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GBG
GBG
GBG - Great Basin Gold Limited - Audited consolidated financial statements
for the year ended December 31, 2008
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 DECEMBER 31, 2008
CONSOLIDATED BALANCE SHEETS
As at December 31, 2007 and 2006
(Expressed in Canadian Dollars)
December 31 December 31
2008 2007
$ $
Assets
Current assets
Cash and cash equivalents 33,549,118 78,362,954
Restricted cash 4,064,100 -
Amounts receivable 4,940,950 3,737,903
Inventory 8,246,093 199,185
Due from related parties 23,174 408,638
Held-for-trading financial
instruments 79,960 833,000
Other receivable 912,900 -
Prepaid expenses 890,183 811,208
52,706,478 84,352,888
Property, plant and equipment 48,849,185 14,295,727
Reclamation deposits 2,886,539 1,720,456
Available-for-sale financial
instruments 899,624 3,326,084
Investment in associates - 7,203,973
Mineral property interests 259,858,656 218,413,930
Total assets 365,200,482 329,313,058
Liabilities and Shareholders`
Equity
Current liabilities
Accounts payable and accrued
liabilities 26,276,562 6,099,246
Due to related parties 252,854 22,098
Current portion of long term
borrowings 916,745 -
27,446,161 6,121,344
Long term borrowings 62,060,594 -
Future income taxes 14,747,392 33,983,164
Site reclamation obligations 3,738,380 1,416,964
80,546,366 35,400,128
Shareholders` equity
Share capital 428,656,646 390,139,711
Warrants 24,005,896 17,934,934
Contributed surplus 21,599,521 11,509,102
Deficit (217,267,111) (132,395,033)
Accumulated other comprehensive
income 213,003 602,872
257,207,955 287,791,586
Total liabilities and shareholders`
equity 365,200,482 329,313,058
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the years ended December 31, 2008 and 2007
(Expressed in Canadian Dollars)
Years ended December 31
2008 2007
$ $
Revenue 24,716,323 -
(18,177,231) -
(Expenses) income
Production cost
Depletion charge (6,344,218) -
Exploration expenses (23,902,737) (13,091,773)
Pre-development expenses (62,597,563) (30,128,319)
Accretion of reclamation obligation (31,722) (37,466)
Conference and travel (1,607,065) (1,474,495)
Foreign exchange loss (2,737,378) (2,532,752)
Legal, accounting, and audit (1,759,612) (1,235,634)
Office and administration (7,396,242) (4,098,435)
Other income 176,877 2,728,886
Salaries and compensation
Salaries and wages (6,844,782) (7,923,752)
Stock-based compensation (9,082,504) (4,458,015)
Shareholder communications (698,978) (431,526)
Trust and filing (664,131) (359,877)
Loss before the undernoted and (116,950,963)
income taxes (63,043,158)
Fair value of financial instruments 15,820 937,365
held-for-trading
Gain on sale of assets 173,490 992,684
Transaction cost (18,768) -
Interest expense (1,273,694) -
Interest income 2,357,564 3,692,550
Loss from associate (351,446) (796,027)
Unrealized loss on held-for-trading (768,860) (104,365)
financial instruments
Loss before income taxes (116,816,857) (58,320,951)
Future income tax recovery 31,944,779 7,153,285
Loss for the year (84,872,078) (51,167,666)
Other comprehensive (loss) income
(2,701,263) 538,061
Unrealized (loss) gain on available-
for-sale financial instruments
Unrealized gain on foreign exchange 2,311,394 -
translation of self-sustaining
foreign operations
Other comprehensive (loss) income (389,869) 538,061
Total comprehensive loss for the (85,261,947) (50,629,605)
year
Basic and diluted loss per share (0.40) (0.31)
Weighted average number of common
shares outstanding 211,282,760 166,098,884
CONSOLIDATED STATEMENTS OF SHAREHOLDERS`EQUITY AND DEFICIT
(Expressed in Canadian Dollars)
Year ended Year ended
December 31, 2008 December 31, 2007
$ $
Common shares Shares Shares
Balance at 390,139,711 201,457,592
beginning of
year 203,395,902 113,411,713
Fair value of 2,076,452 2,005,064
options - -
exercised
Fair value of 545,894 688,689
warrants
exercised - -
Shares issued
for cash, net of
share issue - - 57,500,000 121,427,869
costs
Share purchase 4,655,242 5,111,184
options 2,250,386 3,015,830
exercised
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
Shares issued to 29,700 -
CW Properties
LLC, February
2008 10,000 -
Shares issued 22,787,802 -
for Rusaf Gold
Limited, April
2008 6,613,636 -
Shares issued 76,923 -
for Rusaf Gold
Limited, July
2008 22,041 -
Shares issued 6,648,604 -
for Puma Gold
(Pty) Ltd, July 1,862,354 -
2008
Rusaf share 18,409 -
purchase
warrants
exercised, 13,333 -
October 2008
Share purchase 1,677,909 3,459,187
warrants
exercised 998,890 1,599,495
Balance at end 428,656,646 390,139,711
of the year 215,166,542 203,395,902
Share purchase Warrants
warrants Warrants
Balance at
beginning of the
year 31,433,202 17,934,934 2,672,000 1,252,000
Warrants issued 6,616,856 -
pursuant to
Senior Secured
Notes 18,746,000 -
Warrants issued - 16,210,226
pursuant to
share issuance - 28,750,000
Warrants issued - 1,178,815
pursuant Tranter
transaction - 1,684,312
Warrants issued - -
for Burnstone
Gold Property - -
Exercised (998,890) (545,894) (1,599,495) (688,689)
Expired - - (73,615) (17,418)
Balance at end 24,005,896 17,934,934
of year 49,180,312 31,433,202
Contributed
surplus
Balance at 11,509,102 7,863,472
beginning of the
year
Stock-based 10,411,804 5,633,276
compensation
Share purchase
options
exercised,
credited to
share capital (2,076,452) (2,005,064)
Rusaf share (8,409) -
purchase options
exercised,
credited to
share capital
Fair value of - 17,418
share purchase
warrants expired
Options and 1,763,476 -
warrants issued
on acquisition
of Rusaf Gold
Limited
Balance at end 21,599,521 11,509,102
of the year
Deficit
Balance at beginning (132,395,033) (81,227,367)
of the year
Net loss for the (84,872,078) (51,167,666)
period
Balance at end of the (217,267,111) (132,395,033)
year
Accumulated other
comprehensive income
Balance at beginning 602,872 64,811
of the year
Unrealized (loss) (2,701,263) 538,061
gain on available-for-
sale financial
instruments
Accumulated 2,311,394 -
unrealized gain on
foreign exchange
translation of self-
sustaining foreign
operations
Balance at end of the 213,003 602,872
year
TOTAL SHAREHOLDERS` 257,207,955 287,791,586
EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2008 and 2007
(Expressed in Canadian Dollars)
Years ended December 31
2008 2007
$ $
Operating activities
Loss for the year
(84,872,078) (51,167,666)
Items not involving cash
Depreciation 3,100,780 1,056,497
Future income tax recovery (31,944,779) (7,153,285)
Gain on sale of assets (173,490) (992,684)
Assets written off - 1,236
Unrealized loss on available-for- 768,860 104,365
trading financial instruments
Fair value of financial instruments (15,820) (937,365)
held-for-trading
Loss from associate 351,446 796,027
Non-cash stock-based compensation
expense 10,411,804 5,633,276
Provision for site reclamation cost 478,953 289,660
Unrealized foreign exchange loss 5,216,445 (961,342)
(gain)
Accretion reclamation obligation 31,722 37,466
Amortization charge 18,768 -
Depletion charge 6,344,218 -
Interest accrual 1,837,874 -
Changes in non-cash operating
working capital
Amounts receivable (713,984) (3,311,554)
Prepaid expenses 249,427 (271,217)
Inventory (8,046,908) (145,748)
Accounts payable and accrued
liabilities 20,078,224 3,713,801
Cash used in operating activities
(54,558,543) (53,308,533)
Investing activities
(2,690,291) (11,727,860)
Mineral property acquisition costs
Acquire shares in Rand Mutual (5) (60)
Assurance
Proceeds on sale of assets 471,306 994,447
Purchase of equipment (34,552,892) (12,978,896)
Purchase of shares in Rusaf Gold
Limited - (8,000,000)
Purchase of Hecla Ventures Corp. - (50,791,500)
Transfer to restricted cash (4,064,100) -
Purchase of shares in Kryso (274,798) (448,503)
Resources Plc.
Reclamation deposits (1,181,398) (1,616,754)
Cash used in investing activities
(42,292,178) (84,569,126)
Financing activities
Common shares issued for cash, net 6,247,772 183,710,476
of issue costs
Advances received from long term 65,954,894 -
borrowings
Advances to other parties (985,000) -
Advances from (to) related parties 616,220 (213,085)
Cash generated from financing 71,833,886 183,497,391
activities
(Decrease) increase in cash and
equivalents (47,336,830) 45,619,732
Cash acquired through the purchase 5,987 -
of Puma Gold (Pty) Ltd
Cash acquired through the purchase 4,494,976 -
of Rusaf Gold Limited
Cash acquired through the purchase - 11,156
of Hecla Ventures Corp.
Cash and cash equivalents,
beginning of year 78,362,954 33,964,436
Foreign exchange (1,977,969) (1,232,370)
Cash and cash equivalents, end of
year 78,362,954 78,362,954
CONSOLIDATED SCHEDULE OF EXPLORATION EXPENSES
(Expressed in Canadian Dollars)
Mineral Property Interests Year ended Year ended
December 31 December 31
2008 2007
$ $
Burnstone - Exploration
Assays and analysis 40,817 122,805
Depreciation - 443,666
Drilling 2,342,178 2,427,840
Engineering 62,128 27,034
Environmental, socio-economic and (77,592) 12,666
land
Equipment rental 19,461 (21,900)
Geological 669,751 279,522
Graphics 5,596 15,727
Property fees and exploration option 7,749 22,907
payments
Site activities 182,379 (17,096)
Exploration expenses before the 3,252,467 3,313,171
following
Office and administration 56,895 92,612
Exploration expenses incurred during
the year 3,309,362 3,405,783
Cumulative exploration expenditures, 27,733,355 24,327,572
beginning of year
Cumulative exploration expenditures,
end of year 31,042,717 27,733,355
Hollister - Exploration
Assays and analysis 1,348,040 425,298
Depreciation - 612,831
Drilling 8,316,210 2,880,079
Engineering 66,888 1,170,116
Environmental, socio-economic and 1,086,029 1,574,917
land
Equipment rental - 24,350
Freight - 47,292
Geological (19,146) 606,237
Graphics 3,578 52,026
Property fees and exploration option 133,747 168,334
payments
Site activities 281,851 794,328
Exploration expenses before the 11,217,197 8,355,808
following
Office and administration 196,221 233,565
Exploration expenses incurred during 11,413,418
the year 8,589,373
Cumulative exploration expenditures, 33,781,885 25,192,512
beginning of year
Cumulative exploration expenditures,
end of year 45,195,303 33,781,885
Rusaf Gold - Exploration
Assays and analysis 938,192 -
Depreciation 218,553 -
Drilling 2,492,273 -
Engineering 186,313
Environmental, socio-economic and 13,091 -
land
Equipment rental 477,055 -
Freight 450,618 -
Geological 935,816 -
Graphics 16,494 -
Property fees and exploration option 329,373 -
payments
Site activities 1,481,027 -
Exploration expenses incurred, since 7,538,805 -
acquisition
Cumulative exploration expenditures, - -
beginning of year
Cumulative exploration expenditures, 5,081,484 -
since acquisition
Other - Exploration
Assays and analysis 284,553 100,271
Depreciation 14,459 -
Drilling 6,605 195,976
Engineering 62,721 20,109
Environmental, socio-economic and - 4,316
land
Equipment rental 139,746 46,383
Freight 141,198 14,450
Geological 473,250 273,369
Graphics - 18,408
Property fees and exploration option 103,863 84,363
payments
Site activities 384,967 253,184
Transportation 29,790 55,968
Exploration expenses before the 1,641,152 1,066,797
following
Office and administration - 29,820
Exploration expenses incurred during 1,641,152 1,096,617
the year
Cumulative exploration expenditures, 2,528,091 1,431,474
beginning of year
Cumulative exploration expenditures,
end of year 4,169,243 2,528,091
Total exploration expenses before
the following 23,649,621 12,735,776
Office and administration 253,116 355,997
Total exploration expenses incurred
during the period 23,902,737 13,091,773
Cumulative exploration expenditures,
beginning of period 64,043,331 50,951,558
Cumulative exploration expenditures,
end of period 87,946,068 64,043,331
CONSOLIDATED SCHEDULE OF PRE-DEVELOPMENT EXPENSES
(Expressed in Canadian Dollars)
Mineral Property Interests Year ended Year ended
December 31 December 31
2008 2007
$ $
Burnstone - Pre-development
Mine development
Establishment work 193,475 697,457
Equipment rental and services 892,541 1,047,259
Surface infrastructure 658,127 836,042
Portal construction 1,292,687 308,660
Underground access and 5,558,031 4,000,468
infrastructure
Depreciation 1,144,751 -
Other cost
Access road 470,575 -
Optimization - 523,543
Operational costs 4,801,643 3,348,964
Long hole stoping pilot project 192,504 -
Waste rock dump 27,063 -
Metallurgical plant - 186,837
Vertical shaft 7,778,719 508,530
Energy project 86,256 -
Permanent infrastructure - surface 582,674 -
Pre-development expenses before the 23,679,046 11,457,760
following
Office and administration 414,214 320,274
Pre-development expenses incurred 24,093,260 11,778,034
during the year
Cumulative pre-development 15,080,245 3,302,211
expenditures, beginning of year
Cumulative pre-development
expenditures, end of year 39,173,505 15,080,245
Hollister - Pre-development
Depreciation 1,673,964 -
Equipment rental and services 712,008 1,937,187
Surface infrastructure 1,880,509 2,942,261
Underground access and 24,562,157 6,682,426
infrastructure development
Operational costs 9,013,695 6,289,421
Pre-development expenses before the 37,842,333 17,851,295
following
Office and administration 661,970 498,990
Pre-development expenses incurred
during the year 38,504,303 18,350,285
Cumulative pre-development 18,350,285 -
expenditures, beginning of year
Cumulative pre-development expenses,
end of year 56,854,588 18,350,285
Total pre-development expenses
before the following 61,521,379 29,309,055
Office and administration 1,076,184 819,264
Total pre-development expenses
incurred during the period 62,597,563 30,128,319
Cumulative pre-development
expenditures, beginning of year 33,430,530 3,302,211
Cumulative pre-development
expenditures, end of year 96,028,093 33,430,530
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 is a pre-
production mining company engaged in the acquisition, exploration and
development of precious metal deposits. The Company currently has two
material projects both of which are at the test-mining stage, namely (a)
the Hollister gold project, acquired in 1997, and which is located on the
Carlin Trend goldfield in Nevada, USA (the "Hollister Property") and (b)
the Burnstone gold project, acquired in 2002, and which is located in the
Witwatersrand Basin goldfield in South Africa (the "Burnstone Property").
At the Hollister Property, an initial feasibility study was completed in
2007 on a portion of the property called the Hollister Development Block
("HDB"). An underground exploration and development program is underway
to conduct test mining and to obtain bulk samples. At the Burnstone
Property, an initial feasibility study was completed in 2006, followed by
an optimized feasibility study that was completed in 2007. The
development of an access decline and vertical shaft are now underway.
The Company also acquired the Esmeralda property in Nevada during
December 2008 primarily for the metallurgical plant on the facility and
is also conducting early stage exploration on a number of other
prospects, primarily in Africa and Russia.
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 27
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. ADOPTION OF NEW ACCOUNTING POLICIES
Effective January 1, 2008, the Company adopted the following accounting
standards updates issued by the Canadian Institute of Chartered
Accountants ("CICA"). These new standards have been adopted on a
prospective basis with no restatement to prior period financial
statements.
(a) Section 1400 - Assessing going concern
Historically, the Company`s sole source of funding has been the issuance
of equity securities for cash, primarily through private placements to
sophisticated investors and institutions. The Company completed a
100,000,000 unit offering on March 13, 2009 and thereby raising gross
proceeds of $130 million to fund the development of the Burnstone
project. The Company has granted to the Underwriters an over-allotment
option to acquire additional Common Shares in an aggregate amount of up
to 15% of the aggregate number of Common Shares sold pursuant to the
Offering. The Over-Allotment Option has been exercised in full and
closure is scheduled to be within 30 days of March 13, 2009 taking the
gross proceeds on the offering to $149,500,000.
The Company`s access to future equity financing is always uncertain.
During 2008 the Company also raised secured long term debt to fund its
development operations.
In addition to the unit offering closed on March 13, 2009, the Company
had working capital of $25 million as at December 31, 2008. Management
has assessed the Company to be a going concern based on the available
cash and cash resources.
(b) Section 1535 - Capital Disclosures
The Company`s objectives when managing capital are:
- To safeguard the Company`s ability to continue as a going concern,
so that it can provide returns for shareholders and benefits for
other stakeholders, and
- To provide an adequate return to shareholders by pricing products
commensurately with the level of risk.
The Company considers the items included in the consolidated statement of
shareholder`s equity as capital. The Company manages the capital
structure and makes adjustments to it in the light of changes in economic
conditions and the risk characteristics of the underlying assets. In
order to maintain or adjust the capital structure, the Company may issue
new shares through private placements, sell assets to reduce debt or
return capital to shareholders. The Company is not subject to externally
imposed capital requirements.
(c) Section 3031 - Inventories
This standard requires that inventories be measured at the lower of cost
and net realizable value, and includes guidance on the determination of
cost, including allocation of overheads and other costs. The standard
also requires that similar inventories within a consolidated group be
measured using the same method. It also requires the reversal of previous
write-downs to net realizable value when there is a subsequent increase
in the value of inventories.
The adoption of the Standard had no impact on the Company`s statement of
operations. Inventories are valued consistent with prior years at the
lower of cost or net realizable value.
(d) Financial Instruments - Disclosure (Section 3862) and Presentation
(Section 3863)
Financial instruments are initially measured at fair value when the
Company becomes a party to their contractual arrangements. Transaction
costs are included in the initial measurement of financial instruments,
except financial instruments classified as at fair value through profit
and loss.
Refer to note 5(d) of the financial statements filed on www.sedar.com or
the Company`s website for a detailed discussion of these financial
instruments.
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 31 December31
2008 2007
Canada
Assets other than mineral property
interests 22,610,226 56,796,521
Mineral property interests 1 1
Tanzania
Assets other than mineral property
interests 1,551,261 -
Mineral property interests 36,466,782 -
United States
Assets other than mineral property
interests 27,542,387 5,890,010
Mineral property interests 92,505,493 95,156,279
South Africa
Assets other than mineral property
interests 53,637,952 48,212,597
Mineral property interests 130,886,380 123,257,650
Total assets 329,313,058
365,200,482
Revenue December 31 December 31
2008 2007
United States
Ore sales 24,716,323 -
5. SUBSEQUENT EVENTS
Subsequent to December 31, 2008,
(a) Stock options granted
Directors, employees and certain consultants were allowed to cancel
certain unexercised employee and non-employee stock options and
receive new options equal to 50% of the cancelled options at an
exercise price of $1.25 and vesting period of 24 months. The
allocation of these options was concluded on January 12, 2009.
The Company also granted new options in terms of its share option
plan during February 2009.
Subsequent to the above cancellation, replacement and issuance of
stock options the Company had 16,469,632 options outstanding at an
average exercise price of $1.66 and 2,057,669 options that are
exercisable at an average price of $2.24.
(b) Capital raising
(i) Equity line
In December 2008, the Company entered into an equity line agreement
with an affiliate of Investec. The agreement provided that the
Company could sell to Investec over the term of the agreement up to
$4 million of common shares in tranches at a price which was to be
calculated as 95% of prevailing market with a floor price of $1.12
per common share. The agreement terminated on February 7, 2009 and
the Company issued an aggregate of 2,846,800 common shares to
Investec at an average price of $1.38.
(ii) Public offering
The Company completed a public offering on March 13, 2009 whereby it
issued 100,000,000 units (the "Units") at a price of $1.30 per Unit
(the "Offering Price"). Each Unit consists of one common share
(each, a "Common Share") in the capital of the Company and one-half
of one common share purchase warrant (each whole common share
purchase warrant, a "Warrant") of Great Basin. Each Warrant will
entitle the holder thereof to purchase one Common Share (a "Warrant
Share") at a price of $1.60 at any time before 5:00 p.m. (Vancouver
time) on October 15, 2010.
The Company has granted to the Underwriters an over-allotment option
to acquire additional Common Shares in an aggregate amount of up to
15% of the aggregate number of Common Shares sold pursuant to the
Offering. The Over-Allotment Option has been exercised in full and
closure is scheduled to occur within 30 days of March 13, 2009
taking the gross proceeds on the offering to $149,500,000.
(c) Senior Secured Notes
The Equity offering that closed on March 13, 2009 triggered the anti-
dilution protection on the warrants issued in respect of the Senior
Secured Notes. The exercise price of these warrants was adjusted to
$1.25 (from $1.80) per common share and the number of common shares
which may be acquired increased to 26,994,240 common shares
(including agent`s warrants).
The full set of financial statements and Management Discussion and Analysis
are available on Great Basin`s website: www.greatbasingold.com
Approved by the Board of Directors
Ferdi Dippenaar Ronald W Thiessen
Director Director
Ground Floor, 138 West Street 1500 Royal Centre, 1055 West
Sandown, Johannesburg Georgia Street,
South Africa Vancouver, BC Canada V6E 4N7
Tel 011 301 1800 Toll Free 1 800 667?2114
Fax 011 301 1840
www.greatbasingold.com
23 March 2009
Johannesburg
Sponsor
Nedbank Capital
Date: 24/03/2009 14:30:02 Produced by the JSE SENS Department.
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