From the MD&AThese are managements words.
OUTLOOK
The Company has as its main assets, the Xochipala Property and the remaining balance, after
payout of the Debentures and payment of various accounts payable, of the consideration paid by
Goldgroup for the Cerro Prieto Property (the “Consideration”).
The First Note, Second Note and Production Royalty are scheduled to be paid over time or at a
future time. Payment of the Production Royalty is based on the average price of gold in the
month in which it is produced. Further, pursuant to the Subordination Agreement, the Company
may not receive any payment of the First Note, Second Note (unless paid in shares of
Goldgroup), or the Production Royalty until Goldgroup has repaid the Loan Facility and all
related amounts. On January 9, 2014 Goldgroup announced that it had completed the phase 1
development of the Cerro Prieto mine and are now beginning to produce gold, having produced
285 ounces from the initial production in December, 2013.
The outlook for the Company is strongly tied to receiving the Goldgroup Transaction
Consideration in a timely fashion in order to fund the exploration of the Xochipala Property and
other operations of the Company. The Company’s ability to do so is largely contingent upon
Goldgroup achieving Commercial Production from the Cerro Prieto Property, Goldgroup’s
settlement of the Loan Facility and the future market price of Goldgroup’s common shares.