NewsCANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
The following management discussion and analysis of the financial position and results of operations for the nine
months ended September 30, 2010 and includes information up to and including November 26, 2010 and should be
read in conjunction with the unaudited interim financial statements for the nine months ended September 30, 2010
and the audited financial statements for the years ended December 31, 2009 and December 31, 2008 of Candorado
Operating Company Ltd. (the “Company” or “Candorado”) with the related notes thereto.
The financial statements have been prepared in accordance with Canadian generally accepted accounting principles.
All dollar amounts included therein and in the following management discussion and analysis (“MD&A”) are in
Canadian dollars except where noted.
Throughout the report we refer to Candorado, the “Company”, “we”, “us”, “our” or “its”. All these terms are used in
respect of Candorado Operating Company Ltd. Additional information on the Company can be found on SEDAR at
www.sedar.com and on the Company’s website a www.candorado.com.
Cautionary Statement on Forward-Looking Information
This report contains “forward-looking statements”, including, the Company’s expectations as to but not limited to,
comments regarding the timing and content of upcoming work programs and exploration budgets, geological
interpretations, receipt of property titles, and potential mineral recovery processes. Forward-looking statements
express, as at the date of this report, the Company’s plans, estimates, forecasts, projections, expectations, or beliefs
as to future events or results. Forward-looking statements involve a number of risks and uncertainties, and there can
be no assurance that such statements will prove to be accurate. Therefore, actual results and future events could
differ materially from those anticipated in such statements and Candorado assumes no obligation to update forwardlooking
information in light of actual events or results.
Factors that could cause results or events to differ materially from current expectations expressed or implied by the
forward-looking statements, include, but are not limited to, factors associated with fluctuations in the market price of
minerals, mining industry risks and hazards, environmental risks and hazards, economic and political events affecting
metal supply and demand, uncertainty as to calculation of mineral reserves and resources, requirement of additional
financing, and other risks. Actual results may differ materially from those currently anticipated in such statements.
The forward-looking information in this MD&A is based on management’s current expectations and Candorado
assumes no obligations to update such information to reflect later events or developments, except as required by law.
Description of Business and Summary of Recent Events
The Company is a Venture Issuer and Canadian based resource company focused on the acquisition, exploration
and development of resource projects primarily in British Columbia. Candorado is a large mineral rights holder with its
copper/gold porphyry targets within the Quesnel Trough in Central British Columbia. These properties include the
Eldorado property next to the Imperial Metals’ Red Chris copper/gold porphyry project, the Man-Prime property
located 35 km north of Princeton, and the Murphy Lake property east of Williams Lake. The Company also has 5
lithium properties in the Val d’Or region of Quebec. Subsequent to September 30, the Company has purchased a
property in British Columbia and one in Quebec for rare earth element exploration..
EXPLORATION
Eldorado Property
The Company is currently pursuing joint venture opportunities on its Eldorado property and during the period carried
out a minimum amount of exploration of $3,216 and paid $7,691 in cash in lieu to maintain the property
Man-Prime Property
A thorough review and interpretation of the induced polarization and resistivity geophysical survey, completed in
2007, was undertaken by Fritz Geophysics of Boulder, Colorado. The interpretation has allowed a much better
understanding of the structures and mineralized zones at the Man-Prime Property which will assist in identifying drill
targets and in determining orientation of drill holes. A preliminary 4-hole drill program was commenced in June.
Drilling tested geophysical anomalies, copper-gold soil anomalies and an area of copper mineralization exposed in a
trench at the Prime Zone. During the period $215,193 was expended on the Man-Prime and primarily included
drilling, fieldwork and geological consulting.
Murphy Lake Property
CANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
At Murphy Lake the Company completed the installation of 58 km of cut lines in preparation for a
reconnaissance induced polarization and resistivity geophysical survey, which started in June. A report by
Peter E. Walcott & Associates states that the survey found a large zone of complex IP response
(anomalous chargeability readings) trending across the grid. In addition, magnetic anomalies appear to
be related to the IP anomalies. Further IP and magnetic survey work is necessary to properly delineate
the anomaly or anomalies, in advance of drilling. The exploration targets are similar to alkali copper-gold
porphyry Takom, Megabuck and Deerhorn Zones on the adjacent Gold Field Woodjam property to the
north, which are well delineated by IP and magnetic surveys. During the period the Company expended
$269,101 in carrying out the exploration work program.
This property includes the Timothy Lake, Summer Lake, Bluff Lake, Mac and Spout, and the Tillicum Lake properties.
Quebec Lithium Properties
The Company recorded exploration costs of $133,393 as at September 30, 2010 with respect to its Quebec Lithium
Project which comprises five properties in the La Corne - La Motte Lithium District and has completed the Phase I of
exploration which began on April 27, 2010 with a 4-man crew. The exploration program comprised mapping,
prospecting, and sampling of lithium-bearing pegmatites. Highlights of the exploration program include rock sampling
on the Landrienne Property that has defined an area of spodumene–bearing pegmatites of about 55 m in length,
before it disappears under overburden in both directions. Lithium and rubidium values are high in both grab and
channel samples within a series of pegmatites up to 5 metres in width. An orientation soil survey has been carried out
to determine the ability to trace the pegmatites in areas of overburden. All samples have been submitted to Actlabs in
Val D’Or for 62 element analyses, including rare earth element analysis. A Phase II will be carried out on the property
once analytical results from the Phase I program have been received and compiled. To date the Company has
reported:
Landrienne Property
In the area of an east-west trending topographic ridge, a north-south trending pegmatite was channel sampled at four
locations over a distance of approximately 55 metres. The following table summarizes the lithium and rubidium
results, from south to north.
Location Width Lithium and Rubidium Values
A 5.3 m 1757 ppm Rb
Including 1.3 m 0.37% Li2O
B 3.0 m 2310 ppm Rb, 0.58% Li2O
C 4.0 m 2028 ppm Rb
Including 3.0 m 0.93% Li2O
D 2.0 m 2580 ppm Rb, 0.32% Li2O
Channel samples are rock samples cut with a diamond blade rock saw into the outcrop, making a “channel” about 6
cm wide. The rock is chiselled out, typically along 1.0 m intervals to give a representative grade across a zone.
Within the area of the pegmatite and between the above sample locations, grab samples of pegmatite returned the
following values:
0.45% Li2O 3220 ppm Rb
0.82% Li2O 5070 ppm Rb
2.09% Li2O 1730 ppm Rb
1.49% Li2O 4720 ppm Rb
Rock sample preparation and analysis were carried out by Activation Laboratory Ltd.
An orientation soil survey indicates that the lithium-bearing pegmatite continues under overburden to the south. A
review of historical reports indicates that the pegmatite has not been drilled.
CANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
Lac La Motte South Property
Six grab samples from outcrop or angular float contain >0.25% Li2O, as follows from west to east.
0.28% Li2O
2.41% Li2O (float)
1.14% Li2O, > 1000 ppm beryllium (float)
0.30% Li2O, 1970 ppm Rb
0.43% Li2O
1.16% Li2O
1.70% Li2O, 2020 ppm Rb
La Corne Valor Property
Two grab samples from outcrop contain >0.25% Li2O, as follows.
0.71% Li2O, 3.3% beryllium, 2970 ppm cesium
0.34% Li2O, 1570 ppm Rb
Other Exploration
In addition to the exploration activities described herein, the Company entered into the following:
• subject to TSX Venture Exchange (the “Exchange”) approval, has entered into an agreement with a private
vendor to earn a 100% interest in certain mineral claims, approximately 1,370 hectares in size, situated in
the vicinity of the Canadian International Minerals Ltd. (“CIN”) (V-CIN) Carbo rare earth elements (REEs)
prospect located in the Wicheeda Carbonatite Belt, north of Prince George, BC.
Candorado can earn a 100% interest by way of making payment of five thousand dollar cash payment and
issuing four million common shares of the Company upon the Exchange’s approval. In addition, CIN will
receive one million common shares of the Company on the first anniversary date of the agreement’s
acceptance by the Exchange.
• subject to Exchange approval, has entered into an agreement with a private vendor to earn a 100% interest
in property located adjacent to Commerce Resources Corp.’s Eldor rare earth element (“REE”) project in
Quebec.
Candorado can earn a 100% interest by way of making a one-time payment of $20,000 upon the
Exchange’s approval, issuing 3,000,000 common shares of the Company within 5 days of approval from the
Exchange and is subject to a 2% net smelter return (“NSR”). The NSR may be reduced to 1% at the
Company’s discretion for $1,000,000.
Results of Operations
a) Loss for the Nine Month Period:
During the period ended September 30, 2010 the Company recorded a net loss of $263,778 (
.00 loss per
share compared to a net loss of $253,079 (
.00 loss per share) for the comparative September 30, 2009 period.
CANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
Significant variance details are outlined in the table below:
September 30 September 30 Increase/
2010 2,009 (Decrease)
ADMINISTRATIVE EXPENSES
Consulting fees $ 72,494 $ 35,602 36,892
Depreciation 6,550 7,276 (726)
Insurance 20,778 17,250 3,528
Investor relations 22,500 3,209 19,291
Listing and filing fees 8,882 11,981 (3,099)
Management fees 45,000 40,000 5,000
Office and general 20,683 15,570 5,113
Professional fees 2,316 6,761 (4,446)
Property evaluation 30,734 14,474 16,260
Shareholder communication 5,161 1,835 3,326
Transfer agent fees 7,374 3,211 4,163
Travel 22,997 19,928 3,069
(265,468) (177,097) (88,371)
OTHER ITEMS
Interest income 1,690 - 1,690
Loss on sale of capital assets - (1,703) 1,703
Impairment of mineral properties - (74,279) 74,279
Net loss for the period (263,778) (253,079) (10,699)
Consulting fees – the increase was a result of additional consulting fees for corporate development.
Investor relations – the Company recorded additional costs for data base and general investor relations and
marketing activities.
Property evaluation – property evaluation costs primarily consisted of, site management of $9,297 in geological
consulting fees 15,218, maps and miscellaneous of $6,645 and cash in lieu of $2,689 to hold the Deer Lake mineral
claims in good standing. In addition the Company recorded the amending costs to the Serb Creek agreement of
$15,000 offset by $10,000 from the sale of 3 Serb Creek mineral tenures. These costs were expensed as the Serb
Creek Property had been written off in 2009.
Travel – the increase in travel related to the attendance of mining conferences by directors and officers.
b) Loss for the three month period:
During the three month period ended September 30, 2010 the Company recorded a net loss of $71,708 (
.00
loss per share) compared to a loss of $126,210 (
.00 loss per share) for the comparative 2009 period. The net
loss for the current period was primarily attributable to consulting fees of $27,139 (2009 – $8,327) and
management fees of $15,000 (2009 - $10,000) Insurance of $12,994 (2009 - $NIl). The areas of increase for
these amounts are described hereinabove.
Capital Expenditures
Capital expenditures for the period ended September 30, 2010 included $669,6 on mineral properties. Expenditures
related to the Company’s Murphy Lake, Eldorado, Man/Prime, and Lithium properties. Expenditures for the
September 30, 2009 comparative period included $125,581 on mineral properties, net of recoveries and related to the
Company’s Murphy Lake, Man/Prime and Deer Lake properties.
CANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
Summary of Quarterly Results
The following table sets forth selected unaudited financial information prepared by management of the Company.
Three Months Ended
September 30
2010
June 30
2010
March 31
2010
December 31
2009
Total Revenues $ — $ — $ — $ —
Loss before other items and
income taxes
$ (71,708)
$ (192,070)
$ (103,966)
$ (155,731)
Future income tax recovery $ — $ — $ — $ —
Net Loss $ (71,708) $ (192,070) $ (102,276) $ (1,401,473)
Loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.03)
Three Months Ended
September 30
2009
June 30
2009
March 31
2009
December 31
2008
Total Revenues $ — $ — $ — $ —
Loss before other items and
income taxes
$ (50,228)
$ (56,181)
$ (70,688)
$ (35,700)
Future income tax recovery * $ — $ — $ — $ (7,677)
Net income (loss) * $ (51,931) $ (56,181) $ (70,688) $ (1,208,772)
Loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.03)
* During the year ended December 31, 2008, the Company determined that there are unrecognized future income
tax recoveries on 2,200,000 flow-through shares for gross proceeds of $1,200,000 related to renunciation filings
made during the year ended December 31, 2007. The tax effect related to the renounced deductions should be
recognized on the date the Company filed the renouncement documents with the tax authorities. The comparative
financial statements for the fiscal quarter ended March 31, 2008 were restated to reflect the above changes.
Significant items to report for the quarterly results are as follows:
The Loss before other items and income taxes included:
1) December 31, 2009 - $74,478 stock based compensation expense;
Net loss included:
2) December 31, 2009 - $1,245,557 impairment of mineral resource properties
3) December 31, 2008 - $1,684,998 impairment of mineral resource properties; and
CANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
Financing Activities
During the period ended September 30, 2010 the Company received $131,000 pursuant to the following private
placements financings for:
a) 2,000,000 units at a price of
.05 per unit. Each unit consists of one common share and one share
purchase warrant. Each share purchase warrant entitles the holder to purchase one common share at a
price of
.10 for two years.
b) 620,000 units at a price of
.05 per unit. Each unit consists of one common share and one share purchase
warrant. Each share purchase warrant entitles the holder to purchase one common share at a price of
.10 for two years.
During the period ended September, 2009 the Company had received $345,000 pursuant to three private placement
financings completed subsequent to that period.
Liquidity and Capital Resources
At September 30, 2010 the Company had a working capital of deficiency of $88,532 (December 31, 2009-$733,167
working capital deficiency). The Company will require additional funds in order to meet its payments required under
its option agreements, current accounts payable and accrued liabilities and working capital for its overhead for 2010.
As at September 30, 2010 the Company held 200,000 shares of Nanika Resources Inc. at a fair value of $8,000.
During the period ended September 30, 2010 the Company sold 50,000 shares of Happy Creek Minerals Ltd.
(“Happy Creek”) for net proceeds of $12,995.
The financial statements have been prepared on a going concern basis which assumes that the Company will be able
realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.
Related Party Transactions
During the period ended September 30, 2010, the Company incurred the following to directors, officers and private
companies controlled by them: management fees - $45,000 (2009 - $40,000), rent $3,350 (2009 – 15,075), and
deferred exploration costs - $429,114 (2009 - $24,276). These transactions were recorded at exchange value, which
was the amount of consideration established and agreed to by the related parties.
As at September 30, 2010, the Company was owed an advance of $4,268 (2009 - $4,114) from the President of the
Company, which is included in prepaids and advances and $5,000 for management fees.
As at September 30, 2010, the Company was indebted to a private company controlled by a director of the Company
in the amount of $253,507 (December 31, 2009 - $32,334) representing deferred exploration costs. This amount is
included with accounts payable.
CANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
Contingencies and Commitments
(a) The Company is in receipt of a letter from the British Columbia Ministry of Energy, Mines and Petroleum
regarding the old Hedley heap leach operation by the Company’s predecessor company, Candorado Mines
Ltd. Several environmental issues regarding the site cleanup were addressed in a letter dated November
21, 2005 and in an on-site meeting on November 22, 2005. The Company had been given a November 24,
2005 deadline to provide a clean-up plan but has advised the Ministry that in respect to its financial
resources, this plan could not have been delivered on time. The Company does not admit or deny any
liability regarding the responsibility for the clean-up and has engaged legal counsel regarding this matter.
As indicated, the Ministry of Energy, Mines & Petroleum Resources will now proceed with the required work
and may initiate proceedings to recover the costs incurred. The Company is unable to determine the
amount of potential cost, if any, and therefore has not recognized any amount related to this matter as at
September 30, 2010.
(b) During the year ended December 31, 2008, the Company entered into a two year lease agreement with a
private company controlled by a director of the Company for office space commencing September 1, 2008
and ending August 31, 2010. The Company is committed to making lease payments in 2008 through 2010 of
$40,200 per annum.
Outstanding Share Data
Candorado’s authorized capital is unlimited common shares without par value. As of the date of this report hereof
81,776,056 common shares were issued and outstanding. The Company as at the date of this report had the
following outstanding options, warrants and convertible securities:
Type of Security Number Exercise Price Expiry Date
Stock options 775,000
.125 February 19, 2011
Stock options 625,000
.125 March 9, 2011
Stock options 630,000
.05 November 16, 2011
Stock options* 700,000
.10 January 12, 2012
Stock options* 500,000
.10 February 13, 2012
Stock options* 350,000
.10 February 22, 2012
Stock options* 50,000
.10 August 1, 2012
Stock options* 50,000
.10 December 12, 2012
Stock options 1,000,000
.10 September 25, 2013
Stock options 2,000,000
.10 December 24, 2014
Share purchase warrants 1,000,000
.10 July 6, 2011
Share purchase warrants 1,600,000
.10 September 1, 2011
Share purchase warrants 4,500,000
.10 September 15, 2011
Share purchase warrants 7,000,000
.10 November 16, 2011
Share purchase warrants** 3,740,000
.10 November 18, 2014
Share purchase warrants** 4,050,000
.20 November 18, 2014
Share purchase warrants** 800,000
.10 December 18, 2014
Share purchase warrants 1,000,000
.10 February 16, 2012
* On September 25, 2008, the Company re-priced 1,650,000 stock options with an exercise price between
.23 -
.42 per share to an exercise price of
.10 per share and received shareholder approval at its annual general
meeting held on January 10, 2010.
** On November 19, 2010 the Company received Exchange approval on the extension of warrants, 434,000 warrants
expired without exercise.
CANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
New Accounting Pronouncements
International financial reporting standards (“IFRS”)
In February 2008, the CICA Accounting Standards Board (“AcSB”) confirmed the changeover to IFRS from Canadian
GAAP will be required for publicly accountable enterprises effective for interim and annual financial statements
relating to fiscal years beginning on or after January 1, 2011 at which time Canadian GAAP will cease to apply for
Candorado and will be replaced by IFRS. Following this timeline, the Company will issue its first set of interim
financial statements prepared under IFRS in the first quarter of 2011 including comparative IFRS financial results and
an opening balance sheet as at January 1, 2010. The first annual IFRS consolidated financial statements will be
prepared for the year ended December 31, 2011 with restated comparatives for the year ended December 31, 2010.
Management has developed a project plan for the conversion to IFRS based on the current nature of operations. The
conversion plan is comprised of three phases: IFRS diagnostic assessment, implementation and education, and
completion of all integration system and process changes as well as identify any potential IFRS 1 exemptions.
One of the more significant impacts identified to date of adopting IFRS is the expanded presentation and disclosures
required. Disclosure requirements under IFRS generally contain more detail and depth than those required under
Canadian GAAP and, therefore, will result in more extensive note references. The Company will continue to assess
the level of presentation and disclosures required to its consolidated financial statements.
The Company has identified the areas noted below as those expected to have the most significant impact on its
financial statements. The items listed below do not represent a complete list of areas impacted. As the Company
progresses further into its implementation phase and decisions are made regarding the choices of accounting
policies, and as certain IFRS standards may change prior to the changeover date, the areas impacted and the effect
may be subject to change. The Company will disclose impacts on its financial reporting, including expected
quantitative impacts, systems and processes and other areas of the Company’s business in its future MD&As as such
changes are determined.
IFRS 1, “First-Time Adoption of International Financial Reporting Standards”, provides entities adopting IFRS for the
first time with a number of optional exemptions and mandatory exceptions, in certain areas, to the general
requirement for full retrospective application of IFRS. During 2010, management will prepare a presentation to the
Audit Committee and the Board of Directors which will focus on the key issues and transitional choices under IFRS 1
applicable to the Company.
Impairment of Assets (IAS36)
Canadian GAAP generally uses a two-step approach to impairment testing: first comparing asset carrying
values with undiscounted future cash flows to determine whether impairment exists; and then measuring any
impairment by comparing asset carrying values with discounted cash flows. International Accounting
Standard (IAS) 36, “Impairment of Assets” uses a one-step approach for both testing and measurement of
impairment, with asset carrying values compared directly with the higher of fair value less costs to sell and
value in use (which uses discounted future cash flows). This may potentially result in write downs where the
carrying value of assets were previously supported under Canadian GAAP on an undiscounted cash flow
basis, but could not be supported on a discounted cash flow basis.
Share Based Payments (IFRS 2)
IFRS and Canadian GAAP largely converge on the accounting treatment for share–based transactions with
only a few differences. Consultants who perform the same services as employees are treated as employees
for the purposes of IFRS 2. Stock option grants to employees must be measured on the date of the grant.
Non-employee grants must be measured on the date the goods are supplied or the service is deemed to be
completed. This may lead to a difference in the amount of Stock Option Expense recorded than would be
the case under Canadian GAAP Section 3870.
CANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
Exploration and Evaluation Assets (IFRS 6)
Similar to Canadian GAAP, IFRS allows the choice of capitalizing or expensing exploration costs. The
Company’s policy under Canadian GAAP has been to capitalize all exploration expenditures incurred under
an agreement or acquisition, general property evaluation has been expensed and it will follow the same
policy under IFRS without an impact on the financial statements.
Property, Plant and Equipment (IAS 16)
Under IFRS, Property, Plant and Equipment (“PP&E”) can be measured at fair value or at cost while under
Canadian GAAP, the Company has to carry PP&E on a cost basis and the revaluation is prohibited.
Upon adoption of IFRS, the Company has to determine whether to elect a cost model or revaluation model.
Management has yet to decide on which model to adopt. The Company is in the process of identifying the
potential impact on the property, plant and equipment balance.
In accordance with IAS 16 “Property, Plant and Equipment”, upon acquisition of significant assets, the
Company will need to allocate an amount initially recognized in respect of an asset to its component parts
and accounts for each component separately when the components have different useful lives or the
components provide benefits to the entity in a different pattern.
Future Income Taxes (IAS 12)
Like Canadian GAAP, deferred income taxes under IFRS are determined using the liability method for
temporary differences at the balance sheet date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes, and by generally applying tax rates applicable to the
Company to such temporary differences. Deferred income taxes relating to temporary differences that are in
equity are recognized in equity and under IFRS subsequent adjustments thereto are backward traced to
equity. IFRS prohibits recognition where deferred income taxes arise from the initial recognition of an asset
or liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither accounting nor taxable net earnings. The Company does not expect implementation of IAS 12,
Income Taxes to have an impact on the financial statements. However, as events and circumstances of the
Company’s operations change that give rise to future income taxes, IAS 12 will be applied.
General (IFRS 1/IAS 1)
As the Company elects and approves the IFRS accounting policy for each of the areas above, management
will determine and disclose impact of the IFRS adoption at the transition date on our financial statements.
The International Accounting Standards Board will also continue to issue new accounting standards during
the conversion period and, as a result, the final impact of IFRS on the Company’s consolidated financial
statements will only be measured once all the IFRS applicable accounting standards at the conversion date
are known.
Based on management assessment of the information system currently used by the Company, all
information required to be reported under IFRS will be available with minimal system changes.
As of September 30, 2010, the Company continues to review and examine the above areas for their
impacts.
CANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
Business Combinations and Consolidated Financial Statements
In January 2009, the CICA issued Section 1582 “Business Combinations”, which replaces Section 1581 “Business
Combinations”, and Section 1601 “Consolidated Financial Statements” and Section 1602 “Non Controlling Interests”,
which replace Section 1600 – “Consolidated Financial Statements’. These new sections are effective for years
beginning on or after January 1, 2011 with earlier adoption permitted. Section 1582 and 1602 will require net assets,
non-controlling interests and goodwill acquired in a business combination to be recorded at fair value and noncontrolling
interests will be reported as a component of equity. In addition, the definition of a business is expanded
and is described as an integrated set of activities and assets that are capable of being managed to provide a return to
investors or economic benefits to owners. As well acquisition costs are not part of the consideration and are to be
expenses when incurred. These new sections are not expected to have a material impact on the Company’s financial
condition or operating results.
Off balance-sheet arrangements
The Company has no off-balance sheet arrangements to report.
Financial Risk Factors
The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:
a) Credit Risk
The Company’s credit risk is primarily attributable to cash, taxes recoverable and other receivables. The
Company has no material concentration of credit risk arising from operations. Management believes
that the credit risk concentration with respect to taxes recoverable and other receivables is remote.
Management does not believe that such receivables are impaired. Cash consists of bank deposits
which are held with a Canadian Chartered Bank, from which management believes the risk of loss is
remote.
b) Liquidity risk
The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to
meet liabilities when due. As at September 30, 2010 the Company had a cash balance of $158,492
(2009 - $796,155) and current liabilities of $300,672 (2009 - $265,571). All of the Company’s accounts
payable and accrued liabilities have contractual maturities of less than 60 days and are subject to
normal trade terms. The ability of the Company to continue to pursue its exploration activities and
maintain its working capital is dependent on its ability to secure additional equity or other financing.
c) Interest Rate Risk
The Company has cash balances and no interest-bearing debt.
d) Foreign Currency Risk
The Company does not have foreign operations, nor does it have risk arising from changes in foreign
currency exchange rates. The Company does not use any derivative instruments to reduce its exposure
to fluctuations in foreign currency exchange rates.
e) Equity price risk
The Company is exposed to price risk with respect to equity prices. Equity price risk is defined as the
potential adverse impact on the Company’s earnings due to movements in individual equity prices or
general movements in the level of the stock market. The Company closely monitors individual equity
movements and the stock market to determine the appropriate course of action to be taken by the
Company.
f) Commodity price risk
The Company is exposed to price risk with respect to commodity prices. Changes in commodity prices
will impact the economics of development of the Company. The Company closely monitors commodity
prices to determine the appropriate course of action to be taken by the Company.
g) Sensitivity analysis
As at September 30, 2010 the carrying value amounts of the Company’s financial instruments
approximates their fair value.
CANDORADO OPERATING COMPANY LTD.
MANAGEMENT DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2010
Capital Disclosures
The Company’s capital currently consists of common shares, options and warrants. The Company’s objectives when
managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the
development of its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital
at an acceptable risk. The Company manages the capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure,
the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of
cash. In order to maximize ongoing development efforts, the Company does not pay out dividends. The Company is
currently assessing financing alternatives for its exploration plans and operations through its current operating period.
Risks and Uncertainties
The Company’s principal activity is mineral exploration. Companies in this industry are subject to many and varied
kinds of risks, including, but not limited to, environmental, metal prices, political and economical. The Company has
no sources of financing other than equity financing. The properties in which the Company has in interest or has an
option to earn an interest are in the exploration stages only, are without known bodies of commercial mineralization
and have no ongoing mining operations. Mineral exploration involves a high degree of risk and few properties which
are explored are ultimately developed into producing mines. Exploration of the Company’s mineral properties may
not result in any discoveries of commercial bodies of mineralization.
Accounting Estimates
The information provided in this report including the financial statements, is the responsibility of management. In the
preparation of these statements, estimates are sometimes necessary to make a determination of future values for
certain assets or liabilities. Significant areas requiring the use of management estimates include financial
instruments, the estimation of stock-based compensation, the determination of environmental obligations, impairment
of mineral claims and deferred exploration expenditures, useful lives for amortization, and valuation allowances for
future tax assets. Management believes such estimates have been based on careful judgments and have been
properly reflected in the accompanying financial statements.
Disclosure Controls and Procedures
Disclosure controls and procedures (“DC&P”) are intended to provide reasonable assurance that information required
to be disclosed is recorded, processed, summarized and reported within the time periods specified by securities
regulations and that information required to be disclosed is accumulated and communicated to management. Internal
controls over financial reporting (“ICFR”) are intended to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purpose in accordance with Canadian
generally accepted accounting principles.
TSX Venture listed companies are not required to provide representations in the annual filings relating to the
establishment and maintenance of DC&P and ICFR, as defined in Multinational Instrument 52-109. In particular, the
CEO and CFO certifying officers do not make any representations relating to the establishment and maintenance of
(a) controls and other procedures designed to provide reasonable assurance that information required to be disclosed
by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is
recorded, processed, summarized and reported within the time periods specified in securities legislation, and (b) a
process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with the issuer’s GAAP.
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient
knowledge to support the representations they are making in their certificates regarding the absence of
misrepresentations and fair disclosure of financial information. Investors should be aware that inherent limitation on
the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR
as defined in Multinational Instrument 52-109 may result in additional risks to the quality, reliability, transparency and
timeliness of interim and annual filings and other reports provided under securities legislation