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GBG
GBG
GBG - Great Basin - Audited Consolidated Financial Statements For
The Year Ended 31 December 2007
GREAT BASIN GOLD LIMITED
(Incorporated in Canada and registered as an External Company in South Africa)
(Registration No. 2006/021304/10)
Share Code: GBG & ISIN Number: CA3901241057
("Great Basin" or "the Company")
AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007
CONSOLIDATED BALANCE SHEETS
As at December 31, 2007 and 2006
(Expressed in Canadian Dollars)
December 31 December 31
2007 2006
$ $
Assets
Current assets
Cash and cash equivalents 78,362,954 33,964,436
Amounts receivable 3,737,903 426,349
Inventory 199,185 53,437
Due from related parties 408,638 173,455
Held-for-trading financial
instruments 833,000 -
Prepaid expenses 811,208 539,991
84,352,888 35,157,668
Property, plant and equipment 14,295,727 1,472,501
Reclamation deposits 1,720,456 103,702
Investments - 2,274,649
Available-for-sale financial
instruments 3,326,084 -
Investment in associates 7,203,973 -
Mineral property interests 218,413,930 110,910,000
Total assets 329,313,058 149,918,520
Liabilities and Shareholders`
Equity
Current liabilities
Accounts payable and accrued 6,099,246 1,330,823
liabilities
Due to related parties 22,098 -
6,121,344 1,330,823
Future income taxes 33,983,164 18,837,000
Site reclamation obligations 1,416,964 405,000
35,400,128 19,242,000
Shareholders` equity
Share capital 389,451,022 201,457,592
Warrants 17,934,934 1,252,000
Contributed surplus 12,197,791 7,863,472
Deficit (132,395,033) (81,227,367)
Accumulated other comprehensive
income 602,872 -
287,791,586 129,345,697
149,918,520
329,313,058
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the years ended December 31, 2007 and 2006
(Expressed in Canadian Dollars)
Years ended December 31
2007 2006
$ $
Expenses (income)
Exploration and pre-development 42,044,831 8,007,215
Accretion of reclamation obligation 37,466 -
Conference and travel 1,474,495 1,076,087
Foreign exchange loss(gain) 2,532,752 (1,855,404)
Other income - proceeds from bulk (2,695,599) -
sample
Interest and other income (3,725,837) (1,278,543)
Legal, accounting, and audit 1,235,634 541,391
Office and administration 17,655,463 7,249,189
Shareholder communications 431,526 337,111
Trust and filing 359,877 234,483
(Gain) loss on disposal of assets (992,684) 916
Loss before the undernoted and 58,357,924 14,312,445
income taxes
Loss from associate 796,027 -
Gain on sale of investments - (112,005)
Fair value of financial instruments (937,365) -
held-for-trading received
Fair value adjustment on financial 104,365 -
instruments held-for-trading
Mark-to-market adjustment on - (212,000)
investments
Loss before income taxes 58,320,951 13,988,440
Future income tax recovery (7,153,285) (2,371,629)
Loss for the year 51,167,666 11,616,811
Other comprehensive income
(538,061) -
Unrealized gain on available-for-
sale financial instruments
(538,061) -
Other comprehensive income
50,629,605 11,616,811
Total comprehensive loss
Basic and diluted loss per share 0.31 0.11
Weighted average number of common 166,098,884 104,514,077
shares outstanding
CONSOLIDATED STATEMENTS OF SHAREHOLDERS`EQUITY AND DEFICIT
(Expressed in Canadian Dollars)
Year ended Year ended
December 31, 2007 December 31, 2006
$ $
Common shares Shares Shares
Balance at 201,457,592 93,685,379 161,228,635
beginning of
year 113,411,713
Fair value of 2,005,064 - 753,849
options -
exercised
Private - 3,333,334 7,033,683
placement, net
of share issue -
costs
Shares issued
for cash, net of
share issue 57,500,000 121,427,869 11,200,000 23,058,915
costs
Share purchase 5,111,184 1,193,000 1,782,510
options 3,015,830
exercised
Shares issued - 4,000,000 7,600,000
for Burnstone
Gold Property,
July 2006 -
Shares issued 19,666,931 - -
for Hecla
Ventures Corp., 7,930,214
April 2007
Shares issued to 36,323,195 - -
Tranter
Burnstone (Pty)
Ltd, October 19,938,650
2007
Share purchase 3,459,187 - -
warrants
exercised 1,599,495
Balance at end 389,451,022 113,411,713 201,457,592
of the year 203,395,902
Share purchase Warrants
warrants Warrants
Balance at 1,252,000 - -
beginning of the
year 2,672,000
Warrants issued 16,210,226 672,000 159,000
pursuant to
share issuance 28,750,000
Warrants issued 1,178,815 - -
pursuant Tranter
transaction 1,684,312
Warrants issued - 2,000,000 1,093,000
for Burnstone
Gold Property -
Exercised (1,599,495) (688,689) - -
Expired (73,615) (17,418) - -
Balance at end 17,934,934 2,672,000 1,252,000
of year 31,433,202
Contributed
surplus
Balance at 7,863,472 5,007,211
beginning of the
year
Non-cash stock- 5,633,276 3,610,110
based
compensation
Share purchase
options
exercised,
credited to
share capital (2,005,064) (753,849)
Fair value of 688,689 -
share purchase
warrants
exercised
Fair value of 17,418 -
share purchase
warrants expired
Balance at end 12,197,791 7,863,472
of the year
Deficit
Balance at (81,227,367) (69,610,556)
beginning of the
year
Net loss for the (51,167,666) (11,616,811)
period
Balance at end (132,395,033) (81,227,367)
of the year
Accumulated
other
comprehensive
income
Adjustment to 64,811 -
opening balance
- change in
accounting
policy
Unrealized gain 538,061 -
on available-for-
sale financial
instruments
Balance at end 602,872 -
of the year
TOTAL 287,791,586 129,345,697
SHAREHOLDERS`
EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2007 and 2006
(Expressed in Canadian Dollars)
Years ended December 31
2007 2006
$ $
Operating activities
Loss for the year (51,167,666) (11,616,811)
Items not involving cash
Depreciation 1,056,497 119,597
Future income tax recovery (7,153,285) (2,371,629)
Gain on sale of investment - (112,005)
Gain (loss) on sale of assets (992,684) 916
Assets written off 1,236 -
Mark-to-market adjustment on - (212,000)
investments
Fair value adjustment on financial 104,365 -
instruments held-for-trading
Fair value of financial instruments (937,365) -
held-for-trading received
Non-cash stock-based compensation 5,633,276 3,610,110
expense
Provision for site reclamation cost 289,660 405,000
Unrealized foreign exchange loss (2,193,712) (1,708,226)
Loss from associate 796,027 -
Accretion reclamation obligation 37,466 -
Changes in non-cash operating
working capital
Amounts receivable (3,311,554) (217,587)
Prepaid expenses (271,217) (454,827)
Inventory (145,748) (53,437)
Accounts payable and accrued 3,951,908 686,578
liabilities
Taxation paid (238,107) (10,371)
Dividends received (17,640) -
Cash used in operating activities (54,558,543) (11,934,692)
Investing activities
(11,727,860) (23,774)
Mineral property acquisition costs
Acquire shares in Rand Mutual (60) -
Assurance
Dividends received 17,640 -
Proceeds on sale of investments - 547,005
Proceeds on sale of assets 1,001,236 -
Cost on sale of assets (6,789) -
Purchase of equipment (12,978,896) (1,586,934)
Purchase of shares in Rusaf Gold -
Limited (8,000,000)
Purchase of Hecla Ventures Corp. (50,791,500) -
Purchase of shares on exercise of - (44,000)
Lumina warrants
Purchase of shares in Kryso (448,503) (2,274,649)
Resources Plc.
Reclamation deposits (1,616,754) (40,122)
Cash used in investing activities (84,551,486) (3,422,474)
Financing activities
183,710,476 32,034,108
Common shares issued for cash, net
of issue costs
Advances to from related parties (213,085) (229,415)
183,497,391 31,804,693
Cash generated from financing
activities
Increase in cash and equivalents 44,387,362 16,447,527
Cash acquired through the purchase 11,156 -
of Hecla Ventures Corp.
Cash and equivalents, beginning of 33,964,436 17,516,909
year
Cash and equivalents, end of year 78,362,954 33,964,436
CONSOLIDATED SCHEDULE OF EXPLORATION AND PRE-DEVELOPMENT EXPENSES
(Expressed in Canadian Dollars)
Mineral Property Interests Year ended Year ended
December 31 December 31
2007 2006
$ $
Burnstone - Pre-development
Metallurgical plant 186,837 -
Vertical shaft 508,530 -
Pre-development expenses 695,367 -
incurred during the year
Cumulative pre-development - -
expenditures beginning of year
695,367 -
Cumulative pre-development
expenditures, end of year
Hollister - Pre-development
Equipment rental and services 1,937,187 -
Surface infrastructure 2,942,261 -
Underground access and 6,682,426 -
infrastructure
Operational costs 6,289,421 -
Pre-development expenses before 17,851,295 -
the following
Office and administration 498,990 -
Pre-development expenses 18,350,285 -
incurred during the year
Cumulative pre-development - -
expenditures beginning of year
Pre-development expenses 18,350,285 -
incurred end the year
Burnstone - Exploration
Assays and analysis 122,805 82,082
Depreciation 443,666 119,103
Drilling 2,427,840 939,705
Engineering 27,034 246,864
Environmental, socio-economic 12,666 140,183
and land
Equipment rental (21,900) 5,647
Geological 279,522 149,289
Graphics 15,727 2,821
Property fees and exploration 22,907 105,089
option payments
Site activities (20,884) 267,581
Provision for site reclamation - 405,000
cost
Transportation 3,788 4,874
Exploration expenses before the 3,313,171 2,468,238
following
Office and administration 92,612 335,357
Exploration expenses incurred 3,405,783 2,803,595
during the year
Cumulative exploration 24,327,572 21,523,977
expenditures beginning of year
Cumulative exploration 27,733,355 24,327,572
expenditures, end of year
Hollister - Exploration
Assays and analysis 425,298 14,291
Depreciation 612,831 494
Drilling 2,880,079 389,823
Engineering 1,170,116 118,469
Environmental, socio-economic 1,574,917 511,970
and land
Equipment rental 24,350 -
Freight 47,292 -
Geological 606,237 401,164
Graphics 52,026 26,724
Property fees and exploration 168,334 155,814
option payments
Site activities 725,672 29,408
Transportation 68,656 17,606
Exploration expenses before the 8,355,808 1,665,763
following
Office and administration 233,565 226,326
Exploration expenses incurred 8,589,373 1,892,089
during the year
Cumulative exploration 25,192,512 23,300,423
expenditures beginning of year
Cumulative exploration 33,781,885 25,192,512
expenditures, end of year
Other - Exploration
Assays and analysis 100,271 74,931
Drilling 195,976 326,054
Engineering 20,109 45,853
Environmental, socio-economic 4,316 1,268
and land
Equipment rental 46,383 20,291
Freight 14,450 -
Geological 273,369 320,260
Graphics 18,408 35,308
Property fees and exploration 84,363 1,419
option payments
Site activities 253,184 118,182
Transportation 55,968 22,437
Exploration expenses before the 1,066,797 966,003
following
Office and administration 29,820 131,250
Exploration expenses incurred 1,096,617 1,097,253
during the year
Cumulative exploration 1,431,474 334,221
expenditures beginning of year
Cumulative exploration 2,528,091 1,431,474
expenditures, end of year
Burnstone - Bulk Sampling
Establishment work 697,457 393,129
Equipment rental and services 1,047,259 185,314
Surface infrastructure 836,042 536,019
Portal construction 308,660 322,257
Underground access and 4,000,468 443,229
infrastructure
Optimisation 523,543 -
Operational costs 3,348,964 966,521
Property fees - 60,742
Pre-development expenses before 10,762,393 2,907,211
the following
Office and administration 320,274 395,000
Pre-development expenses 11,082,667 3,302,211
incurred during the year
Cumulative pre-development 3,302,211 -
expenditures beginning of year
Cumulative pre-development 14,384,878 3,302,211
expenditures, end of year
Total pre-development and 42,044,831 8,007,215
exploration expenses before the
following
Office and administration 1,175,261 1,087,933
Total pre-development and 43,220,092 9,095,148
exploration expenses incurred
during the year
Cumulative pre-development and 54,253,769 45,158,621
exploration expenditures
beginning of year
Cumulative pre-development and 97,473,861 54,253,769
exploration expenditures, end of
year
1. NATURE OF OPERATIONS
Great Basin Gold Ltd. ("Great Basin" or the "Company") is incorporated
under the laws of the Province of British Columbia and its principal
business activity is the exploration and development of mineral property
interests. The Company`s principal mineral property interests are the
Hollister Gold Property ("Hollister") (formerly Ivanhoe Gold Property)
located in Nevada, United States of America ("USA"), and the Burnstone Gold
Property ("Burnstone") located in the Republic of South Africa ("South
Africa").
The Company is in the process of exploring and developing its mineral
property interests and has not yet obtained the required mining rights and
permits to commence mining activities. The underlying value and the
recoverability of the amounts shown for mineral property interests and
equipment 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.
2. BASIS OF PREPARATION AND PRINCIPLES OF CONSOLIDATION
These financial statements have been prepared in accordance with Canadian
Generally Accepted Accounting Principles, which as described in note 20 of
the annual consolidated financial statements, differ in certain respects
from accounting principles generally accepted in the United States of
America.
The principal accounting policies applied in the preparation of these
financial statements are set in the annual consolidated financial
statements. These policies have been consistently applied in all years
presented, unless otherwise stated.
These consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated.
3. CHANGES IN ACCOUNTING POLICIES
Effective January 1, 2007, the Company adopted the following new accounting
standards issued by the CICA relating to financial instruments. As required
by the transitional provisions of these new standards, these standards have
been adopted on a prospective basis with no restatement to prior period
financial statements.
(a) Financial Instruments - Recognition and Measurement (Section 3855)
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
statement of operations or comprehensive income (loss), depending on
the classification of the related instruments.
All financial assets and liabilities are recognized when the entity
becomes a party to the contract creating the asset or liability. 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 (loss).
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 for trading financial instruments are measured at fair
value. All changes in fair value are included 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. Changes in
fair value are included in the statement of operations in the
period in which they arise, except for hedge transactions which
qualify for hedge accounting treatment in which case gains and
closes are recognized in other comprehensive income (loss).
- Held-to-maturity investments, loans and receivables, and other
financial liabilities are initially measured at fair value and
subsequently measured at amortized cost. Amortization of premiums
or discounts and losses due to impairment are included in the
statement of operations.
- Available-for-sale financial assets are measured at fair value.
Changes in fair value are included in other comprehensive income
until the gain or loss is recognized in the statement of
operations.
In accordance with this new standard, the Company has classified its
financial instruments as follows:
- Marketable securities are classified as available-for-sale securities.
Such securities are measured at fair market value in the consolidated
financial statements with unrealized gains or losses recorded in other
comprehensive income (loss). At the time securities are sold or
otherwise disposed of, gains or losses are included in the loss for
the period.
- The Company`s shares in Kryso Resources Plc. are classified as
available-for-sale financial instruments. $64,811 was credited to the
opening balance of accumulated other comprehensive income to account
for the fair value adjustment required upon adoption of the standard
and $538,061 for the current year fair value adjustment.
- Derivative financial instruments are classified as held-for-trading
securities. Such securities are measured at fair market value in the
consolidated financial statements and all changes in fair value are
included in the statement of operations in the period in which they
arise.
The Company`s warrants in Kryso Resources Plc. are classified as held-
for-trading financial instruments.
- The carrying amounts of cash and cash equivalents, amounts receivable,
reclamation deposits, and accounts payable and accrued liabilities are
recorded at amortized cost.
(b) Hedging (Section 3865)
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 hedging agreements.
(c) Comprehensive Income (Section 1530)
Comprehensive income is the change in the Company`s shareholder equity that
results from transactions and other events from other than the Company`s
shareholders and includes items that would not normally be included in the
statement of operations, such as unrealized gains or losses on available-for-
sale investments. This standard requires certain gains and losses that would
otherwise be recorded as part of the statement of operations to be presented in
"other comprehensive income" until it is considered appropriate to recognize
into the statement of operations.
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
includes the account "accumulated other comprehensive income" in the
shareholders` equity section of the consolidated balance sheet.
4. SEGMENT DISCLOSURE
The Company operates in a single reportable operating segment, the
exploration and development of mineral properties. Geographic information
is as follows:
Assets December December
31 31
2007 2006
Canada
Assets other than mineral property
interests 56,796,521 31,308,371
Mineral property interests 1 2
United States
Assets other than mineral property 5,890,010 394,917
interests 95,156,279 3,945,348
Mineral property interests
South Africa
Assets other than mineral property
interests 48,212,597 7,305,232
Mineral property interests 123,257,650 106,964,650
149,918,520
Total assets 329,313,058
5. SUBSEQUENT EVENTS
Subsequent to December 31, 2007,
(a) Rusaf Gold Ltd acquisition
The Company announced on February 14, 2008 that it had entered into an
agreement with Rusaf Gold Ltd ("Rusaf") whereby it will purchase the
remaining 63% of the fully diluted equity shares of Rusaf for a total
consideration of $14.4 million, payable in approximately 4.9 million Great
Basin Gold common shares. The exchange ratio was one Great Basin Gold share
for every 4.5 Rusaf shares. For the year ended December 31, 2007 the
Company`s investment of 37% in the issued common stock of Rusaf was
recognized as an investment in associate and the Company has equity
accounted for its share of post-acquisition losses incurred.
The acquisition terms also provide for additional Great Basin Gold shares
to be issued in the first three years from closing, contingent upon gold
discoveries involving more than 500,000 ounces on certain mineral prospects
currently held by Rusaf. In the event of such discoveries, the Company will
issue shares valued at the higher of current or then-prevailing market
price to the former Rusaf shareholders on the basis of valuing these gold
ounces at US$15/oz for inferred resources and US$40/oz for measured and
indicated resources (subject to a minimum average cut-off grade of 1.5
grams per tonne or 0.04 oz per ton). The Company has also agreed to spend
between $7 million and $19 million in exploring Rusaf`s properties during
this period depending on independent advice as to the likelihood of
exploration success.
The Rusaf acquisition is subject to the approval of Rusaf shareholders,
certain judicial orders, as well as Toronto Stock Exchange and other
regulatory approvals. Assuming all such conditions are met in the ordinary
course, the parties are targeting completion of this transaction for the
second calendar quarter of 2008.
(b) Stock options granted
The Company granted 2,630,003 options on February 4, 2008 with an exercise
price of $3 per common share and an expiry date of February 4, 2011.
A further 3,385,000 options were also approved by the Compensation
Committee, which will be granted to the CEO, directors and executive staff
subsequent to the filing of the financial statements. The pricing of these
options was deferred to be determined after the release of the Company`s
2007 results based on a 5 day weighted average on the TSX.
(c) Service agreement with Related Party - Hunter Dickinson Inc.
The Company agreed on January 1, 2008 to an addendum to a Corporate
Services Agreement dated September 25, 2007 with HDI, whereby it will
settle a cancellation fee of $350,000 in cash and not by the issuance of
Great Basin common stock. The transaction was concluded accordingly and the
Company`s share was returned to treasury.
The full set of financial statements, Management Discussion and Analysis,
Annual Information Form as well as Form 40-F are available on Great Basin`s
website: www.greatbasingold.com
Approved by the Board of Directors
Ferdi Dippenaar Ronald W Thiessen
Director Director
4th Floor, 138 West Street 1020 - 800 West Pender Street
Sandown, Johannesburg Vancouver, BC Canada V6C 2V6
South Africa Tel 604 684?6365
Tel 011 884 1610 Fax 604 684?8092
Fax 011 884 1826 Toll Free 1 800 667?2114
www.greatbasingold.com
1 April 2008
Johannesburg
Sponsor
Nedbank Capital
Date: 01/04/2008 14:30:01 Produced by the JSE SENS Department.
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