Tsodilo Resources Limited
Annual Report 2014
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OUR VISION
MISSION STATEMENT
To build a leading African-focused mineral exploration,
production and development company.
Values:
A healthy and safe work environment
Entrepreneurial spirit
Creation of shareholder value
Create positive economic and social impact on
local communities where we operate
Seek value opportunities
Exploration of additional promising prospects
Production of ore bodies with economically
viable assets
CORPORATE COMMITMENT
Tsodilo Resources Limited continues to progress as a
responsible corporation through our field practices,
management systems in Environment, Health and Safety,
contributions to the communities where we operate, and
our commitment to ongoing stakeholder engagement.
Corporate responsibility is increasingly central to our
strategic and operational thinking. We cannot sustain
good financial and operational performance without
simultaneously achieving our objectives in health and
safety, environmental stewardship, human resource
development, and community investment. We believe our
transparent approach to doing business is the only way to
fully engage our stakeholders in a meaningful, mutually
beneficial, relationship.
Tsodilo's vision of Corporate Responsibility is premised
upon a set of principles which guide our relationships with
shareholders, employees, partners, governments, and the
communities affected by our operations.
OUR GUIDING PRINCIPLES
We recognize that every community is unique
and respect the cultural and historical
perspectives and rights of those affected by our
operations
We provide a rewarding and meaningful
livelihood to our employees. We provide
suitable training opportunities and resources
are made available to employees to assist them
in performing their duties.
We seek to provide employment, business and
economic opportunities for local communities
from our existing operations and new projects.
We maintain high standards of corporate
governance, ethics and honesty in all of our
dealings, and operate in compliance both with
Canadian stock exchange listing and disclosure
requirements and the local laws wherever we
work.
We engage with our industry peers,
associations, governments, non-governmental
organizations, and civil society to contribute to
best practice development and track evolving
global standards
On behalf of the board,
James M. Bruchs
Chairman & CEO
We consider the health and safety of our employees and
adjoining communities as most important in all aspects of
our operations.
Dr. Michiel C.J. de Wit
President & COO
We initiate and promote ongoing dialogue and
engagement with a broad range of stakeholders,
maintained in a spirit of transparency and good faith.
We exercise vigilance in protecting the environment and
seek ways to minimize our environmental footprint. We
strive to always meet or exceed regulatory requirements in
our environmental performance.
We conduct our activities in accordance with accepted
standards in the protection and promotion of human
rights.
Our Vision
Management’s Discussion and Analysis
of Financial Results
Financial Reporting Responsibility of
Management
Auditor’s Report to the Shareholders
Consolidated Financial Statements / Notes
Corporate Information
1
2
28
29
30
IBC
Management’s Discussion and Analysis
This management’s discussion and analysis (“MD&A”) should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto for the years ended December 31, 2013 and 2014.
The Company’s consolidated financial statements are prepared in accordance with International Financial
Reporting Standards (IFRS). The Company’s functional and reporting currency is United States dollars and all
amounts stated are in United States dollar unless otherwise noted. In addition, the Company has three operating
subsidiaries, Newdico, Gcwihaba and Bosoto which have a functional currency of the Botswana Pula. This
management’s discussion and analysis has been prepared as at February 26, 2015.
OVERVIEW
Tsodilo Resources Limited (“Tsodilo” or the “Company”) was organized under the laws of the Province of Ontario
in 1996 and continued under the laws of the Yukon in 2002. It is incorporated under laws of the Yukon Territory,
Canada, under the Business Corporations Act of Yukon and the address of the Company’s registered office is 161
Bay Street, P.O. Box 508 Toronto, Ontario, Canada, M5J 2S1. The Company currently exists under the Business
Corporations Act of Yukon and its common shares are listed on the Toronto Venture Stock Exchange (TSX-V)
under the symbol TSD.
Tsodilo is an exploration stage company which is engaged principally in the acquisition, exploration and
development of mineral properties in the Republic of Botswana. The Company is considered to be in the
exploration and development stage given that none of its properties are in production and, to date, has not
earned any significant revenues. The recoverability of amounts shown for exploration and evaluation assets is
dependent on the existence of economically recoverable reserves, the renewal of exploration licenses, obtaining
the necessary permits to operate a mine, obtaining the financing to complete exploration and development, and
future profitable production.
The Company is also actively reviewing additional diamond and base and precious metal opportunities within
southern Africa.
Corporate
At a special meeting of the holders of common shares of the Company held on April 9, 2002 shareholders
approved a restructuring of the Company that incorporated the sale of substantially all of the Company’s assets.
The assets were transferred in settlement on debt due of $612,783 and owing to Trans Hex Group Limited (“Trans
Hex Group”), the principal shareholder and creditor of the Company prior to restructuring. The Company retained
an interest in all future dividends that may be paid by either Northbank Diamonds Limited, Hoanib Diamonds
(Proprietary) Limited or Trans Hex (Zimbabwe) Limited. In addition, the Company was released from the long-
term loans due to Trans Hex Group by the subsidiaries being sold, of $3,341,690, and Trans Hex Group agreed to
return the 10,688,137 common shares in the capital of the Company, representing 73.22% of the issued and
outstanding shares of the Company at that time, to treasury for cancellation. The special meeting of shareholders
also approved the discontinuance of the Company from the Province of Ontario and its continuance under the
Business Corporations Act (Yukon), the change of name of the Company from Trans Hex International Ltd. to
Tsodilo Resources Limited, the election of new directors and the repeal of the existing stock option plan of the
Company and adoption of a new stock option plan. Following the restructuring of the Company, as approved by
shareholders in April 2002, Tsodilo has no long-term debt.
Outstanding Share Data
As of February 26, 2015, 32,389,209 common shares of the Company were outstanding. Of the options to
purchase common shares issued to eligible persons under the stock option plan of the Company, 3,258,890
options remain outstanding of which 2,758,890 are exercisable at exercise prices ranging from CAD $0.75 - $2.23.
As of February 26, 2015, 8,294,831 warrants are outstanding. The warrants were issued by way of private
placements utilized by the Company for financing purposes. Each warrant entitles the holder thereof to purchase
one common share of the Company and the specifics with expiry date, number, exercise price and currency are as
follows:
Outstanding Warrants
Expiry Date
April 22, 2015
June 29, 2015
June 29, 2015
May 29, 2016
July 29, 2016
December 30, 2016
Total
No. of Warrant Shares
2,272,727
2,702,702
1,818,181
306,183
634,116
560,922
8,294,831
Exercise Price & Currency
$1.21 USD
$2.17 CAD
$1.21 USD
$1.40 USD
$1.40 USD
$1.21 USD
If all warrants were converted, 8,294,831 common shares of the Company would be issued.
Principal Shareholders of the Company
The principal shareholders (greater than 5%) of the Company as of February 26, 2015 are as follows:
Name
Description
Azur LLC
Private Investment Vehicle
Shares -
Owns,
Controls or
Directs
4,996,065
International Finance Corporation
Member of the World Bank Group
4,520,883
James M. Bruchs
Director and CEO
First Quantum Minerals
Global Mining Company
David J. Cushing
Director
2,285,619
2,272,727
2,250,770
% of the Issued
and
Outstanding
Shares
15.43%
13.96%
7.06%
7.00%
6.94%
Exploration Activities for 2014
Subsidiaries
The Company has a 98% operating interest in its Botswana subsidiary, Newdico (Proprietary) Limited (“Newdico”),
which holds one prospecting license covering approximately 851 km² in northwest Botswana.
The Company has a 100% interest in its wholly owned Botswana subsidiary, Gcwihaba Resources (PTY) Limited
(“Gcwihaba”), which has one diamond prospecting license covering approximately 494 km², twenty-two metal
(base, precious, platinum group, and rare earth) licenses currently covering 1,244.80 km² (not including fifteen
(15) licenses currently in renewal and five (5) licenses whose terms expires March 31, 2015 for which renewal
applications have been filed ) and eight radioactive minerals licenses currently in renewal.
The Company has a 75% interest in its wholly owned Botswana subsidiary, Bosoto (Pty) Limited, which as of
December 31, 2014, holds the precious stone prospecting license for the area (1.02 km2) which contains the BK16
kimberlite.
The Company holds a 70% interest in its South African subsidiary, Idada Trading 361(Pty) Limited (“Idada”).
Idada has made application for an exploration license (Ref: MP30/5/1/1/2/1047PR) in the Barberton area in
February 2012. This application was accepted in February 2013 and consultation was conducted with interested
and affected parties in April and June 2013. An Environmental Management Plan (EMP) was submitted in April
2013 and a site visit was made by various governmental departments (DMR, EWT, REMDEC) in September 2013.
The Company is now awaiting a decision by the DMR to award the prospecting permit or not.
The Company holds a 100% interest in Tsodilo Resources Bermuda Limited to which the shares of its operating
subsidiaries are registered.
1. DIAMOND PROJECTS
The Company holds 3 Prospecting Licences (1,346 km²) for precious stones, one registered each to Newdico,
Gcwihaba and Bosoto. These licenses are summarized in Table 1. The Gcwihaba license PL 195/2012 covers 494
square kilometers and the initial license grant expires June 30, 2015. The Newdico license (PL 64/2005) covers 851
square kilometres and the term of the license is April 1, 2014 to June 30, 2016. The Bosoto license (PL369/2014)
covers 1.02 square kilometres and the term of the license is October 1, 2014 to September 20, 2017.
Precious Stone Prospecting Licenses as at December 31, 2014
Table 1.
Total Expenditure From
Grant and if held to Full
License Term
BWP
USD as at
12.31.14
PL number
Km²
Grant
Date
Expiry
date
Current
Stage
Expenditure
PL 195/2012
494
7/01/12
6/30/15
Initial Grant
Rental
Fee Per
Annum
(BWP)
2,470
Work
Program
Per Annum
(BWP)
100,000
307,410
32,635
PL 064/2005
851
4/01/14
3/31/16
Extension
4,255
215,000*
438,510
46,573
PL 369/2014
1.02
10/01/14
9/30/17
Initial Grant
1,000
35,407,000#
138,275,000#
64,200,000#
237,885,000#
25,254,100
1,346.02
Total
*The minimum annual expenditure for each year is BWP215 000. However, if during the extension period, a decision is made
based on the micro-diamond results that further work is warranted, the Company estimates that BWP 4,585,000 would be
required for a mini-bulk sample.
238,600,920
26,132,451
# Amounts include services provided by shareholders and all expenditure amounts are incremental in nature and qualified by
positive results in the evaluation process throughout the license term.
PL 195/2012
Soil sampling was performed over license PL 195/2012 in order to confirm previous De Beers’ results. Heavy
mineral sorting of 36 samples collected by the Company produced 4 high titanium chrome-spinel and 1 garnet of
G9 paragenesis. They were confirmed to be mantle derived by electron microprobe analyses. The presence of
these grains confirms that the source is either an ilmenite-poor Group-1 kimberlite, such as Venetia or The Oaks,
or a Group-2 kimberlite which is devoid of any ilmenite like Finsch or Marsfontein. This target is some 40 km south
of the Thankane-01 kimberlite which is almost certainly a Group 2 kimberlite.
A ground magnetic survey was completed in February over this target with 158 line km covering 4.3 km². This
survey highlighted several drill targets. In order to prioritise these targets, the Company complemented the
magnetic survey with a ground gravity survey which was completed in October 2014 using a Scintrex Autogray
CG3 gravimeter. In total 528 stations were surveyed on a 50 x 50 m grid covering 1.2 km². This data will assist in
determining future drill hole positions more accurately. Three drill targets have been highlighted and these are
planned to be drilled in the second quarter of 2015 to determine the causative body of these targets.
PL 64/2005
Interest in the kimberlites located on PL 64/2005 is based on four main factors which makes this area prospective.
Firstly, there are two unexplained surface concentrations of both diamonds and high-interest (G10) garnets across
the border in Namibia the Tsumkwe and the Omatoko targets. Based on the local geomorphology, it was
suggested that the diamonds and garnets from these targets have been derived from one of the diamond-
bearing kimberlites in the Nxau Nxau field or from an undiscovered kimberlite(s) in the general area. The whole
Nxau Nxau kimberlite field now comprises 40 bodies that occur on both sides of the border. Although not all of
these kimberlite occurrences have mineral chemistry data, those that have data do not match that of the garnets
recovered from the Tsumkwe or Omatoko anomalies.
Secondly, the geophysical interpretation of the Southern African Magnetotelluric Experiment (SAMTEX) project
shows, among others, that PL 064/2005 lies within the southern edge of the Congo Craton (Khoza et al., 2013;
Muller and Jones, 2007).
Thirdly, Archaean ages obtained from granite/gneiss samples from two boreholes drilled by the Company in the
general area - L9590/7 (2,641 Ma) and L9660/5 (2,548 Ma) - confirm that the basement rocks are indeed Archaean
in age, satisfying one of the most important exploration criteria for diamonds. This means that those kimberlites
occurring in these prospecting licences and within the Congo Craton should be the most interesting from a
diamond perspective.
And fourthly, microdiamond work on K10 produced 14 stones from 229 kg of kimberlite core (61.23 stones per
ton). This is the highest number of microdiamonds that have been recovered from any of the 40 kimberlites in the
Nxau Nxau cluster indicating that, like any other kimberlite province in the world, some kimberlites are more
interesting than others. Because of the relative limited number of stones a grade curve with some level of
confidence cannot be produced and hence more microdiamonds are required from K10. Samples for micro-
diamonds have been prepared for kimberlite K11 and will be submitted to the microdiamond laboratory once the
results of additional microdiamond analysis for K10 have been completed. K11’s mineral chemistry signature is
similar to K10 and this body is approximately 2.5 ha in size.
Based on the positive micro-diamond results of K10, a detailed ground magnetic survey was completed over the
K10/K11/B7 cluster and over target A16 which occurs 1 km to the southeast of the K10 cluster. A total of 228 line
km were surveyed covering an area of 5 km². B7 had never been drilled and A16 has been drilled in the past but
kimberlite was never intersected. The magnetic survey was able to define the sizes of K10 and K11 more
accurately and provide accurate drill targets for B7 and A16. B7 (K29) and A16 (K30) were drilled using this data
and both proved to be kimberlite. Kimberlite K29 consists of fresh olivine macrocrysts and abundant phenocrysts
up to 3 mm (together ~35 vol.%) set in a fine matrix of mainly carbonate, scattered opaque spinel up to 0.25 mm
and perovskite of smaller size. Country rock xenoliths are extensively carbonated. The rocks from K30 consist of
abundant pelletal lapilli consisting of individual altered olivine grains (mainly phenocrysts) surrounded by either
thin coats of very fine-grained material or larger sized lapilli of kimberlite containing several olivine grains set in a
fine matrix. This fine matrix consists of masses of fine brown carbonate, some small laths of phlogopite, scattered
opaque spinels (up to 0.28 mm) and perovskite. Approximately 20 vol. % of country rock xenoliths of mainly shale
are also either finely coated or are contained or partly contained by more substantial kimberlite. Petrographically,
K29 has been interpreted as a coherent poorly-macrocrystic kimberlite and K30 as an air-fall pyroclastic
kimberlite.
Representative core samples from both kimberlites were submitted to a third-party independent laboratory
located in Johannesburg, South Africa for heavy mineral analysis (HMA). Results have failed to recover any garnet
in these samples but visually K29 has an abundance of ilmenite and medium-interest spinel, whilst K30 contains
no ilmenite but an abundance of visually high-interest spinel and olivine (Table 2). These grains were submitted
for electron micro-probe analysis for major element mineral chemistry. In sample K29, the visually identified
chrome-spinel turned out to be mainly magnetite with a few ulvospinel. One ilmenite has been shown to be
non-kimberlitic and the other ilmenite is kimberlitic but is low in TiO2 and high Fe³ values which indicates that
crystallization occurred under high f02 (oxygen fugacity) or oxidizing conditions which is not favorable for the
preservation of diamonds. In sample K30, all of the visual selected spinel and some of the ilmenite turned out to
be magnetite. There were 11 kimberlitic, four possible kimberlitic and six non-kimberlitic ilmenites in this sample
which are slightly higher in TiO2 than the one from K29. However based on the high fO2 of some ilmenites, the
absence of garnet and kimberlitic spinel and the results from the petrography it is not recommended to proceed
to the next phase for these kimberlites.
Kimberlite samples submitted for heavy mineral analysis and microprobe analysis
Table 2.
Sample ID
Ilmenite
Spinel
Visual
Visual
K 29 (B7)
K30 (A16)
64
nil
30 (Med)
30 (High)
Ilmenite
Probed
1
11
Spinel
Probed
Nil
Nil
During the year, four microdiamond sample residues from the original K10 microdiamond sample were
forwarded to an independent laboratory in Canada for additional microdiamond recovery. No additional stones
were recovered from the +75 micron fraction.
A 50 kg sample from the K11 core has been prepared and sent to an independent mineral recovery unit in
Kimberley, South Africa for diamond analysis in the approximate +0.1 mm fraction.
PL 369/2014 (BK 16)
Tsodilo was granted a prospecting license (PL369/2014) over the BK16 kimberlite pipe through its 75% owned
Botswana subsidiary, Bosoto Pty (Ltd) effective October 1, 2014. The diamondiferous BK16 kimberlite pipe is
located within the Orapa Kimberlite Field (”OKF”) in Botswana and covered by 25 meters of Kalahari Group
sediments. BK16 is located 37 km east-southeast of the Orapa Diamond Mine AK01, 25 km southeast of the
Damshtaa Diamond Mine, and 13 km north-northeast of the Letlhakane Diamond Mine, all operated by
Debswana and 28 km east-northeast from Lucara Diamond Corporation's Karowe mine (F/K/A AK6).
The OKF contains at least 83 kimberlite bodies, varying in size from insignificant dykes to the 110 ha AK01
kimberlite pipe. The AK01 pipe has been dated at 93.1 Ma and it is presumed that all the kimberlite intrusions in
the OKF are of similar and post-Karoo age. Of the 83 known kimberlite bodies, nine (9), AK01 (Orapa, Debswana);
AK06 (Karowe, Lucara Diamond Corporation); BK01, BK09, BK12 and BK15 (Damtshaa, Debswana); DK01 and DK02
(Letlhakane, Debswana); BK11 (Firestone Diamonds), are currently being or have been mined.
The BK16 kimberlite was initially discovered by De Beers in the 1970's using soil sampling techniques, airborne
magnetics, and ground magnetic surveys. This initial work was followed up by some initial drilling and the sinking
of a shallow shaft to 36 meters in the central part of the pipe. Initial indications were that the kimberlite was
diamondiferous albeit low grade and no further work was done by De Beers.
Over the period 1994 to 2010, several companies held the prospecting rights over the area containing the BK16
kimberlite and various forms of surveying and sampling were employed all in an attempt to ascertain whether
BK16 was economically viable. However, none of those efforts systematically evaluated the kimberlite to answer
the question as to BK16's merits. Tsodilo believes that much of the above described sampling was done in the
upper part of the kimberlite which is characterized by a basalt breccia. Like several of the other Orapa kimberlites,
this upper zone of basalt diluted kimberlite is of low grade but the underlying 'cleaner' kimberlite, as is the case at
BK16, is known to be of higher grade.
The Company initially conducted a desk top study of all historical data available at the Botswana Geological
Survey in Lobatse. This includes data from several companies which held the exploration rights from 1994 to
2010. Unfortunately exploration data from De Beers preformed in the 1970’s is not on file and could not be
located.
This historical drill data used for the conceptual geological model includes 27 boreholes to a cumulative depth of
3,553.25 meters. These include 12-inch reverse circulation drilling (5 holes, 641 meters); 6.5-inch percussion holes
(19 holes, 2,290 meters); and HQ size diamond core drilling (3 holes, 622.25 meters).
The Company then completed a high resolution ground magnetic survey (73 line kilometers, 20 meter line
spacing and readings every 5 seconds) and a detailed gravity survey (21 line kilometers, 50 meter line spacing and
441 survey stations) over the 1 km² license block using a Scintrex Autogray CG3 Gravimeter. All data was
processed and modelled using in-house Geosoft and PotentQ software. These two surveys were needed to more
accurately estimate the size of the pipe and combined with the historical drill data to produce the conceptual
geological model. The model suggests that the pipe is some 4.5 ha in size and that there may be a ‘blind’ satellite
pipe to the southeast and connected by possible precursor northwest orientated dyke.
In the first quarter of 2015, the Company initiated its drilling program to drill 12 diamond holes each to an
approximate 350 meter depth to map out the various kimberlite phases that are known to exist in the pipe. This is
important as each of these different phases is likely to be characterized by different grades and with different
diamond values. Later in the year, the Company plans to initiate a bulk sampling program, based on the more
detailed internal geology of the pipe, using Large Diameter Drills (LDD) which would recover sufficient material to
obtain an initial sampling grade from the different kimberlite phases and would provide some ideas on the
diamond values.
This space intentionally left blank
2. METALS (BASE AND PRECIOUS, PLATINUM GROUP METALS, AND RARE EARTH ELEMENTS) PROJECTS
The Company’s Prospecting Licences have evolved with time into a package which covers some 4,055.70 km² not
including licenses currently in renewal (Table 3).
Table 3.
Gcwihaba Metal License Areas as at December 31, 2014
PL numbers
Km²
Grant
Date
Expiry /
Renewal
date
Current
Stage
Expenditure
Total Expenditure
From Grant and if held
to Full License Term
USD as at
BWP
12.31.2014
Rental
Fee Per
Annum
(BWP)
27,424
4,160
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
2,065
Extension
831.80 07/01/14 07/01/16
in renewal
07/01/11 07/01/13
TBD
in renewal
07/01/11 07/01/13
TBD
in renewal
01/01/12 12/31/14
TBD
in renewal
01/01/12 12/31/14
TBD
in renewal
01/01/12 12/31/14
TBD
in renewal
01/01/12 12/31/14
TBD
in renewal
01/01/12 12/31/14
TBD
in renewal
01/01/12 12/31/14
TBD
in renewal
01/01/12 12/31/14
TBD
in renewal
01/01/12 12/31/14
TBD
in renewal
01/01/12 12/31/14
TBD
in renewal
01/01/12 12/31/14
TBD
in renewal
07/01/09 07/01/12
TBD
in renewal
07/01/09 07/01/12
TBD
TBD
in renewal
07/01/09 07/01/12
413.00 07/01/14 07/01/16 2nd renewal
Initial Grant
TBD
Initial Grant
TBD
Initial Grant
TBD
Initial Grant
TBD
Initial Grant
TBD
1,244.80
PL 119/2005
PL 051/2008
PL 052/2008
PL 386/2008
PL 387/2008
PL 388/2008
PL 389/2008
PL 390/2008
PL 391/2008
PL 392/2008
PL 393/2008
PL 394/2008
PL 395/2008
PL 595/2009
PL 596/2009
PL 597/2009
PL 588/2009
PL 093/2012
PL 094/2012
PL 095/2012
PL 096/2012
PL 097/2012
TOTAL
54,403
# Renewal applications have been filed for PL’s 93 -97/2012, which expire March 31, 2015, and minimum expenditures
have been met for the initial license grant term for all licenses as of 12/31/2014, accordingly the Company believes
that it would be inaccurate to state that any amounts or required expenditures should be stated with respect to these
expiring licenses as of the date of this MD&A.
258,320
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
254,130
#
04/01/12 04/01/15
04/01/12 04/01/15
04/01/12 04/01/15
04/01/12 04/01/15
04/01/12 04/01/15
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
512,450
6,225
26,979
#
#
#
#
#
#
#
#
#
-
-
-
-
-
-
-
-
-
-
Work
Program
Per
Annum
(BWP)
125,000
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
125,000
The Company’s exploration work had initially indicated that the sulphide-rich Matchless Amphibolite Belt (‘MAB’)
traverse the Company’s southern licences in northwest Botswana in an area where the Damara Belt connects with
the Lufilian Arc. Petrology, geochemistry and geochronology work was conducted by AEON’s (Africa Earth
Observatory Network) research group located at the NMMU (Nelson Mandela Metropolitan University) in Port
Elizabeth, South Africa. This work has identified Archaean granite-gneisses between 2.548 and 2.641 Ma in age in
Ngamiland, whilst paleoproterozoic granites (ca. 2,000 Ma) seem to have been tectonically interlayered with
Copper Belt (Lufilian Arc)-equivalent metasediments (including graphitic schist, carbonates and diamictites), and
metabasites and gabbros (535 Ma), all of which were intersected during the initial drilling program by the
Company.
During the initial drilling campaign by the Company, three separate mineralisation domains were identified in the
various licences. These are, (1) sulphide mineralisation associated with Neoproterozoic metasediments, (2) base
and precious metals and rare earth elements showings associated with skarns linked to the 535 Ma age basic
intrusions, and (3) a large magnetite deposit which the Company is presently evaluating (Table 4).
Main Mineralogical Domains Identified during the Phase 1 Drill Program
Table 4
Sedimentary Cu/Co (Katanga
Central African Copper Belt-style sedimentary rock-
type sediments) in the central
hosted copper showings at multiple stratigraphic levels,
Copper (cobalt)
shale belt
spatially associated with faults
Sepopa Cu/Au Skarn deposit
Iron-copper skarns associated with ~535 Ma basic
(IOCG?)
intrusions
Xaudum Magnetite Banded Iron
Layered and massive BIF Rapitan type Fe Formation
Formation (XIF)
closely associated with the Grand Conglomerate
Copper-gold-iron
Iron
2.1 STRATEGIC PARTNERSHIP
On November 20, 2013, Tsodilo announced that, further to its April 17, 2013 Memorandum Of Understanding
(“MOU”) with First Quantum Minerals Ltd. (TSX:FM)(LSE:FQM) ("First Quantum"), the Company, its wholly-owned
subsidiary Gcwihaba Resources (Pty) Ltd. ("Gcwihaba"), First Quantum and First Quantum's wholly-owned
subsidiary Faloxia (Proprietary) Limited ("FQM Subco") have entered into a definitive Earn-In Option Agreement
(the "Option Agreement") pursuant to which First Quantum (which term for the purposes of this section includes
FQM Subco) has acquired the right to earn up to a 70% interest in metals prospecting licences in Botswana
granted to Gcwihaba insofar as they cover base, precious and platinum group metals and rare earth minerals by
meeting certain funding and other obligations as set forth below. The interests that may be earned by First
Quantum specifically exclude any rights to iron held by Gcwihaba.
Under the terms of the Option Agreement, First Quantum can earn either a 51% participating interest or a 70%
participating interest in designated projects within the overall license area covered by the Option Agreement (the
"Project Area") by satisfying the following requirements:
funding exploration expenditures within the Project Area in the aggregate amount of US$6 million by
November 20, 2015 (the "Tranche 1 Funding Commitment");
funding an additional US$9 million in exploration expenditures within the Project Area by November 20,
2017; and
completing a technical report ("Technical Report") on a designated area within the Project Area
prepared in compliance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects of
the Canadian Securities Administrators and that meets certain requirements with respect to resources as
described below.
The Tranche 1 Funding Commitment is a firm commitment by First Quantum and must be satisfied irrespective of
whether First Quantum elects to pursue the other requirements to earn an interest in Gcwihaba's licences.
Tranche 1 funding obligations have been met.
In the event that First Quantum satisfies the funding obligations as set forth above, but a Technical Report has
not been completed by the end of the fourth year following the execution of the earn-in option agreement; First
Quantum may maintain the earn-in option for up to an additional three years by continuing to spend a minimum
of $2 million per year on exploration and evaluation studies on the Project Area.
If the Technical Report delineates a "Major Defined Project" (being a designated project within the Project Area
with respect to which the Technical Report delineates a measured, indicated and inferred mineral resource within
the Project Area of not less than 2,000,000 tonnes of copper), First Quantum will be deemed to have earned a 70%
interest in the property that is the subject of such report. If the Technical Report delineates a "Minor Defined
Project" (being a designated project within the Project Area with respect to which the Technical Report delineates
a measured, indicated and inferred mineral resource within the Project Area of less than 2,000,000 tonnes of
copper, or another base, precious or platinum group metal and rare earth mineral), First Quantum will be deemed
to have earned a 51% interest in the property that is the subject of such report; provided, however, that it may
elect to retain an option for up to five years to convert such property into a Major Defined Project. If First
Quantum makes such election, it will be responsible for all further costs and expenses associated with the Minor
Defined Project, including for operations and capital expenditures, until the earliest of: (a) the completion of a
Technical Report for a Major Defined Project, in which event the Minor Defined Project will be deemed to be
converted into a Major Defined Project and First Quantum will be deemed to have earned a vested 70%
participating interest therein; (b) written notice from First Quantum to the Company that First Quantum no longer
wishes to retain the option to convert such Minor Defined Project into a Major Defined Project; and (c) five years
after the date of the original vesting of a 51% interest in the Minor Defined Project. If First Quantum fails to satisfy
the requirements to convert a Minor Defined Project into a Major Defined Project it will retain a vested 51%
participating interest in the Minor Defined Project.
Upon First Quantum's participating interest in a defined project being crystallized at either 51% or 70%,
Gcwihaba and First Quantum will enter into a joint venture agreement for such project. Under the terms of each
such joint venture agreement, Gcwihaba's participating interest in each joint venture will be carried until the
commencement of construction of a mine for the project. Accordingly, all costs and expenses associated with the
defined project until such time, including for operations and capital expenditures, will be funded by First
Quantum.
As of December 31, 2014, First Quantum reported that it has spent in total $12,959,302 (2014: $8,718,125 & 2013:
$4,241,177) on Prospecting Licenses covered by the MOU.
2.2 XAUDUM MAGNETITE BANDED IRON FORMATION (XIF)
Tsodilo, through its local subsidiary Gcwihaba, is evaluating the Xaudum Iron Ore deposit. This project falls
outside of the agreement with First Quantum and is solely a Tsodilo project. The drilling and the ground
geophysical surveys conducted by Gcwihaba have for the last two years concentrated on this Banded Ironstone
Formation (“BIF”). This Xaudum BIF is intimately associated with glacial diamictites and is the cause of the large
Xaudum Magnetic Anomaly that has been isolated and extends over 35 km in a north-south direction with several
magnetite bands that occur over a width of several kilometres. It is part of a Rapitan type iron-formation both in
terms of age and lithology. Rapitan-type iron-formations are Neoproterozoic (0.8-0.6 Ga) iron-formations that are
characterized by their association with glaciomarine sediments. Examples include the Rapitan Group (Canada),
the Yudnamutara Subgroup (Australia), the Chuos Formation (Namibia), and the Jacadigo Group (Brazil).
Due to the large size of this deposit, which has an exploration target of between 5 and 7 billion tonnes of iron ore
at grades ranging between 15 - 40%, it was decided to subdivide the target into several exploration blocks.
In 2014, additional ground geophysics over the Xaudum XIF deposit were required to fill in some of the data gaps
and resurvey some of the lines that had produced poor quality data and infill lines to more accurately site the drill
holes on the ironstones. This amounted to 2,008 line kilometres covering some 71 km ² on 20 or 50 meter line
spacing.
Drilling during the year using the Tsodilo drill rigs was mostly focussed on the Xaudum XIF deposit and 33 holes
were drilled in Block 1. This amounted to 5,439 m drilled recovering 4,160 m of core, all from Block 1. The drilling
on Block 1 was completed in May and in August SRK Consulting (U.K.) presented Gcwihaba’s maiden National
Instrument 43-101 Resource report of Block 1 of this large XIF deposit. For Block 1, SRK derived an Inferred Mineral
Resource of 441 Mt grading 29.4% Fe, 41.0% SiO2, 6.1% Al2O3 and 0.3% P.
Tsodilo subsequently started drilling the next exploration area within the Xaudum XIF deposit, referred to as Block
2a. The Company expects to define a significant Inferred Mineral Resource in Block 2 in due course which will
significantly increase the Xaudum Iron Project total Mineral Resource. Drilling of this block started in August and
nine holes were drilled to a cumulative depth of 1,490 m extracting some 1,223 m of core.
The Company aims to complete the resource definition of Block 2 in order to establish a +1 Bt resource. In
addition it has also started investigating how to progress this deposit with aspects of local beneficiation. New
technology is available to transform the magnetite iron concentrate on site to produce Iron Pellets (heat and
fuse), briquettes or supa-scrap (IMBS non-conventional DRI process) or even pig iron (ESS Prodilux furnace). For
this the local thermal coal in Botswana is considered most appropriate but issues surrounding the infra-structure
need to be resolved.
2.3 KATANGAN-LIKE META-SEDIMENTS
East and south of the XIF Iron project are the skarn IOCG-type mineralization and in the south-east and east of the
Banded Iron Formation rocks are north-north-west to north-north-east trending mineralized metasediments in
what is referred to as the Central Shale Basin. The latter meta-sedimentary sequence is very similar to the parts of
the stratiform Cu-Co (Copper-Cobalt) province of the Central African Copper Belt and are identical to the host
rocks of the Kalumbila Cu-Ni-Co deposit in western Zambia. The black shales, meta-pelites, meta-arenites,
dolomites, with evidence of evaporate minerals, in particular bear strong resemblance to the Mwashya rocks in
Zambia. Most lithologies are mineralized with pyrite, pyrrhotite, and chalcopyrite.
First Quantum Minerals Ltd through its local wholly-owned subsidiary Faloxia (Pty) Ltd are exploring these areas
and a summary of their exploration efforts during 2014 are summarized Table 5.
Table 5
Summary of FQM activities during 2014
Samples submitted
No. of holes
Meters drilled
874
8,227
28
168
10,522.81
13,611.78
Surface samples
Borehole samples
Total
DRILLING
Diamond Drilling
KGP
GEOCHEMISTRY
Hydrogeochemistry
Soil Geochemistry
CSIRO study
Petrology (Mason)
Grab samples
AIRBORNE GEOPHYSICS
GyroLAG Airborne Gravity
DOWNHOLE GEOPHYSICS
-
835
120
-
6
Line Kilometres
10,391.97
Downhole logging
1,018.35
Meters
No. of Holes
Stratigraphic Section Line
174
-
110
13
-
-
4
174
835
230
13
6
-
-
Started during 2013, the Stratigraphic Section Line was completed in the first Quarter of 2014. The final two of
seven diamond boreholes – BWADD0006 and BWADD0007 – were drilled on an east-west section 2 kilometers
south of Shakawe. The aim of the Stratigraphic Section Line was to provide an understanding of the stratigraphy
of the Katangan rocks in the Shakawe area, which would assist in subsequent targeting and drill-testing.
The Stratigraphic Section Line identified a thick package of meta-sedimentary rocks overlying sheared basement.
A gabbroic intrusion is present at the contact between the Katangan rocks and basement. The meta-sediments
include diamictite, Banded Iron Formation, phyllite and a carbonate-shale package. Packages of rocks appear to
be repeated, which suggests thrust stacking. These aforementioned rocks are interpreted to be of the Mwashya
Group. The basal Upper and Lower Roan Group rocks appear to be absent in the location of the Stratigraphic
Section Line.
One additional diamond borehole, BWADD0008, was drilled into the basement high, 2 kilometers southwest of
the Stratigraphic Section Line. The borehole was designed to confirm the presence of ‘true basement’ in the
Shakawe area and demonstrated a thick (>500m) sequence of variably K-feldspar metasomatised quartz-biotite
schist.
Kalahari Geochemistry Program (KGP)
The Kalahari Geochemistry Program (KGP) commenced in September 2013 and was completed in May 2014. A
total of 220 holes were drilled during the program: 52 during 2013 and 168 during 2014. KGP boreholes samples
from surface through the Kalahari cover and approximately 5 meters into Katangan bedrock. All KGP boreholes
drilled in 2014 were diamond drill holes.
The premise of the KGP was the direct-detection of mineralization through the Kalahari cover. Firstly,
mineralization in the Katangan bedrock will leach into the overlying Kalahari sediments both mechanically and
hydromorphically, enlarging the ‘footprint’ of the mineralization. Secondly, the samples of the Katangan rocks
taken from the base of the KGP holes will enable the mapping of lithology, alteration and mineralization and
further assist in targeting.
The KGP boreholes were lined with PVC casing to enable the sampling of groundwater. Sand and core samples
were analyzed for 51 elements at ALS Chemex in Johannesburg, including Ultra Trace gold analysis. One of two
digestion methods was used depending on the type of sample and the depth from which it was taken.
Assay results from the KGP samples were returned during November and analysis of the data will take place in the
1st Quarter of 2015, when targets will be selected for a drilling campaign to take place later in the year.
Hydrogeochemistry
174 samples water samples were collected in the project area between March and November. 86 of these
samples were taken from KGP boreholes and 88 from sources elsewhere in the area, including drill holes,
government boreholes and hand-dug wells.
Three analyses were done on each sample: cations and anions for ICP-MS; iron chromatography for copper
isotopes; and carbon sachets for gold and Platinum Group Elements (PGEs).
An initial interpretation of ICP-MS results has identified three zones of anomalous multi-element signatures (Cu,
As, Pb, Co, Sb and Ni). Data analysis is on-going, and results for copper isotopes and carbon sachets are
outstanding, expected early 2015.
Soil Geochemistry
An experimental grid of 835 soil samples was collected over the Sepopa area during July and August. Previous
drilling by Tsodilo Resources had identified anomalous copper mineralization at the bedrock unconformity and
the soil grid was designed to test whether this could be detected at surface, through the 90 meters of cover.
Analysis of soil pH proved inconclusive and the samples were not submitted to the laboratory for geochemical
analysis.
Airborne Gravity
GyroLAG of South Africa commenced an airborne gravity survey in May. The survey covered a ‘belt’ of shale units,
identified by the 2013 Spectrem airborne EM survey. The purpose of the gravity survey was to identify pre-
Katangan basement domes, the flanks of which are prospective for sediment-hosted copper mineralization.
The 35 SW-NE orientated, 2.5 kilometer-spaced tie lines were completed in July, before work began on flying the
500 meter-spaced N-S flight lines. Continual interruptions to the progress of the survey meant that at the end of
the year only 10,391.97 of the planned 22,092.69 line kilometers had been flown. A reduced survey area will be
completed in 2015, with several flight lines needing to be re-flown due to poor data quality.
The survey was a technical success in that it successfully identified basement highs which were not previous
identifiable in magnetic, EM, drilling or other datasets. The gravity data also identified thickness changed in the
Katangan rocks which are particularly prospective locations for ore deposits.
CSIRO Research Project
Dr Ravi Anand of CSIRO visited the project during October as part of an FQM-commissioned research project into
exploration through the Kalahari cover. Dr Anand studied drill core and outcrops in the project area and collected
a total of 230 samples: 110 of core and 120 surface samples.
At the end of 2014, samples were still being analyzed at CSIRO in Perth, Western Australia. Analyses included
electron microscope, petrology, heavy mineral separation and selective leaches. The study is intended to assist in
the interpretation of the KGP and hydrogeochemistry datasets, and to improve future under-cover exploration.
Target Drilling
Sixteen targets were drill tested in 2014 by diamond drill holes BWADD0009 through BWADD0033. Targets were
selected by several conceptual criteria including the presence of a reducing rock, structures, alteration,
mineralization and their proximity to basement.
Between one and three holes were drilled into any one target. Once drilling ceased at a target, a 3D model and
evaluation of the target was made in order to determine whether further drilling was warranted, and if so where
drill holes would be located.
Many target drill holes intersected pyrite and pyrrhotite-rich black shale. Assays of these sulphide-rich
intersections returned low base and precious metal concentrations but provide useful vectors for follow-up
drilling in 2015.
The highlight target was Laharpo East, located approximately 12 kilometers northeast of Shakawe. Hole
BWADD0033 intersected 1.4 meters @ 0.96% Cu, with anomalous copper mineralization and albite alteration over
a width of 150 meters. Further drilled identified anomalous copper and alteration over a strike length of 2.6
kilometers.
Other Metal Targets
Gcwihaba completed the drilling over targets TOD 17, TOD029 and TOD030 to a cumulative depth of 330 meters.
These anomalies were initially identified as kimberlite targets because there is an association with Ni and Zr/Cr soil
anomalies generated by the 1999 governments Ngamiland Geochemical soil sampling program. These targets
were modelled both as kimberlites (geophysicaly) and base metal mineralization (geochemically) and hence
justified further work. These were drilled under the metal licences PL 051/2008 and PL 052/2008. TOD 17
intersected a series of meta-sediments containing veinlets of sulphides rich in pyrite and traces of chalcopyrite.
Target hole TOD029 had to be abandoned due to drilling problems in the Kalahari cover and target hole TOD030
returned basement and is of no further interest.
Assay results from the relatively un-deformed shales and siltstones from borehole TOD017 were received and did
not return high-interest results. These targets have since been abandoned.
3. Radioactive Licenses
The Company holds eight prospecting permits for radioactive minerals through its wholly owned subsidiary
Gcwihaba Resources (Pty) Ltd in northwest Botswana. The area of the licenses in renewal cover 6,925 km² (Table 6)
and overlap with some of the Gcwihaba diamond and metal permits. Applications for renewal for both sets of
permits have been submitted to the Ministry of Minerals, Energy and Water Resources (MMEWR) and the
Company is awaiting confirmation of the renewals from MMEWR.
Gcwihaba – Radioactive License Areas as at December 31, 2014
Table 6.
PL numbers
Km²
Grant
Date
Renewal
date
Current
Stage
Expenditure
PL 150/2010
PL 151/2010
PL 045/2011
PL 046/2011
PL 047/2011
PL 048/2011
PL 049/2011
PL 050/2011
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
07/01/10
07/01/10
01/01/11
01/01/11
01/01/11
01/01/11
01/01/11
01/01/11
07/01/13
07/01/13
01/01/14
01/01/14
01/01/14
01/01/14
01/01/14
01/01/14
in renewal
in renewal
in renewal
in renewal
in renewal
in renewal
in renewal
in renewal
Rental Fee
Per Annum
(BWP)
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
Work Program
Per Annum
(BWP)
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
Total Expenditure
From Grant and if
held to Full
License Term
BWP
USD as at
12.31.14
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
The Company has reviewed the exploration results from Union Carbide Exploration Corporation which had
secured many prospecting licences in west and northwest Botswana for uranium. Of particular interest are their
findings of anomalous uranium within what they called the Khaudum and Chadum paleo-drainages. High counts
of uranium in both calcrete and water samples and anomalous counts of vanadium from the water samples were
obtained. Up to 30 m thick valley calcrete (the target calcrete) was drilled with geochemical anomalous
concentration of uranium in certain trap environments. However at the time, no ore-bodies were delineated, but
Union Carbide concluded that based on the high uranium concentrations in the water samples the area is
anomalous with respect to uranium.
The age and origin of these types of calcretes further south has been incorporated in a research project
conducted by AEON and the following field observations indicated the presence of two types of duricrust both
slightly radioactive (1500 cpm). These represent good potential hosts for uranium, similarly to the well-known
Langer Heinrich and Klein Trekkopje uranium deposits in Namibia that developed within Tertiary paleo-channel
systems of the Namid Desert. In addition Uranium-rich soils (3,000-6,000 cpm) were identified in the Chadum and
Kkhaudum drainages.
Renewal applications for PL’s 45 - 50 and PL’s 150 & 151 were submitted in September 2013 and July 2013
respectively. The work schedule over this ground has been limited until these applications have been approved.
However, during Faloxia’s target drilling program one hole intersected a surprisingly thick succession of Karoo
Supergroup rocks in what has been interpreted as a glacial palaeo-valley of Carboniferous age. This is supported
by both the airborne Magnetic and EM surveys which can trace this palaeo-valley system over several tens of
kilometers. The valley itself has been modeled to be approximately 1 km wide and well over 600 m deep. Within
this Carboniferous package there is a 6 m section of carbonaceous mud and siltstones (from 162 to 168 m) with
high radioactivity. Reading of between 3,800 and 4,100 counts per minute (“cpm”) were recorded using the
Ludlum Model 3 Survey meter, which is approximately four times the back ground. Assay results over this
intersection varied from 20 to 80 ppm with associated anomalous values in K and Mo. In addition, results from
water samples from Faloxia’s regional hydrogeochemistry program has highlighted six holes (KGPDD0054, -0061,
-0093, -0096, -0097, -0098) that have given high anomalous U results varying from 35.9 to 283 U ug/l. These form
two clusters, one of which is around Hole -0054 that also intersected basal Karoo sediments which suggests that
the Karoo is acting as an intermediate source of U. U anomalies have been reported from several holes drilled in
the Neoproterozoic Katanga rocks, and in recent calcretes and muds in drainage to the west of the project area as
well.
During the flying of the Spectrem EM survey, radiometric data was also collected over the same area and
although the results were subtle there are some suggestions that parts of the palaeo-drainages can be traced
particularly in terms of potassium and thorium.
Gcwihaba is waiting for all the geochemistry results (from both the KGP and hydrogeochemical programs) to be
released. Once the renewals of the permits have been approved, Gcwihaba will continue to outline the areas of
interest based on the complete geochemistry results in combination with the radiometric geophysical data.
Exploration and Evaluation Additions
The Company owns and operates its own diamond core drill rigs and provides support to its drilling operations
with a fleet of eight 6 x 6 heavy trucks and eight light trucks. Geophysical magnetic surveys are conducted by the
company’s employees using company owned magnetometers.
Exploration and evaluation additions for the year ended December 31, 2014 are summarized as follows:
Newdico
Botswana
Gcwihaba
Botswana
Total
Precious
Stones
Precious
Stones
Metals
Subtotal
Radio-
Active
Minerals
$ 4,366
$ 105,252
$ 520,903
$ 116,647
$ 742,802
$ 747,168
2,741
6,742
--
--
35,250
2,046
94
4,818
164,498
21,331
315,613
8,334
35,250
1,451
11,115
1,148
234,998
24,828
326,822
14,300
237,739
31,570
326,822
14,300
46,868
18,231
56,056
19,203
93,490
140,358
41,482
122,946
596,729
115,326
835,001
876,483
$ 102,199
$ 288,637
$1,683,464
$ 300,140
$ 2,272,241
$ 2,374,440
Drilling Expenditures
Amortization Drill
Rigs, Vehicles & Trucks
GIS & Geophysics
Lab Analyses & Assays
License Fees
Office, Maintenance,
& Consumables
Salaries, Wages &
Services
Balance at
December 31, 2013
Exploration and Evaluation additions for the year ended December 31, 2014 are summarized as follows:
Newdico
Botswana
Bosoto
Botswana
Gcwihaba
Botswana
Total
Precious
Stones
Precious
Stones
Precious
Stones
Metals
Subtotal
Radio-
Active
Minerals
$ 66,619
$ 770
$ 33,475
$ 130,593
$ 38,801
$ 202,869
$ 270,258
36,279
605
4,804
710
--
--
--
28
26,801
125,042
26,832
178,675
214,954
2,177
78,270
305
279
154,137
5,109
988
344
--
81,435
82,040
154,786
5,388
159,590
6,126
55,736
4,165
17,899
76,838
19,126
113,863
173,764
168,119
409
188,323
489,288
186,073
863,684
1,032,212
$ 332,872
$ 5,372
$ 269,259
$1,059,277
$ 272,164
$ 1,600,700
$ 1,938,944
Drilling
Expenditures
Amortization
Drill Rigs,
Vehicles &
Trucks
GIS &
Geophysics
Lab Analyses &
Assays
License Fees
Office,
Maintenance,
&
Consumables
Salaries, Wages
& Services
Balance at
December 31,
2014
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2014, the Company had a working capital deficit of ($118,298) [December 2013: surplus
$300,599], which included cash of $232,585 (December 2013: $610,622). These funds are managed in-house in
accordance with specific investment criteria approved by the board of directors, the primary objective being the
preservation of capital to assure funding for exploration activities. In the 1st and 2nd Quarter of 2014, the Company
received proceeds of $238,780 from the exercise of options. During the year ended December 31, 2014, the
Company received net proceeds of $1,636,574 from the issuance of units (common shares and warrants).
Financial Instruments
The carrying amounts reflected in the consolidated Statement of Financial Position for cash, accounts receivable,
accounts payable, and accrued liabilities approximate their fair values due to the short maturities of these
instruments. Certain of the Company’s warrants are classified as derivative liabilities and are recorded at their
estimated fair value. The liability recognized at December 31, 2014 for those warrants is $159,023 (2013:
$184,264). The Company is not required to pay cash to the holders of the warrants to settle this liability. Due to
the nature of the Company’s operations, there is no significant credit or interest rate risk.
Operating Activities
Cash outflow used in operating activities before working capital adjustment decreased from ($852,933) for the
year ended December 31, 2013 to ($706,862) for the year ended December 31, 2014. Other expenses
fluctuated but on the whole were reduced for the year ended December 31, 2014. The largest impact was the
unrealized gain on the valuation of warrants was reduced from 699,948 in 2013 to 25,240, which is a non-
cash item that varies with market valuation and is recorded as a liability under IFRS, but this liability does not
require an outlay of cash and is primarily for disclosure on warrants expressed in Canadian dollars. Corporate
remuneration expense increased from $399,137 to $415,071. Increases in corporate remuneration resulted
from concentrating more expenses to corporate activities, and resulted in savings capitalized by focusing
Botswana activities with local personnel. Expense decreases were throughout the other expense categories
with the largest decreases in investor relations going down by approximately $19,000, and legal and audit
going down by approximately $132,000. Legal and audit was higher in 2013 as a result of agreements on
the First Quantum joint venture arrangement.
This space intentionally left blank
Annual Information
(in US Dollars)
Net loss for the year
Basic loss per share
Basic diluted loss per share
Total other comprehensive income (loss)
Total comprehensive loss for the year
Basic comprehensive loss per share
Diluted comprehensive loss per share
Total assets
Total long term liabilities
Cash dividend
Fiscal Year
December 31, 2014
Fiscal Year
December 31, 2013
($1,031,117)
($0.03)
($0.03)
($1,031,117)
($2,252,223)
($0.07)
($0.07)
$13,469,926
--
--
($778,389)
($0.03)
($0.03)
($1,462,172)
($2,240,561)
($0.07)
($0.08)
$13,365,230
--
--
Quarterly Information
(in US Dollar)
Fiscal Year ended December 31, 2013
Net income (loss for the period
Basic income (loss) per share
Diluted basic income (loss per share
Comprehensive income (loss) for the period
Basic comprehensive income (loss) for the
period
Diluted comprehensive income (loss) per share
Total assets
Total long term liabilities
Quarterly Information
(in US Dollars)
Fiscal Year ended December 31, 2014
Net income (loss) for the period
Basic income (loss) per share
Diluted basic income (loss) per share
Comprehensive income (loss) for the period
Basic comprehensive income (loss) for the
period
Diluted comprehensive income (loss) per share
Total assets
Total long term liabilities
Investing Activities
Quarter 1
Quarter 2
Quarter 3
Quarter 4
$30,658
$0.00
$0.00
($670,413)
($0.03)
$126,591
$0.01
$0.01
($462,546)
($0.01)
($461,724)
($0.02)
($0.02)
($391,720)
($0.01))
($473,914)
($0.02)
($0.02)
($715,882)
($0.02)
($0.02)
$12,366,937
--
($0.02)
$14,087,792
--
($0.01)
$13,805,179
--
($0.03)
$13,365,230
--
Quarter 1
Quarter 2
Quarter 3
Quarter 4
($1,173,718)
($0.04)
($0.04)
($1,191,417)
($0.04)
($241,830)
($0.01)
($0.01)
($316,273)
($0.01)
($0.04)
$13,346,846
--
($0.01)
$13,593,216
--
$310,979
$0.01
$0.01
($360,705)
($0.01)
$73,452
$0.01
$0.01
($383,828)
($0.01)
($0.01)
$13,504,247
($0.01)
$13,469,926
Cash flow applied in investing activities decreased to ($1,445,480) for the year ended December 31, 2014
[December 31, 2013: ($2,103,398)].
Total expenditures of $1,938,944 on exploration properties for the year ended December 31, 2014 were
attributable to the Newdico, Gcwihaba and Bosoto projects in northwest Botswana. Included in this
amount is the proportionate contributory share, ranging from 2.42% to 2.41% attributed to the Trans Hex
Group for the Newdico project. Trans Hex Group has a 2% interest for funding the expenses of Newdico. There
were no material disposals of capital assets or investments during the year.
Financing Activities
Following the restructuring of Tsodilo in April 2002 and the cancellation of the shares formerly held by Trans Hex,
the source of financing for the Company’s activities changed from debt (related party) financing to equity,
through the issue of units by way of non-brokered private placements. Each unit has consisted of one common
share of the Company and one or one-half a warrant with each full such warrant entitling the holder to purchase
one common share of the Company for a purchase price equal to the unit price for a period of two to five years
from the date of issuance.
Private Placement Date
No. of Units
Price per Unit
Net Proceeds USD
September 7, 2012
April 22, 2013
May 29, 2014
July 29, 2014
December 24, 2014
1,181,181
2,272,727
306,183
634,116
560,922
C$1.10
C$1.10
C$1.28
C$1.28
C$1.10
$2,008,780
$2,409,340
$ 355,507
$751,621
$529,446
Warrant Exercise Date
No. of Shares
Price per Share
Proceeds USD
None
Options Exercised Date
No. of Shares
Price per Share
Proceeds USD
May 1, 2012
May 7, 2012
December 19, 2012
January 2, 2013
April 24, 2013
December 16, 2013
December 31, 2013
March 4, 2014
March 13, 2014
March 21, 2014
March 25, 2014
250,000
100,000
50,000
50,000
50,000
50,000
20,000
50,000
75,000
40,000
72,110
April 24, 2014
110,000
C$0.80
C$0.80
C$0.70
C$0.70
C$0.70
C$0.70
C$0.55
C$0.70
50,000 : C$0.70
25,000 : C$0.90
C$1.00
50,000 : C$0.70
22,110 : C$1.00
C$0.70
$204,073
$80,368
$35,506
$35,285
$34,094
$32,913
$10,279
$31,649
$51,725
$35,564
$49,985
$69,857
During the year ended December 31, 2011, the Company received gross proceeds in the amount of $1,926,547
from the exercise of Warrants related to private placements. During the year ended December 31, 2012, the
Company received proceeds of $319,947 from the exercise of Stock Options and $2,008,780 from the issuance of
Units in private placements. During the year ended December 31, 2013, the Company received proceeds of
$112,571 from the exercise of Stock Options and $2,409,340 from the issuance of Units in private placements.
During the years ended December 31, 2014 the Company received proceeds of $238,780 from the exercise of
Stock Options and $1,636,574 from the issuance of Units in private placements.
Tsodilo expects to raise the amounts required to fund its 98% share of the Newdico project, the Gcwihaba project,
the Bosoto project, and corporate general and administration expenses, by way of non-brokered private
placements and joint ventures.
RESULTS OF OPERATIONS
On a consolidated basis, the Company recorded a comprehensive net loss of ($2,252,223) for the year ended
December 31, 2014 [($0.07) per common share] compared to a comprehensive net loss of ($2,240,561) for the
period ended December 31, 2013 [($0.07) per common share]. The change in the loss in 2014 was due primarily
due to increases in corporate remuneration, and due to decreases in most other expense categories.
Cumulative exploration expenditures including amortization of property, plant and equipment used in
exploration activities on all projects amounted to $12,889,827 as at December 31, 2014 compared to $12,125,174
as at December 31, 2013. Cumulative exploration expenditures incurred on the Newdico project as at December
31, 2014 was $6,520,429 compared to $6,779,575 as at December 31, 2013. A net exchange translation difference
accounted for a ($592,018) reduction. Cumulative exploration expenditures incurred on Gcwihaba’s projects as at
December 31, 2014 were $6,364,487 compared to $5,345,599 as at December 31, 2013.
A net
exchange translation difference accounted for a ($581,812) reduction. Cumulative exploration expenditures
incurred on Bosoto’s projects as at December 31, 2014 were $4,911 ($nil: December 31, 2013). The principal
components of the Newdico, Gcwihaba and Bosoto exploration program were: (a) additional soil sampling and
the completion of the processing and analysis of the soil samples; (b) commissioning of further ground magnetic
surveys of selected aeromagnetic anomalies; (c) analyzing detailed proprietary aeromagnetic maps covering the
target areas; and (d) commencement of a diamond core drilling program on selected targets. A table is
presented above with specific details.
PERSONNEL
At December 31, 2014, the Company and its subsidiaries employed twenty-six (26) compared to forty (40) at
December 31, 2013, including senior officers, administrative and operations personnel including those on a short-
term service basis.
YEAR ENDED DECEMBER 31, 2014
The year ended December 31, 2014 was a normal operating year. Operating expenses were at normal levels for
the year.
RISKS AND UNCERTAINTIES
Operations of the Company are speculative due to the high risk nature of its business which includes acquisition,
financing, exploration and development of diamond and metal properties (collectively “mineral”). Material risk
factors and uncertainties, which should be taken into account in assessing the Company's activities, include, but
are not necessarily limited to, those set below. Any one or more of these risks and others could have a material
adverse effect on the Company.
Additional Funding Requirements
Further development and exploration of the various mineral projects in which the Company holds an interest
depends upon the Company's ability to obtain financing through equity or debt financing, joint ventures or other
means. While the Company has been successful in the past in obtaining financing through the sale of equity
securities, there can be no assurance that the Company will be successful in obtaining additional financing in the
amount and at the time required and, if available, that it can be obtained on terms satisfactory to the Company.
These consolidated financial statements have been prepared on the basis of accounting principles applicable to a
going concern, which assumes that the Company will realize its assets and discharge its liabilities in the normal
course of business. The Company incurred a loss of $1,031,117 during the year ended December 31, 2014 and
as of that date the Company had an accumulated deficit of $34,757,730 and negative net working capital
of $118,298. Management has carried out an assessment of the going concern assumption and has concluded
that the cash position of the Company is insufficient to finance exploration and resource evaluation at the
2014 and 2013 levels, and may be insufficient to finance continued operations for the 12 month period
subsequent to December 31, 2014. The continuity of the Company’s operations is dependent on raising
future financing for working capital, the continued exploration and development of its properties and
for acquisition and development costs of new projects. The Company’s failure to raise additional funds could
result in the delay in the work performed on the Company’s exploration properties and may lead to an
impairment charge on the Company’s exploration and evaluation assets. Management believes that it will be
able to secure the necessary financing through a combination of the issue of new equity or debt instruments,
the entering into of joint venture arrangements or the exercise of warrants and options for the purchase of
common shares. However there is no assurance the Company will be successful in these actions. There can be
no assurance that adequate financing will be available, or available under terms favorable to the Company.
During the year ended December 31, 2014, the Company received proceeds of $238,780 from the exercise of
Stock Options and $1,636,574 from the issuance of Units in private placements. Should it be determined
that the Company
is no
longer a going concern, adjustments, which could be significant, would be
required to the carrying value of assets and liabilities. These consolidated financial statements do not reflect
the adjustments to the carrying value of assets and liabilities, or the impact on the consolidated statement of
operations and comprehensive income (loss), and consolidated statement of financial position classifications
that would be necessary were the going concern assumption not be appropriate.
Failure to obtain equity or debt financing on a timely basis may cause the Company to postpone its exploration
and development plans or forfeit rights in some of its projects.
Uncertainties Related to Mineral Resource Estimates
There is a degree of uncertainty attributable to the calculation of mineral resources and corresponding grades
being mined or dedicated to future production. Until resources are actually mined and processed, the quantity of
resources and grades must be considered as estimates only. In addition, the quantity and value of reserves or
resources may vary, depending on mineral prices. Any material change in the quantity of resources, grades or
stripping ratio may affect the economic viability of the Company's properties. In addition, there is no assurance
that recoveries in small-scale laboratory tests will be duplicated in larger-scale tests under on-site conditions, or
during production. Determining the economic viability of a mineral project is complicated and involves a number
of variables.
Commodity Prices and Marketability
The mining industry, in general, is intensely competitive and there is no assurance that, even if commercial
quantities of minerals are discovered, a profitable market will exist for the sale of minerals produced. Factors
beyond the control of the Company may affect the marketability of any minerals produced and which cannot be
accurately predicted, such as market fluctuations, and such other factors as government regulations, including
regulations relating to royalties, allowable production, importing and exporting of minerals and environmental
protection, any combination of which factors may result in the Company not receiving an adequate return on
investment capital. Prices received for minerals produced and sold are also affected by numerous factors beyond
the Company's control such as international economic and political trends, global or regional consumption and
demand and supply patterns. There is no assurance that the sale price of minerals produced from any deposit will
be such that they can be mined at a profit.
Currency Risk
The Company's business is mainly transacted in Botswana Pula and U.S. dollar currencies. As a consequence,
fluctuations in exchange rates may have a significant effect on the cash flows and operating results of the
Company in either a positive or negative direction.
Foreign Operations Risk
The Company's current significant projects are located in Botswana. This exposes the Company to risks that may
not otherwise be experienced if its operations were domestic. The risks include, but are not limited to,
environmental protection, land use, water use, health safety, labor, restrictions on production, price controls,
currency remittance, and maintenance of mineral tenure and expropriation of property. There is no assurance
that future changes in taxes or such regulation in the various jurisdictions in which the Company operates will not
adversely affect the Company's operations. Although the operating environments in Botswana are considered
favorable compared to those in other developing countries, there are still political risks. These risks include, but
are not limited to terrorism, hostage taking, military repression, expropriation, extreme fluctuations in currency
exchange rates, high rates of inflation and labor unrest. Changes in mining or investment policies or shifts in
political attitudes may also adversely affect the Company's business.
Mineral Exploration and Development
The business of exploring for minerals and mining is highly, speculative in nature and involves significant financial
and other risks which even careful evaluation, experience and knowledge may not eliminate. There is no certainty
that expenditures made or to be made by the Company in exploring and developing mineral properties in which
it has an interest will result in the discovery of commercially mineable deposits. Most exploration projects do not
result in the discovery of commercially mineable deposit. While discovery of a mineral deposit may result in
substantial rewards, few properties which are explored are ultimately developed into producing mines. Major
expenses may be required to establish reserves by drilling and to construct mining and processing facilities at a
site. There can be no guarantee that exploration programs carried out by the Company will result in the
development of profitable mining operations.
Title Matters
Any changes in the laws of Botswana relating to mining could have a material adverse effect to the rights and title
to the interests held in those countries by the Company. No assurance can be given that applicable governments
will not revoke or significantly alter the conditions of applicable exploration and mining authorizations nor that
such exploration and mining authorizations will not be challenged or impugned by third parties.
Infrastructure
Exploration, development, mining and processing activities depend on the availability of adequate infrastructure.
Reliable roads, bridges, sewer and water supply are important determinants which affect capital and operating
costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the
maintenance of provision of such infrastructure could adversely affect activities and profitability of the Company.
Uninsured Risks
The mining business is subject to a number of risks and hazards including, but not limited to, environmental
hazards, industrial accidents, labor disputes, encountering unusual or unexpected geologic formations or other
geological or grade problems, encountering unanticipated ground or water conditions, cave~ ins, pit wall failures,
flooding, rock bursts, periodic interruptions due to inclement or hazardous weather conditions and other acts of
God. Such risks could result in damage to mineral properties or facilities, personal injury or death, environmental
damage, delays in exploration, development or mining, monetary losses and possible legal liability. The Company
maintains insurance against certain risks that are associated with its business in amounts that it believes to be
reasonable at the current stage of operations. There can be no assurance that such insurance will continue to be
available at economically acceptable premiums or will be adequate to cover any future claim.
Competition
The mining industry is intensely competitive in all its phases and the Company competes with other companies
that have greater financial resources and technical capacity. Competition could adversely affect the Company's
ability to acquire prospective properties in the future.
Key Personnel
The Company is dependent upon on a relatively small number of key employees, the loss of any of whom could
have an adverse effect on the Company. The Company currently does not have key personal insurance on these
individuals.
ADOPTION OF NEW ACCOUNTING STANDARDS
New Accounting Standards, Amendments and interpretations
The following new standards and issued amendments to standards and interpretations are effective for the year ended
December 31, 2014 and have been adopted when preparing these consolidated financial statements. The Company’s
assessment of the impact of these new standards and interpretations is set out below.
In May 2011, the IASB published new and amended standards addressing the accounting for consolidation, joint
arrangements and disclosures related to involvement with other entities, each of which is highlighted below:
IFRS 10, Consolidated Financial Statements IFRS 10 replaces the consolidation guidance in IAS 27, Consolidated
and Separate Financial Statements and Standing
Interpretations Committee (“SIC”)
Interpretation 12,
Consolidation – Special Purpose Entities, by introducing a single consolidation model for all entities based on
control, irrespective of the nature of the investee. Under IFRS 10, control is based on whether and investor has: 1)
power over the investee; 2) exposure, or rights, to variable returns from its involvement with the investee; and 3)
the ability to use its power over the investee to affect the amount of the returns.
IFRS 11, Joint Arrangements
IFRS 11 replaces IAS 31, Interest in Joint Ventures. IFRS 11 focuses on the rights and obligations of the
arrangement, rather than its legal form (as is currently the case). It addresses the inconsistencies in the reporting
of joint arrangements by requiring a single method to account for all joint arrangements. This new standard
principally addresses two aspects of IAS 31: first, that the structure of the arrangement was the only determinant
of the accounting and, second, that an entity had a choice of accounting treatment for joint arrangements.
Accordingly, IFRS 11 removes the options to apply the proportional consolidation method and classifies joint
arrangements into two types – Joint operations and joint ventures. A joint operation is where the parties have
control of the arrangement (i.e. joint operators) and have rights to the assets and obligations relating to the
arrangement. A joint venture is where the parties have joint control of the arrangement (i.e. joint venturers) and
have rights to the net assets of the arrangements.
IFRS 12, Disclosures of Involvement with Other Entities
IFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interest in other
entities, including joint arrangements, associations, special purpose vehicles and other off-balance sheet
vehicles.
New Standards, Amendments and Interpretations, Not Yet Adopted
IFRS 9, Financial Instruments
IFRS 9 covers the classification and measurement, impairment and hedge accounting of financial assets and
financial liabilities and the effective date is for annual periods on or after January 1, 2018, with an earlier
application permitted. The Company is still assessing the impact of adopting IFRS 9. Amendments to IFRS 9 also
provide relief from the requirement to restate comparative financial statement for the effect of applying IFRS 9.
Instead, additional transition disclosure will be required to help investors understand the effect that the initial
application of IFRS 9 has on the classification and measurement of financial instruments.
RELATED PARTY TRANSACTIONS
During the period ended December 31, 2014 and 2013, the Company incurred leave benefits payable to an officer
and director of the Company, however all amounts for 2013 were paid by year end.
Remuneration of Key Management Personnel of the Company
Short term employee remuneration and benefits
Stock based compensation
Post employment benefits*
2014
2013
$463,002
$ 278,334
185,551
113,836
185,017
48,952
Total compensation attributed to key management personnel
$ 762,389
$ 512,303
*Post employment benefits include $28,736 of accrued leave benefits.
There are no other related party transactions.
OUTLOOK
Precious stones, metals and radio-active materials exploration remain a high-risk undertaking requiring patience
and persistence. Despite difficult capital markets in the junior resource sector, the Company remains committed
to international commodity exploration through carefully managed programs.
The company does not invest in financial instruments, nor does it do any hedging transactions.
ADDITIONAL INFORMATION
Additional information relating to Tsodilo Resources Limited is available on its website at,
www.TsodiloResources.com or through SEDAR at www.sedar.com.
FORWARD-LOOKING STATEMENTS
The Annual Report, including this MD&A, contains certain forward-looking statements related to, among other
things, expected future events and the financial and operating results of the Company. Forward-looking
statements are subject to inherent risks and uncertainties including, but not limited to, market and general
economic conditions, changes in regulatory environments affecting the Company’s business and the availability
and terms of financing. Other risks are outlined in the Uncertainties and Risk Factors section of this MD&A.
Consequently, actual results and events may differ materially from those included in, contemplated or implied by
such forward looking statements for a variety of reasons. Readers are therefore cautioned not to place undue
reliance on any forward-looking statement. The Company disclaims any intention and assumes no obligation to
update any forward-looking statement even if such information becomes available as a result of future events or
for any other reason.
James M. Bruchs
Chairman and Chief Executive Officer
February 26, 2015
Gary A. Bojes
Chief Financial Officer
February 26, 2015
Financial Reporting Responsibility of Management
The annual
report and consolidated
financial
responsibilities for financial reporting and internal
statements have been prepared by management. The
control. The Audit Committee is composed of three
consolidated financial statements have been prepared
directors, all of whom qualify as unrelated directors and
in accordance with International Financial Reporting
are independent of management and free from any
Standards and include amounts that are based on
interest or business relationship which could, or could
informed judgments and best estimates. The financial
be perceived to materially interfere with their ability to
information presented
in this annual report
is
act
in the best
interests of the Company. This
consistent with the consolidated financial statements.
committee meets periodically with management and
Management acknowledges responsibility for the
the external auditors to review accounting, auditing,
fairness, integrity and objectivity of all information
internal control and financial reporting matters. The
contained
in
the annual
report
including
the
Audit Committee
reviews
the annual
financial
consolidated financial statements. Management is also
statements before they are presented to the Board of
responsible for the maintenance of financial and
Directors for approval and considers the independence
operating systems, which include effective controls to
of the auditors.
provide reasonable assurance that assets are properly
protected and that relevant and reliable financial
The consolidated financial statements for the years
information is produced. Our independent auditors
ended December 31, 2014 and 2013 have been audited
have the responsibility of auditing the consolidated
by Ernst & Young LLP, the external auditors, in
financial statements and expressing an opinion on
accordance with Canadian generally accepted auditing
them.
standards on behalf of the shareholders. Their report
follows hereafter.
The Board of Directors, through its Audit Committee, is
responsible for ensuring that management fulfills its
James M. Bruchs
Chairman and Chief Executive Officer
February 26, 2015
Gary A. Bojes
Chief Financial Officer
February 26, 2015
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Tsodilo Resources Limited
We have audited the accompanying consolidated financial statements of Tsodilo Resources Limited, which comprise
the consolidated statements of financial position as at December 31, 2014 and 2013, and the consolidated statements
of operations and comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended, and a
summary of significant accounting policies and other explanatory information.
Management's responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management determines
is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and
fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Tsodilo Resources Limited as at December 31, 2014 and 2013, and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting Standards.
Emphasis of matter – going concern
Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements which indicates
that the Company incurred a loss of $1,031,117 and comprehensive loss of $2,252,223 during the year ended December
31, 2014, and as of that date, the Company had an accumulated deficit of $34,757,730 and negative working capital
of $118,298. These conditions, along with other matters as set forth in Note 1, indicate the existence of
material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern.
Vancouver, Canada
February 26, 2015
Chartered Accountants
Tsodilo Resources Limited
Consolidated Statements of Financial Position
(In United States dollars)
ASSETS
Current
Cash
Accounts receivable and prepaid expenses
Exploration and Evaluation Assets (note 3)
Property, Plant and Equipment (note 4)
Total Assets
LIABILITIES
Current
December 31
2014
December 31
2013
$ 232,585
42,641
275,226
12,889,827
304,873
$ 13,469,926
$ 610,622
85,046
695,668
12,125,174
544,388
$13,365,230
Accounts payable and accrued liabilities
$ 234,501
$ 210,805
Warrants (note 5b)
Total Liabilities
SHAREHOLDERS' EQUITY
Share capital (note 5a)
Contributed surplus (note 5c)
Foreign translation reserve
Deficit
Equity attributable to Owners of the Parent
Non-controlling Interest (note 3)
Total Equity
Total Liabilities and Equity
Commitments (note 11)
Subsequent events (note 13)
159,023
393,524
42,019,009
10,200,381
(4,544,100)
(34,757,730)
12,917,560
158,842
13,076,402
$ 13,469,926
184,264
395,069
40,094,987
9,765,939
(3,340,515)
(33,724,583)
12,795,828
174,333
12,970,161
$ 13,365,230
See accompanying notes to the consolidated financial statements
APPROVED ON BEHALF OF THE BOARD OF DIRECTORS
David J. Cushing
Chairman, of the Audit Committee
James M. Bruchs
Chairman
Tsodilo Resources Limited
Consolidated Statements of Operations and Comprehensive Loss
(In United States dollars)
Administrative Expenses
Corporate remuneration
Corporate travel and subsistence
Investor relations
Legal and audit
Filings and regulatory fees
Administrative expenses
Amortization
Stock-based compensation (note 5c)
Other Income (Expense)
Interest Income
Gain on disposal of assets
Unrealized gain on warrants (note 5b)
Foreign exchange loss
Loss for year
Other Comprehensive Loss
Foreign currency translation
Total Other Comprehensive Loss
Total Comprehensive Loss for the year
Net Loss attributable to shareholders of the parent
Non-controlling interest
Total Comprehensive Loss attributable to owners of
the parent
Non-controlling Interest
Basic loss per share attributable to owners of the
parent (note 7)
Fully diluted loss per share attributable to the
owners of the parent (note 7)
Basic comprehensive loss per share attributable to
the owners of the parent (note 7)
Fully diluted comprehensive
attributable to the owners of the parent (note 7)
loss per share
Years Ended December 31
2014
2013
$ 415,071
$ 399,137
24,184
24,037
76,897
28,336
138,363
2,875
349,420
1,059,183
26
--
25,240
2,800
28,066
(1,031,117)
(1,221,106)
(1,221,106)
($ 2,252,223)
($ 1,033,147)
2,030
($ 1,031,117)
($ 2,236,732)
(15,491)
($ 2,252,223)
($0.03)
($0.03)
($0.07)
($0.07)
29,458
43,301
209,118
32,881
139,528
6,128
550,191
1,409,742
490
--
699,948
(69,085)
631,353
(778,389)
(1,462,172)
(1,462,172)
($ 2,240,561)
($ 778,031)
(358)
($ 778,389)
($ 2,209,098)
(31,463)
($ 2,240,561)
($0.03)
($0.03)
($0.07)
($0.07)
See accompanying notes to the consolidated financial statements
Tsodilo Resources Limited
Consolidated Statements of Changes in Shareholders’ Equity
(In United States dollars except for shares)
Share Capital
Contributed
Surplus
Foreign
Translation
Reserve
Deficit
Non-
Controlling
Interest
Total
Equity
Total
attributable
to equity
holder of the
parent
Shares
Issued
30,541,878
1,501,221
346,110
--
--
Amount
$40,094,987
1,531,680
392,342
--
--
$9,765,939
104,894
(153,562)
483,110
--
($3,340,515)
--
--
--
(1,203,585)
($33,724,583)
--
--
--
(1,033,147)
$12,795,828
1,636,574
238,780
483,110
(2,236,732)
$174,333
--
--
--
(15,491)
$12,970,161
1,636,574
238,780
483,110
(2,252,223)
32,389,209
$42,019,009
$10,200,381
($4,544,100)
($34,757,730)
$12,917,560
$158,842
$13,076,402
Balance January 1, 2014
Units Issued
Exercised Options
Stock Based Compensation
Comprehensive loss
Balance December 31,
2014
See accompanying notes to the consolidated financial statements.
Tsodilo Resources Limited
Consolidated Statements of Changes in Shareholders’ Equity
(In United States dollars except for shares)
Share Capital
Contributed
Surplus
Foreign
Translation
Reserve
Deficit
Non-
Controlling
Interest
Total
Equity
Total
attributable
to equity
holder of the
parent
Shares
Issued
Amount
Balance January 1, 2013
28,099,151
$37,525,377
$9,174,340
($1,909,448)
($32,946,552)
$11,843,717
$205,796
$12,049,513
Units Issued
2,272,727
2,409,340
Exercised Options
170,000
160,270
Stock Based Compensation
Comprehensive loss
--
--
--
--
--
(47,699)
639,298
--
--
--
--
--
--
2,409,340
112,571
639,298
--
--
--
2,409,340
112,571
639,298
--
(1,431,067)
(778,031)
(2,209,098)
(31,463)
(2,240,561)
Balance December 31, 2013
30,541,878
$40,094,987
$9,765,939
($3,340,515)
($33,724,583)
$12,795,828
$174,333
$12,970,161
See accompanying notes to the consolidated financial statements.
Tsodilo Resources Limited
Consolidated Statements of Cash Flows
(In United States dollars)
Cash provided by (used in):
Operating Activities
Net Loss for the year
Adjustments for non-cash items:
Unrealized gain on warrants
Amortization
Foreign exchange loss
Stock-based compensation
Net change in non-cash working capital balances (note 12)
Investing Activities
Additions to exploration properties
Additions to property, plant and equipment
Financing Activities
Shares and warrants issued for cash
Share issuance cost
Years Ended December 31
2014
2013
($ 1,031,117)
($ 778,389)
(25,240)
2,875
(2,800)
349,420
(706,862)
66,100
(640,762)
(1,608,773)
(3,707)
(1,612,480)
1,890,250
(14,894)
1,875,356
(699,948)
6,128
69,085
550,191
(852,933)
120,822
(732,111)
(2,047,594)
(55,804)
(2,103,398)
2,547,080
(25,170)
2,521,910
Impact of exchange on cash
(151)
(57,830)
Change in cash - for the year
Cash - beginning of year
Cash - end of year
(378,037)
610,622
$ 232,585
(371,429)
982,051
$ 610,622
See accompanying notes to the consolidated financial statements
Tsodilo Resources Limited
Notes to the Consolidated Financial Statements
For the years ended December 31, 2014 and 2013
(All amounts are in U.S. dollars unless otherwise noted)
1. NATURE OF OPERATIONS
Tsodilo Resources Limited (“Tsodilo” or “the Company”) is an exploration stage company which is engaged
principally in the acquisition, exploration and development of mineral properties in the Republic of Botswana.
The Company is considered to be in the exploration and development stage given that none of its properties
are in production and, to date, have not earned any revenues. The recoverability of amounts shown for
exploration and evaluation assets is dependent on the existence of economically recoverable reserves, the
renewal or extension of exploration licenses, obtaining the necessary permits to operate a mine, obtaining the
financing to complete exploration and development, and future profitable production. The Company is
incorporated under laws of the Yukon Territory, Canada, under the Business Corporations Act of Yukon and
the address of the Company’s registered office is 161 Bay Street, P.O. Box 508 Toronto, Ontario, Canada, M5J
2S1. The Company currently exists under the Business Corporations Act of Yukon and its common shares are
listed on the Toronto Venture Stock Exchange (TSXV) under the symbol TSD.
These consolidated financial statements have been prepared on the basis of accounting principles applicable
to a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the
normal course of business. The Company incurred a loss of $1,031,117 and comprehensive loss of $2,252,223
during the year ended December 31, 2014, and as of that date, the Company had an accumulated deficit
of $34,757,730 and negative net working capital of $118,298. Management has carried out an assessment of
the going concern assumption and has concluded that the cash position of the Company is insufficient to
finance exploration and resource evaluation at projected levels, and may be insufficient to finance
continued operations for the 12 month period subsequent to December 31, 2014. The continuity of the
Company’s operations is dependent on raising future financing for working capital, the continued
exploration and development of its properties and for acquisition and development costs of new
projects. The Company’s failure to raise additional funds could result in the delay in the work performed on
the Company’s exploration properties and may lead to an
impairment charge on the Company’s
exploration and evaluation assets. Management believes that it will be able to secure the necessary
financing through a combination of the issue of new equity or debt instruments, the entering into of joint
venture arrangements or the exercise of warrants and options for the purchase of common shares. However
there is no assurance the Company will be successful in these actions. There can be no assurance that
adequate financing will be available, or available under terms favorable to the Company. Should it be
determined that the Company is no longer a going concern, adjustments, which could be significant,
would be required to the carrying value of assets and liabilities. The material uncertainties may cast
significant doubt on the Company’s ability to continue as a going concern. These consolidated financial
statements do not reflect the adjustments to the carrying value of assets and liabilities, or the impact
on the consolidated statement of operations and comprehensive loss, and consolidated statement
of financial position classifications that would be necessary should the going concern assumption not be
appropriate.
2. Significant Accounting Policies
(a)
Statement of Compliance with International Financial Reporting Standards
These consolidated financial statements are prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of
the International Financial Reporting Interpretations Committee (“IFRIC”).
These consolidated financial statements have been authorized for release by the Company’s Board of
Directors on February 25, 2015.
(b)
Basis of Preparation
These consolidated financial statements have been prepared on a historical cost basis except for financial
instruments classified as fair value through profit or loss which are stated at their fair value. These
consolidated financial statements are presented in United Stated dollars and include the accounts of the
Company and the following direct and indirect subsidiaries:
2014
2013
Tsodilo Resources Bermuda Limited (“Bermuda”) [Bermuda]
100%
100%
Bosoto (Proprietary) Limited (“Bosoto”) [Botswana]
75%
100%
Gcwihaba Resources (Proprietary) Limited (“Gcwihaba”) [Botswana]
100%
100%
Newdico (Proprietary) Limited (“Newdico”) [Botswana]
98%
98%
Indada Trading 361 (Pty) Ltd. (“Indada”) [South Africa]
70%
70%
All intercompany transactions have been eliminated on consolidation
The accounting policies set out below have been applied consistently to all years presented.
(c)
Significant Accounting Judgments, Estimates and Assumptions
The preparation of the consolidated financial statements in conformity with IFRS requires management to
make judgments, estimates and assumptions that affect the application of polices and reporting amounts of
assets and liabilities, income and expenses. Actual results may differ from these estimates.
Accounts that require estimates as the basis for determining the stated amounts include warrant liability,
contributed surplus, stock-based compensation expense, and amortization expense. The amounts estimated
for the warrant liability and stock based compensation is calculated using the Black-Scholes Merton valuation
model, which requires significant estimates with respect to the expected life and volatility of such
instruments. The estimated depreciation is influenced primarily by the estimated useful life of the Company’s
Property, Plant and Equipment.
Significant judgments are required with respect to the carrying value of the Company’s Exploration and
Evaluation Assets, the determination of the functional currency of the Company and its subsidiaries, the
recoverability of the Company’s deferred tax assets, and potential tax exposures given the company operates
in multiple jurisdictions. In particular, the carrying value of the Company’s Exploration and Evaluation Assets
is dependent upon the Company’s determination with respect to the future prospects of its Exploration and
Evaluation Assets and the ability of the Company to successfully complete the renewal or extension process
for its exploration properties as required. The Company has defined the cash generating units to be Precious
Stones, Metals and Radio Active Minerals. The quantification of potential tax exposures is dependent on the
relevant tax authorities’ acceptance of the Company’s positions.
(d)
Earnings (Loss) per Common Share
Earnings (loss) per share calculations are based on the net income attributable to common shareholders for
the year divided by the weighted average number of common shares issued and outstanding during the year.
Diluted earnings per share calculations are based on the net income attributable to common shareholders for
the year divided by the weighted average number of common shares outstanding during the year plus the
effects of dilutive common share equivalents. This method requires that the dilutive effect of outstanding
options and warrants issued be calculated using the treasury stock method. This method assumes that all
common share equivalents have been exercised at the beginning of the year (or at the time of issuance, if
later), and that the funds obtained thereby were used to purchase common shares of the Company at the
average trading price of common shares during the year. The incremental number of common shares that
would be issued is included in the calculation of diluted earnings per share.
(e)
Exploration and Evaluation Assets
Exploration and Evaluation Assets include acquired mineral use rights for mineral properties held by the
Company. The amount of consideration paid (in cash or share value) for mineral use rights is capitalized. The
amounts shown for Exploration and Evaluation Assets represents all direct and indirect costs relating to the
acquisition, exploration and development of exploration properties, less recoveries, and do not necessarily
reflect present or future values. These costs will be amortized against revenue from future production or
written off if the Exploration and Evaluation Assets are abandoned or sold. The Company has classified
Exploration and Evaluation Assets as intangible in nature. Depletion of costs capitalized on projects put into
commercial production will be recorded using the unit-of-production method based upon estimates of
proven and probable reserves.
Ownership of Exploration and Evaluation Assets involves certain inherent risks, including geological,
commodity prices, operating costs, and permitting risks. Many of these risks are outside the Company’s
control. The ultimate recoverability of the amounts capitalized for Exploration and Evaluation Assets is
dependent upon the delineation of economically recoverable ore reserves, the renewal or extension of
exploration licenses, obtaining the necessary financing to complete their development, obtaining the
necessary permits to operate the mine, and realizing profitable production or proceeds from the disposition
thereof. Management’s estimates of recoverability of the Company’s investment in its Botswana Exploration
and Evaluation Assets have been based on current and expected conditions. However, it is possible that
changes could occur which could adversely affect management’s estimates and may result in future write
downs of Exploration and Evaluation Assets carrying values. See footnote 3 for additional disclosures related
to license commitments and strategic partners commitments and earn-in agreement.
Exploration and Evaluation Assets (Farm-Out)
The Company has entered into a farm-out arrangement last year, in which the Company is the farmor. Farm-
out arrangements will be recorded at cost during the exploration and evaluation phase of the projects. The
farmor will not record any exploration costs of the farmee. There are no accruals for future commitments in
farm-out agreements in the exploration and evaluation phase, and no profit or loss is recognized by the
farmor. In the development phase, a farm-out agreement will be treated as a transaction recorded at fair value
as represented by the costs borne by the farmee.
(f)
Property, Plant and Equipment
Property, plant and equipment is stated at cost, less accumulated depreciation.
Depreciation is calculated on a straight line basis over the following terms:
Vehicles and drilling equipment
Furniture and equipment
5 Years
3 Years
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the
asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset,
is recognized in profit or loss.
Where an item of property, plant and equipment comprises major components with different useful lives, the
components are accounted for as separate items of plant and equipment. Expenditures incurred to replace a
component of an item of property, plant and equipment that is accounted for separately, including major
inspection and overhaul expenditures, are capitalized.
(g)
Cash
Cash consists of cash held in banks and petty cash.
(h)
Foreign Currency Translation
(i) Functional and presentation currency
The Company’s functional and presentation currency is the United States dollar (“U.S. Dollar”). The functional
currencies of the Company’s subsidiaries are as follows:
Tsodilo Resources Bermuda Limited
Gcwihaba Resources (Pty) Limited
(‘Gcwihaba’)
Newdico (Pty) Limited
Bosoto (Pty) Limited
(‘Newdico’)
(‘Bosoto’)
U.S. Dollar
Botswana Pula
Botswana Pula
Botswana Pula
Indada Trading 361 (Pty) Ltd.
(‘Indada’) South African Rand
Each subsidiary and the Company’s parent entity determine their own functional currency and items included
in the financial statements of each entity are measured using that functional currency.
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange
rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the exchange rate prevailing at the reporting date.
(iii) Translation of foreign operations
As at the reporting date the assets and liabilities of Gcwihaba, Newdico, Bosoto, and Indada are translated
into the presentation currency of the Company at the rate of exchange prevailing at the reporting date and
their revenue and expenses are translated at the average exchange for the year. On consolidation, the
exchange differences arising on the translation are recognized in Other Comprehensive Loss and
accumulated in the Foreign Translation Reserve.
If Gcwihaba, Newdico, Bosoto, and Indada were sold, the amount recognized in the foreign currency reserve
would be realized and reflected in the Statement of Operations and Comprehensive Loss as part of the gain
or loss on disposal.
(i)
Income Taxes
Current taxes are the expected tax payable or receivable on the local taxable income or loss for the year, using
the local tax rate enacted or substantively enacted at the reporting date, and includes any adjustments to tax
payable or receivable in respect of previous years.
Deferred income taxes are recorded using the balance sheet method whereby deferred tax is recognized in
respect to temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when they are realized or settled, based on the laws that
have been enacted or substantively enacted by the reporting date. Deferred tax is not recognized for
temporary differences which arise on the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affect neither accounting, nor taxable profit or loss.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to
the extent that it is probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
(j)
Share-based Compensation
The Company follows the fair value method of accounting for stock option awards granted to employees,
directors and consultants. The fair value of stock options is determined by the Black-Scholes Option Pricing
Model with assumptions for risk-free interest rates, dividend yields, volatility of the expected market price of
the Company’s common shares and an expected life of the options. The number of stock option awards
expected to vest are estimated using a forfeiture rate based on historical experience and future expectations.
The fair value of direct awards of stock is determined by the quoted market price of the Company’s stock.
Share-based compensation is amortized to earnings and portions are capitalized for indirect exploration costs
over the vesting period of the related option.
The Company uses graded or accelerated amortization which specifies that each vesting tranche must be
accounted for as a separate arrangement with a unique fair value measurement. Each vesting tranche is
subsequently amortized separately and in parallel from the grant date.
Option-pricing models require the use of highly subjective estimates and assumptions including the expected
stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates.
(k)
Severance Benefits
Under Botswana law, the Company is required to pay severance benefits upon the completion of 5 years of
continued service or upon the termination of employment. Severance is earned at the rate of one day per
month for an employee with less than five years of service and two days per month for employees with greater
than five years of service. The specifics and benefits of the severance program mandated in Botswana are
extended to full-time employees residing and working outside of Botswana. The cost of these severance
benefits is accrued over the period of service until the benefit becomes payable. Portions of the severance
expenses are capitalized to exploration and evaluation assets.
(l)
Financial Assets
All financial assets are initially recorded at fair value and designated upon inception into one of the following
four categories: held for maturity, available for sale, loans and receivables, or at fair value through profit or
loss (“FVTPL”). Financial assets classified as FVTPL are measured at fair value with unrealized gains and losses,
recognized through earnings. The Company does not have any financial assets classified as FVTPL.
Financial assets classified as loans and receivables and held to maturity assets are measured at amortized cost.
The Company’s cash and accounts receivable are classified as loans and receivables. Financial assets classified
as available for sale are measured at fair value with unrealized gains or losses recognized in other
comprehensive income and loss except for losses in value that are considered other than temporary which
are recognized in earnings. At December 31, 2014 and 2013, the Company has not classified any financial
assets as available for sale. Transaction costs associated with FVTPL financial assets are expensed as incurred,
while transaction costs associated with all other financial assets are included in the initial carrying amount of
the asset.
(m)
Financial Liabilities
All financial liabilities are initially recorded at fair value and designated upon inception as FVTPL or other
financial liabilities. Financial liabilities classified as other financial liabilities are initially recognized at fair value
less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently
measured at amortized cost using the effective interest rate method. The effective interest rate method is a
method of calculating the amortized cost of a financial liability and of allocating interest expenses over the
relevant period. The effective interest rate is the rate that discounts estimated future cash payments through
the expected life of the financial liability, to, where appropriate, a shorter period. The Company’s accounts
payable and accrued liabilities are classified as other financial liabilities. Financial liabilities classified as FVTPL
include warrants with exercise prices denominated in a currency other than the Company’s functional
currency. Derivatives, including separated embedded derivatives are also classified as FVTPL and recognized
at fair value with changes in fair value recognized in earnings unless they are designated as effective hedging
instruments. Fair value changes on financial liabilities classified as FVTPL are recognized in earnings.
Transaction costs associated with FVTPL liabilities are expensed as incurred.
(n)
Impairment of Assets
At the end of each reporting period, the Company assesses each cash-generating unit to determine whether
there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is
the higher of the fair value less cost to sell and the value in use. Fair value is determined as the amount that
would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and
willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value
using a discount rate that reflects current market assessment of the time value of money and the risk of a
specific asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in
profit or loss for the period. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash generating unit to which the asset belongs.
When an impairment subsequently reverses, the carrying amount of the asset (or cash generating unit) is
increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the
carrying amount that would have been determined had no impairment loss been recognized for the asset (or
cash generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or
loss.
(o)
Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party
or exercise significant influence over the other party in making financial and operating decisions. Related
parties may be individuals or corporate entities and includes, but is not limited to, key management
personnel, directors, affiliated companies, and project partners. . A transaction is considered to be a related
party transaction when there is a transfer of resources, services or obligations between related parties.
(p)
New Standards, Amendments and Interpretations Adopted
There are no other standards which the Company would have been required to adopt in the year.
(q)
New Standards, Amendments and Interpretations, Not Yet Adopted
IFRS 9, Financial Instruments
IFRS 9 covers the classification and measurement, impairment and hedge accounting of financial assets and
financial liabilities and the effective date is for annual periods on or after January 1, 2018, with an earlier
application permitted. The Company is still assessing the impact of adopting IFRS 9. Amendments to IFRS 9
also provide relief from the requirement to restate comparative financial statement for the effect of applying
IFRS 9. Instead, additional transition disclosure will be required to help investors understand the effect that
the initial application of IFRS 9 has on the classification and measurement of financial instruments.
3. EXPLORATION AND EVALUATION ASSETS
Exploration and evaluation assets are summarized as follows:
Newdico
Botswana
Bosoto
Botswana
Gcwihaba
Botswana
Total
Precious
Stones
Precious
Stones
Precious
Stones
Metals
Subtotal
Radio-
Active
Minerals
Balance at
December 31,
2012
Additions
Net Exchange
Differences
Balance at
December 31,
2013
Additions
Net Exchange
Differences
Balance at
December 31,
2014
$7,518,224
102,199
$ --
--
$2,048,700
288,637
$1,039,199
1,683,464
$544,057
300,140
$3,631,956
2,272,241
$11,150,180
2,374,440
(840,848)
--
(70,957)
(413,856)
(73,785)
(558,598)
(1,399,446)
$6,779,575
332,872
$ --
5,372
$2,266,380
269,259
$2,308,807
1,059,277
$770,412
272,164
$ 5,345,599
1,600,700
$12,125,174
1,938,944
(592,018)
(461)
(97,869)
(385,019)
(98,924)
(581,812)
(1,174,291)
$6,520,429
$4,911
$2,437,770
$2,983,065
$943,652
$6,364,487
$12,889,827
Exploration and evaluation additions for the year ended December 31, 2014 are summarized as follows:
Newdico
Botswana
Bosoto
Botswana
Gcwihaba
Botswana
Total
Precious
Stones
Precious
Stones
Precious
Stones
Metals
Subtotal
Radio-
Active
Minerals
$ 66,619
$ 770
$ 33,475
$ 130,593
$ 38,801
$ 202,869
$ 270,258
36,279
605
4,804
710
--
--
--
28
26,801
125,042
26,832
178,675
214,954
2,177
78,270
305
279
154,137
5,109
988
344
--
81,435
82,040
154,786
5,388
159,590
6,126
55,736
4,165
17,899
76,838
19,126
113,863
173,764
168,119
409
188,323
489,288
186,073
863,684
1,032,212
$ 332,872
$ 5,372
$ 269,259
$1,059,277
$ 272,164
$ 1,600,700
$ 1,938,944
Drilling
Expenditures
Amortization
Drill Rigs,
Vehicles &
Trucks
GIS &
Geophysics
Lab Analyses &
Assays
License Fees
Office,
Maintenance,
&
Consumables
Salaries, Wages
& Services
Balance at
December 31,
2014
The Company’s significant Exploration and Evaluation Assets are summarized as follows:
General
Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of
permits and the potential for problems arising from government conveyance accuracy, prior unregistered
agreements or transfers, native land claims, confirmation of physical boundaries, and title may be affected by
undetected defects. The Company does not carry title insurance. The Company has evaluated title to all of its
mineral properties and believes, to the best of its knowledge, that evidence of title is adequate and acceptable
given the current stage of exploration.
Newdico (Proprietary) Limited (“Newdico”) – Botswana
Newdico’s Prospecting License (“PL”) is located in the Ngamiland District of northwest Botswana. PL64/2005
issued for an initial term of three years expiring June 30, 2008, renewable for 2 additional two year periods
upon application and which have a final expiry of June 2012.
A two year extension application for PL64/2005 covering 851 square kilometres was submitted in order to
continue and complete the first stage exploration and evaluation program. The application was made in April
2012 and a two year exploration extension license was granted on February 27, 2014. The term of the license
commences as of April 1, 2014 and may continue to March 31, 2016. The minimum annual expenditure for
each year is BWP 215,000 (US$22,825). However, if during the extension period, a decision is made based on
the micro-diamond results that further work is warranted, the Company estimates that BWP 4,585,000
(US$486,748) would be required for a mini-bulk sample based on the agree to work plan with the Ministry of
Minerals, Energy and Water Resources (MMEWR) . At any point the work plan may be amended and a new work
plan agreed to with the MMEWR.
Originally, as a result of an agreement completed on June 30, 2002, Newdico was owned 75% by Tsodilo and
25% by Trans Hex Group Limited (“THG”); with Tsodilo being the operator. Both Tsodilo and THG funded their
initial investments in Newdico through a combination of an equity and debt interest. Based on the terms of
the equity and debt interests, THG’s equity and debt interest in Newdico has been accounted for as a non-
controlling interest.
Starting in 2005, THG decided not to fund its proportionate share of expenditures on certain cash calls.
Accordingly, the Company’s interest in Newdico has increased from 75% to 98% at December 31, 2014.
Gcwihaba Resources (Proprietary) Ltd (“Gcwihaba”) – Botswana
Gcwihaba, a wholly owned subsidiary of the Company, holds one (1) prospecting license for precious stone in
the Kgalagadi District; twenty-two (22) metal (base, precious, platinum group, and rare earth) prospecting
licenses in the North-West district of which fifteen (15) are currently in renewal; and, eight (8) radioactive
mineral licenses located in the North-West district, all of which are currently in renewal.
Diamond License
Gcwihaba currently holds one precious stone prospecting license as at December 31, 2014. PL 195/2012 has
an initial expiry date of July 1, 2015 and requires a minimum spending commitment of Botswana Pula 307,410
(US$32,635) if held to its full term. As of December 31, 2014, the Company has fulfilled the spending
requirements associated with this license.
Metal Licenses
Gcwihaba holds twenty-two (22) metal (base, precious, platinum group, and rare earth) prospecting licenses
inclusive of fifteen (15) licenses currently in renewal in the North-West District of Botswana. The current
licenses, those not presently in renewal, cover 4,056 square kilometers. The Company initially acquired the
various licenses in 2005, 2008, 2009 and 2012. In October 2010, PL’s 118 and 119/2005 were relinquished in
part and in December 2010, PL’s 051 and 052/2008 were relinquished in part. In 2012, PL118 was relinquished
in its entirety. The relinquishment of the aforementioned licenses or portions thereof did not cause a reduction
or change in the continuing overall exploration program nor impact the chances of the overall success of the
program. Renewal applications have been filed for five (5) licenses that expire March 31, 2015. For licenses
current and not scheduled to expired on March 31, 2015, the required minimum spending commitment is
Botswana Pula 512,450 (US $54,403) over the term of the licenses, if held to their full-term.
Strategic Exploration and Evaluation Partner
On November 20, 2013, Tsodilo announced that, further to its April 17, 2013 Memorandum Of Understanding
(“MOU”) with First Quantum Minerals Ltd. (TSX:FM)(LSE:FQM) ("First Quantum"), the Company, its wholly-
owned subsidiary Gcwihaba Resources (Pty) Ltd. ("Gcwihaba"), First Quantum and First Quantum's wholly-
owned subsidiary Faloxia (Proprietary) Limited ("FQM Subco") have entered into a definitive Earn-In Option
Agreement (the "Option Agreement") pursuant to which First Quantum (which term for the purposes of this
section includes FQM Subco) has acquired the right to earn up to a 70% interest in metals prospecting licenses
in Botswana granted to Gcwihaba insofar as they cover base, precious and platinum group metals and rare
earth minerals by meeting certain funding and other obligations as set forth below. The interests that may be
earned by First Quantum specifically exclude any rights to iron held by Gcwihaba.
Under the terms of the Option Agreement, First Quantum can earn either a 51% participating interest or a 70%
participating interest in designated projects within the overall license area covered by the Option Agreement
(the "Project Area") by satisfying the following requirements:
funding exploration expenditures within the Project Area in the aggregate amount of US$6 million
by November 20, 2015 (the "Tranche 1 Funding Commitment");
funding an additional US$9 million in exploration expenditures within the Project Area by November
20, 2017; and
completing a technical report ("Technical Report") on a designated area within the Project Area
prepared in compliance with National Instrument 43-101 - Standards of Disclosure for Mineral
Projects of the Canadian Securities Administrators and that meets certain requirements with respect
to resources as described below.
The Tranche 1 Funding Commitment is a firm commitment by First Quantum and must be satisfied irrespective
of whether First Quantum elects to pursue the other requirements to earn an interest in Gcwihaba's licenses.
Tranche 1 funding obligations have been met.
In the event that First Quantum satisfies the funding obligations as set forth above, but a Technical Report has
not been completed by the end of the fourth year following the execution of the earn-in option agreement;
First Quantum may maintain the earn-in option for up to an additional three years by continuing to spend a
minimum of $2 million per year on exploration and evaluation studies on the Project Area.
If the Technical Report delineates a "Major Defined Project" (being a designated project within the Project Area
with respect to which the Technical Report delineates a measured, indicated and inferred mineral resource
within the Project Area of not less than 2,000,000 tonnes of copper), First Quantum will be deemed to have
earned a 70% interest in the property that is the subject of such report. If the Technical Report delineates a
"Minor Defined Project" (being a designated project within the Project Area with respect to which the Technical
Report delineates a measured, indicated and inferred mineral resource within the Project Area of less than
2,000,000 tonnes of copper, or another base, precious or platinum group metal and rare earth mineral), First
Quantum will be deemed to have earned a 51% interest in the property that is the subject of such report;
provided, however, that it may elect to retain an option for up to five years to convert such property into a
Major Defined Project. If First Quantum makes such election, it will be responsible for all further costs and
expenses associated with the Minor Defined Project, including for operations and capital expenditures, until
the earliest of: (a) the completion of a Technical Report for a Major Defined Project, in which event the Minor
Defined Project will be deemed to be converted into a Major Defined Project and First Quantum will be
deemed to have earned a vested 70% participating interest therein; (b) written notice from First Quantum to
the Company that First Quantum no longer wishes to retain the option to convert such Minor Defined Project
into a Major Defined Project; and (c) five years after the date of the original vesting of a 51% interest in the
Minor Defined Project. If First Quantum fails to satisfy the requirements to convert a Minor Defined Project
into a Major Defined Project it will retain a vested 51% participating interest in the Minor Defined Project.
Upon First Quantum's participating interest in a defined project being crystallized at either 51% or 70%,
Gcwihaba and First Quantum will enter into a joint venture agreement for such project. Under the terms of
each such joint venture agreement, Gcwihaba's participating interest in each joint venture will be carried until
the commencement of construction of a mine for the project. Accordingly, all costs and expenses associated
with the defined project until such time, including for operations and capital expenditures, will be funded by
First Quantum.
As of December 31, 2014, First Quantum reported that it has spent in total $12,959,302 (2014: $8,718,125 &
2013: $4,241,177) on Prospecting Licenses covered by the MOU.
Radioactive Minerals
As at December 31, 2014, Gcwihaba holds prospecting permits for eight (8) radioactive mineral licenses in the
North-West District of Botswana. In general, these licenses overlap or are contiguous to the Company’s metal
licenses. PL’s 150 and 151/2013 had an initial grant expiration date of June 30, 2013 and first renewal
applications have been filed and are pending. PL’s 045/2011 - 050/2011 had an initial grant expiration date of
December 31, 2013 and first renewal applications have been filed and are pending.
Bosoto (Pty) Limited (“Bosoto”) – Botswana
Tsodilo was granted a prospecting license (PL369/2014) over the BK16 kimberlite pipe through its 75% owned
Botswana subsidiary, Bosoto Pty (Ltd) effective October 1, 2014. The diamondiferous BK16 kimberlite pipe is
located within the Orapa Kimberlite Field (”OKF”) in Botswana and covered by 25 meters of Kalahari Group
sediments. BK16 is located 37 km east-southeast of the Orapa Diamond Mine AK01, 25 km southeast of the
Damshtaa Diamond Mine, and 13 km north-northeast of the Letlhakane Diamond Mine, all operated by
Debswana and 28 km east-northeast from Lucara Diamond Corporation's Karowe mine (F/K/A AK6). Tsodilo
has a 75% interest in Bosoto.
The Company estimates that it would take approximately $25.3M USD (BWP 237,885,000) in expenditures,
goods and a service over a three year period to sufficiently evaluate the BK16 kimberlite’s economic potential
and if warranted the preparation of a compliant NI 43-101 Bankable Feasibility Study (BFS). This estimate is
based on the agreed work plan with the MMEWR. At any point the work plan may be amended and a new work
plan agreed to with the MMEWR.
Indada Trading 361 (Pty) Limited (“Indada”) – South Africa
The Company holds a 70% interest in its South African subsidiary, Indada Trading 361(Pty) Limited (“Indada”).
Indada has made application for an exploration license (Ref: MP30/5/1/1/2/1047PR) in the Barberton area in
February 2012. This application was accepted in February 2013 and consultation was conducted with
interested and affected parties in April and June 2013. An Environmental Management Plan (EMP) was
submitted in April 2013 and a site visit was made by various governmental departments (DMR, EWT, REMDEC)
in September 2013. The Company is now awaiting a decision by the DMR to award the prospecting permit or
not.
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4. PROPERTY, PLANT, AND EQUIPMENT
Property, Plant, and Equipment
Cost
As at December 31, 2012
Additions
Net Exchange Difference
As at December 31, 2013
As at December 31, 2013
Additions
Net Exchange Difference
As at December 31, 2014
Accumulated Depreciation
As at December 31, 2012
Depreciation
Net Exchange Difference
As at December 31, 2013
As at December 31, 2013
Depreciation
Net Exchange Difference
As at December 31, 2014
Net book value
As at December 31, 2013
As at December 31, 2014
Vehicles
$1,642,022
68,141
(186,788)
$ 1,523,375
Vehicles
$1,523,375
--
(126,598)
$ 1,396,777
Vehicles
$916,774
210,932
(116,140)
$ 1,011,566
Vehicles
$ 1,011,566
183,324
(84,065)
$1,110,825
Furniture and
Equipment
$223,705
31,333
(21,789)
$ 233,249
Furniture and
Equipment
$ 233,249
3,707
(14,477)
$ 222,479
Furniture and
Equipment
$186,192
32,935
(18,457)
$ 200,670
Furniture and
Equipment
$ 200,670
16,032
(13,144)
$ 203,558
Total
$1,865,727
99,474
(208,577)
$ 1,756,624
Total
$ 1,756,624
3,707
(141,075)
1,619,256
Total
$1,102,966
243,867
(134,597)
$ 1,212,236
Total
$ 1,212,236
199,356
(97,209)
1,314,383
$ 511,809
$ 285,952
$ 32,579
$ 18,921
$ 544,388
$ 304,873
For the year ended December 31, 2014, an amount of $196,481 (2013: $237,739) of amortization has been
capitalized under exploration properties.
5. SHARE CAPITAL
(a) Common Shares
Authorized, Issued and outstanding
The authorized capital stock of the Company comprises an unlimited number of common shares with no par
value.
Issued and outstanding: 32,389,209 Common Shares as at December 31, 2014 (December 31, 2013:
30,541,878)
1) During the year ending December 31, 2014:
i.
On March 4, 2014, 50,000 options were exercised at a price of C$0.70 for proceeds to the
Company of $31,649 (C$35,000). The fair value associated with the exercised options that
were reclassified from contributed surplus to share capital was $16,072.
ii.
On March 13, 2014, 75,000 options were exercised, 50,000 at a price of C$0.70 and 25,000
at a price of C$0.90 for proceeds to the Company of $51,725 (C$57,500). The fair value
associated with the exercised options that were reclassified from contributed surplus to
share capital was $34,983.
iii.
On March 21, 2014, 40,000 options were exercised at a price of C$1.00 for proceeds to the
Company of $35,564 (C$40,000). The fair value associated with the exercised options that
were reclassified from contributed surplus to share capital was $33,431.
iv.
On March 25, 2014, 71,110 options were exercised, 50,000 at a price of C$0.70 and 21,110
were exercised at a price of C$1.00 for proceeds to the Company of $49,985 (C$56,111).
The fair value associated with the exercised options that were reclassified from
contributed surplus to share capital was $33,716.
v.
On April 24, 2014, 110,000 options were exercised at a price of C$0.70 for proceeds to the
company of $69,857 (C$77,000). The fair value associated with the exercised options that
were reclassified from contributed surplus to share capital was $35,360.
vi.
On May 29, 2014 306,183 Units were issued at a price of C$1.28 for proceeds to the
Company of $355,507 (C$391,914). Each unit includes one common share and one
warrant entitling the holder to purchase one common share of the Company for a period
until the close of business on May 29, 2016 at USD $1.40. $6,145 (C$6,389) of issuance
costs were netted against the proceeds.
vii.
On July 29, 2014, 634,116 Units were issued at a price of C$1.28 for proceeds to the
Company of $751,621 (C$811,668). Each unit includes one common share and one
warrant entitling the holder to purchase one common share of the Company for a period
until the close of business on July 29, 2016 at USD$1.40. $5,022 (C$5,433) of issuance costs
were netted against the proceeds.
viii.
On December 30, 2014, 560,922 Units were issued at a price of C$1.10 for proceeds to the
Company of $529,446 (C$617,014). Each unit includes one common share and one
warrant entitling the holder to purchase one common share of the Company for a period
until the close of business on December 30, 2016 at USD$1.21. $3,727 (C$4,334) of
issuance costs were netted against the proceeds. The value of the Units is greater than
value of the Common Shares at the issuance date. The amount allocated to Common
Shares is USD$0.79 (C$$0.89) or total USD$444,552 and allocated to Additional Paid in
Capital for Warrants is USD$0.19 (C$0.21) or total USD$104,894.
2) During the year ending December 31, 2013:
i.
On January 3, 2013, 50,000 options were exercised at a price of C$0.70 for proceeds to the
Company of $35,285 (C$35,000). The fair value associated with the exercised options that
were reclassified from contributed surplus to share capital was $20,130.
ii.
On April 22, 2013, 2,272,727 Units were issued at a price of C$1.10 for gross proceeds to
the Company of $2,434,510 (C$2,500,000). Each unit includes one common share and one
warrant entitling the holder to purchase one common share of the Company for a period
until the close of business on April 22, 2015 at USD$1.21. $25,170 of issuance costs were
netted against the proceeds.
iii.
On April 24, 2013, 50,000 options were exercised at a price of C$0.70 for proceeds to the
Company of $34,094 (C$35,000). The fair value associated with the exercised options that
were reclassified from contributed surplus to share capital was $16,872.
iv.
On December 9, 2013, 50,000 options were exercised at a price of C$0.70 for proceeds to
the Company of $32,913 (C$35,000). The fair value associated with the exercised options
that were reclassified from contributed surplus to share capital was $5,972.
v.
On December 31, 2013, 20,000 options were exercised at a price of C$0.55 for proceeds to
the Company of $10,279. ($11,000). The fair value associated with the exercised options
that were reclassified from contributed surplus to share capital was $4,725.
(b) Warrants
As at December 31, 2014, the following warrants were outstanding:
Number of Warrants - Units
Exercise
Price
December 31,
2013
Expiry
Issued
Exercised
Expired December 31
2014
2,702,702
1,818,181
2,272,727
306,183
634,116
560,922
8,294,831
--
--
--
--
--
--
--
June 29, 2015
C$2.17
2,702,702
June 29, 2015
USD$1.21
1,818,181
April 22, 2015
USD$1.21
2,272,727
--
--
--
May 29, 2016
USD$1.40
July 29, 2016
USD$1.40
December 30, 2016
USD$1.21
--
--
306,183
634,116
--
6,793,610
560,922
1,501,221
--
--
--
--
--
--
--
On April 22, 2013, the Company issued 2,272,727 warrants with an exercise price of USD$1.21, expiring on April
22, 2015. As the strike price of these warrants is in U.S. Dollars, the warrants were classified as equity
instruments. The value of the Units is less than the value of the Common Shares, and no amount was allocated
to the warrants.
On May 29, 2014, the Company issued 306,183 warrants with an exercise price of USD$1.40, expiring on May
29, 2016. As the strike price of these warrants is in U.S. Dollars, the warrants were classified as equity
instruments. The value of the Units is less than value of the Common Shares, and no amount was allocated to
the warrants.
On July 29, 2014, the Company issued 634,116 warrants with an exercise price of USD$1.40, expiring on July
29, 2016. As the strike price of these warrants is in U.S. Dollars, the warrants were classified as equity
instruments. The value of the Units is less than value of the Common Shares, and no amount was allocated to
the warrants.
On December 30, 2014, the Company issued 560,922 warrants with an exercise price of USD$1.21, expiring on
December 30, 2016. As the strike price of these warrants is in U.S. Dollars, the warrants were classified as equity
instruments. The value of the Units is greater than value of the Common Shares at the issuance date. The
amount allocated to Common Shares is USD$0.79 (C$$0.89) or total USD$444,552 and allocated to Additional
Paid in Capital for Warrants is USD$0.19 (C$0.21) or total USD$104,894.
Under IFRS, warrants having a strike price other that the functional currency of the issuer are a derivative
liability and are marked to market as the end of each reporting period. For the year ended December 31, 2014
the Company recorded a mark to market loss of $25,240 (2013 –$699,948) on the revaluation of warrants. As
at December 31, 2014, the outstanding liability portion of the warrants have a fair value of $159,023 (2013:
$184,264) which is determined using the Black-Scholes Option Pricing Model with an expected volatility of
93.32%, expected life of 0.49 years at a risk free rate of 1.01%.
Balance December 31, 2012
Additions
Exercise
Expiry
Valuation Change
Balance December 31, 2013
Additions
Exercise
Expiry
Valuation Change
Balance December 31, 2014
Warrant Liability
Number of
Units
Value of
Warrants
2,702,702
--
--
--
--
2,702,702
--
--
--
--
2,702,702
$ 884,212
--
--
--
(699,948)
$ 184,264
--
--
--
(25,241)
$159,023
c) Stock Option Plan
The Company has a stock option plan (“SOP”) providing for the issuance of options that cannot exceed
5,629,830 shares of common stock. The Company may grant options to directors, officers, employees, and
contractors, and other personnel of the Company or its subsidiaries. The exercise price of each option cannot
be lower than the market price of the shares being the closing price of the Company’s common shares on the
Toronto Stock Exchange the day before the grant date. Options generally vest ratably over an eighteen- month
period, beginning with the date of issuance and every 6 months thereafter, and expire in five years from the
date of grant as determined by the Board of Directors.
The following Table summarizes the Company’s stock option activity for the ended December 31, 2013 and
the year ended December 31, 2014:
Outstanding as at December 31, 2012
Granted
Exercised
Cancelled
Expired
Outstanding as at December 31, 2013
Granted
Exercised
Cancelled
Expired
Outstanding as at December 31, 2014
2013
Weighted
average
exercise price
(C$)
Number of
Options
3,045,000
685,000
(170,000)
(25,000)
(360,000)
3,175,000
740,000
(346,110)
(210,000)
(230,000)
3,128,890
C$1.13
C$1.09
C$0.70
C$1.00
C$0.70
C$1.19
C$1.07
C$0.77
C$1.10
C$ 0.65
C$1.25
On January 3, 2013, the Company issued 235,000 options at C$1.20 under its SOP to persons who are officers
and employees of the Company.
On January 3, 2013, 50,000 options granted under its SOP were exercised pursuant to the SOP at C$0.70 for
total proceeds of C$35,000 (USD $35,285).
On January 3, 2013, 110,000 stock options at C$0.70 expired.
On March 22, 2013, the Company issued 450,000 options at C$1.04 under its Stock Options Plan to persons
who are officers and employees of the Company.
On April 24, 2013, 50,000 options granted under its SOP were exercised pursuant to the SOP at C$0.70 for total
proceeds of C$35,000 (USD $34,094).
On May 7, 2013, 250,000 stock options at C$0.70 expired.
On May 23, 2013, 25,000 stock options at C$1.00 were cancelled.
On December 16, 2013, 50,000 options granted under its SOP were exercised pursuant to the SOP at C$0.70
for total proceeds of C$35,000 (USD $32,913).
On December 31, 2013, 20,000 options granted under its SOP were exercised pursuant to the SOP at C$0.55
for total proceeds of C$11,000 (USD $10,279).
2014
On January 2, 2014, the Company issued 260,000 options at C$0.75 under its SOP to persons who are officers
and employees of the Company.
On January 2, 2014, 230,000 stock options issued at C$0.70 expired.
On March 4 2014, 50,000 options granted under its SOP were exercised pursuant to the SOP at C$0.70 for total
proceeds of C$35,000 (USD $31,648).
On March 13, 2014, 75,000 options granted under its SOP were exercised pursuant to the SOP at 50,000: C$0.70
and 25,000: C$0.90 for total proceeds of C$57,500 (USD $51,725).
On March 21, 2014, the Company issued 480,000 options at C$1.25 under its SOP to persons who are officers
and employees of the Company.
On March 21, 2014, 40,000 options granted under its SOP were exercised pursuant to the SOP at C$1.00 for
total proceeds of C$40,000 (USD $35,564).
On March 22, 2014, 210,000 stock options at 50,000 at C$1.04, 100,000 at C$1.19 and 60,000 at C$1.00 were
cancelled.
On March 25, 2014, 71,110 options granted under its SOP were exercised pursuant to the SOP at 50,000: C$0.70
and 21,110: C$1.00: for total proceeds of C$57,111(USD $49,985).
On April 24, 2014, 110,000 options granted under its SOP were exercised pursuant to the SOP at C$0.70 for
total proceeds of C$77,000 (USD $69,864).
The following table summarizes the stock based compensation expense and capitalized stock based
compensation for the years ended December 31, 2014 and 2013.
Stock-based compensation expense
Capitalized Stock-based compensation expense
2014
2013
$ 349,420
$ 550,191
133,688
89,107
$ 483,108
$ 639,298
The following assumptions were used in the Black Scholes option pricing model to fair value the stock options
granted during the years ended December 31, 2014 and 2013:
Expected lives
2014
2013
3.2 to 4.7 years
4.5 years
Expected volatilities (based on Company’s historical prices)
95.5% - 108.0%
143.0% - 146.4%
Expected dividend yield
Risk free rates
Weighted average fair value of option
0%
0%
0.87– 1.60%
1.30% - 1.46%
$0.78
$0.95
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The following table summarizes stock options outstanding as at December 31, 2014:
Options Outstanding
Options Exercisable
Exercise
Number of
Weighted
Weighted
Number of
Weighted
Weighted
Price (C$)
Outstanding
Average
Average
Exercisable
Average
Average
Options
Exercise
Remaining
Options
Exercise Price
Remaining
Price (C$)
Contractual
(C$)
Contractual
Life (Years)
Life (Years)
C$1.00
C$2.23
C$1.25
C$1.03
C$0.90
C$1.00
C$1.20
C$1.04
C$0.75
C$1.25
130,000
500,000
285,000
300,000
210,000
328,890
235,000
400,000
260,000
480,000
C$1.00
C$2.23
C$1.25
C$1.03
C$0.90
C$1.00
C$1.20
C$1.04
C$0.75
C$1.25
0.03
0.34
1.01
1.30
2.01
2.25
3.01
3.22
4.01
4.22
130,000
500,000
285,000
300,000
210,000
328,890
235,000
400,000
130,000
240,000
C$1.00
C$2.23
C$1.25
C$1.03
C$0.90
C$1.00
C$1.20
C$1.04
C$0.75
C$1.25
0.03
0.34
1.01
1.30
2.01
2.25
3.01
3.22
4.01
4.22
3,128,890
C$1.25
2.26
2,758,890
C$1.28
2.01
6. INCOME TAXES
The recovery of income taxes varies from the amounts that would be computed by applying the Canadian
federal and provincial statutory rate for 2014 of approximately 26.5% (2013: 26.5%) to net loss before income
taxes as follows:
Loss for the year
Income tax rate
Income tax recovery
Foreign operation taxed at lower rates
Permanent differences
Benefits not recognized
Expiry of tax losses carried forward
Changes in estimate and foreign exchange
Provision for income taxes
December 31, 2014
December 31, 2013
(1,031,117)
26.50%
(273,246)
5,193
92,596
17,644
153,697
4,116
$ --
($778,389)
26.50%
(206,273)
426,351
(351,434)
573,714
115,622
(567,980)
$ --
As of December 31,2014 the following Deferred tax assets and liabilities have been recognized:
Property, Plant and Equipment
Exploration & –Evaluation Assets
Deferred tax liabilities
Losses carried forward - Botswana
December 31, 2014
($ 21,000)
(2,564,000)
($ 2,585,000)
$ 2,585,000
December 31, 2013
($ 57,000)
(2,401,000)
($ 2,458,000)
$ 2,458,000
Net future income tax asset recorded
$ --
$ --
As at December 31, 2014 the Company has unrecognized deductible temporary differences aggregating
to $5,873,000 (2013: $5,929,000), that are available to offset future taxable income. However these
temporary differences relate to companies with a history of losses, and they may not be utilized to offset
taxable income.
Losses carried forward - Botswana
Losses carried forward - Canadian
Intangible Assets
Other
December 31, 2014
$ 1,190,000
3,843,000
137,000
703,000
$ 5,873,000
December 31, 2013
$ 1,290,000
3,860,000
137,000
652,000
$ 5,939,000
The Canadian tax losses carried forward expire from 2015 thru to 2054. The Botswana losses can be carried
forward indefinitely.
Total assessable losses relating to the activity in
Botswana
$12,937,504
$12,464,920
December 31, 2014
December 31, 2013
7. LOSS PER SHARE
Net loss per share was calculated based on the following:
Year ended December 31
Net loss for the year
Effect of Dilutive Securities
Stock options and warrants
2014
2013
($ 1,031,117)
($ 778,389)
--
--
Diluted net earnings (loss) for the year
($ 1,031,117)
($ 778,389)
The diluted loss per share is the same as the basic loss per share for the year ended December 31, 2014 because
the stock options and warrants were anti-dilutive and had no impact on the EPS calculation. In addition, the
number of stock options and warrants outstanding as at the year ended December 31, 2014, was 11,423,721,
of which 11,150,443 were anti-dilutive.
8. RELATED PARTY TRANSACTIONS
Remuneration of Key Management Personnel of the Company
Short term employee remuneration and benefits
Stock based compensation
Post employment benefits*
2014
2013
$ 430,002
$ 385,835
$185,551
$106,503
283,000
71,835
Total compensation attributed to key management personnel
$ 722,056
$ 740,760
*Post employment benefits include $28,736 of accrued leave benefits for 2014.
An individual related to the CEO provided administrative and management services in 2014 to the Company
in the amount of $33,000 ($33,000: 2013). An elective five (5) year severance payment in the amount of $7,586
(NIL: 2013) was paid to this individual in 2014.
There are no other related party transactions.
9. SEGMENTED INFORMATION
The Company is operating in one industry. As at December 31, 2014 the Company’s Property, Plant, and
Equipment in the United States was $1,256 (2013: $4,132) and in Botswana was $303,617 (2013: $540,256). No
revenues or expenses were realized for Exploration and Evaluation Properties that are detailed in note 3 above.
Segment long term Exploration and Evaluations properties in Botswana were $12,889,827 (2013: $12,125,174).
10. FINANCIAL INSTRUMENTS
The Company’s financial instruments include cash, accounts receivable, accounts payable, accrued liabilities,
and accrued warrants liabilities. The carrying value of cash, accounts receivable, accounts payable and accrued
liabilities as presented in the consolidated financial statements are reasonable estimates of fair values due to
the relatively short periods to maturity and the terms of these instruments.
The Company’s financial instruments have been classified as follows:
Financial Instrument
Classification
Fair Value Hierarchy
Cash
Accounts receivable
Loans and receivables
Loans and receivables
Accounts payable and accrued liabilities Other financial liabilities
n/a
n/a
n/a
Warrants
Fair value through Profit or Loss
Level 3
See the Company’s consolidated statement of financial position for financial instrument balances.
International Financial Reporting Standards 7, Financial Instruments: Disclosures, establishes a fair value
hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy
has the following levels:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – inputs other that quoted prices included in Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices): and
Level 3 – inputs for the asset or liability that are not based on observable market data (unobserved inputs).
Risk Exposure and Management
The Company is exposed to various financial instrument risks and assesses the impact and likelihood of this
exposure. These risks include liquidity risk, credit risk, foreign exchange risk, and interest rate risk. Where
material these risks are reviewed and monitored by the Board of Directors.
(a) Capital Management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a
going concern in order to pursue the development and exploration of its mineral properties and to maintain
a flexible capital structure which optimizes the costs of capital at an acceptable risk.
The Company depends on external financing to fund its activities. The capital structure of the Company
currently consists of common shares, stock options and share purchase warrants. The Company manages the
capital structure and makes adjustments to it in light of changes in economic conditions and the risk
characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt
to issue new shares, acquire or dispose of assets or adjust the amount of cash on hand. In 2014 and 2013 the
Company raised cash capital as shown in note 5(a) in the amount of $1,875,356 and $2,521,911, respectively.
In order to facilitate the management of its capital requirements, the Company prepares annual expenditure
budgets, which are approved by the Board of Directors and updated as necessary depending on various
factors, including capital deployment and general industry conditions.
The Company anticipates continuing to access equity markets to fund continued exploration of its mineral
properties and the future growth of the business. However, there is no guarantee that such financing will be
available when required.
(b) Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company maintains sufficient cash balances to meet current working capital requirements. The Company is
considered to be in the exploration stage. Thus, it is dependent on obtaining regular financings in order to
continue its exploration programs. Despite previous success in acquiring these financings, there is no
guarantee of obtaining future financings. The Company’s cash is invested in business accounts with quality
financial institutions and which is available on demand for the Company’s programs, and is not invested in any
asset backed commercial paper.
(c) Credit Risk
Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet
it contractual obligations. The Company’s credit risk is primarily attributable to its liquid financial assets
including cash and accounts receivable; there are no amounts at risk. The Company limits exposure to credit
risk on liquid financial assets through maintaining its cash with high-credit quality financial institutions. There
are no allowances for doubtful accounts required.
The majority of the Company’s cash is held with a major Canadian based financial institution.
(d) Interest Rate Risk
The Company’s exposure to interest rate risk arises from the interest rate impact on its cash. Because the cash
is held on deposit at financial institutions and may be withdrawn at any time, the Company’s exposure to
interest rate risk is not significant.
(e) Foreign Exchange Risk
The Company is exposed to currency risks on its Canadian dollar denominated working capital balances due
to changes in the USD/CAD exchange rate and the functional currency of the parent company. As at December
31, 2014, a ten percentage change in the exchange rate would result in a $5,711 impact to the Company’s net
income (loss).
The Company issues equity in Canadian dollars and the majority of its expenditures are in U.S. dollars. The
Company purchases U.S. dollars based on its near term forecast expenditures and does not hedge its exposure
to currency fluctuations.
Based on the net Pula denominated asset and liability exposures as at December 31, 2014, a 10% change in
the USD/Pula exchange rate would not materially impact the Company’s earnings. A ten percentage change
in the exchange rate would result in a $20,433 impact the Company’s net income (loss).
11. COMMITMENTS
All operating leases that are for a period of no longer than one year are prepaid.
The aggregate minimum lease payments inclusive of VAT are as follows:
2015
Total
$ 31,019
$ 31,019
The lease commitment is for storage space in Maun, Botswana at an annual rental of Pula 196,185 inclusive of
VAT for year 2015 and office space in Gaborone, Botswana at an annual rental of Pula 96,000 inclusive of VAT
for year 2015 at an exchange rate as at December 31, 2014 to US dollars.
The Company holds prospecting licenses which require the Company to spend a specified minimum amount
on prospecting over the period of the terms as outlined in note 3.
12. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31
2014
December 31
2013
Net change in non-cash working capital balances
Decrease in accounts receivable and prepaid expenses
$42,405
$23,985
Increase in accounts payable and accrued liabilities
23,696
96,837
Total
$66,101
$120,822
13. SUBSEQUENT EVENTS
On January 2, 2015, the Company issued 260,000 options at C$1.05 under its SOP to persons who are officers
and employees of the Company.
On January 11, 2015, 130,000 options at C$1.00 expired.
CORPORATE HEAD OFFICE
TD Canada Trust Tower
Suite 2700
161 Bay Street, Box 508
Toronto, Ontario M5J 2S1
Telephone: (416) 572-2033
Facsimile: (416) 987-4369
Website: www.TsodiloResources.com
E-Mail: info@TsodiloResources.com
AUDITORS
Ernst & Young, LLP
Vancouver, Canada
LEGAL COUNSEL
Norton Rose Fulbright, LLP
Toronto, Ontario
REGISTRAR AND TRANSFER AGENT
Computershare Trust Company of Canada
Toronto, Ontario
STOCK EXCHANGE LISTING
TSX Venture Exchange
Trading Symbol: TSD
Corporate Information
DIRECTORS
James M. Bruchs, Chairman
McLean, Virginia
Appointed as director in 2002
Patrick C. McGinley
Washington, D.C.
Appointed as director in 2002
Jonathan R. Kelafant
Arlington, Virginia
Appointed as director in 2007
David J. Cushing
Chevy Chase, Maryland
Appointed as director in 2008
Michiel C. J. de Wit
Cape Town, South Africa
Appointed as director in 2009
Thomas S. Bruington
Vancouver, British Columbia
Appointed as director in 2013
OFFICERS
James M. Bruchs, B.Sc., J.D.
Chairman and Chief Executive Officer
Appointed in 2002
Michiel C. J. de Wit, Ph.D.
President and Chief Operating Officer
Appointed in 2010
Gary A. Bojes, CPA, Ph.D.
Chief Financial Officer
Appointed in 2007
Gail McGinley
Corporate Secretary
Appointed in 2005