Western Copper and Gold Corporation
(An exploration stage company)
Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
Management’s Responsibility for Financial Reporting
The accompanying consolidated financial statements of Western Copper and Gold Corporation (the
“Company”) have been prepared by management in accordance with International Financial Reporting
Standards and contain estimates based on management’s judgment.
Management maintains an appropriate system of internal control to provide reasonable assurance that
assets are safeguarded, transactions are properly authorized and recorded, and proper records are
maintained. Further information on the Company’s internal control over financial reporting and its
disclosure controls is available in management’s report on internal control, which follows.
The Audit Committee of the Board of Directors has met with the Company’s independent auditors to
review the scope and results of the annual audit and to review the consolidated financial statements and
related financial reporting matters prior to submitting the consolidated financial statements to the Board
of Directors for approval.
The Company’s independent auditors, PricewaterhouseCoopers LLP, have audited the Company’s
consolidated financial statements on behalf of the shareholders and their report follows.
March 21, 2014
(signed) Julien François
(signed) Dale Corman
Julien François
Chief Financial Officer
Dale Corman
Chief Executive Officer
- 2 -
Management’s Report on Internal Control over Financial Reporting
The management of Western Copper and Gold Corporation (the “Company”) is responsible for
establishing and maintaining adequate internal control over financial reporting. The Securities and
Exchange Act of 1934, in Rule 13a-15(f) and 15d-15(f) thereunder, defines this as a process designed by,
or under the supervision of, the Company’s principal executive and principal financial officers and effected
by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles, and includes those policies and
procedures that:
• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions of the Company;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the Company are being made only in accordance with authorizations of
management and directors of Company; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions,
use or disposition of the Company’s assets that may have a material effect on the consolidated
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as at
December 31, 2013. In making this assessment, the Company’s management used the criteria
established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its
1992 Internal Control-Integrated Framework.
During the year ended December 31, 2013, and to the date of this report, there has been no change to
internal controls that would have a material effect on internal controls over financial reporting.
Based on our assessment, management has concluded that, as at December 31, 2013, the Company’s
internal control over financial reporting was not effective due to the existence of a material weakness. A
material weakness existed in the design of internal control over financial reporting caused by a lack of
adequate segregation of duties in the financial close process. The Chief Financial Officer is responsible
for preparing, authorizing, and reviewing information that is key to the preparation of financial reports.
He is also responsible for preparing and reviewing the resulting financial reports. This weakness has the
potential to result in material misstatements in the Company’s financial statements and should also be
considered a material weakness in its disclosure controls and procedures.
Management has concluded, and the Audit Committee has agreed, that taking into account the present
stage of Western Copper and Gold Corporation’s development, the Company does not have sufficient size
and scale to warrant the hiring of additional staff to correct the material weakness at this time.
March 21, 2014
(signed) Julien François
(signed) Dale Corman
Julien François
Chief Financial Officer
Dale Corman
Chief Executive Officer
- 3 -
March 21, 2014
To the Shareholders of Western Copper and Gold Corporation
We have audited the accompanying consolidated financial statements of Western Copper and Gold Corporation,
which comprise the consolidated balance sheets as at December 31, 2013 and December 31, 2012, the
consolidated statements of loss and comprehensive loss, cash flows and changes in shareholders’ equity for the
years then ended, and the related notes, which comprise a summary of significant accounting policies and other
explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board, 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.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s 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 auditor considers 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 Western Copper and Gold Corporation as at December 31, 2013 and December 31, 2012 and its
financial performance and its cash flows for the years then ended in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
(signed) PricewaterhouseCoopers LLP
Chartered Accountants
PricewaterhouseCoopers LLP
PricewaterhouseCoopers Place, 250 Howe Street, Suite 700, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806, www.pwc.com/ca
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
- 4 -
Western Copper and Gold Corporation
Consolidated Financial Statements
(Expressed in Canadian dollars)
CONSOLIDATED BALANCE SHEETS
ASSETS
Note
December 31, 2013
$
December 31, 2012
$
Cash and cash equivalents
Short-term investments
Other assets
CURRENT ASSETS
Property and equipment
Exploration and evaluation assets
ASSETS
LIABILITIES
Accounts payable and accrued liabilities
LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital
Contributed surplus
Deficit
4
5
6
6,044,475
17,162,992
707,699
23,915,166
33,517,542
-
383,038
33,900,580
-
27,349
27,034,538
17,706,346
50,949,704
51,634,275
1,488,060
1,623,669
1,488,060
1,623,669
104,620,174
32,293,888
(87,452,418)
104,603,488
31,494,020
(86,086,902)
SHAREHOLDERS’ EQUITY
49,461,644
50,010,606
LIABILITIES AND SHAREHOLDERS’ EQUITY
50,949,704
51,634,275
Commitments
9
Approved by the Board of Directors
(signed) Robert J. Gayton Director (signed) Robert Byford Director
The accompanying notes are an integral part of these financial statements
- 5 -
Western Copper and Gold Corporation
Consolidated Financial Statements
(Expressed in Canadian dollars)
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
For the year ended December 31,
CORPORATE EXPENSES
Filing and regulatory fees
Office and administration
Professional fees
Rent and utilities
Share-based payments
Shareholder communication and travel
Wages and benefits
2013
$
164,673
258,806
154,988
204,500
652,436
572,635
948,788
2012
$
190,801
211,776
278,653
106,155
1,979,337
372,492
981,085
LOSS BEFORE OTHER ITEMS
2,956,826
4,120,299
OTHER ITEMS
Exploration tax credit
Foreign exchange gain
Interest income
Plan of arrangement costs
-
(1,352,437)
(238,873)
-
(145,789)
(34,202)
(72,830)
45,798
LOSS AND COMPREHENSIVE LOSS
1,365,516
3,913,276
Basic and diluted loss per share
0.01
0.04
Weighted average number of common shares outstanding
93,721,753
93,398,131
The accompanying notes are an integral part of these financial statements
- 6 -
Western Copper and Gold Corporation
Consolidated Financial Statements
(Expressed in Canadian dollars)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31,
Cash flows provided by (used in)
Note
2013
$
2012
$
OPERATING ACTIVITIES
Loss and comprehensive loss
ITEMS NOT AFFECTING CASH
Share-based payments
(1,365,516)
(3,913,276)
652,436
1,979,337
Change in non-cash working capital items
(391,906)
573,148
OPERATING ACTIVITIES
FINANCING ACTIVITIES
Net proceeds from royalty sale
Issuance of common shares
Share issuance costs
Exercise of stock options
FINANCING ACTIVITIES
INVESTING ACTIVITIES
(1,104,986)
(1,360,791)
5
6
6
7
-
-
-
9,350
31,406,744
400,000
(13,676)
301,500
9,350
32,094,568
Redemption (purchase) of short-term investments
Mineral property expenditures
(17,000,000)
(9,377,431)
8,100,000
(6,679,371)
INVESTING ACTIVITIES
(26,377,431)
1,420,629
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
(27,473,067)
32,154,406
Cash and cash equivalents – Beginning
33,517,542
1,363,136
CASH AND CASH EQUIVALENTS - ENDING
6,044,475
33,517,542
The accompanying notes are an integral part of these financial statements
- 7 -
Western Copper and Gold Corporation
Consolidated Financial Statements
(Expressed in Canadian dollars)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Number of
Shares
Share
Capital
$
Contributed
Surplus
$
Deficit
$
Shareholders’
Equity
$
DECEMBER 31, 2011
93,002,503
103,747,315
29,348,559
(82,173,626)
50,922,248
Private placement
Share issuance costs
Exercise of stock options
Transfer of stock option value
Share-based payments
Loss and comprehensive loss
500,000
-
280,000
-
-
-
400,000
(13,676)
301,500
168,349
-
-
-
-
-
(168,349)
2,313,810
-
-
-
-
-
-
(3,913,276)
400,000
(13,676)
301,500
-
2,313,810
(3,913,276)
DECEMBER 31, 2012
93,782,503
104,603,488
31,494,020
(86,086,902)
50,010,606
Cancellation and return to
treasury (note 6)
Exercise of stock options
Transfer of stock option value
Share-based payments
Loss and comprehensive loss
(115,566)
17,000
-
-
-
-
9,350
7,336
-
-
-
-
-
-
(7,336)
807,204
-
-
-
-
(1,365,516)
9,350
-
807,204
(1,365,516)
DECEMBER 31, 2013
93,683,937
104,620,174
32,293,888
(87,452,418)
49,461,644
The accompanying notes are an integral part of these financial statements
- 8 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
1. NATURE OF OPERATIONS
Western Copper and Gold Corporation (“Western” or the “Company”) is an exploration stage company
that is directly engaged in exploration and development of the Casino mineral property located in Yukon,
Canada.
The Company is incorporated in British Columbia, Canada. Its head office is located at 1800 - 570
Granville Street, Vancouver, British Columbia.
The Company will have to raise additional funds to complete the development of its mineral property.
While it has been successful in doing so in the past, there can be no assurance that it will be able to do
so in the future.
2. BASIS OF PRESENTATION
a. Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) under the
historical cost convention.
These financial statements were approved for issue by the Company’s board of directors on March
21, 2014.
b. Accounting estimates
The preparation of financial statements in conformity with IFRS requires management to make
judgments, estimates, and assumptions that affect the application of policies and reported amounts
of assets and liabilities and disclosures of contingent assets and contingent liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting
period.
Actual results could differ from those estimates. Significant accounts that require estimates as the
basis for determining the stated amounts include share-based payments and income and mining
taxes. Actual results could differ from those estimates. Differences may be material.
The recoverability of the amounts shown for exploration and evaluation assets is dependent upon the
existence of economically recoverable reserves and the Company’s ability to secure and maintain title
and beneficial interest in the properties, to obtain the necessary financing to continue the exploration
and future development of the properties, or to realize the carrying amount through a sale or partial
disposal.
- 9 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
3. ACCOUNTING POLICIES
a. Summary of significant accounting policies
The Company’s principal accounting policies are outlined below:
(i)
Basis of consolidation
The Company consolidates an entity when it has power over that entity, is exposed, or has
rights, to variable returns from its involvement with that entity and has the ability to affect
those returns through its power over that entity. The financial statements of other entities (e.g.
subsidiaries) are included in the consolidated financial statements from the date that control
commences until the date that control ceases. All significant intercompany transactions and
balances have been eliminated.
The consolidated financial statements of the Company include its wholly-owned subsidiaries:
Casino Mining Corp., Ravenwolf Resource Group Ltd., and Minera Costa de Plata SA de CV.
(ii)
Presentation currency
The Company’s presentation currency is the Canadian dollar (“$”). The functional currency of
Western and its significant subsidiaries is the Canadian dollar.
(iii) Foreign currency translation
In preparing the financial statements of the individual entities, transactions in currencies other
than the entity’s functional currency (“foreign currencies”) are recorded at the rates of
exchange prevailing at the dates of the transactions. At each balance sheet date, monetary
assets and liabilities are translated using the period end foreign exchange rate. Non-monetary
assets and liabilities are translated using the historical rate on the date of the transaction. All
gains and losses on translation of these foreign currency transactions are included in the
statement of loss.
(iv) Share-based payments
The Company grants stock options to buy common shares of the Company to directors,
officers, employees and consultants. The fair value of stock options granted by the Company is
treated as compensation costs in accordance with IFRS 2 - Share-based Payments. The fair
value of such awards is calculated using the Black-Scholes option pricing model. These costs
are charged to the statement of loss or, if appropriate, are capitalized to exploration and
evaluation assets over the stock option vesting period with an offsetting entry to contributed
surplus. The Company’s allocation of share-based payments is consistent with its treatment of
other types of compensation for each recipient.
If the stock options are exercised, the value attributable to the stock options is transferred to
share capital.
- 10 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
(v)
Income taxes
Income tax expense consists of current and deferred tax expense. Income tax expense is
recognized in the statement of loss.
Current tax expense is the expected tax payable on the taxable income for the period, using
tax rates enacted or substantively enacted at year end, adjusted for amendments to tax
payable with regards to the previous year.
Deferred taxes are recorded using the liability method. Under the liability method, deferred tax
assets and liabilities are recognized for future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases (i.e. timing differences). Deferred tax assets and liabilities are measured
using the enacted or substantively enacted tax rates expected to apply when the asset is
realized or the liability settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period that the substantive enactment occurs.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits
will be available against which the asset can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when they relate to income taxes levied by
the same taxation authority on either the same taxable entity or different entities that intend to
settle their current tax assets and liabilities on a net basis or to realize the assets and settle the
liabilities simultaneously, in each future period in which significant amounts of deferred tax
liabilities or assets are expected to be settled or recovered.
(vi) Loss per share
Basic loss per share is computed by dividing the net loss available to common shareholders by
the weighted average number of shares outstanding during the reporting period. Diluted loss
per share is computed similar to basic loss per share except that the weighted average shares
outstanding are increased to include additional shares for the assumed exercise of all stock
options and warrants, if dilutive.
(vii) Long-lived assets
1. Exploration and evaluation assets
Direct costs related to the acquisition and exploration of mineral properties held or
controlled by the Company are capitalized on an individual property basis until the property
is put into production, sold, abandoned, or determined to be impaired. Administration
costs and general exploration costs are expensed as incurred. When a property is placed
into commercial production, deferred costs will be depleted using the units-of-production
method.
- 11 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
The Company classifies its mineral properties as exploration and evaluation assets until
technical feasibility and commercial viability of extracting a mineral resource are
demonstrable. At this point, the exploration and evaluation assets are transferred to
property and equipment.
Proceeds received from royalties or tax credits, or as part of government assistance
programs are recognized as a reduction in the carrying value of the related asset when the
money is more likely than not to be received. If the applicable property has been written-
off, the amount received is recorded as a credit to the statement of loss in the period in
which the payment is more likely than not to be received.
Although the Company has taken steps to verify title to mineral properties in which it has
an interest, these procedures do not guarantee the Company’s title. Such properties may
be subject to prior agreements or transfers, or title may be affected by undetected defects.
2. Property and equipment
Property and equipment are depreciated using the straight-line method based on their
estimated useful lives, which range from three to five years.
Where an item of plant and equipment comprises major components with different useful
lives, the components are accounted for as separate items of plant and equipment.
The depreciation method, useful life and residual values of property and equipment are
assessed annually.
3. Impairment
The Company’s assets are reviewed for indication of impairment at each balance sheet
date. If any such indication exists, an estimate of the recoverable amount is undertaken,
being the higher of an asset’s fair value less costs to sell (“FVLCTS”) and value in use
(“VIU”). If the asset’s carrying amount exceeds its recoverable amount then an impairment
loss is recognized in the statement of loss.
FVLCTS 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. Fair value of
mineral assets is generally determined as the present value of the estimated future cash
flows expected to arise from the continued use of the asset, including any expansion
prospects.
VIU is determined as the present value of the estimated future cash flows expected to arise
from the continued use of the asset in its present form and from its ultimate disposal.
Impairment is normally assessed at the level of cash-generating units, which are identified
as the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets.
- 12 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
4. Reversal of impairment
An impairment loss is reversed if there is an indication that there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only
to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of amortization, if no impairment loss had been
recognized.
(viii) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks and highly liquid
investments with an original maturity of three months or less.
(ix) Short-term investments
Short-term investments are investments which are transitional or current in nature, with an
original maturity date greater than three months, but no more than one year from the date of
acquisition.
(x)
Flow-through common shares
The issuance of flow-through common shares of the Company results in the tax deductibility of
the qualifying resource expenditures funded from the proceeds of the sale of such shares being
transferred to the purchasers of the shares. Under IFRS, on issuance of such shares, the
Company bifurcates the flow-through shares into: a flow-through share premium, equal to the
estimated premium investors pay for the flow-through feature, which is recognized as a
liability, and share capital. As the related exploration expenditures are incurred, the Company
derecognizes the liability and recognizes a related income tax recovery.
Proceeds received from the issuance of flow-through shares are restricted to be used only for
Canadian resource property exploration expenditures within a two-year period.
(xi) Financial instruments
1. Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments
that are not quoted in an active market are classified as loans and receivables.
Loans and receivables are initially recognized at the transaction value and subsequently
carried at amortized cost less impairment losses using the effective interest rate method.
Interest income is recognized by applying the effective interest rate.
The Company has classified cash and cash equivalents, short-term investments, and other
assets as “Loans and receivables”.
- 13 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
2. Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs, and
are subsequently measured at amortized cost using the effective interest rate method.
The Company has classified accounts payable and accrued liabilities as other financial
liabilities.
(xii) Provisions
Provisions are recorded when a present legal or constructive obligation exists as a result of
past events where it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation, and a reliable estimate of the amount of the obligation can
be made.
The amount recognized as a provision is the best estimate of the consideration required to
settle the present obligation at the balance sheet date, taking into account the risks and
uncertainties surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present value of those
cash flows.
b. Recent accounting pronouncements
The Company has adopted the following standards effective for January 1, 2013. The adoption of
these standards has not had a significant impact on the Company’s financial statements.
(i)
(ii)
(iii)
IFRS 10 Consolidated financial statements builds on existing principles by identifying the
concept of control as the determining factor in whether an entity should be included within the
consolidated financial statements of the parent company. The standard provides additional
guidance to assist in the determination of control where this is difficult to assess.
IFRS 12 Disclosure of interest in other entities includes the disclosure requirements for all
forms of interests in other entities, including joint arrangements, associates, structured entities
and other off balance sheet vehicles.
IFRS 13 Fair value measurement aims to improve consistency and reduce complexity by
providing a precise definition of fair value and a single source of fair value measurement and
disclosure requirements for use across IFRS. The requirements, which are largely aligned
between IFRS and US GAAP, do not extend to the use of fair value accounting but provide
guidance on how it should be applied where its use is already required or permitted by other
standards within IFRS.
- 14 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
A number of new standards, amendments, and interpretations are effective for annual periods
beginning on or after January 1, 2014 and have not been applied in preparing these consolidated
financial statements. The Company is in the process of determining the impact that these changes
will have on its financial statements.
(i)
IFRS 9 Financial instruments is the first part of a new standard on classification and
measurement of financial assets that will replace IAS 39 Financial Instruments: Recognition
and Measurement. IFRS 9 has two measurement categories: amortized cost and fair value. All
equity instruments are measured at fair value.
A debt instrument is at amortized cost only if the entity is holding it to collect contractual cash
flows and the cash flows represent principal and interest. Otherwise, it is measured at fair
value with changes in fair value recorded through profit or loss. Requirements for financial
liabilities were added to IFRS 9 in October 2010. Most of the requirements for financial
liabilities were carried forward unchanged from IAS 39. However, some changes were made to
the fair value option for financial liabilities to address the issue of a company’s own credit risk.
(ii)
IFRIC 21 Levies sets out the accounting for an obligation to pay a levy that is not income tax.
The interpretation addresses what the obligating event is that gives rise to pay a levy and
when should a liability be recognized.
4. SHORT-TERM INVESTMENTS
As at December 31,
Guaranteed Investment Certificates
Accrued interest
2013
$
17,000,000
162,992
17,162,992
2012
$
-
-
-
- 15 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
5. EXPLORATION AND EVALUATION ASSETS
Casino (100% - Yukon, Canada)
The Casino porphyry copper-gold-molybdenum deposit is located in Yukon, Canada.
DECEMBER 31, 2011
Claims maintenance
Engineering studies
Exploration & camp support
Permitting
Royalty proceeds, net
Salary & wages
Share-based payments
$
42,114,531
20,982
3,338,695
524,514
2,507,395
(31,406,744)
272,500
334,473
DECEMBER 31, 2012
17,706,346
Claims maintenance
Engineering
Exploration & camp support
Permitting
Salary & wages
Share-based payments
13,800
1,338,667
564,619
6,829,111
427,227
154,768
DECEMBER 31, 2013
27,034,538
On December 21, 2012, Western completed a royalty sale with 8248567 Canada Limited (the
“Purchaser”), an arms’ length party, whereby the Purchaser cancelled the 5% net profits interest royalty
on all claims comprising the Casino Project, other than the Casino B claims, and paid Western US$32
million in exchange for a 2.75% net smelter returns royalty (the “NSR Royalty”) on the future sale of any
metals and minerals derived from the Casino Project, other than the Casino B claims.
Should Western maintain title to any Casino B claims after the period covered by the existing option
agreement or reacquire the Casino B claims in any way, the 5% Net Profits Royalty in favour of 8248567
Canada Limited will be suspended and the NSR Royalty will apply to such claims.
Western has the option to repurchase 0.75% of the NSR Royalty (resulting in a 2.00% remaining NSR
Royalty) for US$59 million if the amount is paid on or before December 31, 2017.
The gross proceeds of US$32 million ($31,788,800) were recorded as a reduction in the carrying value of
the Casino Project. Associated transaction costs ($382,056) were recorded as an offsetting increase to
the carrying value.
As part of a separate agreement, Western is required to make a payment of $1 million upon making a
production decision on the Casino Project.
- 16 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
6. SHARE CAPITAL
a. Authorized share capital
Unlimited common shares without par value
Unlimited number of preferred shares without par value
b. Share cancellation
Pursuant to the 2006 plan of arrangement involving Glamis Gold Ltd., Western Silver Corp., and
Western Copper Corp. (now Western Copper and Gold Corp.), shareholders of Western Silver Corp.
were required to exchange their common shares in Western Silver Corp. for common shares of
Western within six years of the plan of arrangement. The 115,566 common shares not exchanged in
accordance with the plan of arrangement were cancelled and returned to treasury on May 14, 2013.
c. Financing
On October 4, 2012, Western completed a non-brokered private placement whereby the Company
issued 500,000 flow-through common shares at a price of $0.80 per common share.
7. WARRANTS AND STOCK OPTIONS
a. Warrants
All outstanding warrants as at December 31, 2011 expired during the year ended December 31,
2012. There are no warrants outstanding as at December 31, 2013.
b. Stock options
Based on the stock option plan approved by the Company’s shareholders at the annual general
meeting held on June 21, 2012, the Company may issue stock options for the purchase of up to 10%
of issued capital. The exercise price of the stock options must be greater than, or equal to, the
market value of the Company’s common shares on the last trading day immediately preceding the
date of grant. Stock options vest over a two year period from the date of grant unless otherwise
determined by the directors. The maximum stock option term is 10 years. At December 31, 2013,
the Company could issue an additional 2,936,726 stock options under the terms of the plan.
- 17 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
A summary of the Company’s stock options outstanding and the changes for the years then ended, is
presented below:
Number of
Stock options
DECEMBER 31, 2011
4,313,667
Granted
Exercised
Expired
1,660,000
(280,000)
(420,000)
DECEMBER 31, 2012
5,273,667
Granted
Exercised
Cancelled
Expired
1,750,000
(17,000)
(46,667)
(528,333)
DECEMBER 31, 2013
6,431,667
Stock options outstanding are as follows:
Weighted average
exercise price
$
1.77
0.80
1.08
1.72
1.50
0.66
0.55
1.53
1.21
1.30
Stock options outstanding,
by exercise price
Number of
Stock options
Weighted average
exercise price
$0.55 – 0.60
$0.79 – 0.84
$1.50 – 1.85
$2.84
2,095,000
2,311,667
400,000
1,625,000
DECEMBER 31, 2013
6,431,667
$
0.59
0.80
1.67
2.84
1.30
Average
remaining
contractual life
years
3.67
2.95
1.98
2.54
3.02
Of the total stock options outstanding, 3,594,992 were vested and exercisable at December 31, 2013.
The weighted average exercise price of vested stock options is $1.76 and the average remaining
contractual life is 2.13 years.
- 18 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
8. SHARE-BASED PAYMENTS
The following is a summary of stock options granted by the Company in 2013 and 2012 and the fair value
assigned to each grant. The fair value was calculated at the time of grant using the Black-Scholes option
pricing model and the following inputs and assumptions:
Inputs and assumptions
December 12,
2013
July 9,
2013
January 15, September 10,
2013
2012
July 12,
2012
Stock options granted
Exercise price
150,000
$0.60
1,500,000
$0.60
100,000
$1.59
Market price
Expected option term (years)
Expected stock price volatility
Average risk-free interest rate
Expected forfeiture rate
Expected dividend yield
$0.55
3.0
71.8%
1.18%
-
-
$0.54
3.0
74.5%
1.26%
-
-
$1.59
3.0
73.4%
1.25%
-
-
50,000
$0.84
$0.84
3.0
73.5%
1.25%
-
-
1,610,000
$0.80
$0.72
3.0
76.5%
1.01%
-
-
FAIR VALUE ASSIGNED
$37,500
$375,000
$77,000
$20,000
$548,000
9. COMMITMENTS
The Company has an agreement to lease its head office space until May 31, 2016. The total amount of
payments remaining during the course of the agreement as at December 31, 2013 is $556,000. Of this
amount, $222,000 is due within the next twelve months.
The Company is required to use the proceeds received from the royalty sale for furthering the
development of the Casino Project and for general working capital purposes; provided that the general
working capital purposes of Western do not include the acquisition and development of any mineral
properties unrelated to the Casino Project.
Other commitments related to exploration and evaluation assets are described in note 5.
10. RELATED PARTY TRANSACTIONS
Since the Company’s corporate reorganization in October 2011, administration, accounting and other
office services have been provided by Ravenwolf Resource Group Ltd. (“Ravenwolf”) on a cost-recovery
basis. Ravenwolf was a private company owned equally by Western, NorthIsle Copper and Gold Inc.
(“NorthIsle”), and Copper North Mining Corp. (“Copper North”) until April 1, 2013, when NorthIsle and
Copper North transferred their respective Ravenwolf shares to Western. As a result of the share transfers,
Ravenwolf became a wholly-owned subsidiary of the Company.
- 19 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
Beginning April 1, 2013, Ravenwolf’s results are consolidated with those of the Company. Prior to that
date, Ravenwolf was a related party to the Company.
Amounts charged by Ravenwolf were categorized as follows:
For the year ended December 31,
Filing and regulatory fees
Office and administration
Rent and utilities
Shareholder communication and travel
Wages and benefits
Exploration and evaluation
Other
2013
$
-
27,826
31,855
11,808
226,358
74,837
-
2012
$
1,655
119,655
106,154
26,842
914,257
273,239
4,241
372,684 1,446,043
The Company’s related parties also include its directors and officers. The remuneration of directors and
officers was as follows:
For the year ended December 31,
Salaries and director fees
Share-based payments
2013
$
902,941
564,289
2012
$
905,013
1,588,780
1,467,230 2,493,793
Share-based payments represent the fair value of stock options previously granted to directors and
officers that was recognized during the years presented above.
11. SEGMENTED INFORMATION
a. Operating segment
The Company’s operations are primarily directed towards the acquisition, exploration, and future
development of resource properties in Canada.
b. Geographic information
All interest income is earned in Canada and all assets are held in Canada.
- 20 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
12. INCOME TAXES
a. Rate reconciliation
The income tax expense or recovery reported by the Company differs from the amounts obtained by
applying statutory rates to the loss and comprehensive loss. A reconciliation of the income tax
provision computed at statutory rates to the reported income tax provision is provided below:
For the year ended December 31,
Statutory tax rate
Loss before taxes
2013
25.75%
2012
25%
$
1,365,516
$
3,913,276
Income tax recovery calculated at statutory rate
351,620
978,319
Non-deductible expenditures
Amounts expensed for tax purposes only
Difference in current tax rate in other jurisdictions
Effect of future changes in tax rates
Unrecognized tax benefit
INCOME TAX
(176,902)
128,286
749
2,898
(306,651)
(523,159)
220,064
2,116
-
(677,340)
-
-
b. Unrecognized deferred income tax asset
Future potential tax deductions that are not used to offset deferred income tax liabilities are
considered to be unrecognized deferred income tax assets. The significant components of the
Company’s unrecognized deferred income tax asset are as follows:
As at December 31,
Mineral property interests
Non-capital losses
Property and equipment
Other items
2013
$
1,062,175
1,807,943
179,882
232,382
2012
$
2,316,470
845,715
291,210
347,994
UNRECOGNIZED DEFERRED INCOME TAX ASSET
3,282,382
3,801,389
The Company estimates that the realization of income tax benefits related to these deferred income
tax assets is uncertain and cannot be considered to be more likely than not. Accordingly, no deferred
income tax asset has been recorded.
- 21 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
c. Non-capital losses
The Company has incurred non-capital losses that may be carried forward and used to reduce taxable
income of future years. These losses will expire as follows:
Expiry Date
2033
2032
2031
2013
$
1,176,715
4,687,899
672,122
2012
$
-
2,700,898
672,122
NON-CAPITAL LOSSES
6,536,736
3,373,020
The Company has approximately $21.8 million in Canadian exploration and development
expenditures, and has cumulative eligible capital and undepreciated capital cost balances totalling
$1.2 million. These amounts are available to reduce future taxable income and do not expire.
13. CAPITAL MANAGEMENT
Western is a mineral exploration company with a primary focus of advancing its Casino Project towards
production. Its principal source of funds is the issuance of common shares. The Company considers
capital to be equity attributable to common shareholders, comprised of share capital, contributed surplus,
and deficit. It is the Company’s objective to safeguard its ability to continue as a going concern so that it
can continue to explore and develop its projects.
Western manages its capital structure based on the funds available for its operations and makes
adjustments for changes in economic conditions, capital markets and the risk characteristics of the
underlying assets. To maintain its objectives, the Company may attempt to issue new shares, seek debt
financing, acquire or dispose of assets or change the timing of its planned exploration and development
projects. There is no assurance that these initiatives will be successful.
To facilitate the management of its capital, Western prepares annual expenditure budgets and updates
them as necessary, depending on various factors, many of which are beyond the Company’s control. The
Board of Directors approves all annual budgets and subsequent updates.
The Company monitors its cash position and its short-term investments on a regular basis to determine
whether sufficient funds are available to meet its short-term and long-term corporate objectives. The
Company also seeks to provide liquidity and limit credit risk by acquiring investments that are guaranteed
by Canadian governments or by a Canadian chartered bank and that are redeemable in portion or in full
at the Company’s option without penalty.
There was no change in the Company’s approach to capital management during the year. Western has
no debt and does not pay dividends.
- 22 -
Western Copper and Gold Corporation
Notes to the Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Expressed in Canadian dollars)
14. FINANCIAL INSTRUMENT RISK
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s
risk management framework. The Company has exposure to liquidity, credit, and currency risks from the
use of financial instruments. Financial instruments consist of cash and cash equivalents, short-term
investments, certain other assets, and accounts payable and accrued liabilities.
a. Liquidity risk
Liquidity risk is the risk that the Company will be unable to meet its financial obligations as they come
due. The Company uses cash forecasts to ensure as far as possible that there is sufficient cash on
hand to meet short-term business requirements. Cash is invested in highly liquid investments which
are available to discharge obligations when they come due. The Company does not maintain a line
of credit.
b. Credit risk
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and
cash equivalents and short-term investments. These financial instruments are at risk to the extent
that the institutions issuing or holding them cannot redeem amounts when they are due or
requested. To limit its credit risk, the Company uses a restrictive investment policy. It deposits cash
and cash equivalents in Canadian chartered banks and purchases short-term investments that are
guaranteed by Canadian governments or by Canadian chartered banks. The carrying amount of
financial assets recorded in the financial statements, net of any allowance for losses, represents
Western’s maximum exposure to credit risk.
c. Currency risk
Currency risk is the risk that the Company will lose significant purchasing power to operate its
business as a result of changes in currency rates. The Company typically raises funds in Canadian
dollars. The majority of the Company’s expenditures are incurred in Canadian dollars. To limit its
exposure to currency risk, the Company aims to maintain funds in the currency that matches that of
the costs incurred. Historically, Western has not held significant amounts denominated in currencies
other than the Canadian dollar.
The proceeds of the royalty transaction completed in December 2012 were denominated in US
dollars. Although Western has been decreasing its foreign currency balance throughout 2013, the
Company still had approximately US$5 million in financial instruments at December 31, 2013 (2012 –
US$32 million). As at December 31, 2013, a 1% change in the exchange rate between the Canadian
and US dollar would have resulted in an unrealized gain or loss of approximately $58,000 (December
31, 2012 - $319,000).
- 23 -