GGL Resources Corp V.GGL

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Management Discussion For The Six Months Ended May 31, 2001 7/27/01 GGL DIAMOND CORP ("GGL-V;GGDMF-0") - Management Discussion For The Six Months Ended May 31, 2001 Management Discussion and Analysis GGL Diamond Corp. (formerly Gerle Gold Ltd.) Quarterly Report For The Six Months Ended May 31, 2001 The Company is a mineral exploration company and has been engaged in the acquisition, exploration and development of mineral properties in North America since 1981. For most of the 1980s, the Company was engaged in a variety of exploration projects in locations in North America, representing primarily gold and porphyry copper-gold prospects. In 1992, the Company began diamond exploration on the Slave Craton in the Northwest Territories, an effort that has become the Company's primary exploration focus. In the year 2000, the Company began to utilize its extensive computerized data set to select areas within the Slave Craton of the Northwest Territories for land acquisition and diamond exploration. The result of this process, added to existing land holdings, has brought the 100% ownership position of the Company to over 350,000 acres. During the field season from July through October 2000, the Company collected 746 indicator mineral samples, subsequent analysis revealed the presence of kimberlitic indicators. This led to additional land acquisition, the most recent being in March, 2001. Ground geophysical surveys began in the year 2000 and continue during this winter of 2001. In addition, an airborne geophysical survey was commissioned at the end of February, 2001. From this work, drill targets are being selected, four drilled in March, 2001; one at Fishback, one at Starfish and two at Courageous did not locate kimberlite and therefore the sources of the existing kimberlitic indicators remain to be found. The exploration is a work in progress and will consist of geophysical surveying, indicator mineral sampling and on-going data evaluation and selection of targets for further exploration and drilling. CH Project Claims The 2001 diamond exploration program consists of four phases: Phase one: Now completed, consisted of 4,910 line kilometres of airborne geophysical magnetic and EM surveys conducted by Fugro Airborne Surveys. The geophysical surveys were conducted on the Seahorse, Courageous and Mackay Lake claim areas; all part of the CH Project claims south and west of Lac de Gras. Phase two: In progress, consists of indicator mineral sampling and ground checking of geophysical anomalies. Indicator mineral sampling (to follow up kimberlitic indicators discovered during the year 2000 sampling program) is being conducted on the Mackay Lake claims (completed), on the Courageous and Seahorse claims (80% completed), and on the Starfish and Winter Lake North Claims. Phase three: July to August, will consist of the selection of drill targets based on the results of indicator mineral sampling and geophysical surveys. Phase four: August to October, will consist of diamond drilling of selected targets. The Company is adequately financed to continue the year 2001 exploration program. The Company's primary focus has been and remains exploration for diamond-bearing kimberlite within the Slave Craton of the Northwest Territories. Doyle Lake LA 1-25 Mineral Claims This property adjoins the Mountain Province Claims. De Beers Canada Exploration Inc. (formerly Monopros Limited) ("De Beers") has earned a 60% interest in the claims and is project operator (the Company has a 40% carried interest). Last year, De Beers collected 309 samples and conducted a number of ground geophysical surveys. To February 28, 2001 De Beers has spent $6,108,359 ($6,076,896 to November 30, 2000). During May and June, 2001 De Beers completed a program of nine vertical drill holes over an area of approximately 4 X 1.5 km. The drilling was designed to test ground penetrating radar targets in the area of the head of the 40 km long Ken (Carl) Hicks indicator mineral train. The drilling did not locate the kimberlite or kimberlites responsible for this strong train and additional exploration will be required to locate the source. DeBeers is in the process of finalizing its 2001 summer plans. Legal Proceedings: Doyle Lake LA 26-30, Easy 1-3 claims, Section 84 Judicial Review The LA 26-30 mineral claims containing 12,717 acres and the Easy 1, 2 and 3 claims containing 7,747 acres in the Doyle Lake area, Northwest Territories, were located on ground occupied by earlier claims filed by a third party. The Company asserted these earlier claims had been located in contravention of the Canada Mining Regulations. The Supervising Mining Recorder appointed under the Canada Mining Regulations made a decision dated May 10, 1996 agreeing with the position taken by the Company and the LA 26-30 and Easy 1, 2 and 3 mineral claims were recorded in the name of the Company subject to an appeal filed by the third party pursuant to Section 84 of the Canada Mining Regulations. On appeal, the Supervising Mining Recorder's decision was overturned by the Assistant Deputy Minister's (`ADM') decision dated November 20, 1997. The Company filed for judicial review by the Federal Court of the November 20, 1997 decision, and on February 24, 1999, that decision was set aside and the Supervising Mining Recorder's May 10, 1996 decision was restored subject to another ministerial review by a person other than the one who conducted the review which was set aside; such new review to be conducted in accordance with the reasons given by the Federal Court. On March 24, 1999, the Company was served with a Notice of Appeal for the appeal of the Federal Court decision to the Federal Court of Appeal. On September 12, 2000, the Federal Court of Appeal set aside the decision of the ADM of Indian Affairs and Northern Development of November 20, 1997 where the ADM overturned the May 10, 1996 decision of the Supervising Mining Recorder. The Federal Court has remitted the matter to the Minister for a redetermination de novo in accordance with the reasons for judgement at a date to be set. Now, ten months later, we have yet to be contacted by the office of the Minister as to the progress of this matter and correspondence from our legal counsel has not been answered. The LA 26-30 claims are subject to the De Beers Agreement. Exploration and General and Administrative Expenditures As at May 31, 2001, the Company had incurred exploration costs on mineral properties of $765,659 (drilling, trenching and sampling $102,473, salaries and wages $56,780, technical and professional services $91,025, chartered aircraft $132,136, surveys $188,533, transportation $30,232 and project supplies of $143,416). On a per project basis, the Company spent the $765,659 exploration costs as follows: $66,129 on the Diamond Venture, $69,487 on the Doyle Lake Area Properties, $100,438 on Fishback and Dessert Lake properties, $14,339 on the Murray, $324 on the Hilltop, $507,264 on the CH claims, $1,153 Regional Northwest Territories, $257 on the Happy Creek Gold/Silver Property and $6,268 on other (Drybones). The Company reported a net loss of $295,211 for the period ended May 31, 2001 compared to a net loss of $275,021 for the period ended May 31, 2000. General administration expenses for the period ended May 31, 2001 were $156,502 compared to $111,612 for the period ended May 31, 2000. The increase in general administration expenses was primarily due to an increase in consulting fees (2001 - $20,000; 2000 - $2,403), legal and audit (2001 - $38,864; 2000 - $23,079) and shareholders' meetings and reports(2001 - $27,184; 2000 - $16,175). Revenue for the period ended May 31, 2001 was $29,346 consisting of interest income compared with $2,436 for the period ended May 31, 2000 ($2,349 interest income and $87 operator's administration fee). Acquisition and Disposition of Resource Properties and Write offs During the spring and summer of 2000, the Company staked more than 200,000 acres in the Lac de Gras/Point Lake areas. These CH Claims which include the Starfish, Courageous, Seahorse and Winter Lake claim groups are the focus of the current 2001 drilling program. The Company has a 100% interest in 86 claims. An additional 18 claims were staked during the period and are pending approval from the mining recorders' office. The write off of exploration and mineral property costs for the period ended May 31, 2001 was composed of $66,129 for Diamond Venture, general exploration and $101,926 for other (Drybones). Related Party Transactions During the six months ended May 31, 2001, the Company was billed $32,200 ($10,600 of which is included in accounts payable) by one director (May 31, 2000 - $40,162) for consulting fees and technical and professional services. The fees for the period ended May 31, 2001 are recorded as follows in the financial statements: $20,000 in Consulting fees and $12,200 as Technical and professional services on the Exploration costs schedule included as part of note 1 - Mineral Properties and Deferred Exploration Costs in the Notes to the Consolidated Financial Statements. As at May 31, 2001, the Company has accrued $100,000 owing to two directors for consulting fees and technical and professional services. For the six months ended May 31, 2000, the Company accrued $43,350 for administrative and office services to a company which was 50% owned by the Company. The related company is being dissolved as of November 30, 2000 and no services have been provided by that company since that date. The administrative and office services are recorded as part of Office services and expenses on the Consolidated Statement of Operations and Deficit. Commitments The Company has entered into an operating lease agreement with respect to its office premises. Minimum payments of $24,297 in 2001 and $3,326 in 2002 are required under the agreement. Financial Condition and Liquidity The Company had working capital as at May 31, 2001 of $695,958 compared with working capital of $58,988 as at November 30, 2000. The Company has no material income from operations and any improvement in working capital results primarily from the issuance of share capital. Most of these funds must be spent on Canadian Exploration Expenses as per the private placement agreements completed in December, 2000. As at May 31, 2001 the Company had $89,315 long term debt (mortgage loan) outstanding. For the period ended May 31, 2001, the Company experienced a negative cash flow of $124,914 (before allowing for changes in non-cash operating working capital balances) from operating activities. Changes in operating activities resulted primarily from an increase in administration costs. During the period ended May 31, 2001, the Company completed two brokered and one non-brokered private placements in addition to the exercise of warrants. See note 2 - Share Capital in the consolidated financial statements for May 31, 2001. As a result of the above activities, the Company's cash position as at May 31, 2001 was $843,672. The increase in cash position compared to November 30, 2000 was due principally to the increase in funds raised by way of private placement financings and the exercise of warrants by shareholders. As at May 31, 2001, the Company has spent approximately $680,750 of the total $1,438,224 raised for Canadian Exploration Expenses. Investor Relations Arrangements The Company provides information packages to investors; the package consists of materials filed with regulatory authorities. Our corporate relations person, Susan de Stein, assists us in handling investor and shareholder inquiries and other communications activities. The amount billed by Ms. de Stein's company for the period ended May 31, 2001 was $3,185 which includes the reimbursement of expenses incurred. The Company updates its web site (www.ggldiamond.com) on a continuous basis. Tel: [phone] GGL Diamond Corp. Fax: [phone] Email: [e-mail] Website: www.gerle.com have a good weekend.