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VIRGINIA MINES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE-MONTH PERIODS ENDED MAY 31, 2011
SCOPE OF MANAGEMENT’S FINANCIAL ANALYSIS
The following analysis should be read in conjunction with the unaudited financial statements of Virginia Mines Inc. (the
"Company") and the accompanying notes for the three-month periods ended May 31, 2011 and 2010. The reader should also
refer to the annual Management’s Discussion and Analysis of financial position as at February 28, 2011, and results of
operations, including the section describing the risks and uncertainties.
ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”)
In 2008, the Canadian Accounting Standards Board confirmed that all publicly accountable enterprises must adopt IFRS in
place of Canadian GAAP beginning on January 1, 2011 (for entities with a calendar year-end). As such, our unaudited
interim financial statements as at May 31, 2011, and for the three months then ended have been prepared in accordance with
IFRS as issued by the International Accounting Standards Board (“IASB”). Additionally, our unaudited balance sheet as at
March 1, 2010, and our comparative unaudited financial statements for 2011 have been adjusted to reflect our adoption of
IFRS on a retrospective basis, effective on March 1, 2010 (the “Transition Date”). Consequently, all comparative financial
information presented in this MD&A reflects the consistent, retrospective application of IFRS.
IFRS differ in certain respects from Canadian GAAP. A complete description of our conversion to IFRS, including
reconciliations of previously reported Canadian GAAP information, is provided in note 4 to our unaudited interim financial
statements as at May 31, 2011, and for the three-month periods ended May 31, 2011 and 2010, which note is incorporated by
reference herein.
IMPACT ON THE IFRS OPENING BALANCE SHEET
As at March, 1, 2010
Cnd GAAP Adjustments IFRS
$ $ $
Accounts payable and accrued liabilities 1,818,000 780,000 2,598,000
Share capital 109,665,000 (552,000) 109,113,000
Deficit (41,524,000) (228,000) (41,752,000)
The adjustments are related to the flow-through shares accounting. On transition to IFRS, the Company has adopted an
accounting policy whereby flow-through proceeds should be allocated between the offering of the common shares and the
premium associated with the sale of tax benefits when the common shares are offered. The allocation is made based on the
difference between the quoted price of the common shares and the amount the investor pays for the flow-through shares. A
liability is recognized for the premium paid by the investors and reversed in the statement of earnings as the Company spends
flow-through proceeds.
Previously, the Company's Canadian GAAP policy was to adopt the recommendations of EIC 146 with respect to the
accounting for flow through shares. This resulted in the Company reducing the net proceeds of the flow-through share
issuance by the future tax liability of the Company arising from the renunciation of the exploration and development
expenditures in favour of the flow through share subscribers.
FORWARD-LOOKING STATEMENTS
This document may contain forward-looking statements reflecting management’s expectations with respect to future events.
Such forward-looking statements are dependent upon a certain number of factors and are subject to risks and uncertainties.
Actual results may differ from those expected.
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NATURE OF ACTIVITIES
The Company, incorporated under the Canada Business Corporations Act, is in the business of acquiring and exploring
mining properties. It has not yet determined whether its properties contain ore reserves that are economically recoverable.
The recoverability of the amounts shown for mining properties is dependent upon the existence of economically recoverable
ore reserves, the ability of the Company to obtain necessary financing to complete the exploration and development of its
properties, and upon future profitable production or proceeds from the disposal of properties.
The Company specializes in searching for gold and base metal deposits in mostly unexplored territories of Quebec. Most of
its activities take place in the central part of Quebec, particularly in the James Bay area, which comprises several Archaean
greenstone belts known as being very favourable to the presence of economic gold and base metal deposits. This region
differentiates from others by its accessibility and by the existence of explicit agreements governing the access to the territory.
The Company is among the most active exploration companies in Quebec with a large portfolio of properties.
EXPLORATION ACTIVITIES
Summary of Activities
During the three-month period ended May 31, 2011, exploration costs rose to $3,913,000 compared to $2,029,000 for the
corresponding period in 2010. In the recent quarter, the Company was busy completing drilling programs on the Lac Pau,
Coulon, and Anatacau-Wabamisk projects. The Company spent quite a lot of time planning the exploration programs that
will be carried out in the summer of 2011 on several of its projects.
LAC PAU PROPERTY
In the recent quarter the Company completed a second drilling program on the Lac Pau Property that it owns 100% in the
northern part of the Caniapiscau Reservoir, James Bay. The property covers the Lac Pau auriferous corridor, which is a major
structure followed over 12 kilometres that separates the intrusive rocks of the Beausac Suite and the paragneisses of the
Grosbois Suite. This fertile gold structure is host to several gold showings including the Tricorne showing (up to 9.02 g/t Au
over 5 metres in channel and 3.43 g/t Au over 6 metres in drilling); the Jedi showing (up to 2.35 g/t Au over 6 metres in
channel); the Hope showing (2.27 g/t Au over 10 metres including 3.91 g/t Au over 5 metres and 13.04 g/t Au over 3 metres
in channel); the Beausac-2 showing (14.43 g/t Au over 2 metres in channel); and the Obiwan showing (2.1 g/t Au over
5 metres in channel). The drilling program completed in the recent quarter included 16 new holes (PAU-10-029 to PAU-10-
044) and the extension of two holes drilled in 2010 (PAU-10-007ext and PAU-10-028ext), for a total of 2,776 metres. These
holes tested mainly the Jedi showing and its north-east extension as well as the Hope and Tricorne showings.
A series of nine holes (PAU-11-032 to 040) tested at shallow depth the Jedi showing and its north-east extension over a
lateral distance of 2.4 kilometres, using a spacing of 100 to 300 metres. Except for hole PAU-11-035 that missed the target,
all holes testing this portion of the Lac Pau corridor crosscut significant auriferous intervals. Hole PAU-11-040, located to the
northeastern end of this tested segment, returned the best results with an intersection grading 3.56 g/t Au over 5.5 metres
including 12.05 g/t au over 1.25 metres. The other intersections obtained along this fertile auriferous segment are as follows:
1.64 g/t Au over 11.6 metres including 2.51 g/t Au over 4.5 metres (PAU-11-032); 2.17 g/t Au over 8.5 metres including
3.56 g/t Au over 3 metres (PAU-11-033); 1.26 g/t Au over 10.9 metres including 4.20 g/t Au over 1.5 metres (PAU-11-034);
0.47 g/t Au over 10.5 metres (PAU-11-038); 0.93 g/t Au over 12.1 metres (PAU-11-037); 0.86 g/t Au over 7.75 metres
(PAU-11-036); and 0.86 g/t Au over 7.6 metres (PAU-11-039).
Another series of four holes (PAU-11-041 to 044) was drilled 2.4 kilometres northeast of hole PAU-11-040 to test at shallow
depth the continuity of the Hope showing over a lateral distance of about 250 metres. The vertical continuity of the
mineralization was confirmed by three of these four holes. Hole PAU-11-044 crosscut a mineralized intersection grading
69.78 g/t Au (24.15 cut) over 1.2 metres including a high-grade interval of 112.5 g/t Au over 0.7 metre. As for holes PAU-
11-041 and 042, they yielded results of 1.33 g/t Au over 9.15 metres and 1.29 g/t Au over 3.6 metres, respectively. Hole
PAU-11-043 did not intercept any significant mineralization.
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Three other holes (PAU-11-029, 030 and 031) were drilled and a previous one (PAU-10-007) was extended in the Tricorne
showing area, located a few hundred metres north of the Jedi showing. These holes crosscut some sub-economic
intersections, namely 9.74 g/t Au over 0.5 metre (PAU-11-031); 2.94 g/t Au over 4.5 metres (PAU-11-029); and 2.47 g/t Au
over 2 metres (PAU-10-007 extension).
The Company is encouraged by the recent results obtained on the Lac Pau property. The Jedi and Hope sectors generated
several intersection of economic interest and these intersections remain totally open laterally and vertically. Many portions of
kilometric extension in the Lac Pau corridor remain mostly unexplored and will have to be tested by stripping and eventually
by drilling. A stripping and mapping program is already planned for the summer of 2011 in order to test at surface the
extensions of the mineralized zones discovered last winter as well as the unexplored portions of the Lac Pau corridor.
During the recent quarter the Company spent $573,000 on the Lac Pau project.
COULON PROPERTY
In the winter of 2011, the Company carried out a 15-hole drilling program totalling 7,952 metres on the Coulon project that it
owns 100%. The project is located 15 kilometres north of the Fontanges airport, on the Quebec Middle-North territory. The
program aimed mainly at testing the extensions of lenses 16-17, 43 and 201 as well as many other regional targets.
In the area of lens 16-17, Hole CN-11-223 crosscut an intersection of semi-massive to massive sulphides grading 3.86% Zn,
0.7% Cu and 75.09 g/t Ag over 44 metres (true thickness of 37.4 metres), including a richer interval grading 7.32% Zn,
0.88 % Cu and 85.14 g/t Ag over 12.15 metres (true thickness of 10.35 metres). This new intersection is located to a vertical
depth of 350 metres only and is totally open at depth and to the south (it is closed to the north by hole CN-11-122, which did
not intercept any mineralization). For the time being this mineralized zone is interpreted as a new lens called lens 223 but it
could also represent the faulted extension of lens 16-17 at depth.
The extensions of lens 201 were tested by five new holes (CN-11-224, 225, 226, 227 and 230). The depth continuity of the
mineralization was confirmed by hole CN-11-225, which intersected a sulphide zone grading 5.21% Zn, 1.18% Cu and
35.14 g/t Ag over 6.15 metres (true thickness of 3.6 metres) to a vertical depth of 425 metres thus extending lens 201 by 100
metres downward. All the other holes testing the zone 201 intersected zones of intense alteration frequently containing
disseminated sulphides (pyrite-pyrrhotite-chalcopyrite +/- sphalerite) in plurimetric thickness, thus confirming that the fertile
hydrothermal system remains totally open in this sector.
Hole CN-11-221 tested the plunge of lens 43 to the southwest. It did not intercept any significant mineralization but crosscut
several hydrothermal alteration zones. Three off-hole conductors were outlined by an InfiniTEM borehole completed in this
hole.
Elsewhere on the property, seven holes (CN-11-231 to 237) tested various regional geophysical or geological targets without
success. However, hole CN-11-232 crosscut a significant mineralized zone that yielded 1.04% over 0.95 metre. This
intersection is interpreted as a mineralized exhalite and represents the south extension of the same horizon intercepted in
2007 by hole CN-07-055, which graded 1.65% Zn over 1 metre.
The Company is quite pleased with its drilling program at Coulon. This program led to the discovery of an eighth mineralized
lens on the property named lens 223. This lens remains totally open at depth and to the south and many other holes will be
required to test the extensions. The next drilling program is foreseen for the fall of 2011 or the winter of 2012.
In the recent quarter, the Company spent $1,091,000 on the Coulon property.
ANATACAU-WABAMISK PROPERTY
In the recent quarter the Company completed a short drilling program of six holes totalling 1,272 metres on its Anatacau-
Wabamisk project, located in the Opinaca Reservoir area, on the Quebec Middle-North Territory. The Company owns a
100% participating interest in the Wabamisk part and has the option of acquiring IAMGOLD Corporation’s (“IAMGOLD”)
100% participating interest in the Anatacau portion in consideration of $3 million in exploration work to be carried out before
December 31, 2015.
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Holes WB-11-33, 34 and 35 tested the vertical extension of the Isabelle showing to a vertical depth of 75 to 125 metres and
failed to return significant gold values despite the fact that holes 33 and 34 intercepted Isabelle-type mineralized zones. A
small zone weakly mineralized with disseminated sulphides yielded 15.03 g/t Au over 1 metre in hole WB-11-33, in
sediments forming the hanging wall of the Isabelle zone. At this time this tiny zone seems not to extend significantly. Three
other holes (WB-11-36, 37 and 38) were also drilled one kilometre northwest of the Isabelle showing in order to test induced
polarisation anomalies within a sequence of sediments similar to that of the Isabelle showing. These holes did not intercept
any significant mineralization.
The Company intends to continue exploration over this vast property during the next year. At this time, only a tiny part of the
property has been worked in detail and many other exploration targets remain untested. An important surface work program
consisting of prospecting, geological mapping, mechanical stripping, and till geochemistry, is planned for the summer of
2011 over the entire property.
In the recent quarter, the Company spent $834,000 on the Anatacau-Wabamisk property.
NEW ACQUISITIONS
On April 19, 2011, the Company announced the acquisition of four new properties, notably the Komo, Wabamisk, Lac H,
and Opinaca properties, all located in the James Bay region, province of Quebec, as well as the acquisition of the Carat
royalty linked to the Opinaca property.
a. Komo and Wabamisk Properties – These two properties were dealt with in the same agreement. As per this agreement,
the Company acquired a 100% undivided participating interest in the 118 claims and 45 claims forming the Komo and
Wabamisk properties, respectively, in consideration of the issuance of 40,000 common shares of the Company’s share
capital in favour of Ressources D’Arianne Inc. (“D’Arianne”). As per an underlying agreement, Lithium One Inc. owns
full interests in any potential lithium discovery on four of the claims that constitute the Komo property.
b. Lac H Property – This property was the object of an agreement pursuant to which the Company acquired a 100%
undivided participating interest in the 69 claims constituting the Lac H property, equally owned by SOQUEM Inc.
(“SOQUEM”) and D’Arianne, in consideration of the issuance of a total of 50,000 common shares of the Company’s
share capital (25,000 to SOQUEM and 25,000 to D’Arianne). Of the 69 claims constituting the property, 38 are subject
to a 1.5% NSR in favour of Inco Ltd. Half of this royalty can be bought back for $750,000.
c. Opinaca Property – This property was the object of an agreement pursuant to which the Company has the option to
acquire a 50% participating interest in the 165 claims forming the Opinaca property, in consideration of exploration
expenses of $878,000 to be carried out over the next five years and the issuance of 26,330 common shares of the
Company’s share capital in favour of D’Arianne. Of the 165 claims constituting the property, three are subject to a
2% NSR in favour of Les Explorations Carat Inc. (“Carat”) (the “Carat Royalty”).
d. Carat Royalty – The Company bought back this royalty in consideration of the issuance of 15,000 common shares of the
Company’s share capital in favour of Carat. Should the Company acquire a 50% participating interest in the Opinaca
property, the Carat Royalty linked to the three claims addressed in the Opinaca agreement will become null and void.
Conversely, the Company will retain the 2% NSR on these three claims should it fail to acquire its 50% participating
interest.
These four properties are all located within the Eastmain Achaean volcano-sedimentary belt. The Company has been quite
active for several years in this sector, most particularly on its vast Anatacau-Wabamisk property, which is bordered to the
east by the Lac H and Opinaca properties and to the west by the Komo property. These new acquisitions allow the Company
to acquire a dominant land position in the region. Many exploration programs are foreseen over the coming years to test the
potential of the sector.
NEW AGREEMENT
On March 10, 2011, the Company announced that it has entered into an agreement with Anglo American Exploration
(Canada) Ltd. (“AAEC”), a subsidiary of Anglo American PLC. As per this agreement, the Company transfers to AAEC a
50% undivided participating interest in the mining claims and other mineral tenements comprising the Baie Payne nickel
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property, which covers 18,890 hectares and is situated north of Kangirsuk Village, on the west bank of Ungava Bay, in
northern Quebec. AAEC must fund an aggregate of $4,000,000 in expenditures over a six-year period to maintain its 50%
undivided participating interest in the Baie Payne property. AAEC may, at its sole discretion, accelerate such funding.
Virginia will be the operator during this period.
The Baie Payne property covers important mafic/ultramafic complexes that reach over 1,000 metres in thickness with a
cumulative lateral spread of more than 50 kilometres. All these complexes lie in a supracrustal sequence of iron formations,
basalt, and sulphide mudstones within a sheared allochtonous structure called the Roberts Syncline. More than 40 Ni-Cu
surface showings grading up to 6.5% Ni have been mapped and sampled within this fertile, largely unexplored environment.
OUTLOOK FOR FISCAL 2012
The Company has initiated several exploration programs on numerous projects, all located in the province of Quebec, thus
marking the beginning of another very active year of its history. The Company intends to spend, alone or with partners, about
$17 million in exploration work on its projects during fiscal 2012. Work will be carried out mostly on the James Bay
Territory, in the Opinaca-Eastmain, Caniapiscau and LG-4 regions and to a lesser extent on the Baie Payne and Gayot
projects on the Nunavik Territory.
In the vast region of the Opinaca Reservoir and Eastmain River, the Anatacau-Wabamisk and Éléonore Régional projects as
well as the new properties recently acquired from D’Arianne and SOQUEM (Komo, Wabamisk, Lac H and Opinaca) will be
the object of surface work that will consist of prospecting, geochemical survey, and mechanical stripping during the summer
and fall of 2011. Important programs consisting of mechanical stripping and geological mapping will also be carried out on
the Ashuanipi and Lac Pau properties in the area of the Caniapiscau Reservoir. Similar work will also be carried out on the
Nichicun and Escale projects in the LG-4 area. A budget of about $900,000, solely funded by the Company, will also be
allocated to conduct prospecting and evaluate new exploration targets on the James Bay Territory.
The Company and partner AAEC will also be very active in Nunavik, most particularly on the Baie Payne project, where
important geological surveys will be carried out jointly with prospecting and geological mapping.
SELECTED FINANCIAL INFORMATION
Three-Month Periods Ended
May 31,
2011
May 31,
2010
$ $
Expenses 1,003,000 692,000
Other income 358,000 165,000
Net earnings 271,000 278,000
Basic net earnings per share 0.009 0.009
Diluted net earnings per share 0.009 0.009
RESULTS OF OPERATIONS
COMPARISON BETWEEN THE THREE-MONTH PERIODS ENDED MAY 31, 2011 AND 2010
Expenses
For the three-month period ended May 31, 2011, expenses totalled $1,003,000 compared to $692,000 for the same period of
the preceding year, representing an increase of $311,000. Variations are detailed hereafter.
During the current quarter, salaries totalled $222,000, representing an increase of $5,000 compared to the same period of the
preceding year. The variation results mainly from an increase in annual salaries paid to the employees of the Company.
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For the three-month periods ended May 31, 2011 and 2010, professional and maintenance fees totalled $94,000 and $73,000,
respectively. The increase results mainly from costs related to IFRS consultation and other miscellaneous consulting services.
Rent, office expenses and other related expenses totalled $219,000 during the quarter ended May 31, 2011, representing an
increase of $37,000 from the corresponding period of the preceding year. The variation results mainly from an increase in
sustainable development expenses and sponsorships.
General exploration costs, net of tax credits related to mining exploration, decreased by $42,000 to reach $74,000 during the
current quarter. No tax credits have been accounted for since all Company’s exploration expenses in the first quarter of last
year were related to flow-through financings.
During the current quarter, the Company proceeded with write-offs of several mining properties for a total of $383,000
compared to $95,000 for the same quarter of last year. The variation results mainly from a partial write-off of $267,000 on
the Wabamisk property.
Other Income
For the three-month period ended May 31, 2011, other income totalled $358,000 compared to $165,000 for the same period
of the previous year. Variations are detailed hereafter.
During the period ended May 31, 2011, dividends and interest increased by $126,000. This change is due mainly to the
Company’s higher level in cash and investments in fixed income as well as to an increase in interest rates on the Company’s
bonds.
Fees invoiced to partners during the current quarter totalled $31,000, representing a decrease of $24,000 from the
corresponding period of the preceding year. The decrease is due mainly to less partnership exploration work during the
current quarter.
During the quarter ended May 31, 2011, the Company posted a gain on available-for-sale investments of $58,000 compared
to a loss of $33,000 for the same period in 2010.
During the quarter ended May 31, 2011, the Company posted a gain on investments held for trading of $2,000 compared to a
loss of $57,000 for the same period of the preceding year. The loss results mainly from the fair value revaluation of a
derivative financial instrument.
For the three-month period ended May 31, 2011, the Company posted a loss on investments designated as held for trading of
$28,000 related to the fair value revaluation of the Company’s convertible debentures. For the same period of last year, the
Company posted a gain of $30,000, which results from a gain following a principal repayment on Asset-Backed Commercial
Paper ("ABCP") and from a gain on the fair value revaluation of the Company’s ABCP.
Deferred Tax Recovery
For the three-month period ended May 31, 2011, the Company recognized a $916,000 deferred tax recovery compared to
$805,000 for the same quarter of the preceding year. The Company renounced the resource expenditures in favour of
investors with respect to flow-through financings in both periods ($1,040,000 in 2012 and $797,000 in 2011).
Net Earnings
In light of the above, the Company recognized net earnings of $271,000 for the three-month period ended May 31, 2011,
compared to $278,000 for the same quarter of the preceding year.
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OTHER INFORMATION
Balance sheets as at
May 31, February 28,
2011 2011
$ $
Working capital 42,922,000 45,032,000
Mining properties 41,685,000 37,602,000
Total assets 86,398,000 86,018,000
Shareholders’ equity 82,028,000 80,336,000
Since its incorporation, the Company has not paid any cash dividends on its outstanding common shares. Any future dividend
payments will depend on the Company’s financial needs to fund its exploration programs and its future financial growth, and
any other factor that the board deems necessary to consider in the circumstances. It is highly unlikely that dividends will be
paid in the near future.
LIQUIDITY AND FINANCING
As at May 31, 2011, cash amounted to $7,258,000 compared to $11,620,000 as at February 28, 2011, while the Company’s
working capital totalled $42,922,000, representing a decrease of $2,110,000 compared to the working capital recorded as at
February 28, 2011. The variation is due mainly to exploration expenses incurred in the current quarter.
From management’s point of view, the working capital as at May 31, 2011, will cover current expenditures and exploration
fees in the coming year. However, the Company may, from time to time, when market and financing conditions are
favourable, proceed with fundraising to fund exploration of its most important mining projects.
Operating Activities
For the quarter ended May 31, 2011, cash flows used in operating activities totalled $775,000 compared to $292,000 for the
corresponding period of the preceding year. This variation results mainly from a change in accounts payable and other
amounts receivable related to advances from partners and from a change in commodity taxes receivable.
Financing Activities
Cash flows provided from financing activities for the quarter ended May 31, 2011, amounted to $318,000 compared to
$2,504,000 for the corresponding period of the preceding year. On May 18, 2010, the Company completed a private
placement of 200,000 flow-through common shares at a price of $12.50 per share for gross proceeds of $2,500,000.
Investing Activities
For the quarter ended May 31, 2011, cash flows used in investing activities totalled $3,905,000 compared to $9,804,000 for
the same quarter of the preceding year.
The Company’s investing activities consist mainly of acquisition of mining properties, capitalization of exploration costs as
well as buying and selling of short-term investments.
For the current quarter, the acquisition of mining properties and the capitalization of exploration costs required disbursements
of $4,357,000 compared to $2,857,000 for the same quarter of the preceding year. This increase results mainly from more
important drilling carried out in the winter of 2011 on the Coulon, Lac Pau and Wabamisk properties.
For the quarter ended May 31, 2011, the acquisition of short-term investments reduced liquidities by $204,000 compared to
$6,946,000 for the same quarter of the preceding year. The variation is attributable to a transfer of cash in short-term
investments during the first quarter of last year.
During the quarter ended May 31, 2010, the Company cashed $29,000 following principal repayments on MAV 3 notes.
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QUARTERLY INFORMATION
The information presented thereafter details the total expenses, other income, overall net earnings (net loss), and the net
earnings (net loss) per participating share for the last eight quarters.
Period Net Earnings
Net Earnings (Net Loss)
per Share
Ended Expenses Other Income (Net Loss) Basic Diluted
$ $ $
05-31-2011 1,003,000 358,000 271,000 0.009 0.009
02-28-2011 2,313,000 156,000 (986,000) (0.032) (0.032)
11-30-2010 782,000 317,000 (258,000) (0.009) (0.009)
08-31-2010 2,113,000 395,000 (765,000) (0.025) (0.025)
05-31-2010 692,000 165,000 278,000 0.009 0.009
02-28-2010 (1) 497,000 532,000 1,101,000 0.037 0.037
11-30-2009 (1) 1,024,000 612,000 (384,000) (0.013) (0.013)
08-31-2009 (1) 822,000 869,000 76,000 0.002 0.002
(1) These three periods have not been adjusted to reflect the new IFRS standards.
Analysis of Quarterly Results
As the Company’s business is in the mining exploration field, it receives no earnings from operations. Quarterly changes in
other income have no specific trend except for interest and dividend income that go along with the working capital value and
the change in the bond market interest rates. Gains on sale of investments or mining properties may vary considerably from
one quarter to another. Fees invoiced to partners vary according to agreements and budgets in connection with these
agreements. There is no trend to be observed.
CONTRACTUAL OBLIGATIONS
There was no material change in the Company’s contractual obligations.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
SUBSEQUENT EVENTS
On June 8, 2011, the Company entered into an agreement with Quadra FNX Mining Ltd. ("Quadra FNX") on the Lac Gayot
property. As per the agreement, Quadra FNX has the option to acquire a 50% participating interest in the Lac Gayot property,
in consideration of payments totalling $100,000 and $10 million in exploration work to be carried out over the next nine
years. The Company will be the operator.
On June 13, 2011, the Company entered into an agreement for a private placement of 214,286 flow-through common shares
at a price of $14.00 per share for gross proceeds of $3 million. Proceeds from the offering will be used to fund exploration
work on the Company's numerous projects.
On June 22, 2011, the Company entered into an agreement with IAMGOLD on the Lac Pau property. As per the agreement,
IAMGOLD has the option to acquire a 50% participating interest in the Lac Pau property, in consideration of payments
totalling $130,000 and $6 million in exploration work to be carried out over the next seven years. The Company will be the
operator.
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RELATED PARTY TRANSACTIONS
During the three-month period ended May 31, 2011, rent, office expenses and other required disbursements of $58,000
compared to $54,000 for the same period of the preceding year. These amounts have been paid to companies owned by
directors.
These transactions are conducted in the normal course of operations.
Rent stands for the rental of office space, and office expenses include all Company’s administrative expenses related to
employees offering services to the Company.
CARRYING VALUE OF MINING PROPERTIES
At the end of each quarter, exploration work is reviewed to evaluate the potential of each mining property. Following this
analysis, write-offs are recorded when required.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our condensed interim financial statements have been prepared in accordance with the IFRS applicable to the preparation of
interim financial statements, IAS 34, “Interim Financial Reporting”. These are the Company’s first financial statements
prepared in accordance with IFRS; in consequence the Company explains its choices related to IFRS 1, “First-time Adoption
of International Financial Reporting Standards”, in note 4 to the financial statements.
The Company has consistently applied the same accounting policies in its opening IFRS balance sheet at March 1, 2010, and
throughout all periods presented, as if these accounting policies had always been in effect. Note 4 to the financial statements
for the quarter ended May 31, 2011, discloses the impact of the transition to IFRS on the Company's reported equity,
statement of comprehensive income, including the nature and effect of significant changes in accounting policies from those
used in the Company’s financial statements for the year ended February 28, 2011. Any subsequent changes to IFRS that are
given effect in the Company’s annual financial statements for the year ending February 29, 2012, could result in restatement
of these interim financial statements, including the transition adjustments recognized on changeover to IFRS.
The full description of accounting policies and estimates are presented in the relevant section of the Company’s financial
statements for the quarter ended May 31, 2011.
Estimates, assumptions and judgements are continually evaluated by the Company and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the circumstances.
FUTURE ACCOUNTING CHANGES NOT YET ADOPTED
IFRS 9 was issued in November 2009 and contained requirements for financial assets. This standard addresses classification
and measurement of financial assets and replaces the multiple category and measurement models in IAS 39 for debt
instruments with a new mixed measurement model having only two categories: amortized cost and fair value through profit
or loss. IFRS 9 also replaces the models for measuring equity instruments, and such instruments are either recognized at fair
value through profit or loss or at fair value through other comprehensive income (loss). Where such equity instruments are
measured at fair value through other comprehensive income (loss), dividends are recognized in profit or loss to the extent not
clearly representing a return of investment; however, other gains and losses (including impairments) associated with such
instruments remain in accumulated comprehensive income indefinitely.
Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements in
IAS 39, Financial Instruments – Recognition and Measurement, except that fair value changes due to credit risk for liabilities
designated at fair value through profit and loss would generally be recorded in other comprehensive income (loss).
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In May 2011, IASB issued a group of new standards that address the scope of the reporting entity: IFRS 10, Consolidated
Financial Statements, IFRS 11, Joint Arrangements, IFRS 12, Disclosure of Interests in Other Entities, and IFRS 13, Fair
Value Measurement.
IFRS 10 replaces all of the guidance on control and consolidation in IAS 27, Consolidated and Separate Financial Statements
and SIC-12, Consolidation – Special Purpose Entities. IFRS 10 changes the definition of control so that the same criteria are
applied to all entities to determine control focusing on the need to have both power and variable returns before control is
present. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be
positive, negative or both. The renamed IAS 27 continues to be a standard dealing solely with separate financial statements
and its guidance is unchanged.
IFRS 11 has changed the definitions of joint arrangements reducing the types of joint arrangements to two: joint operations
and joint ventures. The existing policy choice of proportionate consolidation for jointly controlled entities has been
eliminated. Equity accounting is mandatory for participants in joint ventures. Entities that participate in joint operations will
follow accounting much like that for joint assets or joint operations today.
IFRS 12 sets out the required disclosures for entities reporting under IFRS 10 and IFRS 11. IFRS 12 requires entities to
disclose information that helps financial statement readers to evaluate the nature, risks and financial effects associated with
the entity’s interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities.
IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS
standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a
liability in an orderly transaction between market participants, at the measurement date. It also establishes disclosures about
fair value measurement. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the
specific standards requiring fair value measurements and in many cases does not reflect a clear measurement basis or
consistent disclosures.
These standards are required to be applied for accounting periods beginning on or after January 1, 2013, with earlier adoption
permitted. The Company has not yet assessed the impact of these standards or determined whether it will adopt the standards
early.
DISCLOSURE OF OUTSTANDING SHARE DATA
The Company is authorized to issue an unlimited number of common shares, without par value. As at July 14, 2011, a total of
31,223,943 shares were outstanding.
The Company maintains a stock option plan under which stock options may be granted up to a maximum of 10% of the
number of shares outstanding. As at July 14, 2011, a total of 1,802,000 stock options were outstanding. The expiry dates vary
from April 6, 2016 to January 15, 2021.
Also as at July 14, 2011, a total of 24,857 warrants were outstanding and their expiry dates are February 25, 2012 and
June 28, 2012.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Internal control over financial reporting (“ICFR”) is designed to provide reasonable assurance regarding the reliability of the
Company’s financial reporting and its compliance with IFRS in its financial statements. The Company’s Chief Executive
Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls over financial
reporting to the issuers. They established the internal control over financial reporting or had it established under their
supervision in order to obtain reasonable assurance about the reliability of the financial reporting and to make sure that the
financial statements were being prepared in accordance with IFRS.
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The Chief Executive Officer and the Chief Financial Officer have evaluated whether there were changes to ICFR during the
quarter ended May 31, 2011, that have materially affected, or that are reasonably likely to materially affect ICFR. No such
changes were identified through their evaluation.
RISK FACTORS AND UNCERTAINTIES
There have been no significant changes in the risk factors and uncertainties the Company is facing, as described in the
Company’s annual Management's Discussion and Analysis as at February 28, 2011.
ADDITIONAL INFORMATION AND CONTINUOUS DISCLOSURE
This Management’s Discussion and Analysis has been prepared as at July 14, 2011. Additional information on the Company
is available through regular filings of press releases, reports on significant changes, financial statements, circulars, and its
annual information form on SEDAR (www.sedar.com).
(s) André Gaumond (s) Robin Villeneuve
President and CEO Chief Financial Officer