Annual Report
2017
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
Management’s discussion and Analysis
Nature of Activities ........................................................................................................................................ 3
Overall Performance ..................................................................................................................................... 3
Results of Operations .................................................................................................................................... 4
Investing Activities ......................................................................................................................................... 6
Financing Activities ..................................................................................................................................... 24
Working Capital ........................................................................................................................................... 25
Summary of Results per Quarter ................................................................................................................ 25
Fourth Quarter ............................................................................................................................................. 25
Related Party Transactions ......................................................................................................................... 26
Subsequent Events ..................................................................................................................................... 26
Outstanding Share Data .............................................................................................................................. 26
Stock Option Plan ....................................................................................................................................... 27
Off-balance Sheet Arrangements ............................................................................................................... 27
Commitment ................................................................................................................................................ 27
Critical Accounting Estimates...................................................................................................................... 27
Accounting Standards Issued Recently ...................................................................................................... 29
Financial Instruments .................................................................................................................................. 30
Risk Factors ................................................................................................................................................ 30
Foward Looking Information........................................................................................................................ 33
Financial Statement
Independant Auditor’s Report ..................................................................................................................... 34
Statements of Financial Position ................................................................................................................. 36
Statements of Comprehensive Loss ........................................................................................................... 37
Statements of Change in Equity ................................................................................................................. 38
Statements of Cash Flows .......................................................................................................................... 39
Notes to Financial Statements .................................................................................................................... 40
Corporate Information ................................................................................................................................. 68
- 2 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
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, 2017.
This MD&A should be read in conjunction with the Corporation’s audited financial statements as at
September 30, 2017 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 15
Q1-16
Q2-16
Q3-16
Q4-16
Fiscal 16
Q1-17
Q2-17
Q3-17
Q4-17
Fiscal 17
Fiscal 18
Period
October 1, 2014 to September 30, 2015
October 1, 2015 to December 31, 2016
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 December 31, 2016
January 1, 2017 to March 31, 2017
April 30, 2017 to June 30, 2017
July 1, 2017 to September 30, 2017
October 1, 2016 to September 30, 2017
October 1, 2017 to September 30, 2018
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 $11,678,771 as of September 30, 2017 ($13,787,092 as
of September 30, 2016, which includes $3,078,910 as of September 30, 2016 of investments in
guaranteed investment certificates with expiry dates over 1 year (nil as of September 2017)), 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).
From October 1, 2016 to December 7, 2017, the Corporation completed several private placements
by issuing 3,591,208 flow-through shares for total gross proceeds of $4,848,130.
During Fiscal 17, the Corporation signed several option and partnership agreements:
• On February 10, 2017, the Corporation signed a letter of intent creating a strategic alliance
with Altius Minerals Corporation (“Altius”), whereby Altius and the Corporation will combine
their efforts to jointly explore the gold potential of the extensive James Bay region. The
Corporation is the operator;
• On April 27, 2017, the Corporation signed an option agreement with IAMGOLD Corporation
(“IAMGOLD”) whereby IAMGOLD may earn, in three options, a maximum interest of 65% in
the Héva property, by fulfilling $500,000 cash payments and $14,000,000 exploration work.
IAMGOLD is the operator;
- 3 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
2. OVERALL PERFORMANCE (CON’D)
• On August 29, 2017, the Corporation signed an option agreement with Niobay Metals Inc.
(“Niobay”) whereby Niobay may earn, in two options, a maximum interest of 65% in the La
Peltrie property, by fulfilling $250,000 cash payments and $3,000,000 exploration work.
Midland is the operator.
On March 28, 2017, JOGMEC withdrew from the option agreement signed on January 21, 2014 and
abandoned its right to exercise its option to acquire a 50% interest in the Pallas PGE property.
As operator, Midland incurred exploration expenditures totalling $6,243,161 ($4,869,973 in Fiscal 16),
on its properties of which $1,274,505 was recharged to its partners ($1,924,414 in Fiscal 16). The
operating partners incurred $631,255 of exploration expenses ($370,439 in Fiscal 16). Also, the
Corporation invested $619,147 ($443,316 in Fiscal 16) to complete several property acquisitions in
Quebec of which $100,422 was recharged to its partners ($55,608 in Fiscal 16).
The Corporation reported a loss of $1,214,056 in Fiscal 17 compared to $807,158 for Fiscal 16.
Selected annual information
Revenues
Loss
Loss per share, basic and diluted
Fiscal 17
$
96,193
(1,214,056)
(0.02)
Fiscal 16
$
107,423
(807,158)
(0.01)
Fiscal 15
$
301,452
(629,098)
(0.02)
2017
$
As at September 30,
2016
$
2015
$
Total assets
26,477,605
24,456,678
24,407,655
3. RESULTS OF OPERATIONS
Operating expenses increased to $1,864,707 for Fiscal 17 compared to $1,332,206 in Fiscal 16:
•
•
Salaries increased to $584,630 ($456,275 in Fiscal 16). Bonuses based on objectives for $94,500
were paid ($93,166 in Fiscal 16). Since January 2016, the Corporation pays directors fees and
the expense for Fiscal 17 is $51,000 ($34,875 in Fiscal 16).
Stock-based compensation increased to $285,429 ($96,951 in Fiscal 16). 475,000 options were
granted in Fiscal 15, 500,000 in Fiscal 16 and 695,000 in Fiscal 17. Their fair value was estimated
at $123,500, $250,000 and $362,250 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 ($66,913 in
Fiscal 15, $96,951 in Fiscal 16 and $285,429 in Fiscal 17) and the other part was capitalized
within the deferred exploration expenses ($32,035 in Fiscal 15, $16,162 in Fiscal 16 and $164,088
in Fiscal 17). The options vest over 18 months and it should be noted that the grant of options
occurred in August for Fiscal 15 and Fiscal 16 while it occurred in February for Fiscal 17.
• Office expenses increased to $133,918 ($83,856 in Fiscal 16). Computers and participation in
different associations like the Consorem explain this variance.
• Conference and mining industry involvement increased to $173,937 ($127,278 in Fiscal 16). More
employees from Midland participated to the conferences and also this year the New Orleans
conference was added to its agenda.
- 4 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
3. RESULTS OF OPERATIONS (CONT’D)
•
to
Impairment of exploration and evaluation assets
$232,075 ($82,174 in Fiscal 16) and the explanations can be found in the investing activities
section found later in this MD&A.
(non-cash
increased
items)
Project management fees decreased to $96,193 ($107,423 in Fiscal 16). Exploration on Pallas
generated more management fees in Fiscal 17, nevertheless Casault and Jouvex generated less fees
in Fiscal 17. On the other hand, the BJ Altius generated new management fees in Fiscal 17.
Interest income decreased to $169,368 ($225,491 in Fiscal 16) due to gradual decrease of the funds
invested since the $14.4 million private placement closed in May 2015.
A $382,090 ($192,134 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 November 2016 and March 2017 private placements (November 2015 in
Fiscal 16).
- 5 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES
l
y
g
o
o
e
G
$
2,380
23,712
3,486
85,689
2,806
52,441
3,572
4,333
54,870
31,420
23,893
61,136
12,381
92,070
113,385
202,506
346,681
Deferred
exploration
expenses
Fiscal 17
e
c
n
a
l
a
B
i
g
n
n
n
g
e
b
i
$
236,090
1,893,853
221,646
352,708
351,966
157,076
120,742
78,203
652,484
42,841
173,644
523,230
29,024
261,886
1,629,303
124,692
-
Abitibi
Maritime Cadillac
Laflamme Au
Patris Au
Casault Au
Jouvex Au
Heva Au
Valmond
Samson
La Peltrie
Adam
Abitibi Au
Grenville-
Appalaches
Weedon Cu Zn
Au
Gatineau Zn
Bay-James
Bay-James Au
Eleonore Au
JV Eleonore AU
JV BJ Altius
Québec Labrador
Ytterby REE
Northern Quebec
Pallas PGE
Willbob Au
Projects
generation
183,583
-
369,500
565,271
60,191
597,926
74,069
23,436
s
c
i
s
y
h
p
o
e
G
$
-
109,332
-
143,777
97,369
12,157
-
-
312,312
58,410
4,050
7,000
200
40,700
-
-
59,018
-
-
-
-
g
n
i
l
l
i
r
D
$
48,313
183,492
4,827
1,056,768
-
300
-
518
16,654
4,251
114
-
-
-
-
533
-
-
-
o
e
G
y
r
t
s
i
m
e
h
c
$
3,842
5,778
-
48,958
-
3,609
-
-
-
-
1,376
32,763
-
3,889
10,650
16,368
24,228
-
474,576
1,164,421
32,084
328,509
-
-
g
n
i
t
t
u
c
e
n
L
i
$
l
a
t
o
t
b
u
S
$
-
-
-
25,523
20,923
35,580
-
-
49,275
-
-
54,535
322,314
8,313
1,358,610
119,695
102,897
3,572
4,851
428,152
94,081
26,627
d
e
s
a
b
-
k
c
o
t
S
n
o
i
t
a
s
n
e
p
m
o
c
$
1,700
9,692
198
18,247
1,871
11,325
-
1,379
16,409
1,700
1,254
e
g
r
a
h
c
e
R
$
-
-
(8,313)
(686,997)
(60,549)
(1,193)
-
-
(23,947)
-
-
-
-
-
-
-
-
-
-
-
-
100,899
4,346
14,981
-
-
-
136,659
124,035
219,407
429,927
-
6,423
18, 280
4,328
-
-
-
(214,964)
-
-
-
-
566,851
2,090,856
6,703
60,233
(278,542)
-
(125,766)
(589,487)
23,436
-
-
(6,339)
s
t
i
d
e
r
c
x
a
T
$
(54)
(23,795)
-
(80,708)
(1,553)
(9,310)
-
(1,022)
(10,473)
(7,467)
(861)
(1,578)
-
(35,950)
(36,242)
(71,097)
(56,510)
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
7
6
1
l
a
c
s
i
F
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
56,181
308,221
198
611,257
60,867
104,909
3,572
5,208
415,100
88,314
29,826
292,271
2,202,064
221,884
963,965
412,833
261,985
124,314
83,411
1,067,584
131,155
203,470
103,667
626,897
14,981
44,005
100,709
94,216
166,590
162,781
362,595
1,723,519
291,282
162,781
(183,583)
(183,583)
-
-
-
-
169,246
1,561,602
538,746
2,126,873
17,097
91,166
TOTAL
8,041,811
1,798,314
844,325
2,954,767
512,054
133,701
6,243,161
164,088 (1,274,505)
(1,058,212)
-
(183,583)
3,890,949
11,932,760
- 6 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CON’T)
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
$
5,736
72,290
9,395
98,395
30,921
148,663
-
10,499
26,148
3,602
18,752
-
-
-
-
88,123
1,093
305,091
4,068
171,736
1,066,313
113,208
167,340
-
-
74,791
276,334
32,037
47,813
-
-
519
247,159
-
-
19,263
6,352
-
115,092
-
32,287
15,543
21,227
-
576
15,384
-
-
-
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
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
$
-
2,591
2,503
-
-
(14,556)
503
-
15,548 (1,427,271)
3,509 (327,012)
-
-
-
-
-
-
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
269,391
111,951
265,441
336,606
-
-
168
-
-
-
-
90,828
29,445
594
-
-
-
-
-
-
2,043
15,615
22,164
5,385
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
4,229 (155,575)
-
4,069
(59,730)
(322,377)
17,831
-
-
(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
369,500
565,271
14,679
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
- 7 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CON’T)
Expenses Exploration and evaluation
Actual Fiscal 16
Actual Fiscal 17
Budget Fiscal 17
Budget Fiscal 18
Midland Partners
$
$
Total
$
Midland
$
Partners
$
Total
$
Midland Partners
Total
Midland Partners
$
$
$
$
$
Properties
100% owned by Midland
Abitibi Au
Valmond
Samson
Adam
Weedon Cu-Zn-Au
Gatineau Zn
Baie James Au
Éléonore Au
Willbob
Pallas PGE Jogmec
Générations de projet
73,440
-
86,385
47,264
44,884
132
17,260
151,884
771,628
-
-
-
-
-
-
-
-
-
73,440
29,433
-
86,385
47,264
44,884
132
17,260
151,884
3,572
4,851
94,081
100,899
14,981
136,659
124,035
771,628
2,090,856
-
-
-
-
-
-
-
-
-
29,433
255,000
3,572
4,851
94,081
5,000
30,000
50,000
100,899
100,000
14,981
136,659
35,000
50,000
124,035
250,000
-
-
-
-
-
-
-
-
255,000
30,000
5,000
5,000
30,000
100,000
50,000
100,000
100,000
60,000
35,000
5,000
50,000
300,000
250,000
100,000
-
-
-
-
-
-
-
-
2,090,856 1,000,000
- 1,000,000 2,000,000
155,610
155,575
311,185
288,309
278,542
566,851
150,000
150,000
300,000
5,000
17,997
-
17,997
23,436
-
23,436
30,000
-
30,000
120,000
1,366,484
155,575
1,522,059
2,911,112
278,542
3,189,654 1,955,000
150,000 2,105,000 2,825,000
Total
$
30,000
5,000
100,000
100,000
60,000
5,000
300,000
100,000
- 2,000,000
-
-
5,000
120,000
- 2,825,000
With option, operated by Midland and paid by partner
La Peltrie
With option, operated and paid by the partner
628,505
-
628,505
409,164
23,947
457,058
150,000
-
150,000
Patris – Teck
Heva Au
In joint venture
Maritime-Cadillac- Agnico-Eagle 51%
Vermillon- Soquem 53.4%
Ytterby REE-Jogmec 49.4%
Laflamme Au – Abcourt 27.4%
Casault – Soquem 50%
Jouvex – Soquem 50%
JV Eleonore Osisko 50%
JV Altius 50%
-
155,155
170,790
-
170,790
155,155
5,736
16,887
11,529
491,119
5,086
16,476
-
-
155,155
170,790
325,945
10,822
33,363
11,529
491,119
56,552 1,427,271
1,483,823
-
327,012
215,010
208,278
-
-
796,833 1,984,123
2,962,612 2,294,853
327,012
423,288
-
2,780,956
5,257,465
-
292,255
292,255
-
700,000
700,000
102,894
102,894
71,744
246,382
400,000
-
400,000
363,999
538,638
400,000
700,000 1,100,000
-
-
-
-
500,000
500,000
15,000
15,000
500,000
500,000
515,000
515,000
54,535
56,761
111,296
100,000
100,000
200,000
100,000
100,000
200,000
-
-
322,314
673,718
60,549
-
-
-
-
-
10,000
10,000
5,000
5,000
20,000
10,000
-
5,000
5,000
10,000
-
-
-
200,000
322,314
150,000
-
150,000
200,000
687,591
1,361,309
335,000
350,000
685,000
300,000
300,000
600,000
60,549
121,098
48,000
50,000
98,000
100,000
100,000
200,000
219,407
219,407
438,814
300,000
300,000
600,000
275,000
275,000
550,000
600,000
300,000
429,927
2,784,758
815,000 1,763,000 1,280,000 1,080,000 2,360,000
6,946,160 3,453,000 1,665,000 5,118,000 4,105,000 2,095,000 6,200,000
-
948,000
300,000
-
-
214,963
1,545,486
4,968,656
214,964
1,239,272
1,881,813
- 8 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
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 chief executive officer of Midland, qualified person
under NI 43-101, has reviewed the following technical disclosure.
HIGHLIGHTS
• New high-grade gold discoveries on Willbob, Labrador Trough
• New Zn, Ni-Cu and Au discoveries with Altius in James Bay
• New Cu-rich boulders field discoveries with Osisko in James Bay
• New gold showing found on Lasalle , James Bay
• New gold zone identified on Casault with Soquem
• New drilling program commencing on Heva with Iamgold
• A total of 10,357 metres were drilled during Fiscal 16 (12,351.0 metres during Fiscal 16).
Moreover, an additional 2,901 metres were drilled October and November 2017.
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
Following the identification of new drilling targets that were generated on Maritime-Cadillac using a
3D-Model, two (2) short drill holes totalling 618.0 metres were completed during Q2-17.
Hole 141-17-36 was completed at a final depth of 303.0 metres and tested high historical gold values
obtained from the Maritime-Cadillac zone. Drill hole 141-17-36 intersected a gold-bearing zone grading
1.46 g/t Au over 31.60 metres from 112.80 to 144.40 metres, including 2.2 g/t Au over 15.6 metres on
the historic Maritime-Cadillac showing, at a vertical depth of approximately 100 metres. This gold-
bearing zone comprises several higher grade intervals including 4.3 g/t Au over 0.9 metre (124.1 to
125.0 m), 3.4 g/t Au over 1.0 metre (126.0 to 127.0 m) and 5.7 g/t Au over 0.6 metre (135.0 to 135.6
m). The gold mineralization is hosted in an altered felsic intrusion, described as a silicified albitite that
contains up to 3-5% pyrite-pyrrhotite-arsenopyrite, finely disseminated throughout the intrusion.
Hole 141-17-37 was completed at a final depth of 315.0 metres and tested the intersection between
the Dyke East gold-bearing structure with the Maritime Contact. This second hole was collared
approximately 250 metres north of the Maritime-Cadillac zone. Drill hole 141-17-37 yielded an isolated
value of 2.92 g/t Au over 1.2 metre, from 127.3 to 128.5 metres, in a minor shear zone hosting up to
30% quartz veinlets.
- 9 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
Agnico Eagle is currently preparing the next phase of drilling consisting in three (3) holes totalling
1,200 metres to test the continuity of the Maritime-Cadillac zone.
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, 2017, the Laflamme property consists of a total of 668 claims
covering an area of approximately 35,550 hectares and 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 17, therefore the Corporation impaired partially for $6,846 the
exploration property cost ($7,147 in Fiscal 16).
Exploration work on the property
A new drilling program totaling 1,425.0 metres and consisting in three (3) drill holes was completed in
the area of the Copernick (Ni-Cu-PGE) discovery during Q2-17.
Hole LAF-16-42EXT started at depth of 198.0 metres and ended at a final depth of 522.0 metres, for
a total length of 324.0 metres. Unmineralized ultramafic rocks were intersected but no significant assay
result was obtained.
Hole LAF-17-43 tested the Copernick zone at about 100 metres to the west and was completed at a
depth of 600.0 metres. Ultramafic rocks were intersected between 337.35 and 388.0 metres but are
only weakly mineralized overall with disseminated traces to 0.5% Po and of Cpy. No significant assay
result was obtained.
Hole LAF-17-44 was completed at a final depth of 501.0 metres and was testing the Copernick zone
at approximately 100 metres to the east. This hole intersected a porphyritic gabbro instead of
ultramafic rocks as it was expected. No ultramafic rock was intersected in that hole. Few quartz-
carbonate veinlets with Py were cut but no significant assay results was obtained.
Midland is preparing a ground geophysical survey (SQUID) aiming to detect new conductors
associated with the ultramafic rocks confirmed in 2017 to the east of Copernick.
4.3 Patris (Au), in partnership with Teck and operated by Teck
Property Description
The Patris property is located about 30 kilometres to the north-east of Rouyn-Noranda and as at
September 30, 2017 consists in 289 claims covering an area of approximately 12,162 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.
- 10 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
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 (completed)
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
The assay results were received from the drilling program completed on Patris in December 2016.
This program consisted in three (3) holes totalling 744.0 metres. As a result of this program, an
important alteration corridor affecting the ultramafic rocks and the porphyritic dykes was identified over
a distance of 1.1 kilometre between holes PAT-15-03 and PAT-16-10. The best assay result returned
0.68 g/t Au over 1.60 metre in hole PAT-16-10.
4.4 Casault (Au), in partnership with SOQUEM and operated by Midland
Property Description
The Casault property is located about 40 kilometres to the east of the Detour Lake gold project located
north of the city of La Sarre, Abitibi and as at September 30, 2017, 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.
Exploration work on the property
During Q2-17, a drilling program consisting in eight (8) holes totalling 2,208.0 metres was completed
mostly in the area west of the Timiskaming-type conglomerate basin and to the south-east of the Bug
Lake Southeast zone owned by Balmoral. Three IP grids were also completed and the final report
was completed. Several new IP anomalies located near the northern contact of the Timiskaming basin
were identified.
Drill hole CAS-17-86 targeted an induced polarization anomaly located where the regional Sunday
Lake Fault cuts the western end of a Timiskaming-type conglomerate basin, and intersected a new
gold-bearing zone grading 3.1 g/t Au over 1.40 metres (180.50 to 181.90 m), including an interval at
3.94 g/t Au over 0.90 metre (181.00 to 181.90 m). This zone is included within a larger anomalous
envelope which yielded a gold value of 0.56 g/t Au over 16.0 metres, from 180.50 to 196.50 metres.
- 11 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
In addition to this new zone, three other zones with anomalous gold values were intersected higher up
the drill hole, between 119.4 and 172.6 metres downhole depth.
An additional IP-OreVision survey, totalling approximately 10 km, was completed in the area of hole
CAS-17-86. The survey identified an anomalous response associated with the Sunday Lake fault zone.
During Q4-17, a drilling program consisting in five (5) drillholes totalling 1,638.0 metres was completed.
This program tested the lateral extensions (100 metres spacing) of the mineralized zone intersected
ion hole CAS-17-86 (Vortex Zone). Assays are pending.
4.5 Jouvex (Au), in partnership with SOQUEM and operated by Midland
Property Description
The Jouvex property is located about 50 kilometres to the southwest of Matagami and as at September
30, 2017 is composed of 348 claims covering an area of approximately 19,424 hectares. Some claims
were dropped therefore the Corporation impaired partially for $7,707.
See the Casault section for the details on the agreement signed with SOQUEM.
Exploration work on the property
Two IP-OreVision grids were completed during on Jouvex in the northern part of the property.
Preliminary results show the presence of several chargeability anomalies and the presence of a strong
formational conductor on the west grid.
Midland and Soquem are preparing a drilling program for next winter in order to test the best IP
anomalies detected on these grids.
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 30 contiguous claims largely covering sedimentary rocks
of the Cadillac Group just north of the Piché Group. 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.
On April 27, 2017, the Corporation signed an option agreement with IAMGOLD Corporation
(“IAMGOLD”) whereby IAMGOLD may earn, in three option, a maximum interest of 65% in the Héva
property, by fulfilling the following conditions:
- 12 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
First Option for a 50% initial interest
Upon signature (completed)
On or before April 30, 2018 ($250,000 firm commitment)
On or before April 30, 2019
On or before April 30, 2020
On or before October 31, 2021
Second Option for a 10% additional interest
Within 2 years from the date the first option is exercised, $500,000 of
exploration work for each additional 1% interest
Payments in
cash
$
Work
$
50,000
70,000
80,000
120,000
180,000
500,000
-
500,000
700,000
1,200,000
1,600,000
4,000,000
-
5,000,000
Third Option for a 5% additional interest
Within 2 years from the date the second option is exercised, $1,000,000
of exploration work for each additional 1% interest
Total, for a 65% maximum interest
-
500,000
5,000,000
14,000,000
IAMGOLD is the operator.
Exploration work on the property
During Q1-17, a detailed ground magnetic survey was conducted and a prospecting program was
completed in follow-up on soil geochem anomalies. Results from the prospecting returned several new
showings including 41.0 g/t Au , 9.2 g/t Au (East sector), 13.9 g/t Au, 8.0 g/t Au (Centre sector) and
1.7 g/t Au (West sector).
During Q4-17, Iamgold started a trenching program consisting in seven (7) trenches. Moreover, 1,500
metres drilling program which is planned to start in early December. These programs will test the best
structural, geological and geophysical (IP-Mag) targets identified during the compilation phase.
4.7 Valmond (Au), operated by Midland
Property Description
The Corporation acquired claims by map staking about 50 kilometres to the west of the town of
Matagami, Abitibi. As at September 30, 2016, this property consists in 111 claims covering an area of
approximately 6,179 hectares. Some claims were dropped therefore the Corporation impaired partially
for $1,831.
4.8 Samson Ni-Cu-PGE operated by Midland
Property Description
As at September 30, 2017, the Samson property consists of 227 claims covering a surface area of
about 12,601 hectares about 50 kilometres west of the town of Matagami, in Abitibi.
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.
- 13 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
4.9 La Peltrie (Au), operated by Midland
Property Description
As at September 2017, the La Peltrie property comprises 515 claims covering a surface area of about
28,438 hectares and encompasses possible subsidiary faults to the south of the regional Lower Detour
Fault over a distance of more than 10 kilometres.
On August 24, 2017, the Corporation acquired 4 claims from Globex Mining Enterprises Inc. (“Globex”)
by granting a 1% Gross Metal royalty to Globex.
On August 29, 2017, the Corporation signed an option agreement with Niobay Metals Inc. (“Niobay”)
whereby Niobay may earn, in two options, a maximum interest of 65% in the Héva property, by fulfilling
the following conditions:
First Option for a 50% initial interest
Upon signature (completed, 200,000 shares of Niobay received, valued
at $30,000)
On or before December 31, 2017 (firm commitment)
On or before August 31, 2018
On or before August 31, 2019
On or before August 31, 2020
On or before August 31, 2021
Payments in
cash
$
Work
$
30,000
-
30,000
50,000
70,000
70,000
250,000
-
500,000
-
400,000
600,000
1,500,000
3,000,000
Following the initial earn-in of its 50% interest, NioBay may earn an additional tranche of 15% interest
for an undivided 65% interest in the Properties, by producing a Preliminary Economic Study on or
before August 31, 2023.
The Corporation is the operator.
Exploration work on the property
A VTEM-type electromagnetic survey totalling approximately 560 km was completed during Q2-17 in
the southern portion of the property. The final interpretation is in progress.
Moreover, a new OreVision IP survey, totalling approximately 65 kilometres, was completed in Q2-17
on lines at a 200-metre spacing in the west part of the La Peltrie property. The survey was mainly
designed to cover an iron formation with anomalous gold values, which has seen very little drill-testing,
over a distance of more than 1.5 kilometres. The OreVision survey identified a new high-priority drilling
target, characterized by a chargeability anomaly defined over approximately 600 metres, associated
with an interpreted NW-SE-trending structure which has never been drill-tested. This anomaly cross-
cuts the gold-bearing iron formation, and two historic drill holes, respectively located 250 metres east
and 250 metres west of the structure, yielded gold-bearing intercepts grading 0.24 g/t Au over
19.50 metres (drill hole 11-493-01) and 0.35 g/t Au over 9.30 metres (drill hole 11-493-02).
Several other new OreVision anomalies were also identified along this iron formation, as well as
another very similar gold-bearing iron formation located approximately 3.5 kilometres further west,
where historic drill holes yielded anomalous gold values up to 0.14 g/t Au over 19.0 metres (drill hole
1180-97-09).
- 14 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
During Q4-17, a drilling program comprising seven (7) drillholes totalling 1,881.0 metres was
completed. This program tested the best IP-OreVision targets identified on the West and Central grids.
Assays are pending.
4.10 Adam (Cu-Au), operated by Midland
Property Description
The Adam property is wholly owned by Midland and is located about 65 kilometres west of the town of
Matagami. As at September 30, 2017, it consists of 243 claims covering a surface area of about 13,512
hectares in the Abitibi region of Quebec.
The Adam property has 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.
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 VTEM electromagnetic survey totalling 224 km was completed during Q2-17 in the northwest part
of the property. Several formational-type conductors were identified.
A detailed compilation of the historical works on the Adam property was completed during Q3-17. The
data will be reviewed during Q1-18.
4.11 Abitibi Gold (Au) operated by Midland
Property Description and exploration work on the property
As at September 2017, the Abitibi Gold property comprises 119 claims covering a surface area of
about 6,469 hectares. Some claims were dropped therefore the Corporation impaired partially for
$37,220 during Fiscal 16.
Exploration work on the property
A compilation of the historical works on the Mistaouac group of claims was completed during Q4-17.
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 111 claims covering an approximate area of 6,575 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 $7,091 ($7,756 in Fiscal
16) the exploration property cost.
- 15 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
Exploration work on the property
During Q1-17, a till sampling program had been completed along the road to the northeast of the
Weedon mine as well as a ground EM test in the vicinity of Lingwick. A very weak conductor was
detected to the south of the 2006 Cu-Zn showing.
During Q3-17, a follow-up till survey was completed to the NE of the Weedon mine over the anomaly
that was found last year near the road. The follow-up survey confirmed the presence and extended
the first till anomaly.
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, 2017, 194
claims covering 11,433 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 $3,808 (7,344 in Fiscal 16).
Exploration work on the property
In Fiscal 17, no exploration work was done on the property. Midland is currently seeking for a partner.
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, 2017 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 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. The property regroups several
properties for a total of 664 claims covering a surface area of about 34,715 square kilometres.
Exploration work on the property
The first regional exploration program carried out in 2016 included till surveys (717 samples), lake
sediment surveys (102 samples) as well as prospecting work (240 rock samples). As a result of this
work, several prospective areas were delineated, including eleven (11) high-priority areas that will be
the focus of a ground follow-up during the next phase of exploration.
These new exploration targets, identified during the 2016 program, may be divided into two broad
areas, located on either side of the Eleonore mine: the Northwest Area and the Southeast Area.
Anomaly thresholds for tills and lake sediments were characterized by Osisko using their regional
database for the James Bay region.
- 16 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
Northwest Area
• Target 1: Characterized by a cluster of till samples with anomalous gold values above the 95th
percentile (“PCT”), over more than 2 kilometres, in heavy mineral concentrates and in the fine
fraction.
• Target 2: Presence of an anomaly in gold grain counts in till samples and of arsenic values
> 95 PCT in the fine fraction, in addition to a 2-metre-wide iron formation that graded 0.17 g/t
Au in the prospecting campaign.
• Target 3: A follow-up on an anomaly in gold grain counts in till samples yielded a copper
anomaly > 95 PCT in the fine fraction.
• Target 4: Anomaly covering more than 6 square kilometres, characterized by four (4) lakes with
anomalous gold values > 99 PCT and one lake with anomalous arsenic > 99.5 PCT.
Southeast Area
• Target 5: Cluster of gold and copper anomalies in the fine fraction of till samples > 95 PCT.
• Target 6: Area characterized by several gold anomalies identified by prospecting, with values
of 0.48 g/t Au, 0.28 g/t Au, 0.21 g/t Au and 0.17 g/t Au in grab samples collected in mafic
volcanic rocks and paragneisses with pyrrhotite and pyrite mineralization. This area is located
at the contact between the La Grande and Opinaca subprovinces. The contact between these
two geological subprovinces is the most important gold metallotect in the region.
• Target 7: Three copper anomalies in the fine fraction of till samples > 95 PCT, combined with
a zinc anomaly > 99 PCT; a float boulder also yielded a grade of 6.85% Cu.
• Target 8: Target characterized by favourable geology identified during prospecting, with the
presence of a silicified paragneiss with calc-silicate alteration and 2-10% pyrite and 2-3%
pyrrhotite mineralization, which yielded values up to 0.31 g/t Au in grab sample. This target is
also located directly along the prolific contact between the La Grande and Opinaca
subprovinces.
• Target 9: A gold anomaly > 95 PCT in the fine fraction, where cursory prospecting work was
carried out in 2016.
• Target 10: Cluster of lake sediment anomalies over more than 5 kilometres, characterized by
two gold anomalies > 99.5 PCT, one gold anomaly > 95 PCT, and one antimony anomaly > 98
PCT.
• Target 11: Several lakes with anomalous antimony values ranging from 0.3 to 0.9 ppm Sb.
In the southern part of the project, in a poorly known area, a field of copper-rich, sub-angular diorite
boulders were discovered. Four (4) diorite boulders sampled in 2016 and 2017 returned 8.28% Cu,
6.85% Cu, 4.54% Cu and 3.45% Cu in grab samples. Mineralisation consists in decimeter-thick,
disseminated chalcopyrite ribbons in the boulders. The Cu±Mo±Ag±Bi geochemical signature of the
boulders and the dioritic host rock suggest a porphyry copper system. These boulders are all found
within a 100 meters diameter zone, which suggests a local source. Pyrrhotite-bearing diorite outcrops
were observed near the boulders but the source of the copper mineralization has not been found yet.
The autumn 2016 and summer 2017 campaigns have also delineated a 600 meters x 100 meters area
very anomalous in gold hosted in amphibolites. Twelve (12) samples of amphibolite mineralized in
disseminated pyrrhotite, pyrite and chalcopyrite, returned more than 0.1 g/t Au, with a maximal value
of 0.82 g/t Au, out of 25 samples collected in the area in 2016 and 2017. This type of low-grade
mineralized halo is common around orogenic gold deposits. The gold-anomalous amphibolites are
located near the prolific contact between the geological subprovinces of La Grande and Opinaca. This
contact hosts most of the important gold deposits and showings in the area, such as the Eleonore
Mine and the Cheechoo prospect, located about 30 kilometers north-west of this area.
- 17 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
Midland and Osisko plan a 2018 follow-up program (IP survey) in the area with the Cu-rich boulders
and approved a $700,000 budget.
4.16 JV JB Altius (Au), in partnership with Altius operated by Midland
Property description
On February 10, 2017, the Corporation signed a letter of intent creating a strategic alliance with Altius
Minerals Corporation (“Altius”), whereby Altius and the Corporation will combine their efforts to jointly
explore the gold potential of the extensive James Bay region. The Corporation is the operator.
The following projects were identified as designated projects: Elrond (48 claims on 2 487 hectares),
Gondor (41 claims on 2 107 hectares), Isengard (132 claims on 6 758 hectares), Minas Tirith (45
claims on 2 399 hectares) and Shire (538 claims on 28 610 hectares).
Exploration work on the property
The compilation and targeting work for the 2017 summer reconnaissance campaign was completed
during Q3-17. Several new interesting areas were targeted using Quebec Government data
(alterations, veins, sulfides, rock assays, Au in stream sediments), and by the compilation of
assessment reports from other companies. Follow-up till sampling and prospection are proposed for
the summer field campaign on these.
During Q4-17, Midland and Altius reported two base metal discoveries. Midland announced the
discovery of a new high-grade massive sulphide zinc showing, as part of its strategic exploration
alliance with Altius Minerals Corporation. The new showing, named “O’Connor” is located
approximately 80 kilometers east of Nemaska, Eeyou Istchee, Quebec, in an under explored area.
Mineralization ranges from coarse grained sphalerite in quartz ‘exhalite’ that returned 7.53% Zn and
4.5 g/t Ag to massive coarse pyrrhotite-pyrite-sphalerite that returned up to 2.79% Zn and 4.4 g/t Ag
in grab samples (note that grab samples are selective by nature and values reported may not be
representative). One pyritic massive sulfide also returned 0.09% Co and 6.8 g/t Ag from grab samples.
The mineralization is interpreted as the distal part of a volcanogenic massive sulfide system. The
mineralized horizon was traced over 150 meters and remains open along strike both west and east.
Midland also announced the discovery of a new nickel-copper-cobalt showing, in the context of its
strategic exploration alliance with Altius Minerals Corporation. The mineralization consists in a meta-
pyroxenite with about 15% disseminated pyrrhotite and 3% pentlandite that returned 1.07% Ni, 0.24%
Cu, 0.09% Co and 4.5% S from a grab sample from outcrop (note that grab samples are selective by
nature and values reported may not be representative). Another outcrop of meta-pyroxenite located
about 100 metres from the first sample location also returned 0.46% Ni with a low sulfur value of 1.11%
in a grab sample. The new showing is located about 12 km southeast of the Clearwater Au deposit
and 25 kilometers east of Hydro-Quebec’s Eastmain-1 dam.
Following those discoveries, a Heli-borne VTEM survey was performed over the Shire and Moria
showings. On the Moria project, electromagnetic anomalies (EM) that could indicate massive Ni-Cu
sulfide mineralization were identified in several areas, notably in the northeastern extension of the
Gimli/Gloin Ni-Cu-Co showings, in an area without outcrops. On the Shire project, the EM survey
demonstrates that the O’Connor Zn-Co showing is located on a 15-km long string of EM anomalies.
Pyrrhotite-pyrite massive sulfides and quartz-sulfides exhalites were observed in several places along
this regional EM conductor. These results suggest a new massive sulfide belt on the Shire project.
- 18 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
During Q4-17, Midland and Altius also announced the discovery of new gold showings. On the Elrond
project, located about 80 kilometers south of Radisson, Quebec, grab samples from an amphibolite
strongly mineralized in arsenopyrite and pyrite yielded values of 4.52 g/t Au and 3.23 g/t Au, (note
that grab samples are selective by nature and values reported may not be representative). About 100
meters to the north, a grab sample of silicified amphibolite yielded 1.81 g/t Au. Overall, 10 grab
samples out of 59 collected from the Elrond project returned gold values over 0.1 g/t Au. Three of
these Au-anomalous samples are late pegmatitic dykes that have a Au±Mo±Bi±As signature (up to
0.89 g/t Au, 268 ppm Bi, and 628 ppm Mo). The presence of Au-Bi-Mo bearing, late pegmatitic/granitic
dykes, suggests that the area has a potential for Alaska-type intrusion-related gold deposits. The
Elrond project is located directly at the prolific contact between the La Grande and Opinaca geological
subprovinces, which hosts many important gold deposits and showings in the James Bay region (such
as Eleonore, La Grande Sud, Cheechoo, Corvet-Est, Orfée and La Pointe). There is no previous
exploration recorded on the project.
The Minas Tirith project is located directly on the James Bay road, about 90 kilometers south-east of
Eastmain, Quebec. It is located very close to the Pontax regional shear zone that forms the boundary
between the La Grande and Opinaca subprovinces in the area. The project was staked based on
historical anomalous gold values in grab samples reported from a previous exploration campaign. A
grab sample from wacke displaying Eleonore-type calc-silicate alteration and injected with quartz veins
returned 5.23 g/t Au. Four (4) grab samples out of 16 collected from Minas Tirith returned anomalous
gold values over 0.1 g/t Au. This is the first known significant gold showing (> 1g/t Au) in the area, the
closest one being more than 40 kilometers away to the north-east.
The new Helm’s Deep project is located on the shore of the Eastmain-1 reservoir, about 20 kilometers
south-east of the Clearwater gold deposit. The project was staked following the discovery of a new
gold showing that yielded 2.42 g/t Au in a grab sample, in a strongly sheared sandstone with trace
pyrite. Grab sampling of quartz-tourmaline-biotite veins within sandstones also returned anomalous
gold values of 0.72 g/t Au and 0.68 g/t Au. Four (4) grab samples out of a total of 39 collected in the
western part of the project returned more than 0.1 g/t Au. Gold mineralization is hosted in sandstones
and polymictic conglomerates that exhibit widespread calc-silicate alteration peripheral to zones of
biotite-tourmaline alteration. The alteration and host rocks at Helm’s Deep are reminiscent of the
Eleonore gold deposit. There is no previous exploration recorded on the project.
4.17 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 258 claims covering an area of approximately 13,532 hectares as at
September 30, 2017. Some claims were dropped therefore the Corporation impaired partially for
$9,932 in Fiscal 16.
Exploration work on the property
During Q4-17 a prospecting program was completed on the Eleonore Centre property. No significant
result was obtained during this program.
4.18 James Bay Gold (Au), operated by Midland
Property Description
Midland owns a 100% interest on 342 claims as at September 30, 2017 covering 17,675 hectares in
the James Bay Area. Some claims were dropped therefore the Corporation impaired partially for
$12,002 the exploration property cost ($5,613 in Fiscal 16).
- 19 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
Exploration work on the property
During Q4-17, Midland completed a prospecting program on the Lasalle property. The Lasalle property
is located about 35 kilometers south of Hydro-Quebec’s LG-3 airport and of the Trans-Taïga road. The
highlight of the 2017 campaign is the discovery of three new gold showings along a gold-bearing shear
zone that is several kilometers long, located at a metasediments/metavolcanics contact. The three
new gold showings returned respectively 22.6 g/t Au, 7.03 g/t Au and 2.35 g/t Au.
The 2017 prospection campaign was focused in the eastern part of the Lasalle property, in an area
that was not previously explored by Midland and in which gold-bearing shear zones identified to the
west was interpreted as continuing. A grab sample of a silicified and foliated amphibolite containing
about 1% pyrite, located in a 100 meters thick shear zone, returned 22.6 g/t Au, as well as strongly
anomalous copper, bismuth and molybdenum (note that grab samples are selective by nature and
values reported may not be representative of mineralized zones). Along the same shear zone, 750
meters east, another grab sample of foliated amphibolite returned 7.03 g/t Au and anomalous copper
and bismuth. Finally, a further 800 meters east in the same shear zone, a grab sample of paragneiss
with pyrite, galena and sphalerite stringers returned 2.35 g/t Au, 105 g/t Ag, 3.32% Pb and 5.53% Zn,
along with strongly anomalous bismuth and antimony. Eighteen (18) outcrop samples collected during
the 2017 campaign returned more than 0.1 g/t Au, out of a total of 132 samples.
NORTHERN QUEBEC
4.19 Pallas (PGE), in partnership with JOGMEC and operated by Midland
Property Description
As at September 30, 2017, the property totals 584 claims covering approximately 26,503 hectares in
the Labrador Trough («Trough») some 80 kilometres west of Kuujjuak, Québec. Some claims were
dropped therefore the Corporation impaired partially for $5,923 the exploration property cost in
Fiscal 17.
On March 28, 2017, JOGMEC withdrew from the option agreement signed on January 21, 2014 and
abandoned its right to exercise its option to acquire a 50% interest in the Pallas PGE property.
Exploration work on the property
During Q1-17, a diamond drilling program consisting in six (6) holes totalling 1,239 metres was
completed. These drill holes tested the Apophis, Ida and Hektor showings at various depths and were
completed at the end of October. All the assay results have been received and the best results were
obtained from the Hektor and Apophis showings that returned 2.1 g/t PGE+Au over 1.15 metre in hole
CE-16-06 and 1.26 g/t PGE+Au over 0.35 metre in hole CE-16-08.
4.20 Willbob (Au), operated by Midland
Property Description
The Willbob property in the Labrador Trough consists of 1,450 claims covering about 66,562 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
A drilling program consisting in eight (8) holes totaling 1,299 m was completed during Q1-17 with the
objective to test the extensions of the Lafrance and Golden Tooth surface showings.
- 20 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
During the helicopter-supported drilling campaign, four (4) shallow drill holes (2 sections of 2 drill holes
each) were completed on each of the Lafrance and Golden Tooth showings for a total of eight (8) drill
holes totaling 1,299 m.
Lafrance showing:
• 1.62 g/t Au over 1.0 m (WB-16-01 ; 9.30 to 10.30 m)
• 1.00 g/t Au over 4.6 m incl. 3.3 g/t Au over 1.2 m (WB-16-02; 5.00 to 9.60 m)
• 0.30 g/t Au over 11.2 m incl. 1,6 g/t Au over 0.95 m (WB-16-03; 9.20 to 20.40 m)
• 0.17 g/t Au over 1.5 m (WB-16-04; 16.60 to 18.10 m)
Golden Tooth showing:
• 1.12 g/t Au over 3.65 m incl. 4.98 g/t Au over 0.5 m (WB-16-05; 30.15 to 33.80 m)
• 1.28 g/t Au over 6.35 m incl. 3.81 g/t Au over 0.95 m (WB-16-06; 45.05 to 51.40 m)
• 0.74 g/t Au over 2.65 m incl. 1.15 g/t Au over 0.85 m (WB-16-07; 41.60 to 44.25 m)
• 2.14 g/t Au over 1.5 m (WB-16-08; 70.00 to 71.50 m)
In addition to these gold-bearing intercepts located directly underneath the Lafrance and Golden Tooth
surface showings, several new gold-bearing zones were intersected at shallow depth, including these
best results:
New zone at Lafrance:
• 0.31 g/t Au over 24.5 m incl. 2.28 g/t Au over 0.8 m (WB-16-02; 65.00 to 89.50 m)
New zones at Golden Tooth:
• 0.71 g/t Au over 2.5 m incl. 2.6 g/t Au over 0.45 m (WB-16-05; 122.50 to 125.00 m)
• 1,88 g/t Au over 0.85 m incl. 1.9 g/t Au sur 0.35 m (WB-16-05 ; 131.85 to 132.70 m)
• 1.40 g/t Au over 2.1 m incl. 3.0 g/t Au over 0.35 m (WB-16-06; 23.95 to 26.05 m)
• 1.84 g/t Au over 3.3 m incl. 3.1 g/t Au over 1.7 m (WB-16-06; 30.50 to 33.80 m)
• 0,35 g/t Au over 1,5 m (WB-16-07 ; 23.50 to 25.00 m)
• 0.96 g/t Au over 1.4 m (WB-16-07; 64.80 to 66.20 m)
• 1.62 g/t Au over 1.25 m (WB-16-07; 74.35 to 75.60 m)
• 1,52 g/t Au over 0.65 m (WB-16-07 ; 163.60 to 164.25 m)
• 0.94 g/t Au over 3.2 m incl. 2.14 g/t Au over 1.1 m (WB-16-08; 103.80 to 107.00 m)
About 600 metres northwest of the Golden Tooth showing, the Golden Tooth North (GTN) occurrence
was discovered during the summer 2016 prospecting campaign, with gold values reaching 12.15 g/t
Au. The GTN zone has also been traced over more than 300 metres strike length and yielded values
up to 13.2 g/t Au, 13.1 g/t Au, 9.5 g/t Au, 8.9 g/t Au and 4.5 g/t Au in grab samples. These grab samples
were collected in a diorite unit altered to albite-chlorite and hosting quartz-calcite veining with
pyrrhotite-arsenopyrite mineralization. A channel completed this fall on GTN-4 which had historically
returned gold values up to 5.5 g/t Au, returned 1.91 g/t Au over 2.0 m, including 3.5 g/t Au over 1.0 m
which includes 5.8 g/t Au over 0.5 m.
A new gold-bearing sector called Dragon Head and located about 1.5 kilometre north-west of Golden
Tooth North returned values of 14.5 g/t Au, 1.4 g/t Au and 1.1 g/t Au.
In the Kuni area, new polymetallic (Pb-Zn-Ag-Au) mineralization was discovered with grades reaching
5.5% Pb and 3.4% Zn; and 4.8% Pb and 3.2% Zn in grab samples. Another grab sample in this area
also yielded a gold value reaching 7.4 g/t Au.
Further south, a new showing, dubbed Stars, yielded Cu-Au-Ag values reaching 1.2% Cu, 2.7 g/t Au
and 13.6 g/t Ag in grab sample. This new showing shows some gold-bearing massive sulphides
characteristics with mineralization consisting in massive pyrrhotite-pyrite with chalcopyrite. A total of
11 grab samples were collected over an outcropping area of approximately 40 metres by 20 metres.
- 21 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
In an effort to validate a historical channel sample result obtained by Noranda in the 1980s on the
Dessureault showing, a channel sample was collected by Midland this fall on the historical channel
which had graded 12.0 g/t Au over 3.3 metres. The channel sample (duplicate) collected by Midland
graded 6.2 g/t Au over 3.9 metres including 8.9 g/t Au over 2.0 metres (note that true thicknesses
cannot be determined at this time with the information available). In addition, several grab samples
collected by Midland returned excellent values grading up to 31.8 g/t Au, 22.9 g/t Au, 21.6 g/t Au, 11.2
g/t Au, 10.5 g/t Au, 9.9 g/t Au and 9,5 g/t Au.
During Q3-17 and Q4-17, Midland completed a prospecting program at the property scale. Also, a lake
bottom sampling program was completed. During this program, a total of fourteen (14) drill holes
totalling 3,505 metres were completed. These holes tested the extensions of the Golden Tooth, GTN,
Kuurok, Polar Bear, Sunshine and Stars surface showings. Because of some unexpected delays with
the lab, the final and complete assay results of the drilling program have not been received yet.
New results (Prospecting program)
The “Alias” showing is located about 2 kilometers north-west of the Golden Tooth showing (up to 3.1
g/t Au / 1.7 meters in a 2016 DDH). Grab sampling of outcrops and subcropping boulders in a 100
meters x 25 meters area yielded several high gold values: 72.7 g/t Au, 48.6 g/t Au, 19.95 g/t Au, 2.72
g/t Au, 2.58 g/t Au, 2.28 g/t Au, 2.24 g/t Au, 1.86 g/t Au and 1.82 g/t Au. Overall, 16 grab samples
out of 23 collected in the area yielded more than 0.1 g/t Au (note that grab samples are selective by
nature and values reported may not be representative). Mineralization in the area consists in many
decimeter-thick tension quartz veins, strongly mineralized in pyrite-chalcopyrite, crosscutting gabbros
exhibiting strong ankerite alteration halos visible over several meters. The veins appear to define new
north-south “brittle shear zones” that remain open to the north and south. It is the first significant
example of this new mineralization style on the project.
The “Wayne” showing is located in a new, highly prospective area in the northeast portion of the
project. A grab sample of diorite containing 5% disseminated pyrrhotite and with centimeter-thick
quartz veins yielded 32.7 g/t Au. About 200 meters south-east, another grab sample yielded 2.49 g/t
Au; it is a diorite with 5-10% disseminated pyrrhotite in the wallrock of a quartz tension vein; the vein
itself yielded a low gold value of 0.03 g/t Au. More sampling was done subsequently around these high
gold values; results are pending.
The “Kavi” showing is located more than 80 kilometers south of the previous two showings, on claims
that were acquired during winter 2017. Two grab samples from this area yielded 6.63 g/t Au, 1.32%
Pb, 12.3 g/t Ag, and 2.56 g/t Au, 4.96% Cu, 29.7 g/t Ag. The samples are a few meters apart and
were collected from a brittle fault zone with quartz-calcite-chalcopyrite-galena veins cutting a gabbro.
More samples will be collected from the structure in a later exploration phase. This new gold-bearing
structure is located only a few hundred meters east of the Robelin regional fault; the Robelin fault
appears to control the high-grade gold showings on Osisko Mining/Barrick’s Kan project, located about
30 kilometers north (up to 10.7 g/t Au over 5.0 metres in channels and 4.62 g/t Au over 8.0 meters in
drillholes; Osisko Mining press release from January 10th, 2017). The discovery of this new, very
promising showing in a completely unexplored portion of the Willbob project clearly outlines the strong
regional gold potential of the project.
- 22 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
4.
INVESTING ACTIVITIES (CONT’D)
The new “SP” showing is located about 600 meters east of the Golden Tooth showing (up to 3.1 g/t
Au / 1.7 meters in drillhole in 2016). Grab samples of mineralized quartz veins, found within a 120
meters x 50 meters area, yielded three very high gold values: 419 g/t Au, 38.3 g/t Au and 21.7 g/t Au.
Anomalous gold values were also found in the wallrock of the veins, which sometimes contains quartz
veinlets: 2.04 g/t Au, 0.454 g/t Au, 0.256 g/t Au, 0.176 g/t Au, 0.17 g/t Au. Mineralization in the area
consists in a series of quartz-ankerite tension-type veins, up to 10 cm thick, containing clusters of
pyrite-galena±sphalerite, crosscutting a strongly chloritized and ankeritized quartz diorite with
disseminated pyrite. Overall, nine (9) grab samples out of 15 collected from the area returned more
than 0.1 g/t Au (note that grab samples are selective by nature and values reported may not be
representative of mineralized zones).
The new “Serpent” showing is located about 4.5 kilometers south of the Golden Tooth showing, in a
poorly explored area where no gold mineralization was known before. The mineralization of the
Serpent showing is found within a 50-cm thick shear zone injected with quartz-calcite-chlorite±pyrite
veins, crosscutting a gabbro. A grab sample from this zone returned 15.35 g/t Au, and three (3) other
samples also yielded anomalous values: 0.487 g/t Au, 0.448 g/t Au, 0.254 g/t Au. Overall, four (4) grab
samples out of 6 samples collected from the shear zone returned more than 0.1 g/t Au.
QUEBEC / LABRADOR
4.21 Ytterby (REE), in partnership with JOGMEC and operated by Midland
Property Description
On December 2, 2017, the last 31 claims of Ytterby Quebec were dropped while all the claims in
Labrador were dropped during Fiscal 2017. The Corporation wrote off entirely the Labrador claims for
$185,625 (some claims were dropped in Fiscal 16 therefore the Corporation impaired partially for
$7,162 the exploration property cost and all the Quebec claims had been written off in previous years).
Therefore, as of December 2, 2017, the February 23, 2010 memorandum of agreement signed with
JOGMEC is de facto terminated and JOGMEC has lost its 49.4% interest.
Exploration work on the property
No exploration work conducted during Fiscal 17.
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.
- 23 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
5. FINANCING ACTIVITIES
The Corporation finances itself mainly through share issuance.
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. 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 March 16, 2017, the Corporation completed a private placement by issuing 614,000 flow-through
shares at $1.35 per share, for total gross proceeds of $828,900.
On November 22, 2017, the Corporation completed a private placement by issuing a total of 1,692,854
flow-through shares at $1.35 per share, for total gross proceeds of $2,285,354. In connection with the
private placement, the Corporation paid finder’s fees of $64,572. Directors and officers of the
Corporation participated in these placements for a total consideration of $131,625 under the same
terms as other investors.
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 $11,678,771 as of September 30, 2017 ($13,787,092 as
of September 30, 2016) which is calculated as follow:
Current assets
Investments – non-current portion
Current liabilities
Adjusted working capital
6.2 Cash flow required
Fiscal 17
$
12,497,871
-
(819,100)
11,678,771
Fiscal 16
$
11,369,712
3,078,910
(661,530)
13,787,092
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.
- 24 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
6. WORKING CAPITAL (CONT’D)
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 2017 flow-through private placement of $2,285,354)
Mining credits of preceding year (Fiscal 2017)
Staking and property maintenance
Total
Annualized
$
1,360,000
(70,000)
4,105,000
(1,040,000)
200,000
4,555,000
7. SUMMARY OF RESULTS PER QUARTERS
For the eight most recent quarters:
Q4-17
$
Q3-17
$
Q2-17
$
Q1-17
$
Revenues
Net loss
Loss per share
Total assets
25,587
(550,307)
(0.01)
26,477,605
12,850
(110,435)
-
26,956,987
24,997
(261,195)
-
27,010,601
32,759
(292,119)
(0.01)
25,846,801
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
No adjustments were required following the early adoption of IFRS 9 (see Section 16).
8. FOURTH QUARTER
The Corporation reported a loss of $550,307 for Q4-17 compared to a loss of $291,829 for Q4-16.
The Corporation earned project management fees of $25,587 in Q4-17 ($37,257 in Q4-16). In Q4-17,
the most active projects with partners were mainly Casault with Soquem and BJ Altius. In Q4-16, the
most active projects with partners were mainly Casault and to a lesser extent Pallas.
Total expenses increased to $615,532 in Q4-17 compared to $382,449 in Q4-16:
•
Salaries increased to $136,065 ($107,700 in Q4-16) due to salary increase.
•
Stock-based compensation increased to $65,705 ($40,702 in Q4-16). Of the multiple factors
influencing this expense, we notice that the fair value estimated with the Black Scholes model for
the Fiscal 2017 and 2016 is approximately doubled from the fair value estimated for the August
2015 grant.
to
Impairment of exploration and evaluation assets
$227,584 ($61,261 in Fiscal 16). During Q4-17, the Ytterby property was written off for $185,625,
since no exploration program is planned in the near future and all the claims on the Labrador side
were dropped. In the normal course of managing a portfolio of properties, some claims were
dropped and the following properties were partially impaired:
(non-cash
increased
items)
•
- 25 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
8. FOURTH QUARTER (CONT’D)
o During Q4-17: Laflamme for $6,846, Jouvex for $7,707, Valmond for $1,831, Weedon for
$2,671, Gatineau for $3,808, James Bay Au for $12,002, Pallas for $5,923 and generation
of projects for $1,242.
o 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.
In Fiscal 17, a $15,960 (nil in Q4-16) 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 March 16, 2017 private placement. 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 $2,261,784 ($1,656,615 in Q4-16) in exploration expenses of which
$354,964 ($628,486 in Q4-16) was recharged to the partners. The exploration expenses incurred in
Q4-17 were mostly executed on Willbob, Casault and BJ Altius whereas in Q4-16, the exploration
expenses were mostly executed on Casault, Willbob, JV Eleonore, Pallas and Heva. The Corporation
acquired properties for $99,071 net mostly on BJ Altius ($141,993 net in Q4-16 mostly on Abitibi).
9. RELATED PARTY TRANSACTIONS
The following are the related party transactions that occurred in Fiscal 17:
In the normal course of operations:
• A firm in which René Branchaud (director and corporate secretary) is a partner charged legal fees
amounting to $76,821 ($63,568 in Fiscal 16);
• A company controlled by Ingrid Martin (chief financial officer) charged accounting fees totaling
$120,964 ($145,310 in Fiscal 16) of which $51,508 ($69,620 in Fiscal 16) relates to her staff;
• As at September 30, 2017, the balance due to the related parties amounted to $7,861 ($16,300 as
at September 30, 2016).
Out of the normal course of operations:
• Directors and officers of the Corporation participated in the flow-through private placement of
November 2016 for $136,100 (November 2015 for $96,050). 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
See section 5 on financing activities.
11. OUTSTANDING SHARE DATA
Common shares
Options
Warrants
As at
December 7, 2017
Number
58,854,411
3,190,000
20,622,569
82,666,980
As at
September 30, 2017
Number
57,161,557
3,190,000
20,622,569
80,974,126
- 26 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
12. STOCK OPTION PLAN
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.
13. OFF-BALANCE SHEET ARRANGEMENTS
The Corporation does not have any off-balance sheet arrangements.
14. COMMITMENT
In February 2016, the Corporation extended the lease for five years, from March 2017 to February
2022. The rent is $31,432 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.
- 27 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
15. CRITICAL ACCOUNTING ESTIMATES (CONT’D)
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 $232,075 for Fiscal 17 ($82,174 for
Fiscal 16). No reversal of impairment losses has been recognized for the reporting periods.
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.
15.3 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.
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.
- 28 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
16. 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.
16.1 Accounting standards adopted in current fiscal year
The Corporation has adopted the following new and revised standards, along with any consequential
amendments, effective October 1, 2016. These changes were made in accordance with the applicable
transitional provisions.
a) IFRS 9, Financial Instruments, (“IFRS 9”)
The Corporation has elected to early adopt the requirements of IFRS 9, Financial Instruments with a
date of initial application of October 1, 2016. This standard replaces IAS 39, Financial Instruments:
Recognition and Measurement (“IAS 39”). IFRS 9 eliminates the classification of financial instruments
as “available-for-sale” and “held to maturity” and the requirement to bifurcate embedded derivatives
with respect to hybrid financial assets. This standard incorporates a new hedging model, which
increases the scope of hedged items eligible for hedge accounting, and aligns hedge accounting more
closely with risk management. This standard also amends the impairment model by introducing a new
“expected credit loss” model for calculating impairment. This new standard also increases required
disclosures about an entity’s risk management strategy, cash flows from hedging activities, and the
impact of hedge accounting on the financial statements.
IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost
or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity
manages its financial instruments and the contractual cash flow characteristics of the financial assets.
Most of the requirements in the IAS 39 for classification and measurement of financial liabilities and
for the derecognition of financial assets were carried forward in IFRS 9.
The accounting for the financial instruments and the line item in which they are included in the
statement of financial position were unaffected by the adoption of IFRS 9.
In accordance with the transitional provision of IFRS 9, the financial assets and liabilities held on
October 1, 2016 were reclassified retrospectively without prior period restatement based on the new
classification requirements taking into account the business model under which they are held at
October 1, 2016 and the cash flow characteristics of the financial assets at their date of initial
recognition.
No measurement adjustments were required to the opening balances as at October 1, 2016.
16.2 Accounting standards issued but not yet effective
a) IFRS 16 Leases
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. Save for short term leases and leases of low value assets, 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.
- 29 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
16. ACCOUNTING STANDARDS ISSUED RECENTLY (CONT’D)
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 financial statements.
17. 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, 2017 financial statements.
18. 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.
18.1 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.
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.
18.2 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.
18.3 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.
- 30 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
18. RISK FACTORS (CONT’D)
18.4 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.
18.5 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.
18.6 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.
18.7 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.
18.8 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.
- 31 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
18. RISK FACTORS (CONT’D)
18.9 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.
18.10 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.
18.11 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.
18.12 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.
18.13 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.
- 32 -
Midland Exploration Inc.
Management Discussion & Analysis
For the year ended September 30, 2017
19. 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 7, 2017
(s) Gino Roger
Gino Roger
President and CEO
(s) Ingrid Martin
Ingrid Martin
CFO
- 33 -
December 7, 2017
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, 2017 and 2016, 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.
- 34 -
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Midland Exploration Inc. as at September 30, 2017 and 2016 and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards.1
1 CPA auditor, CA, public accountancy permit No. A123642
- 35 -
Midland Exploration Inc.
Statements of Financial Position
As at September 30, 2017 and 2016
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
Total current assets
Non-current assets
Investments - non-current portion (note 6)
Tax credits and mining rights receivable – non-current portion
Advance paid for exploration work
Listed shares
Exploration and evaluation assets (note 7)
Exploration properties
Exploration and evaluation expenses
Total non-current assets
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
2017
$
2016
$
4,628,896
6,503,910
105,995
279,945
922,454
56,671
12,497,871
-
117,623
-
33,000
1,896,351
11,932,760
13,829,111
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
13,979,734
13,086,966
26,477,605
24,456,678
477,838
341,262
819,100
646,494
15,036
661,530
35,142,832
1,922,031
2,679,002
(14,085,360)
25,658,505
32,332,811
1,997,093
2,224,411
(12,759,167)
23,795,148
26,477,605
24,456,678
The accompanying notes are an integral part of these financial statements.
On behalf of the Board of Directors
(s) Jean-Pierre Janson
Jean-Pierre Janson
Director
(s) Gino Roger
Gino Roger
President, Director
- 36 -
Midland Exploration Inc.
Statements of Comprehensive Loss
For the years ended September 30, 2017 and 2016
Revenues
Project management fees
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
Change in fair value - listed shares
Loss before income taxes
Fiscal 17
$
Fiscal 16
$
96,193
107,423
584,630
285,429
64,091
55,988
133,918
43,404
173,937
67,665
216,730
6,840
232,075
1,864,707
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
169,368
3,000
172,368
225,491
-
225,491
(1,596,146)
(999,292)
Recovery of deferred income taxes (note 11)
382,090
192,134
Loss and comprehensive loss
(1,214,056)
(807,158)
Basic and diluted loss per share (note 10)
(0.02)
(0.01)
The loss and comprehensive loss are solely attributable to Midland Exploration Inc. shareholders.
The accompanying notes are an integral part of these financial statements.
- 37 -
Midland Exploration Inc.
Statements of Changes in Equity
For the years ended September 30, 2017 and 2016
Number of
shares
outstanding
Capital
stock
$
Warrants
$
Contributed
surplus
$
Deficit
$
Balance at October 1, 2016
Loss and comprehensive loss
54,674,417
-
32,332,811
-
1,997,093 2,224,411 (12,759,167)
(1,214,056)
-
-
Total
equity
$
23,795,148
(1,214,056)
Flow-through private placement
Less: premium
1,898,354
-
1,898,354
2,562,776
(382,090)
2,180,686
-
-
-
-
-
-
-
-
-
2,562,776
(382,090)
2,180,686
Warrants exercised
Warrants expired
Stock-based compensation
Share issue expenses
Balance at Sept. 30, 2017
588,786
-
-
-
57,161,557
629,335
-
-
-
35,142,832
(69,988)
(5,074)
-
-
-
-
-
(112,137)
1,922,031 2,679,002 (14,085,360)
-
5,074
449,517
-
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)
-
-
559,347
-
449,517
(112,137)
25,658,505
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
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
-
(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
The accompanying notes are an integral part of these financial statements.
- 38 -
Midland Exploration Inc.
Statements of Cash Flows
For the years ended September 30, 2017 and 2016
Operating activities
Loss
Adjustment for:
Stock-based compensation
Impairment of exploration and evaluation assets
Variation – fair value of listed shares
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
Flow-through private placement
Exercise of options
Exercise of warrants
Share issue expenses
Investing activities
Additions to investments
Disposals or maturities of investments
Additions to exploration properties
Option payments on 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 17
$
Fiscal 16
$
(1,214,056)
(807,158)
285,429
232,075
(3,000)
(382,090)
(1,081,642)
(8,562)
(22,295)
5,320
6,439
(360,755)
326,226
(53 627)
(1,135,269)
2,562,776
-
559,347
(112,137)
3,009,986
(3,425,000)
8,729,000
(465,274)
50,000
344,624
(4,830,008)
883,423
1,286,765
3,161,482
1,467,414
4,628,896
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
The accompanying notes are an integral part of these financial statements.
- 39 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
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”). Except for the early adoption of IFRS 9 – Financial Instruments as further described in note
3, 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 7, 2017.
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.
- 40 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
a) Financial assets
Financial assets are derecognized when the contractual rights to receive the cash flows from the
financial asset have expired, or when the financial asset and all substantial risks and rewards have
been transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or
when it expires.
Financial assets are initially measured at fair value. If the financial asset is not subsequently accounted
for at fair value through profit or loss, then the initial measurement includes transaction costs that are
directly attributable to the asset’s acquisition or origination. On initial recognition, the Corporation
classifies its financial instruments in the following categories depending on the purpose for which the
instruments were acquired.
Effective October 1, 2016
Fair value through profit and loss listed shares:
Listed shares at fair value through profit and loss are equity investments recognized initially at fair
value and subsequently measured at fair value. Gains or losses arising from changes in fair value are
recorded in the statement of loss and comprehensive loss. Dividend income on those investments are
recognized in the statement of loss and comprehensive loss.
Amortized cost:
Financial assets at amortized cost are non-derivative financial assets with fixed or determinable
payments constituted solely of payments of principal and interest that are held within a “held to collect”
business model. Financial assets at amortized cost are initially recognized at the amount expected to
be received, less, when material, a discount to reduce the financial assets to fair value. Subsequently,
financial assets at amortized cost are measured using the effective interest method less a provision
for expected losses. The Corporation’s cash and cash equivalents, investments and accounts
receivable are classified within this category.
Effective until September 30, 2016
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.
b) Financial liabilities
Effective for all periods presented
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.
- 41 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
c) Impairment of financial assets
Effective October 1, 2016
Amortized cost:
The expected loss is the difference between the amortized cost of the financial asset and the present
value of the expected future cash flows, discounted using the instrument’s original effective interest
rate. The carrying amount of the asset is reduced by this amount either directly or indirectly through
the use of an allowance account. Provisions for expected losses are adjusted upwards or downwards
in subsequent periods if the amount of the expected loss increases or decreases.
Effective until September 30, 2016
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.
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.
- 42 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
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.
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.
- 43 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
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.
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.
- 44 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
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.
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 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.
- 45 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
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.
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 adopted in current fiscal year
The Corporation has adopted the following new and revised standards, along with any consequential
amendments, effective October 1, 2016. These changes were made in accordance with the applicable
transitional provisions.
a) IFRS 9, Financial Instruments, (“IFRS 9”)
The Corporation has elected to early adopt the requirements of IFRS 9, Financial Instruments with a
date of initial application of October 1, 2016. This standard replaces IAS 39, Financial Instruments:
Recognition and Measurement (“IAS 39”). IFRS 9 eliminates the classification of financial instruments
as “available-for-sale” and “held to maturity” and the requirement to bifurcate embedded derivatives
with respect to hybrid financial assets. This standard incorporates a new hedging model, which
increases the scope of hedged items eligible for hedge accounting, and aligns hedge accounting more
closely with risk management. This standard also amends the impairment model by introducing a new
“expected credit loss” model for calculating impairment. This new standard also increases required
disclosures about an entity’s risk management strategy, cash flows from hedging activities, and the
impact of hedge accounting on the financial statements.
IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost
or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity
manages its financial instruments and the contractual cash flow characteristics of the financial assets.
Most of the requirements in the IAS 39 for classification and measurement of financial liabilities and
for the derecognition of financial assets were carried forward in IFRS 9.
The following table summarizes the classification and measurement changes for the Corporation’s
financial assets and financial liabilities as a result of the adoption of IFRS 9.
- 46 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
3. ACCOUNTING STANDARDS ISSUED RECENTLY (CONT’D)
Financial assets
Cash and cash equivalents
Investments
Accounts receivable
Listed shares
IAS 39
IFRS 9
Loans and receivables
Loans and receivables
Loans and receivables
n/a (new asset since
September 2017)
Amortized cost
Amortized cost
Amortized cost
Fair value through profit
and loss
Financial liabilities
Accounts payable and accrued liabilities Financial liabilities
Advance received for exploration work
measured at amortized cost
Financial liabilities
measured at amortized cost
Amortized cost
Amortized cost
The accounting for these instruments and the line item in which they are included in the statement of
financial position were unaffected by the adoption of IFRS 9.
In accordance with the transitional provision of IFRS 9, the financial assets and liabilities held on
October 1, 2016 were reclassified retrospectively without prior period restatement based on the new
classification requirements taking into account the business model under which they are held at
October 1, 2016 and the cash flow characteristics of the financial assets at their date of initial
recognition.
No measurement adjustments were required to the opening balances as at October 1, 2016.
3.2 Accounting standards issued but not yet effective
a) IFRS 16 Leases
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. Save for short term leases and leases of low value assets, 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 financial statements.
- 47 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
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.
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 $232,075 for the year ended September 30,
2017 (“Fiscal 17”) ($82,174 for the year ended September 30, 2016 (“Fiscal 16”)). 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.
- 48 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
4. CRITICAL ACCOUNTING ESTIMATES, JUDGMENTS AND ASSUMPTIONS (CONT’D)
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.
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 certificates bearing interest between
0.80% and 1.15%, maturing between December 5, 2017 and
June 6, 2018
Guaranteed investment certificate bearing interest of 1.41%,
maturing June 5, 2017
As at September 30
2016
2017
$
$
467,414
328,896
4,300,000
-
4,628,896
-
1,000,000
1,467,414
All the exploration work imposed by the November 2015 flow-through financing was completed before
September 30, 2016. Also, all the exploration work imposed by the November 2016 and March 2017
flow-through financings was completed before September 30, 2017.
- 49 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
6.
INVESTMENTS
Current
Guaranteed investment certificates, not cashable before the expiry
date, between 1.40% and 1.95% interest payable annually,
maturing between November 30, 2017 and July 23, 2018, with a
maturity value of $6,605,807
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
Non-current
Guaranteed investment certificates, not cashable before the expiry
date, between 1.45% and 1.95% interest payable annually,
maturing between July 16, 2018 and July 23, 2018, with a
maturity value of $3,130,844
As at September 30
2016
2017
$
$
6,503,910
-
-
8,729,000
-
6,503,910
3,078,910
11,807,910
- 50 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
7. EXPLORATION AND EVALUATION ASSETS
The following tables disclose the acquisition costs of exploration properties:
Acquisition
costs
Undivided
interest
%
As at
Sept. 30,
2016
$
Net
Additions
$
Option
payments
$
Impairment
$
As at
Sept. 30,
2017
$
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
JV BJ Altius
Northern
Quebec
Pallas PGE
Willbob
Quebec
Labrador
Ytterby
Project
Generation
49
72.6
100
50
50
100
100
100
100
100
100
100
100
100
100
50
50
100
100
50.6
100
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
-
323
31,793
-
9,457
8,141
1,897
5,328
28,008
4,855
2,760
(11,233)
13,778
27,561
32,014
36,449
755
56,095
72,443
55,842
38,508
201,188
2,042
-
-
-
-
-
-
(50,000)
-
(30,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
(6,846) 1)
-
-
(7,707) 1)
-
(1,831) 1)
-
-
-
-
(7,091) 1)
(3,808) 1)
(12,002) 1)
-
-
-
290,838
122,347
87,072
26,995
45,432
57,906
10,756
101,601
16,830
20,166
138,669
36,703
32,102
198,893
141,681
96,972
56,095
(5,923) 1)
-
105,028
257,030
(2,042) 2)
-
23,429
1,506,118
31,048
518,725
-
(80,000)
(1,242) 1)
(48,492)
53,235
1,896,351
1)
2)
Some claims were dropped and the Corporation impaired partially the property.
The Company wrote off the property since no exploration program is planned for the near future and/or dropped all the
claims.
- 51 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
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
- 52 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
The following two tables disclose details of exploration and evaluation expenses:
E&E expenses
Undivided
interest
%
49
72.6
100
50
50
100
100
100
100
100
100
100
100
100
100
50
50
100
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
JV BJ Altius
Northern
Quebec
Pallas PGE
Willbob
Quebec
Labrador
Ytterby
Project
Generation
As at
Sept. 30,
2016
$
236,090
1,893,853
221,646
352,708
351,966
157,076
120,742
78,203
628,505
42,841
173,644
Net
Additions
$
56,235
332,006
198
691,965
62,420
114,219
3,572
6,230
425,573
95,781
30,687
523,230
29,024
105,245
14,981
261,886
1,629,303
124,692
-
136,659
130,458
237,687
219,291
295,012
369,500
565,271 2,151,089
Option
payments Tax credits Impairment
$
$
$
As at
Sept. 30,
2017
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(54)
(23,795)
-
(80,708)
(1,553)
(9,310)
-
(1,022)
(10,473)
(7,467)
(861)
(1,578)
-
(35,950)
(36,242)
(71,097)
(56,510)
-
292,271
- 2,202,064
221,844
-
963,965
-
412,833
-
261,985
-
124,314
-
-
83,411
- 1,067,584
131,155
-
203,470
-
-
-
626,897
44,005
-
362,595
- 1,723,519
291,282
-
162,781
-
(125,766)
(589,487)
538,746
-
- 2,126,873
- (183,583)1)
-
(6,339)
(1,058,212)
91,166
(183,583) 11,932,760
-
50.6
183,583
-
100
74,069
23,436
8 041,811 5,132,744
1) The Company wrote off the property since no exploration program is planned for the near future and/or dropped all the
claims.
- 53 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
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
- 54 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
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 (completed)
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.
- 55 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
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.
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.
On April 27, 2017, the Corporation signed an option agreement with IAMGOLD Corporation
(“IAMGOLD”) whereby IAMGOLD may earn, in three option, a maximum interest of 65% in the Héva
property, by fulfilling the following conditions:
First Option for a 50% initial interest
Upon signature (completed)
On or before April 30, 2018 ($250,000 firm commitment)
On or before April 30, 2019
On or before April 30, 2020
On or before October 31, 2021
Second Option for a 10% additional interest
Within 2 years from the date the first option is exercised, $500,000 of
exploration work for each additional 1% interest
Payments in
cash
$
Work
$
50,000
70,000
80,000
120,000
180,000
500,000
-
500,000
700,000
1,200,000
1,600,000
4,000,000
-
5,000,000
Third Option for a 5% additional interest
Within 2 years from the date the second option is exercised, $1,000,000
of exploration work for each additional 1% interest
Total, for a 65% maximum interest
-
500,000
5,000,000
14,000,000
IAMGOLD is the operator.
7.6 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.
- 56 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
7.7 La Peltrie
The Corporation owns the La Peltrie property and some claims are subject to a 1% Gross Metal royalty.
On August 29, 2017, the Corporation signed an option agreement with Niobay Metals Inc. (“Niobay”)
whereby Niobay may earn, in two options, a maximum interest of 65% in the La Peltrie property, by
fulfilling the following conditions:
First Option for a 50% initial interest
Upon signature (completed, 200,000 shares of Niobay received, initially
valued at $30,000)
On or before December 31, 2017 (firm commitment)
On or before August 31, 2018
On or before August 31, 2019
On or before August 31, 2020
On or before August 31, 2021
Payments in
cash
$
Work
$
30,000
-
30,000
50,000
70,000
70,000
250,000
-
500,000
-
400,000
600,000
1,500,000
3,000,000
Following the initial earn-in of its 50% interest, NioBay may earn an additional tranche of 15% interest
for an undivided 65% interest in the Properties, by producing a preliminary economic study on or before
August 31, 2023.
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. Osisko is the operator.
- 57 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
7. EXPLORATION AND EVALUATION ASSETS (CONT’D)
7.11 JV JB Altius (Au), in partnership with Altius operated by Midland
On February 10, 2017, the Corporation signed a letter of intent creating a strategic alliance with Altius
Minerals Corporation (“Altius”), whereby Altius and the Corporation will combine their efforts to jointly
explore the gold potential of the extensive James Bay region. The Corporation is the operator.
The following projects were identified as designated projects: Elrond, Gondor, Isengard, Minas Tirith,
Moria and Shire.
NORTHERN QUEBEC
7.12 Pallas PGE
On March 28, 2017, JOGMEC withdrew from the option agreement signed on January 21, 2014 and
abandoned its right to exercise its option to acquire a 50% interest in the Pallas PGE property.
7.13 Willbob
The Corporation owns the Willbob property and some claims are subject to a 2% NSR royalty.
QUEBEC / LABRADOR
7.14 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%. On December 2, 2017, the
last 31 claims of Ytterby Quebec were dropped while all the claims in Labrador were dropped during
Fiscal 2017. The Corporation wrote off entirely the Labrador claims for $185,625 (some claims were
dropped in Fiscal 16 therefore the Corporation impaired partially for $7,162 the exploration property
cost and all the Quebec claims had been written off in previous years). Therefore, as of December 2,
2017, the February 23, 2010 memorandum of agreement signed with JOGMEC is de facto terminated
and JOGMEC has lost its 49.4% interest.
8. EQUITY
Authorized
Unlimited number of common shares without par value, voting and participating.
8.1 Private placements
a) 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.
- 58 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
8. EQUITY (CONT’D)
b) November 2016
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.
c) March 2017
On March 16, 2017, the Corporation completed a private placement by issuing 614,000 flow-through
shares at $1.35 per share, for total gross proceeds of $828,900. On that date, the Corporation’s share
closed at $1.15 on the Exchange, therefore the residual value attributed to the benefit related to flow-
through shares renunciation is $0.20, for a total value of $122,800, credited to the liability related to
the premium on flow-through shares.
8.2 Warrants
Changes in the Corporation’s number of outstanding warrants were as follow:
Fiscal 17
Fiscal 16
Balance – Beginning of year
Exercised
Expired
Balance – End of year
Number
21,254,213
(588 786)
(42 858)
20 622 569
Warrants outstanding as at September 30, 2017 are as follows:
Amount
$
Number
Amount
$
1,997,093 21,254,213 1,997,093
-
-
1 922 031 21,254,213 1,997,093
(69 988)
(5 074)
-
-
Number of warrants
20,622,569
20,622,569
Exercise
price
$
1.15
8.3 Broker warrants
Expiry date
May 3, 2018
Changes in the Corporation’s number of outstanding broker warrants were as follow:
Balance – Beginning of year
Exercised
Balance – End of year
Fiscal 17
Fiscal 16
Number
Amount Number Amount
$
$
-
-
-
- 555,000
- (555,000)
-
-
116,550
(116,550)
-
- 59 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
8. EQUITY (CONT’D)
8.4 Policies and processes for managing capital
The capital of the Corporation consists of the items included in equity of $25,658,505 as of September
30, 2017 ($23,795,148 as of September 30, 2016). 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
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 17
$
1,023,499
51,000
129,666
1,204,165
(619,535)
584,630
Fiscal 16
$
892,546
34,875
73,634
1,001,055
(544,780)
456,275
Fiscal 17
$
449,517
(164,088)
Fiscal 16
$
142,127
(45,176)
285,429
96,951
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.
- 60 -
Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
9. EMPLOYEE REMUNERATION (CONT’D)
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.
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.
On February 21, 2017, the Corporation granted to its directors, officers, employees and consultants
545,000 options exercisable at $1.14, 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 $288,850 for an estimated fair value of $0.53 per option. The fair value
of the options granted was estimated using the Black-Scholes model with no expected dividend yield,
48% expected volatility, 1.33% 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 May 10, 2017, the Corporation granted to a director 100,000 options exercisable at $1.04, 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 $48,000 for an
estimated fair value of $0.48 per option. The fair value of the options granted was estimated using the
Black-Scholes model with no expected dividend yield, 48% expected volatility, 1.27% 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.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
9. EMPLOYEE REMUNERATION (CONT’D)
A summary of changes in the Corporation’s common share purchase options is presented below:
Fiscal 17
Fiscal 16
Weighted
average
exercise
price
$
1.10
1.13
-
1.10
1.10
Number of
options
2,495,000
695,000
-
3,190,000
2,551,668
Number of
options
2,020,000
500,000
(25,000)
2,495,000
1,836,666
Weighted
average
exercise
price
$
1.18
1.10
0.60
1.10
1.14
Balance – Beginning of year
Granted
Exercised
Balance – End of year
Balance – End of year exercisable
The following table summarizes information about common share purchase options outstanding and
exercisable as at September 30, 2017:
Number of options
outstanding
Number of options
exercisable
260,000
315,000
20,000
345,000
605,000
450,000
500,000
50,000
545,000
100,000
3,190,000
260,000
315,000
20,000
345,000
605,000
450,000
333,334
25,000
181,667
16,667
2,551,668
Exercise
price
$
1.76
1.54
1.61
1.25
0.85
0.60
1.10
1.13
1.14
1.04
Expiry date
February 17, 2021
February 16, 2022
February 27, 2022
February 19, 2023
February 20, 2024
August 13, 2025
August 11, 2026
November 23, 2026
February 21, 2027
May 10, 2027
10. LOSS PER SHARE
The calculation of basic loss per share is based on the loss for the year divided by the weighted
average number of shares in circulation during the year. In calculating the diluted loss per share,
potential common shares such as share options and warrants have not been included as they would
have the effect of decreasing the loss per share. Decreasing the loss per share would be antidilutive.
Details of share options and warrants issued that could potentially dilute earnings per share in the
future are given in Notes 8 and 9.
Loss
Weighted average number of basic and diluted outstanding shares
Basic and diluted net loss per share
Fiscal 17
$
Fiscal 16
$
(1,214,056)
(807,158)
56,669,706 54,001,374
(0.01)
(0.02)
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Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
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 17
$
Fiscal 16
$
382,090
382,090
192,134
192,134
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 26.80% (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 17
$
(1,596,146)
Fiscal 16
$
(999,292)
(428,000)
84,500
679,100
(382,090)
(330,900)
4,700
-
(382,090)
(268,810)
33,247
191,006
(192,134)
41,479
3,077
-
(192,135)
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 $899,500.
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 17
$
Fiscal 16
$
2,162,000
25,000
145,000
2,332,000
1,848,000
22,000
199,000
2,069,000
1,432,500
1,432,500
868,000
868,000
Deferred income tax assets not recognized
899,500
1,201,000
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Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
11.
INCOME TAXES (CONT’D)
As of September 30, 2017, 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
1,063,000
1,365,000
Provincial
$
69,000
112,000
183,000
514,000
631,000
713,000
663,000
736,000
891,000
749,000
811,000
1,048,000
1,344,000
2026
2027
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
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 17 Fiscal 16
$
$
433,395
61,118
8,338
134,403
359,210
72,427
3,263
129,450
279,618
42,370
959,242
96,969
16,162
677,481
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.
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Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
12. COMPENSATION TO KEY MANAGEMENT AND RELATED PARTY TRANSACTIONS (CONT’D)
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:
In the normal course of operations:
♦ A firm in which an officer is a partner charged professional fees amounting to $76,821 ($63,568
in Fiscal 16) of which $49,469 ($51,089 in Fiscal 16) was expensed and $27,352 ($12,479 in
Fiscal 16) was recorded as share issue expenses;
♦ A company controlled by an officer charged professional fees of $51,508 ($69,620 in Fiscal 16)
for her staff; and
♦ As at September 30, 2017, the balance due to the related parties amounted to $7,861 ($16,300
in September 30, 2016).
Out of the normal course of operations:
♦ Directors and officers of the Corporation participated in the flow-through private placement of
November 2016 (note 8.1 b)) for $136,100 (November 2015 (note 8.1 a)) for $96,050). 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 2017 by Statistic Canada
for a 12-month period which was 1.0%):
Within 1 year
1 to 5 years
After 5 years
Total
As of September 30, 2017
$
18,795
114,993
-
133,788
In February 2016, the Corporation extended the lease for five years, from March 2017 to February
2022. The rent is $31,432 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 $31,062 ($25,634
in Fiscal 16). This amount consists of minimum lease payments.
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Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
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
Since the guaranteed investment certificates are at fixed rates, the Corporation is not exposed to
interest rate risk on the instruments themselves. The Corporation’s other financial assets and liabilities
do not comprise any interest rate risk since they do not bear interest.
Equity risk
Equity risk is the risk that the fair value of a financial instrument varies due to the changes in the
Canadian mining sector and equity market. For the Corporation’s listed shares at fair value through
profit and loss, a variation of plus or minus 20% of the quoted market prices as at September 30, 2017
would result in an estimated effect on the net income (loss) of $6,600.
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 17, 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. Nevertheless, the
management considers the credit risk to be minimal and further disclosure are not significant.
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, 2017, 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.
The fair value of the listed shares at fair value through profit and loss is established using the closing
price on the most beneficial active market for this instrument that is readily available to the Corporation
and as such are classified as Level 1 in the fair value hierarchy.
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Midland Exploration Inc.
Notes to Financial Statements
For the years ended September 30, 2017 and 2016
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
Listed shares received for option payment
Exercise of options credited to capital stock
Exercise of warrants credited to capital stock
Interest received
Fiscal 2017 Fiscal 2016
$
164,088
204,721
1,058,212
30,000
-
69,988
213,399
$
45,176
396,820
855,716
-
6,500
116,550
239,459
16. SUBSEQUENT EVENT
On November 22, 2017, the Corporation completed a private placement by issuing a total of 1,692,854
flow-through shares at $1.35 per share, for total gross proceeds of $2,285,354. On that day, the
Corporation’s share closed at $0.94 on the Exchange, therefore the residual value attributed to the
benefit related to flow-through shares renunciation is $0.41, for a total value of $694,070, 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 $64,572. Directors and officers of the Corporation participated in
these placements for a total consideration of $131,625 under the same terms as other investors.
- 67 -
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)
Paul Archer
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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