The following Management’s Discussion and Analysis, with an approval date of November 28, 2013, should be read together with the unaudited financial statements for the quarter ended September 30, 2013, and related notes attached thereto, which are prepared in accordance with International Financial Reporting Standards (“IFRS”). All amounts are stated in Canadian dollars unless otherwise indicated.
Overview
The Company is in the resource exploration/development and production business. The Company has leased and acquired mineral rights to properties located near Port Hardy on Vancouver Island and near Powell River. These properties are industrial mineral properties containing cement feedstock materials and Kaolin as well as a strong potential for development of base and precious metal deposits optioned to Lumina Copper Corp. The Company has been continuously shipping product to a Seattle Cement Plant since October 2003.
The Company currently trades on the TSX Venture Exchange under the symbol ELT.
The following is a summary of significant events and transactions that occurred during 2013.
Specifically:
Expiry of 1,900,000 warrants on January 21, 2013 and 9,124,999 warrants on February 28, 2013 leaving a balance of Nil warrants outstanding.
February 11, 2013 announced the acquisition of the Palace Claims which is a 218 hectare potential graphite property in Quebec.
February 25, 2013 announced a potential gold property acquisition via online staking of 638 hectares near (Monster Lake) Chibougamau, Quebec.
On March 1st, 2013, the Company discontinued its 70/30 option agreement on the Golden Ridge Property with Auracle Resources Ltd. The terms of the agreement were payment of $25,000 cash, a re-mbursement of $50,000 for mineral exploration work and 200,000 shares which were not paid.
On March 15th, 2013 the TSX Venture Exchange accepted for filing a purchase agreement dated March 2, 2013 for 3 Monster property consisting of 10 mineral claims located near Chibougamau, Quebec. Total consideration was $5,000 and the issuance of two million common shares of the company.
Barge load number 111 was shipped on March 16th, 2013.
Barge load number 112 was shipped on April 20th and barge number 113 was shipped on May 19th, 2013.
Barge load number 114 was shipped on July 20th and barge number 115 was shipped on September 19th, 2013.
As at September 30, 2013 the Company held $2,145 (December 31, 2012 - $9,901) in cash assets and had a net gain for the quarter of $101,236 (December 31, 2012 – net loss $714,741).
Net cash use from investing activities for the period ended September 30, 2013 was $94,657 compared to net cash used by investing activities of $71,900 during the period ended September 30, 2012.
Financing activities during the period ended September 30, 2013 were only in relation to an increase in related party transactions of $19,325.
Summary of Quarterly Results
The results above are consistent with the decreased shipments due to the economic slowdown of the US and Canadian cement markets. It is normal for the Company to experience net income in the third quarter as the bulk of the shipments for the geyserite usually occur in the late summer and early fall. The fourth quarter usually experiences the greatest loss for the year due to little or no revenue in combination with the write down of mineral properties if applicable.
Capital Resources
The Company does not have sufficient funds to meet its operational expenses for 2013 and cover anticipated administrative expenses throughout the year and will have to complete a financing during the year. In light of a valuation of the PEM 100 quarry completed in January 2010, the Company decided to write-off the asset in the amount of $1,159,798 due to the negligible value and drain on cash flow in 2009 and $380,264 in 2010. The Company has taken a further write down during the year ended December 31, 2012 in the amount of $86,849. It will continue the chalky geyserite production at its PEM100 Quarry site in Port Hardy with an effort to lower administrative and production expenses until a suitable arrangement can be found for the property. The Company is searching for alternative arrangements for the property to enhance shareholder value and reduce operating expenses.
The discussion and analysis of our financial condition and results of operations is based on our annual financial statements, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Application of IFRS requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the revenues and expenses reported during the period. Changes in these estimates, judgments and assumptions will occur as a result of future events, and accordingly,
actual results could differ from amounts estimated.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements to which the Company is committed as at September 30, 2013.
Related Party Transactions
a) The Company paid or accrued consulting fees of $3,000 (September 30, 2012 - $1,500) to a director and CFO of the Company, Ron Savelieff for CFO and consulting services.
b) The Company accrued geological fees and expenses of $10,316 (September 30, 2012 - $50,059), that are included in exploration costs and management fees of to a company controlled by the Company’s President, Jo Shearer.
c) The Company paid directors’ fees performed by directors of $Nil (September 30, 2012 - $Nil).
d) Royalties totaling $Nil (September 30, 2012 - $Nil) were accrued to a company controlled by the President, Jo Shearer.
e) Royalties totaling $12,647 (September 30, 2012 - $5,782) were paid or accrued to the spouse of a former director, Jackie Howich.
Due to Related Parties
As at September 30, 2013, amounts due to directors, officers and companies with a common director or officer for royalties, fees and expenses aggregated $1,094,675 (December 31, 2012 - $897,856). Amounts due to related parties are unsecured and non-interest bearing with no fixed terms of repayment accordingly fair value is not readily determinable.
Transactions with related parties have been valued in these financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
Proposed Transactions
The Company may be required to raise further capital in order to meet all financial obligations for future periods. The Company may raise the required capital through private placement offerings of its securities.
Critical Accounting Estimates
Management regularly assesses the mineral properties for impairment. During the nine month period ended September 30, 2013 impairments of $25,353 (December 31, 2012 - $397,310) were recorded.
Share Data
As at November 29, 2013
Authorized share capital: Unlimited common shares without par value and unlimited number of class A preference shares without par value;
Shares issued and outstanding as at November 29, 2013: common shares ;
As at November 29, 2013 the options outstanding are nil.
Subsequent Events
Subsequent to September 30, 2013:
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On November 14th, 2013 Electra announced a barge shipment to Ash Grove Cement.
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As of November 27th, 2013 Electra continues to pursue a 10:1 share consolidation and substantial financing.
Outlook
The Company’s continuing focus will be on sustained production of chalky geyserite at the PEM100 Quarry in Port Hardy. The possible development of a docking port located on the west side of the island will contribute to the reduction of hauling cost for the product. The Company is also working with its major customer in pricing of the chalky geyserite to facilitate the sharing of administrative costs. Based on results of current production and new product development, the
Company remains confident that production will be met for all outstanding orders.
Corporate Governance
The Company’s Board of Directors follows recommended corporate governance guidelines for public companies to ensure transparency and accountability to shareholders.
The current Board of Directors is comprised of four individuals, two of whom are neither an officer nor employee of the Company and are unrelated and independent from Management. The audit committee is comprised of three directors, two of whom are not independent from management and one who is independent.
The audit committee fulfills its role of ensuring the integrity of the reported information through its review of the interim and audited financial statements prior to their submission to the Board of Directors for approval. The audit committee meets with management quarterly to review the financial statements including the MD&A and to discuss other financial, operating and internal control matters.
Controls and Procedures
In contrast to the certificate required under National Instrument 52-109 Certificate of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109, in particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of:
i. 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 files or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and ii. 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 IFRS.
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 this certificate.
Investors should be aware that inherent limitations 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 NI 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.
Caution Regarding Forward-looking Information
Statements in this report that are not historical facts are forward-looking statements involving known and unknown risks and uncertainties, which could cause actual results to vary considerably from these statements. Readers are cautioned not to put undue reliance on forward-looking statements.
Additional information related to the Company available for view on SEDAR at www.sedar.com.
Form 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, Jo Shearer, CEO, and Director of Electra Gold Ltd., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Electra Gold Ltd. (the “issuer”) for the interim period ended September 30, 2013.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
Date: November 28, 2013
“Jo Shearer”
Jo Shearer
CEO and Director
Form 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, Ron Savelieff, CFO, and Director of Electra Gold Ltd., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Electra Gold Ltd. (the “issuer”) for the interim period ended September 30, 2013.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
Date: November 28, 2013
“Ron Savelieff”
Ron Savelieff
CFO and Director
