Tsodilo Resources Limited
Annual Report 2015
President’s Message
2015 was a challenging year for the mining industry,
with a significant decline in metals and rough diamond
prices resulting in a decrease of global funding for
development and exploration projects. All segments of
from
the mining
international mining conglomerates
junior
mining companies
industry were
affected
to
We are looking forward to an exciting and challenging
year ahead as we make progress in the development
of an economic kimberlite and
f u r t h e r
d e v e l o p m e n t o f o u r i r o n ; base and precious
metal projects. Please follow our progress carefully
and remain informed by regular visits to our website,
www.TsodiloResources.com.
the
The Company has pursued a number of measures in
2015 to address the business challenges it faced and
continues to deal with lower resource prices resulting
in a decrease of capital available for our activities. A focus
on even more efficiency across our activities in
2015 resulted in lower costs compared to 2014 while
still allowing us to advance our main projects. The
in 2015 by
Company made difficult decisions
relinquishing licenses that no longer met the Company’s
investment criteria in light of the current economic
realities.
Fortunately, as a result of decisions made almost a
decade earlier, the Company was able to carry on its
activities on a limited budget by utilizing its own drill rigs
and geophysical equipment. We were able to
conduct
exploration program without
interruption throughout the year.
our
the past year,
During
the Company supported
exploration activity by raising funds in the capital
markets through the successful issuance of stock by
way of private placements. This process will continue
in the coming year. Our current share base consists of
33,542,784 issued and outstanding 3 9 ,393,970 on a
fully diluted basis) common shares.
Dr Michiel CJ de Wit
President
February 29, 2016
in
interest
Tsodilo has a 75%
its Botswana
Bosoto (Pty) Ltd BK16 kimberlite diamond
project; a 100% interest in its Botswana Gcwihaba
Resources (Pty) Limited metal projects; and a 70%
interest in the Barberton, South Africa gold and silver
project.
The world’s economies will recover as equity and
credit markets
of
strengthen.
commodities including diamond will rise from their
recent
lows as market conditions improve and
demand increases. The Company is well positioned
to meet the challenges in the upcoming year and for
the years’ thereafter.
price
The
Contents
President’s Message to Shareholders
Management’s Discussion and Analysis
Financial Reporting Responsibility of Management
Auditors’ Report to the Shareholders
Consolidated Financial Statements / Notes
Corporate Information
1
2
28
29
34
IBC
1 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, 2015 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 29, 2016.
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.
2 Outstanding Share Data
As of February 29, 2016, 33,542,784 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, 3,221,390 options remain
outstanding of which 2,816,390 are exercisable at exercise prices ranging from CAD $0.70 - $1.25.
Outstanding Options
Expiry Date
No. of Option Shares
April 17, 2016
January 3, 2017
April 2, 2017
January 3, 2018
March 22, 2018
January 2, 2019
March 21, 2019
January 2, 2020
March 27, 2020
September 1, 2020
January 4, 2021
Total
300,000
210,000
328,890
235,000
400,000
222,500
480,000
260,000
400,000
100,000
260,000
3,196,390
Exercise Price (CAD)
$1.03
$0.90
$1.00
$1.20
$1.04
$0.75
$1.25
$1.05
$0.83
$0.70
$0.70
As of February 29, 2016, 2,617,296 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
May 29, 2016
July 29, 2016
December 30, 2016
August 10, 2017
Total
No. of Warrant Shares
306,183
634,116
560,922
1,116,075
2,617,296
Exercise Price & Currency
$1.40 USD
$1.40 USD
$1.21 USD
$1.10 USD
If all warrants were converted, 2,617,296 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 29, 2016, are as follows:
Name
Description
Shares
Owns, Controls
or Directs
% of the Issued
and Outstanding
Shares
Azur LLC
Private Investment Vehicle
4,996,065
International Finance Corporation Member of the World Bank Group
4,520,883
David J. Cushing
James M. Bruchs
Director
Director and CEO
First Quantum Minerals
Global Mining Company
2,880,096
2,285,619
2,272,727
14.89%
13.47%
8.61%
6.81%
6.77%
Exploration Activities for 2015
Subsidiaries
The Company currently has a 100% operating interest in its Botswana subsidiary, Newdico (Proprietary) Limited
(“Newdico”), which held one prospecting license covering approximately 851 km² in northwest Botswana during the
year. This license was relinquished effective June 30, 2015.
3 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 twenty (20) are currently in renewal; and, eight (8) radioactive mineral licenses located in
the North-West district.
The Company has a 75% interest in its Botswana subsidiary, Bosoto (Pty) Limited, which holds the precious stone
prospecting license for the area which contains the BK16 kimberlite.
The Company holds a 70% interest in its South African subsidiary, Idada Trading 361(Pty) Limited (“Idada”). Idada filed
an 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, and REMDEC) in September 2013. During the second quarter of
2015, notice was received from the Department of Mineral Resources, South Africa which granted the Company the
prospecting rights for gold and silver in the applied for area subject to certain subsequent conditions being met. The
Company fulfilled those requirements in the third quarter of 2015 and is awaiting the Execution of the Right
documents.
The Company holds a 100% interest in Tsodilo Resources Bermuda Limited to which the shares of its operating
subsidiaries are registered.
1. DIAMOND PROJECTS
During all or part of 2015, the Company held 3 Prospecting Licences for precious stones, one registered each to
Newdico, Gcwihaba and Bosoto. These licenses are summarized in Table 1. The Gcwihaba license PL 195/2012 covered
494 square kilometers; the Newdico license (PL 64/2005) covered 851 square kilometres; and the Bosoto license
(PL369/2014) covers 1.02 square kilometres and the term of the current license is October 1, 2014 to September 30,
2017.
Precious Stone Prospecting Licenses as at December 31, 2015
Table 1.
PL number
Km²
Grant
Date
Expiry
date
Current
Stage
Expenditure
PL 195/2012
250.7
7/01/15
6/30/17
PL 064/2005
851
4/01/14
3/31/16
PL 369/2014
1.02
10/01/14
9/30/17
Relinquished
12/31/2015
Relinquished
6/30/2015
Initial Grant
Total
1,346.02
Rental
Fee Per
Annum
(BWP)
--
Work
Program
Per Annum
(BWP)
--
--
1,000
--
35,407,000#
138,275,000#
64,200,000#
Total Expenditure From
Grant and if held to Full
License Term
BWP
USD as at
12.31.15
--
--
--
--
237,885,000#
25,254,100
238,600,920
26,132,451
4 PL 195/2012
This license was initially granted in 2012. An application for a 50% renewal was successful and the license was renewed
in 2015 for two years. A target drilling program commenced and completed in 2015 failed to intersect any kimberlite
the license was relinquished in its entirety.
Soil sampling and a detailed ground geophysical program was completed in 2014, and the work in 2015 focused on
target drilling on four kimberlite-looking targets. Five vertical diamond holes were drilled (NQ) to a cumulative depth
of 491 meters and 261 meters of core were extracted (Table 2). Four of the holes intersected mafic lavas of the Molopo
Farms complex and a fifth hole sampled the top of a highly silicified banded iron stone formation. The Molopo Farms
complex is a 2 billion year old igneous layered intrusion complex similar in age to the Bushveld Igneous complex.
Minor sulphide mineralization was observed in the form of pyrite and chalcopyrite in carbonate veins.
Table 2
Boreholes drilled on PL195-2012
Hole
Depth
Core
number
(m)
(m)
PL195_001V
122.60
88.26
PL195_002V
92.40
53.93
PL195_003V
110.70
55.66
PL195_004V
92.60
52.88
PL195_005V
45.32
10.29
Total
463.62
261.02
Main rock type
Drill Azimuth Dip
Kalahari cover (sand, silcrete, calcrete) 0 – 33 m;
Bedded siltstones/Chert (Transvaal?) 33- 62.6 m;
Mafic lavas with minor mineralization (Molopo
Farms complex) 62.7 – 122.6 m.
Kalahari cover 0 – 43 m; Mafic lavas, massive and
vesicular 43 – 92.4 m, with carbonate veins with
minor sulphides.
Kalahari cover (sand) 0 – 35 m; Mafic lavas, massive
and vesicular 35 – 110.7 m.
Kalahari sand 0 - 33 m; Dark green mafic volcanics
– massive and vesicular 33 – 92.6 m.
Kalahari cover (sand, calcrete) 0 – 27.4 m; BIF
(goethite and hematite) with lighter cherty layers.
D1
0°
-90°
D1
D1
D1
D1
0°
0°
0°
0°
-90°
-90°
-90°
-90°
Samples were submitted for petrographic studies. This suite of volcanic rocks is dominated by leuco-andesite with a
high percentage of amygdales. One hole intersected hornfelses, altered shales, of the Transvaal Supergroup that had
been thermally metamorphosed by the intrusion. The intrusion varied in composition from fine-grained volcanic
breccias (leuco-andesitic in composition), thermally altered felsic volcanic rock and amygdale-rich fine-grained basic to
intermediate volcanic rock. Sulphide mineralization, mainly in the form of pyrite and minor chalcopyrite, are associated
with bands of epidote-chlorite-quartz-albite and calcite.
No kimberlite was intersected and remodeling of the geophysical data with the drill information suggests that
kimberlites might still be present in the area but that these are going to be small and possibly only as dykes. The
sulphide mineralization is limited and although the Molopo Farms complex has been targeted by many companies in
the past no ore body have ever been discovered within the complex. Based on these negative results the license has
been relinquished.
5 PL 64/2005
Interest in the kimberlites located on PL 64/2005 was 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 or an
undiscovered kimberlite in and around the Nxau Nxau field. 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.
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 were required from K10. K11’s mineral chemistry signature is similar to
K10 and this body is approximately 2.5 ha in size. Following the two year extension of PL 64/2005 and 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 SE of the K10 cluster. A total of 228 line km were surveyed covering an
area of 5 km². B7 was never drilled and A16 has been drilled in the past but kimberlite was never intersected. This
survey was able to define the sizes of K10 and K11 more accurately and provide accurate drill targets for B7 and A16.
Target B7 (K29) and A16 (K30) were drilled and both proved to be kimberlite. A total of 262.70 m was drilled resulting
in 101.30 m (k29) and 119.20 m of core from K29 and K30 respectively. Petrographically K29 has been interpreted as a
coherent poorly-macrocrystic kimberlite and K30 as an air-fall pyroclastic kimberlite. Both the coherent and the
pyroclastic kimberlite specimens are petrographically rated as low interest with respect to diamond potential due the
relatively large grain size of groundmass spinels and the scarcity of olivine macrocrysts.
Microdiamond sample residues from the original K10 microdiamond sample were forwarded to the C.F Mineral
Research laboratory in Kelowna (BC). No additional stones were recovered from the +75 micron fraction. In April, 99.1
kg of kimberlite from K10 was sent to Ekapa Minerals in South Africa. The material was soaked in water and after a
number of days was wet sieved to remove the plus 2mm material and the minus 5 micron material. After sieving 20%
of the material remained as +2mm which was crushed using a lab sized jaw crusher. The screened material was treated
in a Mountain Goat reverse helix trommel, and then fed into a Desert Fox Spiral Concentrating Machine, at a rate of
approximately 30Kg/hour and 156 grams of concentrate were recovered. The concentrate was dried and sieved into 6
fractions: +2mm, +850μ, +420μ, +250μ, +150μ, and <150μ total. The magnetic material was removed from each
fraction with a hand Fe magnet and the non-magnetic material of less than 2mm was separated using a heavy liquid
6 approximately 2.9 SG. Abundant ilmenite, garnet and rare chromites and one diamond in the +0.450 mm fraction were
recovered. An additional 50 kg sample from the K11 core was prepared and sent to the Ekapa Minerals recovery unit in
Kimberley in March (2015) for diamond analysis but no diamonds were recovered.
During the second quarter of 2015, the Company performed an extensive and exhaustive review of its’ Nxau Nxau
kimberlite project and concluded that the project no longer met the Company’s investment criteria. The decision to
relinquish the license effective June 30, 2015 was filed with the Ministry of Minerals, Energy and Water Resources
(MMEWR). The Company’s decision to cease exploration resulted in a charge of $6,897,401, which is included in other
expenses and reflects a write-down of the Company’s carrying value of the Newdico Nxau Nxau project.
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.
Summary of Work Performed in 2015
All the historical holes were entered into the Tsodilo database along with the detailed in-house generated ground
geophysical surveys (Gravity and Magnetic) which the Company completed in 2014. This information was used to plan
and drill 17 core holes to develop the geological model. Although 20 holes were drilled, three of these were repeat
holes due to drilling problems and hence 17 holes were used for the final geological model. Five of the 17 holes were
vertical and the others were inclined holes. The cumulative depth of this program was 3,727 meters producing 3,089
7 meters of NQ size core. The inclined holes were surveyed with the down-the-hole Gyro surveys and orientated using
the Reflex ACTII system. The cores were stored in the Company’s premises at the Maun airport.
The following measurements were taken of the drill core:
1. Magnetic susceptibility readings taken every 20 cm. Density measurement were completed on every 2 m of
core and 2,100 density measurements, using both the standard rapid emersion technique and the varnish
coating method, have been entered into the Company’s database. These also include repeats and standards.
After some experimentation it was decided that all core in the BK16 project will be measured for dry bulk
density using the varnish coating method as it has been demonstrated to give superior dry bulk density
results over the standard rapid emersion technique, particularly when dealing with the weathered kimberlite
which is friable and highly porous. The standard procedure now is to sample between 20 and 30 cm of solid
core every two meters. This core is then coated with a thin coat of varnish, weighted and the volume
established by water displacement.
2. Detailed geological logs are prepared for each hole and converted into an electronic format. Both hand
drawn logs and the electronic logs are kept in the Company’s database. Dilution logging is an important part
of the geological logs and will be used in the geological model in order to locate areas with higher volumes
of xenoliths inclusions, which are either crustal (basalt, sandstone) or mantle (peridotite, eclogite), and hence
areas with potentially diluted grades.
3.
A first pass geotechnical log is prepared for each hole in terms of Rock Quality Designation (RQD), which is a
rough measure of the degree of jointing or fracture in a rock mass, measured as a percentage of the drill core
in lengths of 10 cm or more. High-quality rock has an RQD of more than 75%, low quality of less than 50%. It
is therefore logical that there would be a strong correlation between core recovery and RQD.
The Company’s geologists were assisted by Dr. Jock Robey with the detailed logging of the cores. During this work,
three major phases and one minor phase were mapped:
First phase volcaniclastic ‘red’ kimberlite with 90 % basalt xenoliths, called VK1 (Red VK).
Second phase massive, dark volcaniclastic kimberlite – the black VK2.
Third phase basalt xenoliths rich volcaniclastic kimberlite – grey VK3.
A coherent phase (VK) similar to hypabyssal kimberlite was intersected in one hole – CK.
These data sets were entered into the GIS database and used for the geological model of the kimberlite. The BK16
geological model defined some 13 to 14.5 million tonnes of exploration target for the VK2 and VK3 phases with
estimated grade of 13 to 19 carat per hundred ton (“cpht”) with low confidence but based on previous bulk sampling.
During the year all the density work was completed and the geotechnical studies will be completed in the first quarter
of 2016.
Based on this geological model the Company has planned the outlay of a Large Diameter Drilling (LDD) bulk sampling
program in consultation with the mineral resource consultants Zstar of South Africa.
In anticipation of this drilling program which is scheduled to start during in 2016, the Company purchased a DMS
mobile plant from De Beers Botswana. This plant is capable of handling a 10 tons/hour head feed throughput and was
used in the evaluation of AK06 (Karowe Diamond Mine) owned by Lucara Diamond Corp. It is set up and located just
outside the Letlhakane village approximately 15 km directly WNW from the BK16 kimberlite pipe.
8 The plant is equipped among others with primary and secondary crushers (Cone and Jaw), de-sliming screens,
conveyors, a scrubber with 12 mm trommel screen, a DMS preparation screen and DMS cyclone (250mm/57mm). It is
supported by a laboratory, security office and concentrates storage units. A detailed engineering review of the plant
was completed and refurbishing of the mechanical operation of the plant and the establishment of a final recovery
unit has been presented.
Summary of work to be performed in 2016
The program for 2016 will focus on the LDD work. Because of the cost of each LDD hole (24 inch diameter), it is
required to drill a NQ core pilot hole at each LDD site in order to maximize the kimberlite recovery of each hole and to
correlate the geology with the sample results from the LDD program. The cumulative depth of the LDD holes is 3,460
m so the pilot hole drilling program should take under two months to complete. This drilling is scheduled to start
during the 1st quarter of 2016. The LDD meterage is based to recover at least 200 carats for first stage evaluation using
a conservative grade of 10 cpht and will generate some 2,000 tons for processing.
In total, 17 LDD holes (3,460 m) are to be drilled and this includes material from VK2, VK3 and diluted material. This
work is scheduled to start in the 3rd quarter. Refurbishment of the plant and set-up of the final recovery unit will start
during the second quarter.
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 1,244.80 km² not
including licenses currently in renewal (Table 3).
Table 3. Gcwihaba Metal License Areas as at December 31, 2015
PL numbers
Km²
Grant
Date
Expiry /
Renewal
date
Current
Stage
Expenditure
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
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
07/01/09 07/01/12
in renewal
TBD
07/01/14 07/01/16 2nd renewal
413.00
Initial Grant
04/01/12 04/01/15
TBD
Rental
Fee Per
Annum
(BWP)
4,160
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
2,065
TBD
Total Expenditure
From Grant and if
held to Full License
Term
BWP
USD as at
12.31.2015
Work
Program
Per Annum
(BWP)
125,000 258,320
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
125,000 254,130
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
23,400
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
23,020
TBD
9 PL 094/2012
PL 095/2012
PL 096/2012
PL 097/2012
TOTAL
TBD
TBD
TBD
TBD
1,244.80
04/01/12 04/01/15
04/01/12 04/01/15
04/01/12 04/01/15
04/01/12 04/01/15
Initial Grant
Initial Grant
Initial Grant
Initial Grant
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
512,450
TBD
TBD
TBD
TBD
46,420
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 mineralization domains were identified in the
various licences. These are, (1) sulphide mineralization associated with Neoproterozoic metasediments, (2) base and
precious metals and REE 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).
Table 4
Main mineralogical domains identified during the Phase 1 drill program
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:
10
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 was a firm commitment by First Quantum and was to 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. As of December 31, 2015, First Quantum has reported that the total expenditures
spent on Prospecting Licenses covered by the MOU amounted to $14,732,922.28.
On January 6, 2016, First Quantum notified the Company that they did not intend to continue with the Tranche 2
Expenditure terminating the Earn-in-Option Agreement. Tsodilo has initiated discussions with other companies to
select a new joint venture partner for the development of its metals projects in Tsodilo's license holdings.
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 partnership with First Quantum and is solely a Tsodilo project. The drilling and the ground geophysical surveys
conducted by Gcwihaba have so far 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).
Because of 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.
Drilling on Block 1 of the Xaudum XIF deposit was completed and in 2014 SRK Consulting (U.K.) presented Gcwihaba’s
maiden National Instrument 43-101 Resource report of this Block which forms the northern part of this large XIF
deposit. For this block SRK has 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.
Here the company expects to define a significant Inferred Mineral Resource in due course which will significantly
increase the Xaudum Iron Project total Mineral Resource. The first holes of this block were drilled between August and
November 2014, and the Company aims to complete the resource definition of Block 2 in order to prove at least a +1Bt
resource.
The Company continues its 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),
11 briquettes or supa-scrap (IMBS non-conventional DRI process) or even pig iron (ESS Prodilux furnace). For this the
thermal coal in eastern Botswana is considered most appropriate but issues surrounding the infra-structure need to be
resolved.
2.3 KATANGAN-LIKE META-SEDIMENTS
General geology
Southeast and east of the XIF Iron project 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 is 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.
The majority of Katangan metasediments intersected in drilling are interpreted to belong to the Mwashya Group
(shale, carbonate), or the Grand Conglomerate (diamictite) units, occurring on each side of the ‘basement high’. Most
of the FQM and Tsodilo Resources drilling have taken place within these two stratigraphic Groups. Much of the drilling
has shown diamictite to alternate with carbonate-shale packages and this is attributed to repetition by bedding-
parallel thrust faults. The distribution of magnetite-facies BIF is restricted to the diamictite on the western side of the
basement-high, and this probably reflects differences in seawater chemistry across the ‘basement high’ during the
Sturtian Glaciation.
The understanding of the upper Katangan stratigraphy in the Shakawe area is poor. The diamictite of the Grand
Conglomerate typically transitions abruptly into a clean dolomite referred to as the Kakontwe. This change reflects an
abrupt global warming event at the end of the Sturtian glaciation and it is a feature observed in some drill cores from
the Shakawe area. However, at the western end of FQM’s Stratigraphic Section Line the diamictite is conformably
overlain by calcareous sandstone.
The rocks at the extreme western end of the east- west sections contain zircon populations of ≈1.1 Ga and ≈2.0 Ga, but
contain no 2.5 Ga zircons. The rocks are interpreted to be of the Ghanzi-Chobe Supergroup. The Kgwebe Volcanics are
the most likely source of these ≈1.1 Ga zircons, implying significant differences in the provenance of the Katangan
Supergroup and the Ghanzi-Chobe Supergroup meta-sediments.
Summary of Prospecting Activities during 2015
Target Drilling
Four diamond drill holes were completed during 2015. BWADD0034 targeted an extension of the Laharpo East target,
where weak copper mineralisation is associated with albite and and/or chlorite-amphibole alteration over an area of
several square kilometres. The hole intersected shale, siltstone and schist with local chlorite alteration, but no copper
mineralisation or albite alteration. Drill holes BWADD0035 and 36 intersected the Middle Earth target, identified by the
Kalahari Geochemistry Program (KGP) as containing anomalous metals in the bedrock, Kalahari sand, and at the
interface between the two. The drill holes intersected a thrust-repeated package of shale and sandstone. Pyrrhotite
was present in variable quantities throughout the sequence, hosted in shales and schists containing garnet and
kyanite porphyroblasts.
12 Metal anomalism at the School target was identifiable in both hydrogeochemistry and KGP data. BWADD0037
intersected steeply dipping, highly strained schists and carbonaceous shale. The borehole contained minor amounts
of garnet, kyanite and chlorite alteration.
Hydrogeochemistry
Analyses for a large set of hydrogeochemistry samples were received during the year. The distribution of samples was
constrained by the location of boreholes that intersected a water table. This erratic distribution of samples determined
that additional samples were collected later in the year; the analyses for which are pending.
The initial data show a wide variation in baseline chemistry, i.e. Total Dissolved Solids, pH, and oxygen level, all of
which impart a non-linear control on the solubility of copper in the groundwater.
The only large, multi-point anomaly was the School target which appeared to show a natural plume of groundwater
anomalous in metals flowing down hydraulic-head towards the Okavango River. The data also identified large mafic
intrusive rocks, which provided additional support for the validity of the technique.
The results from hydrogeochemistry samples collected late in the year are anticipated early 2016. This includes the
copper isotope data, the analytical method for which has proven to be problematic.
Kalahari Geochemistry Program (KGP)
Low-detection limit, multi-element assay results for the KGP were received in late 2014 and interpreted in early 2015.
Lithogeochemistry samples from the Katangan bedrock mapped rock type as well as alteration and trace amounts of
mineralisation. The interface between the Katangan rocks and the Kalahari sand contained transported detritus
including heavy minerals such as iron oxides and sulphides. Weak metal anomalism was detected in some of the more
iron-rich samples of Kalahari sand.
Two high priority targets were identified from the KGP data: the Middle Earth and School targets. Both targets had
several KGP holes reporting multi-element anomalies in multiple sample media (bedrock, interface and Kalahari).
CSIRO study
Dr Ravi Anand of CSIRO conducted an FQM-sponsored research project into exploration through the Kalahari cover.
The short project was designed to increase our knowledge of the mechanisms for metal transport in the Kalahari,
enabling existing data to be used more intelligently and for subsequent exploration to be conducted more effectively.
Key outcomes were the recognition of the vertical movement of metals in the Kalahari profile by groundwater and
biological mechanism, the lateral dispersion of several heavy mineral species along the unconformity and optimal size
fractions and digestion methods for identifying trace amounts of metal anomalism in sand.
Geophysics
Downhole density and conductivity logging of 10 KGP boreholes was conducted. The data are to be used to enhance
the processing of airborne gravity and EM data respectively.
13 CSIRO remodelled the Spectrem airborne EM data to determine whether reprocessing with geological constraints
could improve the accuracy of the technique as a means of mapping the paleotopography of the Katangan bedrock.
Passive seismic was trialled at the end of 2015. The technique has the potentially to be a very quick and low-cost
means of mapping the paleotopography of the Katangan bedrock. Results are pending.
General Geology
Sulphur isotope samples were collected from variety of locations on the project. The analyses show that the
predominant origin of sulphur in sulphide minerals such as pyrite, pyrrhotite and chalcopyrite, is diagenetic. One
sample returned heavy sulphur indicative of evaporite-derived brines. Whilst sulphur isotopes are not an indicator of
prospectivity, the technique elucidates a part of the basin’s history.
The Pre-Kalahari geological map was updated using lithogeochemistry from the KGP drill holes, airborne gravity data
and drill hole data. Differences in the structural style across the north-south oriented basement high were noted, with
significant thrust repetition and the absence of BIF to the east of the basement high.
Several regional-scale cross sections were constructed to enhance the understanding of the terrane. A variety of
geophysical techniques were employed along with drilling data and geochronology data.
Summary of Work Performed in 2015
DRILLING
Diamond Drilling
GEOCHEMISTRY
Cu-isotopes
Samples submitted
No. of holes
Meters drilled
1,382
4
1,395.50
Surface samples
Borehole samples
Total
DOWNHOLE GEOPHYSICS
Downhole logging
577.40
Meters
No. of Holes
9
9
10
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 cover 3,911.80 km² (Table 5) and overlap some of
the Gcwihaba metal permits.
14 Gcwihaba – Radioactive License Areas as at December 31, 2015
Table 5.
PL
numbers
Km²
Grant
Date
Renewal
date
Current
Stage
Expenditure
Rental Fee
Per
Annum
(BWP)
Work
Program
Per Annum*
(BWP)
Total Expenditure From
Grant and if held to Full
License Term
BWP
USD as at
12.31.2015
PL 150/2010
PL 151/2010
PL045/2011
PL 046/2011
PL 047/2011
PL 048/2011
PL 049/2011
PL 050/2011
Total
411.30 04/01/15 03/31/17 2nd Renewal
311.40 04/01/15 03/31/17 2nd Renewal
547.80 04/01/15 03/31/17 2nd Renewal
372.00 04/01/15 03/31/17 2nd Renewal
478.00 04/01/15 03/31/17 2nd Renewal
404.20 04/01/15 03/31/17 2nd Renewal
973.40 04/01/15 03/31/17 2nd Renewal
413.70 04/01/15 03/31/17 2nd Renewal
3,911.80
2,060
1,560
2,740
1,860
2,390
2,025
4,870
2,070
19,575
70,000
70,000
70,000
70,000
70,000
70,000
70,000
70,000
560,000
--
--
--
--
--
--
--
--
1,159,150
--
--
--
--
--
--
--
--
105,002
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
meters 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
(Liluende, 2012). In addition Uranium-rich soils (3,000-6,000 cpm) were identified in the Chadum and Kkhaudum
drainages.
Summary of Work Performed in 2015
Water samples were collected over most of northern Ngamiland as part of the regional base metal exploration
program. Many were taken from holes drilled by FQM but others were collected from water wells at cattle posts and
other previously drilled holes. Although not all samples have been analyzed there were 8 samples with values higher
than 25 ppb U believed to be the anomalous cut-off for these types of samples in this area. Several of those positive
samples were proximal to the U targets that Union Carbide had generated in the past and again highlighted the
Khaudum and Chadum drainages as being very prospective for secondary uranium. As new geological models have
been developed over uranium deposits in Namibia, that are hosted in secondary environments such as calcretes and
alluvium, like the Trek Kopje and Langer Heinrich deposits also located in the Damara Belt, the Company will be
looking to apply some of those models to the uranium anomalies in Ngamiland over the next quarter, also hoping that
all water results would have been received by then.
15 In addition and during the drilling of the Kalahari Geochemistry Program (KGP) five holes (KGPDD0054, 0061, 0093,
0096, 0097 and 0098), of which KGPDD0054 and KGPDD0063 intersected lower Karoo Group sediments, returned
encouraging uranium assay results. Interestingly borehole BBWA0014, drilled on a conceptual base metal target to
over 600 m deep, also intersected Lower Karoo (Dwyka and possibly Lower Ecca) sediments from below the Kalahari to
the end of the hole (still in Karoo), and also reported uranium in one of the units. Karoo hosted uranium deposits occur
in eastern Botswana and also in the Karoo in South Africa at Beaufort West. Clearly this model will also be considered in
the review of the geological settings of uranium deposits in Ngamiland.
Interestingly, most of the boreholes with uranium spikes and drilled in the metasediments of the Katanga Group as
part of the Xaudum Ironstone project are all found adjacent to the north-south orientated basement granitic high. In
addition, some of the positive results from the Union Carbide work in southern Ngamiland around 1980 also seem to
be associated with basement rocks. A re-look at the granite type as a primary source for uranium is also been planned.
The Company is presently evaluating all the different datasets as well as its relationship with the local geology. That
part of the project area that was covered with an airborne radiometric survey will be incorporated. The aim is to verify
the geological model and start with some ground mapping. Finally the Company is also evaluating the use of ground
geophysical instruments to locate and define drill targets for uranium.
Exploration and Evaluation additions for the year ended December 31, 2015 are summarized as follows:
Newdico
Botswana
Bosoto
Botswana
Idada
So. Africa
Gcwihaba
Botswana
Total
Precious
Stones
Precious
Stones
Precious
Stones
Precious
Stones
Metals
Subtotal
TOTAL
Radio-
Active
Minerals
$ 49,362
$ 72,611
$ --
$ 7,024
$ 27,156
$ 27,183
$ 61,363
$ 183,336
91,005
--
2,088
846
41,503
17,079
3,039
--
--
--
--
--
196
2,430
325
250
20,579
156
4,778
353
20,578
--
--
1,297
41,353
2,576
5,103
1,900
173,961
19,655
10,230
2,746
20,258
40,105
3,498
13,240
13,219
13,095
39,554
103,415
162,378
377,828
--
43,251
70,904
52,791
166,946
707,152
$325,937
$552,165
$3,498
$66,716
$137,145
$114,944
$318,805
$1,200,405
Drilling
Expenditures
Amortization Drill
Rigs, Vehicles &
Trucks
GIS & Geophysics
Lab Analyses &
Assays
License Fees
Office,
Maintenance, &
Consumables
Salaries, Wages &
Services
Balance at
December 31,
2015
16 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
Dec. 31, 2014
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2015, the Company had a working capital deficit of ($746,529) [December 2014: ($118,928)], which
included cash of $73,910 (December 2014: $232,585). 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). In the 2nd quarter of 2015, security
options were exercises for proceeds of $21,575. The Company received total proceeds of $934,837 from the sale of
common shares and warrant units as a result of the private placement which closed on August 10, 2015. Post August
10, 2015 and to date, the Company has accepted investor deposits for subscription to a Private Placement for security
units in the amount of $800,050.
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 2015 for those warrants is NIL (2014: $159,023). The Company was 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 increased from ($706,862) for the period
year ended December 31, 2014 to ($725,988) for the year ended December 31, 2015. Other operating expenses
17 fluctuated but on the whole were increased for the period ended December 31, 2015 by $5,109 compared to 2014.
The largest impact on Comprehensive income (loss) for the period was the impairment on evaluation and exploration
of $8,874,979 (2014: NIL). The realized gain on the valuation of warrants was reduced from $25,240 in 2014 to
$159,023, 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. A
gain on the disposal of fixed assets was $25,492 (2014: NIL). Stock based compensation expense decreased by
approximately $12,000. Expense increases were throughout the other expense categories with the largest decreases
in legal and audit fees expenses going down by approximately $9,000 and the largest increases in corporate
remuneration going up by approximately $29,000.
[Remainder of page left blank intentionally]
18 Annual Information
(in US Dollars)
Fiscal Year
December 31, 2015
Fiscal Year
December 31, 2014
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
($9,722,451)
($0.30)
($0.30)
($1,122,545)
($10,844,996)
($0.33)
($0.33)
$4,439,220
--
--
($1,031,117)
($0.03)
($0.03)
($1,221,106)
($2,252,223)
($0.07)
($0.07)
$13,469,926
--
--
Quarterly Information
(in US Dollar)
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
Quarterly Information
(in US Dollars)
Fiscal Year ended December 31, 2015
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
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)
$310,979
$0.01
$0.01
($360,705)
($0.01)
$73,452
$0.01
$0.01
($383,828)
($0.01)
($0.04)
$13,346,846
($0.01)
$13,593,216
($0.01)
$13,504,247
($0.01)
$13,469,926
Quarter 1
Quarter 2
Quarter 3
Quarter 4
($212,347)
($0.01)
($0.01)
($695,675)
($0.02)
($6,767,478)
($0.21)
($0.21)
($6,545,694)
($0.21)
($0.02)
$13,121,763
--
($0.21)
$7,289,616
--
($385,287)
($0.00)
($0.00)
($855,108)
($0.02)
($0.02)
$6,599,835
--
($2,357,299)
($0.30)
($0.30)
($2,748,519)
($0.33)
($0.33)
$4,439,220
--
Investing Activities
Cash flow applied in investing activities decreased to ($1,039,742) for the period ended December 31, 2015 (2014:
($1,612,480)).
Total expenditures of $1,200,405 on exploration properties for the period ended December 31, 2015 were attributable
to the Newdico, Gcwihaba, Bosoto and Idada projects in northwest Botswana. Previously included in this amount was
the proportionate contributory share, ranging from 2.32 to 2.23% to the Trans Hex Group for the Newdico project.
Trans Hex Group now has zero interest for funding the expenses of Newdico. There no longer are expenses and
funding for the exploration of the Newdico project. An impairment charge was recognized for the project of
$6,654,616 in 2015. Gcwihaba had an impairment charge for its diamond operations of $2,220,363 in 2015.
19 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
May 29, 2014
July 29, 2014
December 24, 2014
August 17, 2015
306,183
634,116
560,922
1,116,075
C$1.28
C$1.28
C$1.10
C$1.10
$ 355,507
$751,621
$529,446
$934,857
Warrant Exercise Date
No. of Shares
Price per Share
Proceeds USD
None
Options Exercised Date
No. of Shares
Price per Share
Proceeds USD
March 4, 2014
March 13, 2014
March 21, 2014
March 25, 2014
April 24, 2014
April 2, 2015
50,000
C$0.70
75,000
40,000
72,110
110,000
37,500
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
C$0.75
$31,649
$51,725
$35,564
$49,985
$69,857
$21,575
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. In the 2nd quarter of 2015, security options
were exercises for proceeds of $21,575. A private placement took place on August 10, 2015, from which the Company
received total proceeds of $934,857 from the sale of common shares and warrant units.
Tsodilo expects to raise the amounts required to fund the Gcwihaba project, and its share of the Bosoto and Idada
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 ($10,844,996) for the year ended
December 31, 2015 [($0.33) per common share] compared to a comprehensive net loss of ($2,252,223) for the year
ended December 31, 2014 [($0.07) per common share]. The change in the loss in 2015 was due primarily to the
impairment of exploration and evaluation assets.
20 Cumulative exploration expenditures including amortization of property, plant and equipment used in exploration
activities on all projects amounted to $4,116,040 as at December 31, 2015 compared to $12,889,827 as at December
31, 2014. Cumulative exploration expenditures incurred on the Newdico project as at December 31, 2015 was $0
compared to $6,520,429 as at December 31, 2014. A net negative exchange translation difference accounted for a
($191,750) reduction. Cumulative exploration expenditures incurred on Gcwihaba’s projects as at December 31, 2015
were $3,722,196 compared to $6,364,487 as at December 31, 2014. A net exchange translation difference accounted
for a ($740,733) reduction. Cumulative exploration expenditures incurred on Bosoto’s projects as at December 31,
2015 were $390,773 compared to $4,911 as at December 31, 2014. A net exchange translation difference accounted
for a ($166,303) reduction. Cumulative exploration expenditures incurred on Idada’s projects as at December 31, 2015
$3,071 were ($nil: December 31, 2014). A net exchange translation difference accounted for a ($427) reduction. The
principal components of the Newdico, Gcwihaba, Bosoto and Idada 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
in the Exploration and Evaluation Additions section above with specific details.
PERSONNEL
At December 31, 2015, the Company and its subsidiaries employed twenty-two (22) compared to twenty-six (26) at
December 31, 2014, including senior officers, administrative and operations personnel including those on a short-term
service basis.
YEAR ENDED DECEMBER 31, 2015
The year ended December 31, 2015 was a normal operating year. Operating expenses were at normal levels for the
year. Impairment charges were significant in 2015. See discussion under operating activities above.
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 $9,722,451 and comprehensive loss of $10,844,996 during the year ended
December 31, 2015 and as of that date the Company had an accumulated deficit of $44,321,339 and negative net
working capital of $746,527. Management has carried out an assessment of the going concern assumption and has
21 concluded that the cash position of the Company is insufficient to finance exploration and resource evaluation at the
projected levels, and may be insufficient to finance continued operations for the 12 month period subsequent to
December 31, 2015. 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. Since August 10, 2015 and to date, the Company has accepted investor deposits in the amount of
$800,050 for subscription to a Private Placement for security units. Of this amount, $210,000 was deposited in the first
quarter of 2016.
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, 2015, the Company received proceeds of $21,575 from the exercise of Stock
Options. The Company received total proceeds of $928,907 from the issuance of common shares and warrant units as
a result of the private placement which closed on August 10, 2015. Since August 10, 2015 and to date, the Company
has accepted investor deposits in the amount of $800,050 for subscription to a Private Placement for security units. Of
this amount, $210,000 was deposited in the first quarter of 2016.
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
operation and comprehensive income (loss), and consolidated statement of financial position classifications that
would be necessary were the going concern assumption not 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
22
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.
23 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
There are no other standards which the Company would have been required to adopt in the year.
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial
statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.
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.
Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests
The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint
operation, in which the activity of the joint operation constitutes a business, must apply the relevant IFRS 3 principles
for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation
is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is
retained. In addition, a scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when
24 the parties sharing joint control, including the reporting entity, are under common control of the same ultimate
controlling party.
The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any
additional interests in the same joint operation and are prospectively effective for annual periods beginning on or
after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact on the
Company.
Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture
The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary
that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from
the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate
or joint venture, is recognized in full. Any gain or loss resulting from the sale or contribution of assets that do not
constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or
joint venture. These amendments must be applied prospectively and are effective for annual periods beginning on or
after 1 January 2016, with early adoption permitted.
These amendments are not expected to have any impact on the Company. These amendments must be applied
retrospectively and are effective for annual periods beginning on or after 1 January 2016, with early adoption
permitted. These amendments are not expected to have any impact on the Company.
RELATED PARTY TRANSACTIONS
Remuneration of Key Management Personnel of the Company
Short term employee remuneration and benefits
Stock based compensation
Post employment benefits*
2015
2014
$430,002
$430,002
$142,029
$185,551
$142,938
$106,503
Total compensation attributed to key management personnel
$714,969
$722,056
*Post employment benefits include $57,471 of accrued leave benefits through 2015.
An individual related to the CEO provided administrative and management services in 2015 to the Company in the
amount of $33,000 ($33,000: 2014). An elective five (5) year severance payment in the amount of $7,586 (NIL: 2013)
was paid to this individual in 2014. In 2015, the Company’s President elected to receive his 5 year severance in the
amount of $17,590 (NIL: 2014).
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.
25 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
Gary A. Bojes
Chief Financial Officer
26 This page intentionally left blank
27
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
in accordance with International Financial Reporting
and are independent of management and free from
Standards and include amounts that are based on
any interest or business relationship which could, or
informed judgments and best estimates. The financial
could be perceived to materially interfere with their
information presented
in this annual report
is
ability to 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
statements before they are presented to the Board of
also responsible for the maintenance of financial and
Directors
for
approval
and
considers
the
operating systems, which include effective controls to
independence 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, 2015 and 2014 have been
have the responsibility of auditing the consolidated
audited by Ernst & Young LLP, the external auditors, in
financial statements and expressing an opinion on
accordance with Canadian generally accepted
them.
auditing 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 29, 2016
Gary A. Bojes
Chief Financial Officer
February 29, 2016
28 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, 2015 and 2014, 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 audits 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, 2015 and 2014, and the results of 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 modifying our opinion, we draw attention to note 1 in the consolidated financial statements which
indicates that the Company incurred a loss of $9,722,451 and a comprehensive loss of $10,844,996 during the
year ended December 31, 2015, and as of that date, the Company had an accumulated deficit of $44,321,339
and a negative working capital of $746,527. 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 29, 2016
Chartered Professional Accountants
29 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
Accounts payable and accrued liabilities
Subscriptions (note 5a)
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
Nature of operations (note 1)
Commitments and contingencies (note 11)
Subsequent events (note 13)
December 31
2015
December 31
2014
$ 73,910
$ 232,585
42,820
116,730
4,116,040
206,450
42,641
275,226
12,889,827
304,873
$ 4,439,220
$ 13,469,926
$ 273,207
590,050
--
863,257
42,893,919
10,670,028
(5,666,645)
(44,321,339)
3,575,963
--
3,575,963
$ 4,439,220
$ 234,501
--
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
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
30
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
Impairment (note 3)
Gain on disposal of assets
Realized gain on warrants (note 5b)
Foreign exchange gain
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
2015
2014
$
444,030
$ 415,071
26,073
17,873
65,052
34,937
138,023
1,300
337,004
1,064,292
--
(8,874,979)
25,492
159,023
32,305
(8,658,159)
(9,722,451)
(1,122,545)
(1,122,545)
($ 10,844,996)
($ 9,563,609)
(158,842)
($ 9,722,451)
($ 10,686,154)
(158,842)
( $10,844,996)
($0.30)
($0.30)
($0.33)
($0.33)
24,184
24,037
76,897
28,336
138,363
2,875
349,420
1,059,183
26
--
--
25,240
2,800
28,066
(1,031,117)
(1,221,106)
(1,221,106)
($ 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)
See accompanying notes to the consolidated financial statements
31 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
Total equity
attributable
to owners of
the parent
Non-
Controlling
Interest
Total
Equity
Shares
Issued
Amount
Stock-based
compensation
& Other
Warrants
32,389,209 $42,019,009
835,296
39,614
1,116,075
37,500
$10,095,487
--
(18,039)
$104,894
93,611
--
($4,544,100)
--
--
($34,757,730) $12,917,560
928,907
21,575
--
--
$158,842 $13,076,402
928,907
21,575
--
--
--
--
--
--
--
--
(1,764)
395,839
--
--
--
--
--
--
(1,764)
--
(1,764)
--
(1,122,545)
--
(9,563,609)
395,839
(10,686,154)
--
(158,842)
395,839
(10,844,996)
33,542,784 $42,893,919
$10,471,523
$198,505
($5,666,645)
($44,321,339)
$3,575,963
$ -
$3,575,963
Share Capital
Contributed Surplus
Foreign
Translation
Reserve
Deficit
Total equity
attributable
to owners of
the parent
Non-
Controlling
Interest
Total
Equity
Shares
Issued
Amount
Stock-based
compensation
& Other
Warrants
30,541,878 $40,094,987
1,531,680
392,342
1,501,221
346,110
$9,765,939
--
(153,562)
$ --
104,894
--
($3,340,515)
--
--
($33,724,583) $12,795,828
1,636,574
238,780
--
--
$174,333 $12,970,161
1,636,574
238,780
--
--
--
--
--
--
483,110
--
--
--
--
(1,203,585)
--
(1,033,147)
483,110
(2,236,732)
--
(15,491)
483,110
(2,252,223)
32,389,209 $42,019,009
$10,095,487
$104,894
($4,544,100)
($34,757,730) $12,917,560
$158,842 $13,076,402
Balance January 1,
2015
Units Issued
Exercised Options
Additional Paid in
Capital – Subsidiary
Purchase, Other
Stock Based
Compensation
Comprehensive loss
Balance December 31,
2015
Balance January 1,
2014
Units Issued
Exercised Options
Stock Based
Compensation
Comprehensive loss
Balance December 31,
2014
See accompanying notes to the consolidated financial statements.
32 Tsodilo Resources Limited
Consolidated Statements of Cash Flows
(In United States dollars)
Cash provided by (used in):
Operating Activities
Net Loss for the year
Adjustments for non-cash items:
Impairment
Realized gain on warrants
Amortization
Amortization on disposal of property, plant and equipment
Foreign exchange loss
Stock-based compensation
Years Ended December 31
2015
2014
($ 9,722,451)
($ 1,031,117)
8,874,979
(159,023)
1,300
(25,492)
(32,305)
337,004
(725,988)
--
(25,240)
2,875
--
(2,800)
349,420
(706,862)
Net change in non-cash working capital balances (note 12)
38,529
(687,459)
66,100
(640,762)
Investing Activities
Additions to exploration properties
Additions to property, plant and equipment
Proceeds from sale of property, plant and equipment
Financing Activities
Shares and warrants issued for cash
Share issuance cost
Subscriptions received
(967,709)
(116,357)
44,324
(1,608,773)
(3,707)
--
(1,039,742)
(1,612,480)
950,482
(5,930)
590,050
1,890,250
(14,894)
--
1,534,602
1,875,356
Impact of exchange on cash
33,924
(151)
Change in cash - for the year
Cash - beginning of year
Cash - end of year
(158,675)
232,585
$ 73,910
(378,037)
610,622
$ 232,585
See accompanying notes to the consolidated financial statements
33 Tsodilo Resources Limited
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
(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 $9,722,451 and comprehensive loss of
$10,844,996 during the year ended December 31, 2015, and as of that date, the Company had an
accumulated deficit of $44,321,339 and negative net working capital of $746,527. 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, 2015. 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.
34 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 29, 2016.
(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:
ENTITY
2015
2014
Tsodilo Resources Bermuda Limited (“TRBL”) [Bermuda]
100%
100%
Bosoto (Proprietary) Limited (“Bosoto”) [Botswana]
75%
75%
Gcwihaba Resources (Proprietary) Limited (“Gcwihaba”) [Botswana]
100%
100%
Newdico (Proprietary) Limited (“Newdico”) [Botswana]
100%
98%
Idada Trading 361 (Pty) Ltd. (“Idada”) [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
35 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.
36 Exploration and Evaluation Assets (Farm-Out)
The Company entered into a farm-out arrangement in 2013, 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
(”TRBL”)
U.S. Dollar
Gcwihaba Resources (Pty) Limited
(“Gcwihaba”)
Botswana Pula
Newdico (Pty) Limited
(“Newdico”)
Botswana Pula
Bosoto (Pty) Limited
(“Bosoto”’)
Botswana Pula
Idada Trading 361 (Pty) Ltd.
("‘Idada”)
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.
37
(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 Idada 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 TRBL, Gcwihaba, Newdico, Bosoto, and Idada 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.
38 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 if the employee so elects 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, 2015 and 2014, 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 and subscriptions 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
39
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. See note 3 for impairment adjustments in 2015.
(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
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the
Company’s financial statements are disclosed below. The Company intends to adopt these standards, if
applicable, when they become effective.
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
40 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.
Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests
The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a
joint operation, in which the activity of the joint operation constitutes a business, must apply the relevant
IFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held
interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint
operation while joint control is retained. In addition, a scope exclusion has been added to IFRS 11 to specify
that the amendments do not apply when the parties sharing joint control, including the reporting entity, are
under common control of the same ultimate controlling party.
The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition
of any additional interests in the same joint operation and are prospectively effective for annual periods
beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected
to have any impact on the Company.
Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture
The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a
subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain
or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3,
between an investor and its associate or joint venture, is recognized in full. Any gain or loss resulting from
the sale or contribution of assets that do not constitute a business, however, is recognized only to the extent
of unrelated investors’ interests in the associate or joint venture. These amendments must be applied
prospectively and are effective for annual periods beginning on or after 1 January 2016, with early adoption
permitted.
These amendments are not expected to have any impact on the Company. These amendments must be
applied retrospectively and are effective for annual periods beginning on or after 1 January 2016, with early
adoption permitted. These amendments are not expected to have any impact on the Company.
41 3. EXPLORATION AND EVALUATION ASSETS
Exploration and evaluation assets are summarized as follows:
Newdico
Botswana
Bosoto
Botswana
Idada
So. Africa
Gcwihaba
Botswana
Total
Precious
Stones
Precious
Stones
Precious
Stones
Precious
Stones
Metals
Subtotal
Radio-
Active
Minerals
Balance at
December
31, 2013
Additions
Net Exchange
Differences
Balance at
December
31, 2014
$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
Additions
325,937
552,165
3,498
137,145
114,944
318,805
1,200,405
Net Exchange
Differences
(191,750)
(166,303)
(427)
(340,942)
(115,668)
(740,733)
(1,099,213)
Impairment
(6,654,616)
--
(284,123)
(2,220,363)
--
--
--
(2,220,363)
(8,874,979)
66,716
Balance at
December
31, 2015
Drilling
Expenditures
Amortization Drill
Rigs, Vehicles &
Trucks
GIS & Geophysics
Lab Analyses &
Assays
License Fees
Office,
Maintenance, &
Consumables
Salaries, Wages &
Services
Balance at
December 31,
2015
$ --
$390,773
$3,071
$ --
$2,779,268
$942,928
$3,722,196
$4,116,040
Newdico
Botswana
Bosoto
Botswana
Idada
So. Africa
Gcwihaba
Botswana
Total
Precious
Stones
Precious
Stones
Precious
Stones
Precious
Stones
Metals
Subtotal
TOTAL
Radio-
Active
Minerals
$ 49,362
$ 72,611
$ --
$ 7,024
$ 27,156
$ 27,183
$ 61,363
$ 183,336
91,005
--
2,088
846
41,503
17,079
3,039
--
--
--
--
--
196
2,430
325
250
20,579
156
4,778
353
20,578
--
--
1,297
41,353
2,586
5,103
1,900
173,861
19,665
10,230
2,746
20,258
40,105
3,498
13,240
13,219
13,095
39,554
103,415
162,378
377,828
--
43,251
70,904
52,791
166,946
707,152
$325,937
$552,165
$3,498
$66,716
$137,145
$114,944
$318,805
$1,200,405
42 Exploration and evaluation additions for the year ended December 31, 2015 are summarized as follows:
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 North-West District of Botswana. PL64/2005 was 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.
In the first and second quarters of 2015, additional drilling was performed on known kimberlites to collect
additional samples for petrography and micro-diamond processing.
During the second quarter of 2015, the Company performed an extensive and exhaustive review of its’ Nxau
Nxau kimberlite project and concluded that the project no longer met the Company’s investment criteria.
The decision to relinquish the license effective June 30, 2015 was filed with the Ministry of Minerals, Energy
and Water Resources (“MMEWR”). The Company’s decision to cease exploration resulted in a charge of
$6,654,616, which is included in impairment expenses and reflects a write-down of the Company’s carrying
value of the Newdico Nxau Nxau project.
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, 2015.
Prior to year-end, Tsodilo Resources Bermuda Limited (“TRBL”) purchased the two Newdico shares and any
associated claims held by Trans Hex Diamonds for $1,000 per share. As a result of the purchase transaction,
TRBL owns 100% of Newdico.
43 Gcwihaba Resources (Proprietary) Ltd (“Gcwihaba”) – Botswana
In 2015, Gcwihaba, a wholly owned subsidiary of the Company, held one (1) prospecting license for precious
stones in the Kgalagadi District; twenty-two (22) metal (base, precious, platinum group, and rare earth)
prospecting licenses in the North-West district of which twenty (20) are currently in renewal; and, eight (8)
radioactive mineral licenses located in the North-West district.
Diamond License
The precious stone license held by Gcwihaba was relinquished during the fourth quarter of 2015. Work
performed concluded that the project no longer met the Company’s investment criteria. The decision to
relinquish the license was filed with the MMEWR in the fourth quarter 2015. The Company’s decision to cease
exploration resulted is a charge to $2,220,363, which is included in impairment expenses and reflects a write-
down of the Company’s carrying value of Gcwihaba’s diamond project.
Metal Licenses
Gcwihaba holds twenty-two (22) metal (base, precious, platinum group, and rare earth) prospecting licenses
inclusive of twenty (20) licenses currently in renewal in the North-West District of Botswana. The current
licenses, those not presently in renewal, cover 1,244.80 square kilometers and collectively have a proposed
minimum spending commitment of BWP 512,450 ($46,420) if held to their full term. 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.
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 could 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 $6 million by
November 20, 2015 (the "Tranche 1 Funding Commitment");
funding an additional S$9 million in exploration expenditures within the Project Area by November
20, 2017; and
44
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 was a firm commitment by First Quantum and was to 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. As of December 31, 2015, First Quantum
has reported that the total expenditures spent on Prospecting Licenses covered by the MOU
amounted to $14,732,922.
Subsequent to year end, specifically January 6, 2016, First Quantum notified the Company that they did not
intend to continue with the Tranche 2 Expenditure terminating the Earn-in-Option Agreement. Tsodilo has
initiated discussions with other companies to select a new joint venture partner for the development of its
metals projects in Tsodilo's license holdings.
Radioactive Minerals
As at December 31, 2015, Gcwihaba held 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 September 30, 2013 and first renewal
applications were duly filed. PL’s 045/2011 - 050/2011 had an initial grant expiration date of December 31,
2013 and first renewal applications were also filed. All eight (8) licenses were renewed for a two year period
effective April 1, 2015 and each have a proposed minimum expenditure of 70,000 BWP ($6,341 converted as
at 12/31/2015) per annum.
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 $21.5M (BWP 237,885,000) in expenditures, goods
and services 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.
Idada Trading 361 (Pty) Limited (“Idada”) – South Africa
The Company holds a 70% interest in its South African subsidiary, Idada. Idada 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
45 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. During the second quarter
2015, notice was received from the Department of Mineral Resources, South Africa which granted the
Company the prospecting rights for gold and silver in the applied for area subject to certain subsequent
conditions being met. The Company fulfilled those requirements in the third quarter and await the Execution
of the Right documents.
4. PROPERTY, PLANT, AND EQUIPMENT
Property, Plant, and Equipment
Cost
As at December 31, 2013
Additions
Net Exchange Difference
As at December 31, 2014
As at December 31, 2014
Additions
Disposals
Net Exchange Difference
As at December 31, 2015
Accumulated Depreciation
As at December 31, 2013
Depreciation
Net Exchange Difference
As at December 31, 2014
As at December 31, 2014
Depreciation
Disposals
Net Exchange Difference
As at December 31, 2015
Net book value
Vehicles
$1,523,375
--
(126,598)
$ 1,396,777
Vehicles
$1,396,777
--
(40,209)
(203,288)
$ 1,153,280
Vehicles
$1,011,566
183,324
(84,065)
$ 1,110,825
Vehicles
$ 1,110,825
142,626
(23,672)
(161,670)
$ 1,068,109
Furniture and
Equipment
$233,249
3,707
(14,477)
$ 222,479
Furniture and
Equipment
$ 222,479
116,357
--
(25,594)
$ 313,242
Furniture and
Equipment
$200,670
16,032
(13,144)
$ 203,558
Furniture and
Equipment
$ 203,559
12,154
--
(23,750)
$ 191,963
Total
$1,756,624
3,707
(141,075)
$ 1,619,256
Total
$ 1,619,256
116,357
(40,209)
(228,882)
$ 1,466,522
Total
$1,212,236
199,356
(97,209)
$ 1,314,383
Total
$ 1,314,384
154,780
(23,672)
(185,420)
$ 1,260,072
As at December 31, 2014
As at December 31, 2015
$ 285,952
$ 85,171
$ 18,921
$ 121,279
$ 304,873
$ 206,450
For the year ended December 31, 2015, an amount of $234,289 (2014: $196,481) of amortization has been
capitalized under exploration properties.
46 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: 33,542,784 Common Shares as at December 31, 2015 (December 31, 2014:
32,389,209)
1) During the year-ended December 31, 2015:
i.
On April 2, 2015, 37,500 options were exercised at a price of C$0.75 for proceeds to the
Company of $21,575 (C$28,215). The fair value associated with the exercised options
that were reclassified from contributed surplus to share capital was $18,039.
ii.
On August 10, 2015, 1,116,075 Units were issued at a price of C$1.10 for proceeds to the
Company of $934,837 (C$1,227,682). 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 August 10, 2017 at $1.10. $5,930 (C$7,784) of
issuance costs were netted against the proceeds.
iii.
As at December 31, 2015 the Company raised $590,050 and subsequent thereto
$210,000 for private placements to take place in 2016. See footnote 13 – Subsequent
events.
2) 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 $1.40. $6,145 (C$6,389) of issuance
costs were netted against the proceeds.
47 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 $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 $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 $0.79 (C$0.89) or total $444,552 and allocated to Additional Paid in Capital for
Warrants is $0.19 (C$0.21) or total $104,894.
(b) Warrants
As at December 31, 2015, the following warrants were outstanding:
Number of Warrants - Units
Expiry
Exercise Price December 31,
Issued
Exercised
Expired
2014
December 31,
2015
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
306,183
July 29, 2016
USD$1.40
634,116
USD$1.21
560,922
December 30,
2016
August 10,
2017
--
--
--
--
--
--
--
--
--
--
--
--
2,702,702
1,818,181
2,272,727
--
--
--
--
--
--
306,183
634,116
560,922
1,116,075
2,617,296
USD$1.10
--
8,294,831
1,116,075
1,116,075
--
6,793,610
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 $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.
48
On December 30, 2014, the Company issued 560,922 warrants with an exercise price of $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 $0.79 (C$0.89) or total $444,552 and allocated to Additional Paid
in Capital for Warrants is $0.19 (C$0.21) or total $104,894.
On August 10, 2015, the Company issued 1,116,075 warrants with an exercise price of $1.10, expiring on
August 10, 2017. 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 the value of the Common Shares at the issuance date. The
amount allocated to Common Shares is $0.75 (C$0.99) or total $835,296 and allocated to Additional Paid in
Capital for warrants is $0.08 (C$0.11) or total $93,611.
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,
2015 the Company recorded a mark to market loss of $159,023 (2014 –$25,240) on the revaluation of
warrants. As at December 31, 2015, the outstanding liability portion of the warrants, have a fair value of nil
(2014: $159,023), as they expired during the year.
For the year ended December 31, 2015 the Company no longer has any derivative liability, as all outstanding
warrants are issued in the functional currency U.S. Dollars.
Warrant Liability
Number of Units
in $CAD
2,702,702
--
--
--
--
2,702,702
--
--
(2,702,702)
--
Value of
Warrants
$ 184,264
--
--
--
(25,241)
$ 159,023
--
--
(159,023)
--
$
Balance December 31, 2013
Additions
Exercise
Expiry
Valuation Change
Balance December 31, 2014
Additions
Exercise
Expiry
Balance December 31, 2015
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.
49
The following Table summarizes the Company’s stock option activity for the ended December 31, 2014 and
the year ended December 31, 2015:
Outstanding as at December 31, 2013
Granted
Exercised
Cancelled
Expired
Outstanding as at December 31, 2014
Granted
Exercised
Expired
Outstanding as at December 31, 2015
Weighted
average
exercise price
(C$)
Number of
Options
3,175,000
740,000
(346,110)
(210,000)
(230,000)
3,128,890
760,000
(37,500)
(630,000)
3,221,390
C$1.19
C$1.07
C$0.77
C$1.10
C$0.65
C$1.25
C$0.89
C$0.75
C$ 1.98
C$1.03
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).
2015
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.
On March 27, 2015, the Company issued 400,000 options at C$0.83 under its SOP to persons who are
directors and an employee of the Company.
On September 1, 2015, the Company issued 100,000 options at C$0.70 under its SOP to a person who is a
director of the Company.
50 On May 4, 2015, 500,000 options at C$2.23 expired.
The following table summarizes the stock based compensation expense and capitalized stock based
compensation for the years ended December 31, 2015 and 2014.
Stock-based compensation expense
Capitalized Stock-based compensation expense
2015
2014
$ 337,004
$ 349,420
58,385
133,688
$ 395,839
$ 483,108
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, 2015 and 2014:
Expected lives
2015
2014
3.9 years
3.2 to 4.7 years
Expected volatilities (based on Company’s historical prices)
99.3% - 103.0%
95.5% - 108.0%
Expected dividend yield
Risk free rates
Weighted average fair value of option
0%
0%
1.15% - 1.31%
0.87– 1.60%
$0.52
$0.78
The following table summarizes stock options outstanding as at December 31, 2015:
Options Outstanding
Options Exercisable
Exercise
Number of
Weighted
Weighted
Number of
Weighted
Weighted
Price (C$)
Outstanding
Average
Average
Exercisable
Average
Average
Options
Exercise
Remaining
Options
Exercise Price
Remaining
Price (C$)
Contractual
(C$)
Contractual
Life (Years)
Life (Years)
C$1.25
C$1.03
C$0.90
C$1.00
C$1.20
C$1.04
C$0.75
C$1.25
C$1.05
C$0.83
C$0.70
285,000
300,000
210,000
328,890
235,000
400,000
222,500
480,000
260,000
400,000
100,000
C$1.25
C$1.03
C$0.90
C$1.00
C$1.20
C$1.04
C$0.75
C$1.25
C$1.05
C$0.83
C$0.70
3,221,390
C$1.03
0.01
0.30
1.01
1.25
2.01
2.22
3.01
3.22
4.01
4.24
4.67
2.33
285,000
300,000
210,000
328,890
235,000
400,000
222,500
480,000
130,000
200,000
25,000
2,816,390
C$1.25
C$1.03
C$0.90
C$1.00
C$1.20
C$1.04
C$0.75
C$1.25
C$1.05
C$0.83
C$0.70
C$1.05
0.01
0.30
1.01
1.25
2.01
2.22
3.01
3.22
4.01
4.24
4.67
2.05
51 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 2015 of approximately 26.5% (2014: 26.5%) to 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, 2015
December 31, 2014
(9,722,451)
26.50%
(2,576,450)
405,485
67,186
1,795,228
72,868
235,681
$ --
(1,031,117)
26.50%
(273,246)
5,193
92,596
17,644
153,697
4,116
$ --
As of December 31,2015 the following Deferred tax assets and liabilities have been recognized:
Property, Plant and Equipment
Exploration & Evaluation Assets
Deferred tax liabilities
Tax losses carried forward
December 31, 2015
$ --
(995,000)
(995,000)
995,000
December 31, 2014
($ 21,000)
(2,564,000)
($ 2,585,000)
$ 2,585,000
Net future income tax asset recorded
$ --
$ --
As at December 31, 2015 the Company has unrecognized deductible temporary differences aggregating to
$12,359,000 (2014: $5,873,000), 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 - Canada
Intangible Assets
Other
December 31, 2015
December 31, 2014
7,540,000
4,138,000
137,000
544,000
12,359,000
$ 1,190,000
3,843,000
137,000
703,000
$ 5,873,000
The Canadian tax losses carried forward expire from 2026 thru to 2035. The Botswana losses can be carried
forward indefinitely.
Total assessable losses relating to the activity in
Botswana
12,065,873
$12,937,504
December 31, 2015
December 31, 2014
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
2015
2014
($9,722,451)
($ 1,031,117)
--
--
Diluted net earnings (loss) for the year
($9,722,451)
($ 1,031,117)
52
The diluted loss per share is the same as the basic loss per share for the year ended December 31, 2015
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, 2015,
was 5,838,686, of which 5,553,294 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*
2015
2014
$430,002
$430,002
142,029
142,938
185,551
106,503
Total compensation attributed to key management personnel
$714,969
$722,056
*Post employment benefits include $57,471of accrued leave benefits through 2015.
An individual related to the CEO provided administrative and management services in 2015 to the Company
in the amount of $33,000 ($33,000: 2014). An elective five (5) year severance payment in the amount of
$7,586 (NIL: 2013) was paid to this individual in 2014. In 2015, the Company’s President elected to receive his
5 year severance in the amount of $17,590 (NIL: 2014).
There are no other related party transactions.
9. SEGMENTED INFORMATION
The Company is operating in one industry. As at December 31, 2015 the Company’s Property, Plant, and
Equipment in the United States was $726 (2014: $1,256) and in Botswana was $205,724 (2014: $303,617). No
revenues were realized for Exploration and Evaluation Properties that are detailed in note 3 above. Segment
long term Exploration and Evaluations properties in Botswana were $4,112,969 (2014: $12,889,827).
10. FINANCIAL INSTRUMENTS
The Company’s financial instruments include cash, accounts receivable, accounts payable, accrued liabilities,
subscriptions 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
Subscriptions
Warrants
Other financial liabilities
Fair value through Profit or Loss
Level 3
n/a
n/a
n/a
n/a
53 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 2015 and
2014 the Company raised cash capital as shown in note 5(a) in the amount of $950,482 and $1,875,356,
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.
54 (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, 2015, a ten percentage change in the exchange rate would result in a $51,620 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, 2015, a ten percentage
change in the exchange rate would result in a $19,315 impact the Company’s net income (loss).
11. COMMITMENTS AND CONTINGENCIES
Generally, operating leases are prepaid in one year increments.
Currently, the aggregate minimum lease payments inclusive of VAT are as follows:
Year
2016
2017
Term
2/01/2016 – 1/31/2017
2/01/2016 – 1/31/2018
BWP
102,720
102,720
Total
205,440
* converted at lease effective date
USD *
$9,004
$9,004
$18,008
The lease commitment is for office space in Gaborone, Botswana. The lease period is for two years; year one
is a firm commitment and year two has a 3 month opt out rental penalty clause.
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.
55 12. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31
2015
December 31
2014
Net change in non-cash working capital balances
(Increase) decrease in accounts receivable and prepaid expenses
($177)
$42,405
Increase in accounts payable and accrued liabilities
38,706
23,696
Total
$38,529
$66,101
13. SUBSEQUENT EVENTS
On January 3, 2016, 310,000 options at C$1.25 expired.
On January 4, 2016, the Company issued 260,000 options at C$0.72 under its SOP to persons who are officers
and employees of the Company.
Since August 25, 2015 and to date, the Company has accepted investors’ deposits in the amount of $800,050
for subscriptions to a Private Placement for security units. $210,000 of this amount was deposited
subsequent to December 31, 2015.
56 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
Mark Scowcroft
Cape Town, South Africa
Appointed as director in 2015
OFFICERS
James M. Bruchs, B.Sc., J.D.
Chairman and Chief Executive Officer
Appointed in 2002
Michiel C. J. de Wit, Ph.D.
Irene, South Africa
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