to 18 months of remuneration will be paid.
12.2 Related party transactions
In addition to the amounts listed above in the compensation to key management (note 12.1), following
are the related party transactions:
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Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
12. COMPENSATION TO KEY MANAGEMENT AND RELATED PARTY TRANSACTIONS (CONT’D)
In the normal course of operations:
♦
A firm in which an officer is a partner charged professional fees amounting to $63,568 ($125,932
in Fiscal 15) of which $51,089 ($55,001 in Fiscal 15) was expensed and $12,479 ($70,931 in
Fiscal 15) was recorded as share issue expenses;
A company controlled by an officer charged professional fees of $69,620 ($57,660 in Fiscal 15)
for her staff; and
As at September 30, 2016, the balance due to the related parties amounted to $16,300 ($21,563
in September 30, 2015).
♦
♦
Out of the normal course of operations:
♦
Directors and officers of the Corporation participated in the flow-through private placement of
November 2015 (note 8.1 c)) for $96,050 (December 2014 (note 8.1 a)) for $79,050) and in the
units private placement of May 2015 (note 8.1 b)) for $15,400. The directors and officers
subscribed to the units private placement and the flow-through private placement under the same
terms and conditions set forth all subscribers.
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 in September 2016 by Statistic Canada
for a 12-month period which was 1.3%):
Within 1 year
1 to 5 years
After 5 years
Total
As of September 30, 2016
$
23,899
10,060
-
33,959
In September 2012, the Corporation extended the lease for five years, from March 2013 to February
2018. The rent is $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 is also responsible for its proportionate
share of the non-residential surtax and the water surtax.
Lease payments recognized as an expense during the reporting period amounted to $25,634 ($24,871
in Fiscal 15). This amount consists of minimum lease payments.
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Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
14. FINANCIAL INSTRUMENTS AND RISKS
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:
14.1 Market Risk
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 $128,079 as of September
30, 2016 ($161,007 as of September 30, 2015). The Corporation’s other financial assets and liabilities
do not comprise any interest rate risk since they do not bear interest.
14.2 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 and its investments in
financial instruments held with a Canadian chartered bank, with a broker which is a subsidiary of a
Canadian chartered bank or with an independent investment dealer member of the Canadian Investor
Protection Fund. In Fiscal 16, the investments are composed of guaranteed investment certificates
issued by Canadian banks or guaranteed by the Canadian Investor Protection Fund. The Corporation
aims at signing partnership agreements with established companies and follows closely their cash
position to reduce its credit risk on accounts receivable. The carrying amount of cash and cash
equivalents and investments represents the Corporation maximum credit exposure.
14.3 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, 2016, the Corporation had enough funds available to meet its
financial liabilities and future financial liabilities from its existing commitments. All accounts payable
and accrued liabilities terms are less than 31 days.
14.4 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.
Fair value estimates are made at the statement of financial position date, based on relevant market
information and other information about financial instruments.
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Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2016 and 2015
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
Exercise of warrants credited to capital stock
Interest received
Fiscal 2016 Fiscal 2015
$
45,176
396,820
855,716
6,500
116,550
239,459
$
32,035
339,513
60,990
-
-
73,945
16. SUBSEQUENT EVENT
On November 17 and 24, 2016, the Corporation completed a private placement by issuing 1,284,354
flow-through shares at $1.35 per share, for total gross proceeds of $1,733,876. On those dates, the
Corporation’s share closed at $1.15 and $1.14 respectively, on the Exchange, therefore the residual
value attributed to the benefit related to flow-through shares renunciation is $0.20 and $0.21
respectively, for a total value of $259,290, credited to the liability related to the premium on flow-
through shares. In connection with the private placement, the Corporation paid finder’s fees of $60,650.
Directors and officers of the Corporation participated in these placements for a total consideration of
$136,100.
On November 23, 2016, the Corporation granted to an employee 50,000 options exercisable at $1.13,
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 $25,500
for an estimated fair value of $0.51 per option. The fair value of the options granted was estimated
using the Black-Scholes model with no expected dividend yield, 48% expected volatility, 0.72% 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.
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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, LLP
1250 René-Lévesque Boulevard West, Suite 2500
Montreal, Quebec, H3B 4Y1
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
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