| Tue 15 May 2007, 13:00 | | ARQ - Anooraq Resources Corporation - Consolidated |
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ARQ
ARQ
ARQ - Anooraq Resources Corporation - Consolidated financial statements
Anooraq Resources Corporation
(Incorporated in British Columbia, Canada)
(Registration number 10022-2033)
(JSE share code: ARQ ISIN: CA03633E1088)
(TSXV share code: ARQ ISIN: CA03633E1088)
(AMEX share code: ANO ISIN: CA03633E1088)
(`Anooraq` or `the Company`)
CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2007
(Expressed in Canadian Dollars, unless otherwise stated)
These financial statements have not been reviewed by the Company`s auditors
ANOORAQ RESOURCES CORPORATION
Consolidated Balance Sheets
(Expressed in Canadian Dollars)
March 31 December 31
2007 2006
(unaudited)
ASSETS
Current assets
Cash and equivalents $ 10,954,055 $ 12,775,145
Amounts receivable 128,382 159,079
Due from related parties (note 6) 162,734 138,616
Prepaid expenses 80,448 104,164
11,325,619 13,177,004
Deferred financing costs 316,095 337,852
Equipment 71,137 73,315
Mineral property interests (note 4) 8,398,661 8,240,751
$ 20,111,512 $ 21,828,922
LIABILITIES AND SHARHOLDERS` EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 238,029 $ 1,034,144
Term loan 11,703,066 11,818,677
11,941,095 12,852,821
Shareholders` equity
Share capital 50,383,206 50,207,363
Contributed surplus 4,793,645 4,849,043
Deficit (47,006,434) (46,080,305)
8,170,417 8,976,101
Nature of operations (note 1)
Subsequent events (note 7)
$ 20,111,512 $ 21,828,922
See accompanying notes to consolidated financial statements
Approved by the Board of Directors
/s/ Tumelo M. Motsisi /s/ Popo Molefe
Tumelo M. Motsisi Popo Molefe
Director Director
ANOORAQ RESOURCES CORPORATION
Consolidated Statements of Operations
(Unaudited - Expressed in Canadian Dollars)
Three months ended March 31
2007 2006
Expenses
Accounting, audit and legal $ 102,785 $ 166,812
Conference and travel 103,122 87,663
Consulting 78,729 52,553
Exploration (schedule) 33,020 91,994
Foreign exchange loss (gain) (262,248) 9,401
Interest expense 469,124 -
Interest income (219,778) (27,646)
Office and administration 91,212 70,687
Salaries and benefits 329,754 375,394
Stock-based compensation - office and
administration 1,044 12,967
Stock-based compensation - exploration 401 24,352
Shareholders communications 58,367 61,421
Trust and filing 141,598 84,116
Loss before the following 927,130 1,009,714
Future income tax recovery (note 4) (1,000) -
Loss for the period $ 926,130 $ 1,009,714
Basic and diluted loss per share $ 0.01 $ 0.01
Weighted average number of common shares
outstanding 148,227,907 148,220,407
See accompanying notes to consolidated financial statements
ANOORAQ RESOURCES CORPORATION
Consolidated Statements of Shareholders` Equity and Deficit
(Expressed in Canadian Dollars)
Three months ended
March 31, 2007
(unaudited)
Number of
Share capital shares
Balance at beginning of the period 148,220,407 $ 50,207,363
Share purchase options exercised at
$1.40 per share 85,000 119,000
Fair value of stock options allocated to
shares issued on exercise - 56,843
Balance at end of the period 148,305,407 $ 50,383,206
Contibuted surplus
Balance at beginning of the period 4,849,043
Stock-based compensation 1,445
Fair value of stock options allocated to
shares issued on exercise (56,843)
Balance at end of the period $ 4,793,645
Deficit
Balance at beginning of the period (46,080,305)
Loss for the period (926,130)
Balance at end of the period $ (47,006,434)
TOTAL SHAREHOLDERS` EQUITY $ 8,170,417
Year ended
December 31, 2006
Number of
Share capital shares
Balance at beginning of the period 148,220,407 $ 50,207,363
Share purchase options exercised at $1.40
per share - -
Fair value of stock options allocated to
shares issued on exercise - -
Balance at end of the period 148,220,407 $ 50,207,363
Contibuted surplus
Balance at beginning of the period 4,824,697
Stock-based compensation 24,346
Fair value of stock options allocated to
shares issued on exercise -
Balance at end of the period $ 4,849,043
Deficit
Balance at beginning of the period (41,575,461)
Loss for the period (4,504,844)
Balance at end of the period $ (46,080,305)
TOTAL SHAREHOLDERS` EQUITY $ 8,976,101
The accompanying notes are an integral part of these consolidated financial
statements.
ANOORAQ RESOURCES CORPORATION
Consolidated Statements of Cash Flows
(Unaudited - Expressed in Canadian Dollars)
Three months Three months
ended ended
March 31 March 31
2007 2006
Operating activities
Loss for the period $ (926,130) $ (1,009,714)
Items not involving cash
Amortization included in exploration expenses 4,734 12,872
Amortization of deferred finance costs 21,757 -
Future income tax recovery (1,000) -
Accrued interest on term loan 416,099 -
Stock-based compensation 1,445 37,319
Unrealized foreign exchange gain (163,000) -
Equity loss in exploration expenditures
(note 4) 18,803 9,203
Changes in non-cash operating working capital
Amounts receivable 30,697 84,164
Amounts due to and from related parties (24,118) 38,756
Prepaid expenses 23,716 (1,146)
Accounts payable and accrued liabilities (796,115) (104,571)
Cash and equivalents used by operating
activities (1,393,112) (933,117)
Investing activities
Purchase of equipment (2,556) -
Equity investment (note 4) (12,713) -
Cash and equivalents (provided by) used by
investing activities (15,269) -
Financing activities
Issuance of common shares 119,000 -
Cash and equivalents provided by financing
activities 119,000 -
Effect of exchange rate changes on cash and
equivalents (531,710) -
Increase (decrease) in cash and equivalents (1,821,090) (933,117)
Cash and equivalents, beginning of period 12,775,145 4,590,284
Cash and equivalents, end of period $ 10,954,055 $ 3,657,167
Supplementary information
Interest paid $ - $ 13,965
Interest received $ (219,778) $ (41,611)
Taxes paid $ - $ -
Non-cash operating, financing and investing
activities
Fair value of options allocated to shares
issued on exercise $ 56,843 $ -
See accompanying notes to consolidated financial statements
ANOORAQ RESOURCES CORPORATION
Consolidated Schedules of Exploration Expenses
(Unaudited - Expressed in Canadian Dollars)
Republic of South Africa Three months ended March 31
2007 2006
Northern Limb of the Bushveld Complex
Amortization $ 4,734 $ 12,872
Assays and analysis 2,427 1,851
Engineering 8,377 23,271
Geological and consulting 5,125 28,964
Graphics 1,984 354
Property fees and assessments - (16,941)
Property option payments 5,608 32,548
Site activities 2,081 20,382
Transportation - 1,408
30,336 104,709
Eastern Limb of the Bushveld Complex
Drilling - (26,020)
Engineering - 12,812
Geological and consulting 2,684 493
2,684 (12,715)
Exploration expenses before the following 33,020 91,994
Stock-based compensation 401 24,352
Exploration expenses 33,421 116,346
Cumulative expenditures, beginning of period 23,613,314 22,846,780
Cumulative expenditures, end of period $ 23,646,735 $ 22,963,126
See accompanying notes to consolidated financial statements
ANOORAQ RESOURCES CORPORATION
THREE MONTHS ENDED MARCH 31, 2007
MANAGEMENT`S DISCUSSION AND ANALYSIS
1.1 Date
This Management`s Discussion and Analysis ("MD&A") should be read in
conjunction with the unaudited financial statements of Anooraq Resources
Corporation ("Anooraq", or the "Company") for the three months ended March 31,
2007 and the audited financial statements for the year ended December 31, 2006.
All dollar amounts herein are expressed in Canadian Dollars unless otherwise
stated.
This MD&A is prepared as of May 3, 2007.
This discussion includes certain statements that may be deemed "forward-looking
statements". These forward-looking statements constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements in this
discussion, other than statements of historical facts, that address future
production, reserve potential, exploration drilling, exploitation activities
and events or developments that the Company expects are forward-looking
statements. Although the Company believes the expectations expressed in such
forward-looking statements are based on reasonable assumptions, such statements
are not guarantees of future performance and actual results or developments may
differ materially from those in the forward-looking statements. Factors that
could cause actual results to differ materially from those in forward-looking
statements include market prices, exploitation and exploration successes,
continued availability of capital and financing and general economic, market or
business conditions. Investors are cautioned that any such statements are not
guarantees of future performance and actual results or developments may differ
materially from those stated herein.
1.2 Overview
Anooraq is engaged in the exploration and development of platinum group metals
("PGM") prospects in the Bushveld Complex of the Republic of South Africa.
The large Bushveld Complex covers a total area of approximately 67,000 square
kilometers and is divided into four main areas or "limbs". Most PGM production
from the Bushveld Complex to date has been derived from the Merensky and UG2
reefs, which are the main PGM-bearing horizons on the Eastern and Western Limbs
of the Bushveld. The PGM-bearing horizon on the Northern Limb, called the
Platreef, tends to be nearer to the surface and is wider than those on the
other limbs, and so has potential for the discovery and development of
large-scale deposits that are amenable to open pit mining.
In 2007, Anooraq has interests in early to advanced stage exploration
properties on the Nor thern and Eastern Limbs of the Bushveld Complex, called
the Platreef and Ga-Phasha Projects. Anooraq`s exploration work in 2006, and so
far in 2007, has mainly been focused on advancing the Ga-Phasha Project in the
Eastern Bushveld.
In November 2006, Anooraq concluded an agreement with Anglo Platinum, whereby
Anglo Platinum provided South African Rand ("ZAR") 70 million in funding to
Anooraq via a term loan.
In December 2006, the Company entered into a Settlement Agreement with Pelawan
Investments (Proprietary) Limited ("Pelawan") to waive the deemed dilutive
financing contemplated in the 2004 share exchange agreement. The equity
issuance terms of this settlement are subject to regulatory approval and are
currently being reviewed by the regulators.
1.2.1 Ga-Phasha JV Project, Eastern Limb
Anooraq has a 50% interest in the Ga-Phasha PGM Project (the "Ga-Phasha
Project"), located on the North-Eastern Limb of the Bushveld, approximately 250
kilometers northeast of Johannesburg. Anooraq acquired the project by way of a
reverse takeover transaction ("RTO") with Pelawan Investment Holdings (Pty)
Ltd. in 2004 (further details below). Ga-Phasha has significant PGM mineral
resources outlined in the Merensky and UG2 Reefs that are open to further
expansion. In 2006, a program targeting the UG2 Reef was completed.
The Ga-Phasha Project is a 50/50 joint venture with Anglo Platinum Limited
("Anglo Platinum"). Anglo Platinum is the operator.
Agreement
In January 2004, the Company entered into an agreement with Pel awan, a private
South African Black Economic Empowerment ("BEE") company, pursuant to which the
Company and Pelawan would combine their respective PGM assets, comprising the
Company`s Northern Limb PGM projects and Pelawan`s 50% participation interest
in the Ga-Phasha Project. The transaction between Anooraq and Pelawan was
completed on September 29, 2004.
Pursuant to the terms of the agreement between the Company and Pelawan, the
Company acquired Pelawan`s 50% shareholding in Micawber and the rights to its
50% participation interest in the Ga-Phasha Project in return for 91.2 million
common shares of the Company (the "Consideration Shares") and cash payments
totalling ZAR 15,652,744 ($3,055,416). Approximately 83 million Consideration
Shares are being held in escrow until the earlier of September 29, 2010 or
twelve months after the commencement of commercial production from the
Ga-Phasha Project at which time they will be released.
The Ga-Phasha property consists of four farms, covering an area of
approximately 9,700 hectares, held by Micawber 277 (Proprietary) Limited
("Micawber"), a private South African corporation owned 50% by Anglo Platinum
through its wholly owned subsidiary Rustenburg Platinum Mines ("RPM") and 50%
by Anooraq through its wholly owned South African subsidiary Plateau Resources
(Pty) Ltd ("Plateau"). The 50/50 joint venture between Plateau and RPM is
governed by, among other things, a shareholders agreement relating to Micawber
dated September 22, 2004.
On March 28, 2005, Pelawan sold 7.9 million of the Anooraq shares it was
permitted to sell under the agreement to strategic stakeholders in Anooraq and
the proceeds from such sales were remitted to Pelawan shareholders through the
Pelawan Trust. The proceeds received by the Pelawan Trust from the sale of
certain shares held by the Pelawan Trust were distributed to Pelawan`s
shareholder base, comprising 15 broadly-based BEE entities, including women
investment groups, cultural trusts and Limpopo-based groups within those areas
where Anooraq`s proposed mining activities are situated.
The share exchange agreement which gave effect to the combination provided that
if any financings in relation to the Ga-Phasha and Drenthe-Overysel
(subsequently renamed "Boikgantsho") Projects (the "Projects") took place prior
to a particular date (the "Finalization Date") and the shareholder dilution
associated with such financings caused Pelawan`s shareholding in Anooraq to
fall below a 52% minimum shareholding, Anooraq would issue additional common
shares to Pelawan in order to maintain that minimum. Such 52% minimum
shareholding allowed for compliance with BEE equity requirements under South
African mineral legislation and was also a requirement of the South African
Reserve Bank for approving the transaction. Originally, the Finalization Date
was September 30, 2005 but that date, by agreement in November 2005 between
Anooraq and Pelawan, was extended.
The share exchange agreement further provided that, to the extent that if no
such dilutive financings had taken place by the Finalization Date, certain
dilutive financings were deemed to have occurred by that date. The purpose was
to make allowance for the dilutive effect on Pelawan`s shareholding of the
anticipated financings for mine development of the Projects and safeguard the
status of Anooraq as a BEE company. For the purposes of calculating whether, by
virtue of such deemed dilutive financings, any common shares are required to be
issued to Pelawan in order to maintain a minimum 52% shareholding, the share
exchange agreement provided that the quantum of such deemed financings would
equal: (a) 30% of the estimated development costs in accordance with the
bankable feasibility studies in respect of the Projects, less cash on hand, or
(b) to the extent that such bankable feasibility studies had not been prepared
as at the Finalization Date, $70.8 million related to the Ga-Phasha Project and
$27.6 million related to the Drenthe-Overysel Project, less cash on hand (the
"Deemed Dilutive Financings"). Following the Finalization Date, Anooraq has the
right but not the obligation to issue additional common shares to Pelawan in
order to maintain Pelawan`s minimum shareholding.
As neither additional financings nor bankable feasibility studies for the
Projects had been completed by Anooraq as at September 30, 2005 and, in the
absence of an amending agreement between the parties, a dilutive financing
totaling $98.4 million and share issuances (based on the share price at the
date of the deemed dilutive financing) would have been deemed to have taken
place as at such date and the Company would have been obligated to issue to
Pelawan that number of shares which, after notionally giving effect to the
Deemed Dilutive Financings, would have resulted in Pelawan continuing to hold a
52% interest in the Company. In November 2005, Anooraq and Pelawan agreed to
extend the Finalization Date to the earlier of:
(a) the first date at which both the Drenthe-Overysel financing and the
Ga-Phasha financings shall, in fact, have occurred;
(b) any date which is within a 60-day period following an announcement by
Anooraq of a further material transaction, as defined; and
(c) December 31, 2006.
In December 2006, the Company entered into a Settlement Agreement with Pelawan
to waive the deemed dilutive financing contemplated in the 2004 share exchange
agreement. Under the terms of the Settlement Agreement:
(i) Anooraq will issue to Pelawan 36 million common shares ("Adjustment
Consideration Shares"), representing a 50% reduction in the number of shares
potentially to be issued under the original RTO transaction terms. The Company
is currently awaiting regulatory approval for the issuance of the Adjustment
Consideration Shares.
(ii) Anooraq will issue to Pelawan share purchase warrants for the purchase of
167 million common shares in Anooraq ("BEE Warrants"). The BEE Warrants are
exercisable until December 31, 2008. The BEE Warrants can be exercised at the
higher of (a) $1.35 if exercised on or before December 31, 2007 or $1.48 if
exercised after December 31, 2007 or (b) at a price that is 50% less than the
price per Anooraq common share payable by arms length parties under an equity
financing undertaken by the Company that either raises an amount of at least
$98,400,000 or is undertaken pursuant to a material transaction (a "Concurrent
Financing"). The Company is currently awaiting regulatory approval for the
issuance of the BEE Warrants.
(iii) From the date of issue of the Adjustment Consideration Shares to Pelawan
in (i) above or as a result of the exercise of any of the BEE Warrants up to
the closing date of the Concurrent Financing, the common shares issued to
Pelawan pursuant thereto will be subject to a lock up arrangement and Pelawan
will not be entitled to dispose of any of these shares, save for the exemption
referred to in (iv) below and the payment of any taxes. After the closing date
of the Concurrent Financing, the disposal of such shares shall remain subject
to the original lock up agreement entered into between Pelawan and Anooraq
under the terms of the original RTO transaction ("the BEE Lock Up"), which is
the earlier of September 29, 2010 or twelve months after the commencement of
commercial production from the Ga-Phasha Project.
(iv) Anooraq has agreed to grant Pelawan an exemption to the BEE Lock Up for
the purposes of facilitating Pelawan`s financing of the exercise of the BEE
Warrants. In the event that Pelawan exercises any BEE Warrants, Pelawan shall,
in its sole discretion, be entitled to dispose of that number of common shares
up to 25% (or such greater amount as is required to facilitate the financing of
the exercise of the BEE Warrants) of the aggregate common shares issued to
Pelawan pursuant to such exercise, provided that all of the proceeds received
by Pelawan from such disposal shall be applied by Pelawan to support the
financing of the exercise of the BEE Warrants and reasonable expenses related
to such exercise.
(v) On the occurrence of a Concurrent Financing, Pelawan shall be obliged to
exercise the BEE Warrants to ensure, at a minimum, that Anooraq retains its
status as a 52% controlled BEE company, in compliance with undertakings given
by Pelawan and the Company in favour of the South African Reserve Bank and
Anglo Platinum Limited.
Financings
In November 2006, the Company, through its wholly owned subsidiary Plateau,
entered into a 70 million ZAR term loan agreement with Rustenburg Platinum
Mines Limited, a wholly owned subsidiary of Anglo Platinum Limited. The loan
bears interest at prime plus two percent, as quoted by the Standard Bank of
South Africa. The first interest payment is due and payable in January 2008,
with other subsequent interest payments due and payable in six month intervals
thereafter. The final repayment date for the loan will be on September 30,
2010, however, the agreement allows for early repayment. The Company is
required to spend 85% of the loan amount to fund work towards the preparation
of and operational expenditures contemplated in a bankable feasibility study
for the Ga-Phasha project. Pursuant to security agreements entered into in
connection with the loan, the Company has ceded, as security, its interest in
Micawber.
Project Activities
Prior to the involvement of Anooraq, Anglo Platinum (and others) had carried
out extensive drilling as well as preliminary engineering and mine planning
studies on the Ga-Phasha property. Significant mineral resources were outlined
in the UG2 and Merensky Reefs. South African consultants, Global Geo Services
(Pty) Ltd. carried out a resource estimate on behalf of Anooraq in early 2004
based on information received to that time from Anglo Platinum, outlining
significant mineral resources in both the UG2 and Merensky Reefs.
Under a preliminary development plan, proposed in 2001-2002, the UG2 Reef was
seen as the principal target reef horizon for mining, with mineralization being
processed through a joint concentrator situated on Anglo Platinum`s adjacent
Twickenham property.
A program review took place between April and October 2006, in which several
approaches were considered to optimize mining of the deposits at Ga-Phasha. The
review confirmed that the UG2 reef deposit remains the primary focus for
development and the Merensky reef warrants further study through additional
drilling programs.
As a result of this work, Anooraq and Anglo Platinum agreed on the parameters
of, and engaged an independent project manager to conduct, a Pre-feasibility
Study ("PFS") for the Project. The PFS will consist of a Phase 1 study to
exploit the UG2 reef to a depth of some 650 meters below surface, and will also
seek to identify a single preferred option by which to proceed to the bankable
feasibility phase. The PFS will also contemplate optimizing economies of scale
between the Parties` operations on the North- Eastern Limb of the Bushveld
Complex, and in that regard, will evaluate the possible usage of joint
infrastructure and processing facilities between Anglo Platinum`s Twickenham
Platinum Mine and Ga- Phasha.
Read, Swatman & Voigt (Pty) Ltd ("RSV") has been appointed as the independent
project manager to conduct the PFS.
Plans for 2007
A detailed timetable of further studies as well as a project timetable toward a
Bankable Feasibility Study will be released after the PFS.
1.2.2 Platreef Projects, Northern Limb
Prior to January 2004, Anooraq mainly focused on the acquisition and
exploration of mineral properties (called "farms" in South Africa) on the
Bushveld`s Northern Limb. Anooraq initially outlined a mineral resource in the
Drenthe deposit on its Drenthe and Witrivier farms in 2000. In November 2003,
Anooraq and RPM, which has an open pit operation nearby, formed the Boikgantsho
Joint Venture ("Boikgantsho JV"), with Anooraq as the operator. Most of
Anooraq` s work on the Northern Limb has been focused on the Boikgantsho JV
ground, mainly taking place prior to the end of 2005. In December 2006, Anooraq
received new order rights for the farms Rietfontein 2 KS, Malokongskop 780 LR
and Drenthe 778 LR, which are a portion of its properties on the Northern Limb
of the Bushveld Complex.1
Anooraq also holds several other early exploration stage properties on the
Northern Limb. At Rietfontein, Ivanhoe Nickel and Platinum Ltd. ("Ivanplats")
is earning an interest by carrying out exploration in conjunction with work on
its adjacent Turfspruit farm. Ivanplats outlined mineralization on the
Rietfontein farm through drilling in 2001. There is disagreement over budgets,
compilation and analysis of the exploration results, and the overall adequacy
and completeness of Ivanplats` exploration activities.
The Company and Ivanplats are currently in discussions over these matters, both
outside of and within a formal arbitration process, pursuant to the terms of
the earn-in agreement.
1.2.3 Boikgantsho JV Project
The objective of the Boikgantsho JV is to explore and develop PGM deposits on
the Drenthe and Witrivier farms and the northern portion of the Overysel farm,
located immediately to the south of the Drenthe farm. Drilling under the JV in
2004 expanded the Drenthe deposit and resulted in the discovery of the Overysel
North deposit.
In March 2005, Anooraq completed a preliminary economic assessment of a
potential open pit development on the Drenthe and Overysel North deposits,
which gave positive returns. Anooraq also completed an additional 24,000 meters
of drilling on the Drenthe deposit in 2005. The program was designed to define
measured mineral resources within the deposit and advance the project toward a
feasibility study.
Agreement
In November 2003, Anooraq, through its wholly-owned South African subsidiary
Plateau, entered into a joint venture agreement with Potgietersrust Platinum
Limited, a wholly owned subsidiary of Anglo Platinum, to explore and develop
PGM, gold, nickel and copper mineralization on Anooraq`s Drenthe and Witrivier
farms and the northern portion of Anglo Platinum`s adjacent Overysel farm.
Anooraq made its required expenditures by the end of 2004, and now has the
option to proceed on a year-by-year basis and to take the project to a bankable
feasibility study ("BFS") level.
Once a BFS has been completed, either or both of the partners in the
Boikgantsho JV will have the option to proceed to exploitation. If both
partners decide to proceed, then a joint management committee will be
established to oversee development and operations. The ultimate joint venture
interest allotted to Anooraq and Anglo Platinum will be determined according to
the proportion of contained metal within the Drenthe deposit that lies on the
ground contributed by each, as determined by the BFS. Anglo Platinum has the
option to be diluted to a minimum 12.5% non-contributory interest, adjusted
depending on the final PGM royalty to be established under the Mineral and
Petroleum Royalty Bill, to a maximum of 15%.
1 New Order Prospecting Rights have been converted from `old order prospecting
rights` into prospecting rights in terms of the Mineral and Petroleum Resources
Development Act, 2002.
Anglo Platinum has the right to enter into a PGM Ore or Concentrate Purchase
and Disposal Agreement with the Company at the exploitation phase, based on
standard commercial terms, whereby PGM produced from the operation would be
treated at Anglo Platinum`s facilities. Anglo Platinum owns and operates a PGM
smelter at Polokwane, which is approximately 80 kilometers east of the
property.
Project Activities
A preliminary assessment of a potential open pit development of the Drenthe and
Overysel North Deposits, based on mineral resources outlined to September 2004,
was completed during the first quarter of 2005. As the preliminary assessment
is based, in part, on inferred resources that are geologically speculative,
there is no certainty that the economic considerations or results will be
realized. The preliminary assessment indicates favorable financial results for
an open pit and conventional mill operation. Further details are provided in a
technical report filed at www.sedar.com.
Drilling in 2005 focused on the Drenthe deposit. The program tested the entire
area within the provisional open pit design for the Drenthe deposit that was
used for the March 2005 preliminary assessment. One hundred and thirty six
vertical holes, totaling approximately 24,400 meters, were drilled at 50-meter
intervals along 50-meter spaced lines. The program confirmed the continuity of
the PGM mineralization within the Drenthe deposit. An independent consultant
was engaged to update the deposit database and estimate of the mineral
resources.
Results from the updated resource model and recommendations from the
preliminary assessment will be followed up by pre-feasibility work. Currently,
however, the Company is focused on advancing the Ga- Phasha Project.
Plans for 2007
Planning is underway to resume work on the Boikgantsho pre-feasibility study in
2007.
1.2.4 Market Trends
Platinum prices have been increasing for the past three years and averaged
US$1145/oz in 2006. Platinum has continued to increase in 2007, averaging
approximately US$1215/oz to early May. Palladium prices declined in 2005,
averaging approximately US$201/oz, but have been increasing since that time.
Palladium prices averaged US$323/oz in 2006, and have averaged US$350/oz to
early May 2007. Gold prices continued a strong uptrend in 2006, averaging
US$604/oz, compared to US$445/oz in 2005. Gold prices decreased in late
2006-early 2007, but have been increasing since mid January 2007, and have
averaged US$657/oz to early May.
1.3 Selected Annual Information
December 31 December 31 December 31
2006 2005 2004
Current assets $ 13,177,004 $ 5,159,433 $ 15,787,528
Mineral property interests 8,240,751 8,502,000 8,494,358
Other assets 411,167 174,163 197,995
Total assets 21,828,922 13,835,596 24,479,881
Current liabilities 1,034,144 378,997 1,413,234
Long term liabilities 11,818,677 - -
Shareholders` equity 8,976,101 13,456,599 23,066,647
Total liabilities and
shareholders` equity $ 21,828,922 $ 13,835,596 $ 24,479,881
Year ended Year ended 14 months ended
Dec 31, 2006 Dec 31, 2005 Dec 31, 2004
Expenses
Amortization 30,862 48,503 39,121
Conference and travel $ 360,959 $ 646,992 $ 486,481
Consulting 168,457 965,720 536,216
Exploration 720,463 5,191,818 7,821,145
Foreign exchange (34,817) 68,720 145,199
Gain on disposal of
equipment (41,291) - -
Interest expense 253,071 - -
Interest income (117,829) (119,779) (485,452)
Legal, accounting and
audit 690,132 474,422 479,731
Office and administration 354,353 551,278 457,571
Salaries and benefits 1,511,874 1,659,465 834,223
Shareholders
communications 289,824 260,155 342,848
Trust and filing 415,440 85,254 159,633
Subtotal 4,601,498 9,832,548 10,816,716
Stock based compensation 24,346 2,536,253 2,466,548
Future income tax recovery (121,000) (65,000) -
Write-off (recovery) of
amounts receivable - - (256,000)
Loss for the year $ 4,504,844 $ 12,303,801 $ 13,027,264
Loss per share $ 0.03 $ 0.08 $ 0.18
Weighted average number
of common shares
outstanding (thousands) 148,220 148,107 73,017
1.4 Summary of Quarterly Results
Expressed in thousands of dollars, except per-share amounts. Small differences
are due to rounding.
Mar 31 Dec 31 Sep 30 Jun 30
2007 2006 2006 2006
Current assets 11,326 13,177 2,337 3,143
Mineral properties 8,399 8,241 8,600 8,211
Other assets 387 411 98 103
Total assets 20,112 21,829 11,035 11,457
Current liabilities 238 1,034 478 311
Long term liabilities 11,703 11,819 - -
Shareholders` equity 8,171 8,976 10,557 11,146
Total liabilities and
shareholders` equity 20,112 21,829 11,035 11,457
Expenses
Exploration 33 152 42 466
Conference and travel 103 218 17 38
Consulting 79 (133) 222 27
Foreign exchange loss (gain) (262) 231 (117) (159)
Interest on term loan 416 253 - -
Interest expense (income) (167) (95) 16 (12)
Legal, accounting and audit 103 102 205 216
Gain on disposal of fixed asset - (19) (11) (11)
Office and administration 91 102 79 102
Salaries and benefits 330 394 335 408
Shareholder communications 58 112 38 78
Trust and filing 142 288 29 15
Subtotal 926 1,605 855 1,168
Stock-based compensation -
exploration - - (2) (6)
Stock-based compensation -
office and administration 1 - (1) (3)
Future income tax expense
(recovery) (1) (25) 4 (100)
Loss for the period 926 1,580 856 1,059
Basic and diluted loss per share 0.01 0.01 0.01 0.01
Weighted average number of
common shares outstanding 148,228 148,220 148,220 148,220
Mar 31 Dec 31 Sep 30 Jun 30
2006 2005 2005 2005
Current assets 4,103 5,159 6,369 8,327
Mineral properties 8,493 8,502 8,661 8,495
Other assets 161 174 181 179
Total assets 12,757 13,835 15,211 17,001
Current liabilities 273 379 351 1,248
Long term liabilities - - - -
Shareholders` equity 12,484 13,456 14,860 15,753
Total liabilities and
shareholders` equity 12,757 13,835 15,211 17,001
Expenses
Exploration 92 15 526 2,318
Conference and travel 88 208 26 191
Consulting 53 86 127 440
Foreign exchange loss (gain) 9 202 (113) (119)
Interest on term loan - - - -
Interest expense (income) (28) (27) 12 (60)
Legal, accounting and audit 167 173 (7) 178
Gain on disposal of fixed asset - - - -
Office and administration 71 121 158 96
Salaries and benefits 375 465 422 412
Shareholder communications 61 40 54 90
Trust and filing 84 3 (2) 8
Subtotal 972 1,286 1,203 3,554
Stock-based compensation -
exploration 24 (155) 32 843
Stock-based compensation -
office and administration 13 (367) 124 2,069
Future income tax expense
(recovery) - 117 (182) -
Loss for the period 1,009 881 1,177 6,466
Basic and diluted loss per share 0.01 0.01 0.01 0.04
Weighted average number of
common shares outstanding 148,220 148,107 148,069 148,028
1.5 Results of Operations
The loss for the three months ended March 31, 2007 was $926,130 compared to a
loss of $1,009,714 for the first quarter 2006. This decrease primarily resulted
from interest income of $219,778, foreign exchange gains of $262,248 which
offset interest on the term loan of $416,099. The Company recorded a loss of
$0.01 per share for the first quarter of 2007, which equates to a loss of $0.01
per share for the same quarter of 2006.
Exploration expenditures decreased in the first quarter of the year to $33,020
from $91,994 in the first quarter of fiscal 2006 due to decreased activities at
the Boikgantsho and Ga-Phasha projects. The exploration expenses for the first
quarter of 2007 were mainly incurred on the Boikgantsho project.
Legal, accounting and audit for the period ended March 31, 2007 amounted to
$102,785 in comparison to $166,812 for the first quarter of fiscal 2006, mainly
due to reduced legal advisory fees. Office and administration for the first
quarter of 2007 amounted to $91,156 in comparison to $70,687 spent for the
first quarter of fiscal 2006.
Conference and travel costs increased to $103,122 for the first quarter of 2007
from $87,663 in the first quarter 2006 due to travel by management personnel to
mining conferences.
Consulting costs increased to $78,729 in comparison to $52,553 spent in the
first quarter of fiscal 2006. Salaries and benefits for the first quarter of
2007 amounted to $329,754 in comparison to $375,394 spent in the first quarter
of fiscal 2006. This fluctuation is within the course of normal operations.
Trust and filing for the period ended March 31, 2007 amounted to $141,598 in
comparison to the $84,116 incurred in the first quarter of fiscal 2006. The
increase is due to additional regulatory filing costs associated with the
Company`s listing on the Johannesburg Stock Exchange.
1.6 Liquidity
At March 31, 2007, the Company had working capital of approximately $11.1
million as compared to $12.1 million at the end of the 2006 fiscal year. The
cash position at March 31, 2007 was approximately $10.9 million.
Anooraq`s sources of capital are primarily equity investment and most recently
a term loan. The Company`s access to capital sources is dependant upon general
financial market conditions, especially those that pertain to venture capital
situations such as mineral exploration and development. There can be no
assurance that Anooraq`s future capital requirements can be met in the long
term, or that adequate financing will be obtained on a timely basis or at all.
Failure to obtain adequate financing will result in significant delays of
exploration programs and a substantial curtailment of operations. The Company`s
cash resources at March 31, 2007 are sufficient for its present needs,
specifically to continue administrative and exploration operations at current
levels through the end of the year 2007. Future programs may be deferred and
operations curtailed if additional funding is not secured. However, the Company
anticipates being able to raise additional financing.
The Company had 148,305,407 common shares outstanding at March 31, 2007. As the
Company proceeds on its exploration programs in the Bushveld, it will need to
raise additional funds for such expenditures from time to time. Anooraq will
issue to Pelawan 36 million common shares ("Adjustment Consideration Shares"),
representing a 50% reduction in the number of shares potentially to be issued
under the original RTO transaction terms. The Company is currently awaiting
regulatory approval for the issuance of the Adjustment Consideration Shares.
The Company`s tabular disclosure of contractual obligations at March 31, 2007
is as follows:
Payments due by period
Less than
Total 1 year 1 to 3 years
Contractual obligation Nil Nil Nil
Long term debt obligations 17.5m Nil 4.5m
Operating lease obligations Nil Nil Nil
Purchase obligations Nil Nil Nil
Other Nil Nil Nil
Total 17.5m Nil 4.5m
Payments due by period
More than 5
3-5 years years
Contractual obligation Nil Nil
Long term debt obligations 13.0m Nil
Operating lease obligations Nil Nil
Purchase obligations Nil Nil
Other Nil Nil
Total 13.0m Nil
Other than previously disclosed, the Company has no other capital lease
obligations, operating leases or any other long term debt. The Company has
routine market-price leases on its office premises in Johannesburg.
The Company has no "Purchase Obligations" defined as any agreement to purchase
goods or services that is enforceable and legally binding on the Company that
specifies all significant terms, including: fixed or minimum quantities to be
purchased; fixed, minimum or variable price provisions; and the approximate
timing of the transaction.
The Company`s long term debt obligations are denominated in South African Rand
("ZAR"). Payments and settlement on the obligation is denominated in ZAR. Long
term obligations have been presented at an exchange rate of 1 Canadian dollar =
6.33ZAR.
1.7 Capital Resources
At March 31, 2007, Anooraq had working capital of approximately $11.1 million
as compared to $12.1 million at the end of the 2006 fiscal year. The Company
had approximately 148 million common shares outstanding at March 31, 2007.
1.8 Off-Balance Sheet Arrangements
None.
1.9 Transactions with Related Parties
Hunter Dickinson Inc. ("HDI") is a private company owned equally by ten public
companies, one of which is Anooraq. HDI provides geological, corporate
development, administrative and management services to, and incurs third party
costs on behalf of the Company on a full cost recovery basis, pursuant to an
agreement dated December 31, 1996. During the first quarter of 2007 HDI billed
Anooraq $154,004 as compared to $322,047 for the first fiscal quarter of 2006
for such services and cost reimbursements.
Southgold Exploration (Proprietary) Limited ("Southgold") is a wholly-owned
subsidiary of Great Basin Gold Ltd., a Canadian public company which has
certain directors in common with the Company. Southgold shared certain premises
and other facilities in 2006 with the Company pursuant to a cost- sharing
arrangement based on a full cost recovery basis.
During the period ended March 31, 2007, the Company paid or accrued $13,501
(first fiscal quarter 2006 - $27,101) to CEC Engineering Ltd, a private company
owned by a former director, for engineering and project management services at
market rates.
1.10 Fourth Quarter
None.
1.11 Proposed Transactions
None.
1.12 Critical Accounting Estimates
The Company`s accounting policies follow the same accounting policies and
methods of application as presented in note 3 of the consolidated financial
statements for the year ended December 31, 2006, and as presented in changes in
accounting policies item 1.13 and note 3 of the consolidated financial
statements for the three months ended March 31, 2007 which have been publicly
filed on SEDAR at www.sedar.com. The preparation of consolidated financial
statements in accordance with generally accepted accounting principles requires
management to select accounting policies and make estimates.
Such estimates may have a significant impact on the financial statements. These
estimates include:
mineral resources and reserves,
the carrying values of mineral property, plant and equipment,
restoration costs following completion of the mining activities, and
the valuation of stock-based compensation expense.
Actual amounts could differ from the estimates used and, accordingly, effect
the results of operation.
Mineral resources and reserves, and the carrying values of mineral property,
plant and equipment
Mineral resources and reserves are estimated by professional geologists and
engineers in accordance with recognized industry, professional and regulatory
standards. These estimates require inputs such as future metals prices, future
operating costs, and various technical geological, engineering, and
construction parameters. Changes in any of these inputs could cause a
significant change in the estimated resources and reserves which, in turn,
could have a material effect on the carrying value of mineral property, plant
and equipment.
Site restoration costs
Upon the completion of any mining activities, the Company will ordinarily be
required to undertake environmental reclamation activities in accordance with
local and/or industry standards. The estimated costs of these reclamation
activities are dependent on labour costs, the environmental impacts of the
Company`s operations, the effectiveness of the chosen reclamation techniques,
and applicable government environmental standards. Changes in any of these
factors could cause a significant change in the reclamation expense charged in
a period.
Stock-based compensation expense
From time to time, the Company may grant share purchase options to employees,
directors, and service providers. The Company uses the Black-Scholes option
pricing model to estimate a value for these options. This model, and other
models which are used to value options, requires inputs such as expected
volatility, expected life to exercise, and interest rates. Changes in any of
these inputs could cause a significant change in the stock-based compensation
expense charged in a period.
1.13 Changes in Accounting Policies including Initial Adoption
The CICA issued Section 3855, Financial Instruments -Recognition and
Measurement, Section 3861, "Financial Instruments - Disclosure and
Presentation", Section 3865, "Hedges", and Section 1530, "Comprehensive
Income", all applicable to the Company for annual or interim accounting periods
beginning on January 1, 2007.
Section 3855 requires all financial assets, financial liabilities and
non-financial derivatives to be recognized on the balance sheet and measured
based on specified categories. Section 3861 identifies and details information
to be disclosed in the financial statements.
Section 3865 sets out when hedge accounting can be applied and builds on
existing Canadian GAAP guidance by specifying how hedge accounting is applied
and disclosed.
Section 1530 introduces new standards for the presentation and disclosur e of
the components of comprehensive income. Comprehensive income is defined as the
change in net assets of an enterprise during a reporting period from
transactions and other events and circumstances from non-owner sources.
The CICA also issued Section 1506, Accounting Changes, which revises the
current standards on changes in accounting policy, estimates or errors as
follows: voluntary changes in accounting policy are allowed only when they
result in financial statements that provide reliable and more relevant
information; changes in accounting policy are to be applied retrospectively
unless doing so is impracticable; changes in estimates are to be recorded
prospectively; and prior period adjustments are to be corrected
retrospectively. In addition, this standard calls for enhanced disclosure about
the effects of changes in accounting policies, estimates and errors on the
financial statements.
1.14 Financial Instruments and Other Instruments
The carrying amounts of cash and equivalents, amounts receivable, and accounts
payable and accrued liabilities approximate their fair values due to their
short-term nature. The carrying values of the term loan approximate its fair
value based on market rates of interest. It is not practicable to determine the
fair values of amounts receivable due from to related parties due to the
related party nature of such amounts and the absence of a secondary market for
such instruments.
1.15 Other MD&A Requirements
Not applicable.
1.15.1 Additional Disclosure for Venture Issuers without Significant Revenue
Not applicable. The Company is not a venture issuer.
1.15.2 Disclosure of Outstanding Share Data
The following details the share capital structure as at May 3, 2007. These
figures may be subject to minor accounting adjustments prior to presentation in
future consolidated financial statements.
Exercise
Expiry date price Number Number
Common shares 148,410,907
Share
purchase
options September 28, 2007 $ 1.40 301,500
December 14, 2007 $ 1.40 298,200
December 17, 2010 $ 1.40 3,065,000 3,664,700
Subject to the settlement agreement with Pelawan discussed in Section 1.2.1,
the Company is required to issue to Pelawan 36 million common shares and 167
million warrants. Each warrant is exercisable until December 31, 2008 and can
be exercised at the higher of (a) $1.35 if exercised on or before December 31,
2007 or $1.48 if exercised after December 31, 2007 or (b) at a price that is
50% less than the price per Anooraq common share payable by arms length parties
under an equity financing undertaken by the Company that either raises an
amount of at least $98,400,000 or is undertaken pursuant to a material
transaction (a "Concurrent Financing").
The Company is currently awaiting approval from the respective regulatory
agencies for the issuance of the shares.
This discussion includes certain statements that may be deemed "forward-looking
statements". All statements in this discussion, other than statements of
historical facts, that address future production, reserve potential,
exploration drilling, exploitation activities and events or developments that
the Company expects are forward-looking statements. Although the Company
believes the expectations expressed in such forward-looking statements are
based on reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from those
in the forward-looking statements. Factors that could cause actual results to
differ materially from those in forward-looking statements include market
prices, exploitation and exploration successes, continued availability of
capital and financing and general economic, market or business conditions.
Investors are cautioned that any such statements are not guarantees of future
performance and actual results or developments may differ materially from those
projected in the forward-looking statements.
1.15.3 Disclosure Controls and Procedures
The Company`s management is responsible for establishing and maintaining
adequate internal control over financial reporting. Any system of internal
control over financial reporting, no matter how well designed, has inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.
There have been no changes in the Company`s internal control over financial
reporting during the quarter ended March 31, 2007 that have materially
affected, or are reasonably likely to materially affect, internal control over
financial reporting.
The Company has disclosure controls and procedures in place to provide
reasonable assurance that any information required to be disclosed by the
Company under securities legislation is recorded, processed, summarized and
reported within the applicable time periods and to ensure that required
information is gathered and communicated to the Company`s management so that
decisions can be made about timely disclosure of that information.
There have been no significant changes in the Company`s disclosure controls
during the quarter ended March 31, 2007 that could significantly affect
disclosure controls subsequent to the date the Company carried out its
evaluation.
ANOORAQ RESOURCES CORPORATION
Notes to Consolidated Financial Statements
For the three months ended March 31, 2007
(Unaudited - Expressed in Canadian Dollars, unless otherwise stated)
1. NATURE OF OPERATIONS
Anooraq Resources Corporation (the "Company" or "Anooraq") is incorporated in
the Province of British Columbia, Canada and its principal business activity is
the exploration of mineral property interests. Since 1999, the Company has
focused on mineral property interests located in the Republic of South Africa,
with particular attention on the Bushveld Complex.
Operating results for the three month period ended March 31, 2007 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 2007.
The Company is in the process of exploring its mineral property interests and
has not yet determined whether its mineral property interests contain
economically recoverable mineral reserves. The underlyi ng value and the
recoverability of the amounts shown for mineral property interests are entirely
dependent upon the existence of economically recoverable mineral reserves, the
ability of the Company to obtain the necessary financing to complete the
exploration and development of the mineral property interests, and future
profitable production or proceeds from the disposition of the mineral property
interests.
The consolidated financial statements are prepared on the basis that the
Company will continue as a going concern. Management recognizes that the
Company will need to generate additional financial resources in order to meet
its planned business objectives. However, there can be no assurances that the
Company will continue to obtain additional financial resources and/or achieve
profitability or positive cash flows. If the Company is unable to obtain
adequate additional financing, the Company will be required to curtail
operations and exploration activities. Furthermore, failure to continue as a
going concern would require that the Company`s assets and liabilities be
restated on a liquidation basis which would differ significantly from the going
concern basis.
2. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
These interim consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles. The interim
consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly owned. The Company`s investment in the
Ga-Phasha joint venture is accounted for using the equity method.
These interim financial statements do not include all the disclosures required
for annual financial statements under generally accepted accounting principles.
However, these interim financial statements follow the same accounting policies
and methods of application as the Company`s most recent audited annual
financial statements except for the changes described in note 3 below.
These interim consolidated financial statements should be read in conjunction
with the Company`s audited annual consolidated financial statements.
3. CHANGES IN ACCOUNTING POLICIES
Effective January 1, 2007, the Company adopted the following new accounting
standards issued by the Canadian Institute of Chartered Accountants ("CICA")
relating to financial instruments. These new standards have been adopted on a
prospective basis with no restatement to prior period financial statements.
(a) Section 3855 - Financial Instruments - Recognition and Measurement.
This standard sets out criteria for the recognition and measurement of
financial instruments for fiscal years beginning on or after October 1, 2006.
This standard requires all financial instruments within its scope, including
derivatives, to be included on a Company`s balance sheet and measured either at
fair value or, in certain circumstances when fair value may not be considered
most relevant, at cost or amortized cost. Changes in fair value are to be
recognized in the statements of operations and comprehensive income.
All financial assets and liabilities are recognized when the entity becomes a
party to the contract creating the item. As such, any of the Company`s
outstanding financial assets and liabilities at the effective date of adoption
are recognized and measured in accordance with the new requirements as if these
requirements had always been in effect. Any changes to the fair values of
assets and liabilities prior to January 1, 2007 are recognized by adjusting
opening deficit or opening accumulated other comprehensive income.
All financial instruments are classified into one of the following five
categories: held for trading, held-to-maturity, loans and receivables,
available-for-sale financial assets, or other financial liabilities. Initial
and subsequent measurement and recognition of changes in the value of financial
instruments depends on their initial classification:
Held-to-maturity investments, loans and receivables, and other financial
liabilities are initially measured at fair value and subsequently measured at
amortized cost.
Available-for-sale financial assets are measured at fair value. Revaluation
gains and losses are included in other comprehensive income until the asset is
removed from the balance sheet.
Held for trading financial instruments are measured at fair value. All gains
and losses are included in net earnings in the period in which they arise.
All derivative financial instruments are measured at fair value, even when
they are part of a hedging relationship. All gains and losses are included in
net earnings in the period in which they arise.
(b) Section 3865 - Hedges.
This new standard specifies the circumstances under which hedge accounting is
permissible and how hedge accounting may be performed. The Company currently
does not have any hedges.
(c) Section 1530 - Comprehensive Income.
Comprehensive income is the change in the Company`s net assets that results
from transactions, events, and circumstances from other than the Company`s
shareholders. This standard requires certain gains and losses that would
otherwise be recorded as part of net earnings to be presented in other
"comprehensive income" until it is considered appropriate to recognize into net
earnings. This standard requires the presentation of comprehensive income, and
its components in a separate financial statement that is displayed with the
same prominence as the other financial statements.
Accordingly, the Company now reports a consolidated statement of comprehensive
income (loss) and includes the account "accumulated other comprehensive income"
in the shareholders` equity section of the consolidated balance sheet.
4. MINERAL PROPERTY INTERESTS
Three months ended Year ended
March 31, 2007 December 31, 2006
Ga-Phasha Project
Balance, beginning of year $ 4,040,751 $ 4,302,000
Equity loss - exploration expenses (18,803) (555,677)
Net investments during the period 12,713 59,428
Equity gain - future income tax
recovery 1,000 121,000
Equity gain - foreign exchange 163,000 114,000
Ga-Phasha Project, end of period 4,198,661 4,040,751
Platreef Properties - acquisition
costs 4,200,000 4,200,000
Balance, end of period $ 8,398,661 $ 8,240,751
5. SHARE CAPITAL
(a) Authorized share capital
The Company`s authorized share capital consists of an unlimited number of
common shares without par value.
(b) Share option plan
The continuity of share purchase options is as follows:
Contractual
Weighted weighted average
average remaining life
exercise price Number of options (years)
Balance, December
31, 2004 $ 1.87 2,610,000 1.54
Granted 1.39 4,233,200
Exercised 0.79 (200,000)
Expired 2.00 (1,522,500)
Cancelled 1.60 (342,500)
Balance, December
31, 2005 $ 1.47 4,778,200 3.61
Cancelled 1.90 (235,000)
Expired 1.84 (555,000)
Balance, December
31, 2006 $ 1.39 3,988,200 3.23
Exercised 1.40 (85,000)
Cancelled 1.40 (60,000)
Balance, March
31, 2007 $ 1.39 3,843,200 3.08
Options outstanding and exercisable at March 31, 2007 were as follows:
Number of
options
Expiry date Option price outstanding
July 1, 2007 $ 0.95 100,000
September 28, 2007 $ 1.40 345,000
December 14, 2007 $ 1.40 333,200
December 17, 2010 $ 1.40 3,065,000
Total 3,843,200
Average option price $ 1.39
There were no options granted during the 3 months ended March 31, 2007.
(c) Commitment to issue common shares
Pursuant to the Settlement Agreement in December 2006 between the Company and
Pelawan Investments (Proprietary) Limited ("Pelawan") as described in note 5(a)
of the audited consolidated financial statements for the year ended December
31, 2006, Pelawan has waived the deemed dilutive financing contemplated in the
2004 share exchange agreement. Under the terms of the Settlement Agreement:
(i) Anooraq will issue to Pelawan 36 million common shares ("Adjustment
Consideration Shares"). The Company is currently awaiting regulatory approval
for the issuance of the Adjustment Consideration Shares.
(ii) Anooraq will issue to Pelawan share purchase warrants for the purchase of
167 million common shares in Anooraq ("BEE Warrants"). The BEE Warrants are
exercisable until December 31, 2008. The BEE Warrants can be exercised at the
higher of (a) $1.35 if exercised on or before December 31, 2007 or $1.48 if
exercised after December 31, 2007 or (b) at a price that is 50% less than the
price per Anooraq common share payable by arms length parties under an equity
financing undertaken by the Company that either raises an amount of at least
$98.4 million or is undertaken pursuant to a material transaction (a
"Concurrent Financing"). The Company is currently awaiting regulatory approval
for the issuance of the BEE Warrants.
(iii) From the date of issue of the Adjustment Consideration Shares to Pelawan
in (i) above or as a result of the exercise of any of the BEE Warrants up to
the closing date of the Concurrent Financing, the common shares issued to
Pelawan pursuant thereto will be subject to a lock up arrangement and Pelawan
will not be entitled to dispose of any of these shares, save for the exemption
referred to in (iv) below and the payment of taxes. After the closing date of
the Concurrent Financing, the disposal of such shares shall remain subject to
the original lock up agreement entered into between Pelawan and Anooraq under
the terms of the original RTO transaction ("the BEE Lock Up"), which is the
earlier of September 29, 2010 or twelve months after the commencement of
commercial production from the Ga- Phasha Project.
(iv) Anooraq has agreed to grant Pelawan an exemption to the BEE Lock Up for
the purposes of facilitating Pelawan`s financing of the exercise of the BEE
Warrants. In the event that Pelawan exercises any BEE Warrants, Pelawan shall,
in its sole discretion, be entitled to dispose that number of common shares up
to 25% (or such greater amount as is required to facilitate the financing of
the exercise of the BEE Warrants) of the aggregate common shares issued to
Pelawan pursuant to such exercise, provided that all of the proceeds received
by Pelawan from such disposal shall be applied by Pelawan to support the
financing of the exercise of the BEE Warrants and reasonable expenses related
to such exercise.
(v) On the occurrence of a Concurrent Financing, Pelawan shall be obliged to
exercise the BEE Warrants to ensure, at a minimum, that Anooraq retains its
status as a 52% controlled BEE company, in compliance with undertakings given
by Pelawan and the Company in favour of the South African Reserve Bank and
Anglo Platinum Limited.
6. RELATED PARTY TRANSACTIONS AND BALANCES
Three months
ended Year ended
Note March 31 December 31
Services rendered by ref 2007 2006
Hunter Dickinson Inc. (a) $ 154,004 $ 1,023,633
CEC Engineering Ltd. (b) 13,501 127,781
As at As at
March 31 December 31
Related party balances receivable 2007 2006
Hunter Dickinson Inc. (a) $ 143,366 $ 98,820
Southgold Exploration (Proprietary) (c)
Limited 19,368 39,796
Receivable from related parties $ 162,734 $ 138,616
Related party balances payable March 31 December 31
(included in accounts payable) 2007 2006
CEC Engineering Ltd. ( b) - 6,435
(a) Hunter Dickinson Inc. ("HDI") is a private company owned equally by ten
public companies, one of which is the Company. HDI has certain directors in
common with the Company and provides geological, corporate development,
administrative and management services to, and incurs third party costs on
behalf of, the Company and its subsidiaries on a full cost recovery basis
pursuant to an agreement dated December 31, 1996.
(b) During the three months ended March 31, 2007, the Company paid or accrued
$13,501 (2006 - $27,101) to CEC Engineering Ltd, a private company owned by a
former director, for engineering and project management services at market
rates.
(c) Southgold Exploration (Proprietary) Limited ("Southgold") is a
wholly-owned subsidiary of Great Basin Gold Ltd., a Canadian public company
which has certain directors in common with the Company. Southgold shared
certain premises and other facilities in 2006 with the Company pursuant to a
cost-sharing arrangement based on a full cost recovery basis.
7. SUBSEQUENT EVENT
Subsequent to March 31, 2007, the Company issued 175,000 common shares pursuant
to the exercise of share purchase options at $1.40 per share.
Date: 15/05/2007 13:00:03 Produced by the JSE SENS Department.
