Entourage Mining Ltd.: Exhibit 99.2 - Filed by newsfilecorp.com
ENTOURAGE MINING LTD.
(An Exploration Stage
Company)
MANAGEMENT DISCUSSION AND ANALYSIS
For The Three Month Period Ended March 31, 2011
(Stated
in Canadian Dollars)
This Management Discussion and Analysis of Entourage
Mining Ltd. (the “Company”) provides analysis of the Company’s financial results
for the three month period ended March 31, 2011. The following information
should be read in conjunction with the accompanying interim financial statements
and related notes.
1.1 Date of Report
The following Management Discussion and Analysis (“MD&A”)
for Entourage Mining Ltd. (“Entourage” or the “Company”) is prepared as of May
18, 2011 and should be read in conjunction with the interim financial statements
and related notes for the three month period ended March 31, 2011. Except as
noted, all dollar amounts contained in this management discussion and analysis
and in the interim financial statements are in Canadian dollars.
Forward-Looking Statements
This MD&A contains certain statements that may be deemed
“forward-looking statements”. All statements in this MD&A, other than
statements of historical fact, that address exploration drilling, exploitation
activities and events or developments that the Company expects to occur, are
forward looking statements. Forward looking statements are statements that are
not historical facts and are generally, but not always, identified by the words
“expects”, “plans”, “anticipates”, “believes”, “intends”, “estimates”,
“projects”, “potential” and similar expressions, or that events or conditions
“will”, “would”, “may”, “could” or “should” occur. Information inferred from the
interpretation of drilling results and information concerning mineral resource
estimates may also be deemed to be forward looking statements, as it constitutes
a prediction of what might be found to be present when and if a project is
actually developed. Although the Company believes the expectations expressed in
such forward-looking statements are based on reasonable assumptions, such
statements are not guarantees of future performance and actual results may
differ materially from those in the forward-looking statements. Factors that
could cause the actual results to differ materially from those in
forward-looking statements include market prices, exploitation and exploration
successes, and continued availability of capital and financing, and general
economic, market or business conditions. Investors are cautioned that any such
statements are not guarantees of future performance and actual results or
developments may differ materially from those projected in the forward-looking
statements. Forward looking statements are based on the beliefs, estimates and
opinions of the Company’s management on the date the statements are made. The
Company undertakes no obligation to update these forward-looking statements in
the event that management’s beliefs, estimates or opinions, or other factors,
should change.
Management’s Responsibility for Financial Statements
The information provided in this MD&A, including the
interim financial statements, is the responsibility of management. In the
preparation of these statements, estimates are sometimes necessary to make a
determination of the future values for certain assets or liabilities. Management
believes such estimates have been based on careful judgments and have been
properly reflected in the accompanying financial statements.
Management maintains a system of internal controls to provide
reasonable assurance that the Company’s assets are safeguarded and to facilitate
the preparation of relevant and timely information.
1.2 Nature of Business and Overall Performance
Entourage Mining Ltd. was originally incorporated under the
name, Entourage Holdings Ltd., pursuant to the Company Act (British Columbia) on
June 16, 1995. On June 25, 1996, we changed our name to Entourage Mining Ltd. On
February 18, 1998, we became a reporting Issuer as defined under the Securities
Act of the Province of British Columbia in British Columbia, Canada.
The Company’s shares have been publicly traded since February
2nd, 2004 when the Company was called for trading on the
Over-The-Counter Bulletin Board in the United States. The Company is a reporting
issuer in both the United States and in British Columbia.
We are a natural resource company engaged in the acquisition
and exploration of natural resource properties. We commenced operations in 1996
and currently has a mineral property option agreement to acquire:
- An unencumbered 100% interest in the Pires Gold Project located in Goias
State, Central Brazil;
and has acquired:
- An unencumbered 65% interest in 47 prospective uranium claim blocks in
Costebelle Township known as the Doran property in eastern Quebec;
and we intend to seek and acquire additional properties worthy
of exploration and development.
Entourage is an exploration stage company and there is no
assurance that a commercially viable mineral deposit exists on any of the
properties, and further exploration will be required before a final evaluation
as to the economic and legal feasibility of all of our claims is determined.
Effective March 6, 2009 the Company's completed a reverse split
of its shares of common shares at a ratio of one new share for every ten old
shares held. The capitalization of 100,000,000 common shares with no par value
remains the same after the reverse stock split; during the period ended
September 30, 2010, shareholders of the Company approved the change of its
authorized share capital to unlimited. The Company trades on the
Over-The-Counter Bulletin Board under the symbol ENMGF.
Mineral Projects
The Pires Gold Project (Brazil)
Pires Property Description
The Company is exploring for Sediment Hosted Vein gold deposits
on 8 mineral licenses covering approximately 12,000 hectares in southern Goiás
State, Brazil. The Pires Gold Project (“Pires”) originally consisted of 5
mineral licenses covering more than 8,500 hectares (21,000 acres) located 2.5
hours drive on a paved highway that crosses the licenses from Brasilia (the
capital of Brazil) and about 1 hour outside of the small city of Pires do Rio,
Goiás State. Subsequent to the acquisition, the Company dropped two of the
southernmost claim blocks and acquired 5 new claim blocks surrounding the
original land package. The property is rectangular in shape and is approximately
8 kilometres long and 5 kilometres wide.
The Pires Property covers sericite schist, chlorite schist and
quartzites that have been intensely weathered under oxidizing tropical
conditions. Metamorphic foliation of the schists and quartzites dips mainly to
the west, and appears to be tightly folded. These metamorphic rocks belong to
the Brasilia Belt, a region where terrains from the west have been thrust
eastward over the ancient (Archean) Sao Francisco craton.
Pires Property Agreements
On June 17, 2009, and as amended on November 13, 2009, the
Company signed a definitive Mineral Property Option agreement with Infogeo
Servicos E Locacoes (“Infogeo”), a private arms length Brazilian company,
whereby the Company acquired an option to acquire a 100% interest in the Pires
Gold Project (“Pires” or the “Pires Property”), pursuant to the following
terms:
To earn a 40% interest in the
property (First Milestone), in year one:
| |
(i) |
pay to the Optionor (or its nominee) USD
$50,000 as follows: |
| |
|
(A) USD $25,000 within seven days of the
execution of this Agreement (paid), and |
| |
|
(B) USD$25,000 within 45 days of the execution
of this Agreement (paid); and |
|
(ii) |
expend not less than USD $300,000 (the “First
Target”) in exploration expenditures on the property on or before May 31,
2010 (incurred). |
To earn an additional 20% (60 %
total) interest in the property (Second Milestone), in year two:
| |
(i) |
paying USD $100,000 to the Optionor (or its nominee) on
or before January 16, 2010 (paid), and |
| |
(ii) |
expend not less than USD $300,000 (less the amount by
which any exploration expenditures pursuant to item (ii) of the First
Milestone exceeded the First Target) (the “Second Target”) in exploration
expenditures on the property before January 16, 2011 (term extended – see
below). |
To earn an additional 15% (75%
Total) interest in the property option (Third Milestone), in year three:
| |
(i) |
issue to the Optionor 100,000 common shares of the
Company on or before January 16, 2011(issued), and |
| |
(ii) |
expend up to USD $1,000,000 to complete and submit a
final report by January 16, 2012 (term extended – see below), (Any excess
expended in years one and two is to be applied against this $1,000,000
expenditure requirement). |
Option to Purchase final 25% (100%
total) (Upon completion of the Third Milestone)
Purchase up to 20% of an interest in
the property, by paying the Optionor USD$1,000,000 for each 5% incremental
interest in the Property, and USD $2,000,000 for the remaining 5% interest.
Pursuant to the amendment on November
13, 2009, the Company agreed to issue a total of 300,000 (150,000 issued prior
to December 31, 2009 and 150,000 issued prior to December 31, 2010) common
shares of the Company in return for extension of the Year 1 exploration
expenditures requirement. The Company recorded $62,260 for 150,000 shares issued
during the year ended December 31, 2009 in capital stock and $62,260 for
remaining 150,000 shares as an obligation to issue shares as at December 31,
2009, which were issued during the year ended December 31, 2010.
Pursuant to an amendment on January 15,
2011, the Company received an extension from the Pires Gold Project optionor
where the terms of its Second Milestone exploration expenditures have been
extended from January 16, 2011 to November 1, 2011 and the Third Milestone
exploration expenditures from January 16, 2012 to November 1, 2012 for
consideration of US$25,000 to be paid no later than July 15, 2011.
On February 18, 2010, the Company
signed a Letter of Intent (“LOI”) with Ansell Capital Corp., (“Ansell”) a TSX
Venture listed company, pursuant to which Ansell proposed to acquire all of the
outstanding and issued shares of the Company through a plan of arrangement (the
“Plan of Arrangement”) under the British Columbia Corporations Act. The terms of
the Arrangement will provide for a one to one common share, option and warrant
swap between Ansell and the Company’s shareholders.
Pursuant to the terms of the LOI,
Ansell agreed to: (a) advance no less than US $200,000 (advanced) to be jointly
administered by Ansell and the Company, which funds to be spent on qualifying
expenditures to satisfy the Company’s work commitments in respect of the Pires
Property May 31, 2010 work commitment; and (b) advance the Company $75,000
(received) to pay certain agreed payables prior to the execution of the
Definitive Agreement for a 25% interest in Entourage’s First Milestone of the
Pires Gold project. The Company recorded the $75,000 payment received in 2010
against the mineral property costs. The Company has the right to repurchase the
25% interest by paying back all advances by Ansell for a period of 12 months
after termination of the LOI. On July 14, 2010, the Company was notified by
Ansell that it would not be proceeding with the Plan of Arrangement.
Pires Exploration Activities
The Pires exploration program began with due diligence
replication of reported highly enriched gold float samples. Entourage has
collected float quartz vein, outcrop and soil samples with enriched gold
concentrations. The five highest gold (Au) values to date are 405 grams per
tonne (g/t), 297 g/t, 114, g/t, 80 g/t, 77 g/t, 70 g/t and 55 g/t (analyses
completed at SGS-Geosol and Intertek Laboratories in Brazil, and ACME Analytical
Laboratory in Canada). These highly enriched samples were collected from
different parts of the property located up to 15 km apart on strike. Hand
trenching has succeeded in exposing some of these occurrences as undeformed
quartz veins in or close to bedrock near the float samples, and locally abundant
concentrations suggest that other samples are also proximal to source.
The Pires Property covers metasedimentary strata that were
deformed during the Neoproterozoic compressional event that formed the Brasilia
thrust belt. Syn-deformational quartz veins and boudins comprise one of the two
deposit types targeted for exploration on the Pires Property. Post deformational
quartz veins carrying high values of gold possibly associated with the regional
Transbrasiliano extensional event in the latest Neoproterozoic are the second deposit type targeted at Pires. Mineralization of the
second, undeformed extensional quartz vein type is described in 2 places on the
Property (the Garimpo, and Point 1 areas) located more than 13 km apart. To
date, no mineral resource or reserves have been defined on the Property. The
Pires Property merits further exploration and a two-phase program is recommended
herein. Phase 1 includes: continuing surface sampling in unsampled or minimally
sampled areas of the Property; completion of ongoing structural and geological
mapping; surface geochemistry; hand trenching; a ground magnetic test grid; and
450 m of drilling. The estimated budget of the recommended Phase 1 program is
CDN$220,500. Phase 1 was completed in early summer of 2010 which included
drilling of 550 metres. Phase 2 requires further exploration work estimated at
CDN$580,000. The largest recommended expenditure for Phase 2 is drilling to test
an assumed 3 or 4 target areas. Please refer to the National Instrument 43-101
compliant report on the Pires property filed on SEDAR and EDGAR on February 17,
2010.
Future Exploration and Development
The Company is seeking financing for Phase 2 exploration on the
Pires Gold Project.
The Doran Uranium Prospect (Quebec)
Doran Uranium Property Description
The Doran Uranium property consists of 47-contiguous mineral
claims (polygons) covering approximately 2,473 hectares in the Baie Johan Beetz
area of Costebelle Township, Quebec. The claim block is centered at GPS 548009 E
and 5572265 N.
The Doran property is located in the southeastern part of
Quebec, along the north shore of the Gulf of St. Lawrence, and about 25
kilometres west of Aguanish, approximately 109 kilometres east of Havre St.
Pierre. The property extends inland from the Gulf of St Lawrence a distance of
approximately 10 kilometres to the north. Locally this area is known as “Moyenne
Cote Nord” or middle coast north of the St. Lawrence Seaway.
The property is situated within the Costebelle Township, NTS
map sheet 12 L/08. Access to the property is by daily scheduled flights to
Natashquan-Aguanish, then by car from Aguanish to the Pashshibou River and to
the southern part of the property.
The topography of the property for the most part is rolling
hills having a maximum relief of 100 metres with elevation ranging from sea
level to 100 metres. All mineralized areas of interest are located comfortably
above sea and river levels.
The climate around the property area is characterized by long
winters, generally extending from late October until mid-April.
Doran Uranium Property Agreements
By agreement dated March 15, 2005, the Company obtained an
option to acquire a 100% interest in 44 claim blocks prospective for uranium
situated in Costebelle Township in eastern Quebec (the “Doran Property”) in
exchange for cash payments of $220,000, the issuance of 75,000 common shares and
expenditures of $1,000,000 on the Doran Property over three years, as
follows:
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a. |
$35,000 and 12,500 common shares within ten business days
of the date of approval of the agreement (paid and issued); |
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|
|
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b. |
$35,000 and 12,500 common shares on or before March 15,
2006 (paid and issued); and expending $200,000 on or before March 15, 2006
(incurred); |
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|
|
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c. |
$75,000 and 25,000 common shares on or before March 15,
2007 (paid and issued); and expending $300,000 on or before March 15, 2007
(incurred by Abbastar Holdings Inc. (“Abbastar”) – see below);
and |
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|
|
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d. |
$75,000 (paid in 2008 by Abbastar – see below) and 25,000
common shares on or before March 15, 2008 (issued); and expend an
additional $500,000 on or before March 15, 2008 (incurred by Abbastar –
see below). |
All the above terms have been met and the Company earned 100%
interest of the property.
The property interest is subject to a 2.5% Net Smelter Return
(NSR). The Company has the right to purchase up to three-fifths of the NSR, or
1.5%, for $1,750,000.
On February 13, 2007, the Company entered into an option
agreement (the “Option”) with Abbastar Holdings Inc. (“Abbastar”), a TSX Venture
Exchange listed company, whereby Abbastar may earn up to a 70% interest in the
Doran Property by making a one time cash payment of $100,000 CDN (received) to
the Company and spending $5,000,000 on the Doran Property over 4 years (the
Company retains the right to purchase the NSR on the Doran Property). The TSX
Venture Exchange approved this transaction on May 30, 2007. The terms of the
Option provide that Abbastar may earn its interest in the Doran property as
follows:
| |
- 20% interest by spending $500,000 on or
before February 13, 2008 (incurred); |
| |
- 15% additional interest by expending an
additional $1,000,000 on or before February 13, 2009 (incurred); |
| |
- 15% additional interest by expending an
additional $1,500,000 on or before February 13, 2010; and |
| |
- 20% additional interest by expending an
additional $2,000,000 on or before February 13, 2011. |
As of March 31, 2011, Abbastar had earned a 35% interest in the
Doran property but has allowed the balance of their option to expire.
Competitive factors in the market for mineral
resources
The Company is prospecting for uranium in Quebec. It is
anticipated that uranium generated power will become more popular in the decades
to come as rising oil prices and political strife in the world’s oil producing
regions continue. In 2010, the annual sales volume of
U3O8 reached 42.8 million pounds and production of
uranium, if any, by the Company would have no significant effect on the price of
uranium.
Applicable Regulations and Permits
The Company has obtained the necessary work, environmental and
regulatory permits required to undertake the exploration programs it is
undertaking on its mineral properties. The Company anticipates that, assuming
further planned work will be done, there will be no difficulties in obtaining
necessary work, environmental and regulatory permits for further exploration
work. The jurisdictions wherein our properties are located have long histories
in mining exploration and are friendly and accommodating to mineral
exploration.
Claim Status
All claims of the Doran Uranium Project are in good standing;
furthermore, the Corporation has $1,335,273 in excess work credits (Dépenses
Acceptées) that will be applied in increments of $1,200 per claim as the claims
approach renewal; this will enable the Corporation to keep the claims in good
standing to 2013 and beyond.
Doran Uranium Project Exploration Activities
Exploration, including geological mapping, rock sampling,
trenching and shallow drilling on the Doran Uranium Deposit resulted in the
estimation of a historical uranium resource which requires verification to
conform to Canadian NI 43-101 geological reporting standards. Before these
standards were initiated, previous work on the property, done by Aguanish
Uranium Inc., Noranda and Lacana Mining, was successful in locating and
partially exposing several potential target areas, including the Doran East
Centre target where three holes were drilled (1978) 14 feet apart with cores
returning values of 6.4, 6.4 and 9.2 Lbs. Per ton uranium
(U3O8).
We expended $245,591 in exploration work on the property in
fiscal year 2005 and a National Instrument 43-101 compliant report by Eric
Ostensoe (P.Geo.) was commissioned. In late February 2006, Mr. Ostensoe
completed his report and the Company posted the report on SEDAR and EDGAR (March
9, 2006) as well as on our website. In April 2007, an updated NI 43-101
Technical Report was prepared by Michel Proulx, M.Sc., P. Geo and Michel Boilly,
Ph.D., P.Geo, both Qualified Persons as that term is described in National
Instrument 43-101, and this report was filed on SEDAR by Abbastar Holdings Ltd.
on May 2, 2007.
In May 2006, we advanced to On Track Explorations, the Doran
project operator, $150,000CDN to commence drilling and ground exploration work
as outlined in Mr. Ostensoe’s report. Drilling commenced thereafter on the “Main
Zone” of the Doran property. Our option agreement on the Doran property requires
that we expend $300,000 in year two of the agreement.
We spent $346,166 on drilling and exploration in fiscal 2006
and reported drill results on July 20, 2006. As well, in July 2006, the
Government of Quebec reimbursed our company $57,745 as part of the Province’s
mining exploration incentive program. This rebate was based upon our 2005
drilling exploration expenses.
On May 11, 2007, the Company and Abbastar announced that
drilling had commenced on the “L” anomaly of the Doran project and in all 32
holes were drilled for a total of 3,273 metres of diamond drilling and 1,158
samples were analyzed representing 2,469 linear metres or 75% of the drill hole
length. The results of our Phase II drilling campaign were reported August 23,
2007 on EDGAR. A sample of the results are as follows:
- Hole H17A (L Anomaly): 16.99m of 0.0435%
U3O8 (0.87lb/t),
- Hole H18 (L Anomaly): 24.1m of 0.033% U3O8 (0.66lb/t) (including 16.5m of 0.73lb/t announced June
28, 2007),
- Hole H18A (L Anomaly): 7.25m of 0.023% U3O8 (0.46lb/t),
- Hole H19 (L Anomaly): 3.52m of 0.039% U3O8 (0.78lb/t),
- Hole H22 (L Anomaly): 18.44m of 0.024% U3O8 (0.48lb/t),
- Hole H27 (L Anomaly): 5.8m of 0.33% U3O8 (0.66lb/t),
- Hole H31 (N Anomaly): 0.66 metres of 0.29%
U3O8 (5.8lb/t)(at surface).
The holes were divided into four zones with particular emphasis
on the “L” zone where 18 drill holes were spotted to evaluate the lateral and
depth extensions of this zone. The first four drill holes (17, 17A, 18, 18A)
drilled at different azimuths and plunge angles and set up to test the L19
anomaly, recorded encouraging near surface results including 16.99 metres (55
feet) of 0.87lb/short ton U3O8 and 24.1 metres
(79 feet) of 0.66lb/ton U3O8, as well, holes 27
and 27A, intersected three and four pegmatites respectively. The first
pegmatite, H27, returned .66lb/ton U3O8 over
5.8 metres. The L zone remains open in all directions while lateral
extension and depth extension are unknown.
The 2007 drilling program confirmed the existence of uranium
mineralization in the northeast grid (L, N, X and Y). Findings corroborated the
channel sample results of 2006 that showed mineralization to be non-uniformly
distributed among the pegmatites and even within each pegmatite. Drill holes
revealed that the thickness of the radioactive pegmatites range from one meter
to roughly 20 metres along holes and are presented as sub-parallel multiple
slabs slightly dipping to the west and separated from each other by sterile
rocks. All pegmatites have been intersected at a maximum of 90 vertical metres
from surface.
To date, the Doran Showing, located at the south of Doran
(drilled in 2006 & the Fall of 2007) and the North East grid have both been
successfully drilled in confirming the presence of a series of sub-parallel
uranium bearing pegmatites.
Former Senior Project Geologist, Michel Proulx M. Sc. (P.Geo.
and a qualified person, as that term is defined in Canadian Mining National
Instrument 43-101 policy) recommended follow up drilling on the Doran Showing
(Phase III) as well as an additional 4,000 metres of drilling on the L zone to
gain a better understanding of the behavior of the uranium-bearing pegmatite
bodies, the structural geology context and of uranium phase minerals.
The Fall of 2007 drilling campaign was completed in early
November of that year. The program comprised 1,691 metres of drilling in 15
drill holes and was designed to test the area between the North End zone and the
Hot Spot zone, the lateral extent of the Hot Spot zone, and to determine the
south extension and thickness of the Hill Top pegmatite, all of which are part
of the Doran showing.
This campaign was designed to further delineate the Doran
Showing where we drilled in the summer of 2006. The Doran Showing consists of
four distinct pegmatite-bearing structures: The Main Zone, the North End Zone,
Dyke Zone and Hot Spot
Results from this drill campaign were announced on February 4,
2008. The Fall 2007 drill campaign achieved similar results to the 2006 campaign
and all 15 drill holes encountered uranium mineralization.
In total, over 6,000 metres have been completed on the Doran
property by our company and Abbastar and the companies are encouraged that the
goal of delineating a Rossing type (Namibia) uranium deposit may be
realized.
The completion of the Fall 2008 exploration program earned
Abbastar an additional 15% interest in the property and Abbastar has now earned
a 35% interest in the Doran property but has allowed the balance of their option
to expire.
For further information on the Doran Property, please refer to
the 43-101 Technical Report dated February 19, 2009 located on our website at
www.entouragemining.com.
Future Exploration and Development
Due to a recent increase in uranium spot prices, the Company is
seeking financing to resume exploration on the Doran Uranium Project. Since the
Company has fulfilled the terms of the original sub-agreement with the vendor,
there is no further required work commitment.
1.3 Selected Annual Information
N/A
1.4 Results of Operations for the Three Month Period Ended
March 31, 2011
During the three month period ended March 31, 2011, the Company
reported a net loss of $142,733 or $0.01 per share, as compared to a net loss of
$137,056 or $0.02 per share for the three month period ended March 31, 2010.
Expenses decreased from $137,056 in 2010 to $78,089 in the current period, a
decrease of $58,967. This decrease was mainly attributable to:
- Mineral property costs decreased from $74,902 for the three month period
ended March 31, 2010 to $51,393 for the three month period ended March 31,
2011. This decrease was due to reduced exploration expenditures on the Pires
Gold Project in Brazil completed during the period due to a lack of working
capital.
- Management fees decreased from $19,500 for the three month period ended
March 31, 2010 to $15,000 for the three month period ended March 31, 2011.
This decrease was due to the termination of a management agreement with an
officer of the Company during the year ended December 31, 2010.
- Professional fees decreased from $19,307 for the three month period ended
March 31, 2010 to $3,077 for the three month period ended March 31, 2011. This
decrease was due to the legal expenses incurred for the Ansell Letter of
Intent during the first quarter 2010.
Overall, the Company’s operating expenses decreased as compared
to the prior period due to a reduction in the mineral exploration and
administrative activity that occurred during the period ended March 31, 2011 due
to a shortage of working capital. There can be no assurance that the Company
will be able to continue to raise funds in which case the Company may be unable
to meet its obligations. Should the Company be unable to realize its assets and
discharge its liabilities in the normal course of business, the net realizable
value of its assets may be materially less than the amounts recorded in the
financial statements.
1.5 Summary of Quarterly Results
In Canadian dollars
|
2011
Q1 |
2010
Q4 |
2010
Q3 |
2010
Q2 |
2010
Q1 |
2009
Q4 |
2009
Q3 |
2009
Q2 |
| Net sales |
$Nil |
$Nil |
$Nil |
$Nil |
$Nil |
$Nil |
$Nil |
$Nil |
| (Income)/Loss before other item |
$78,089 |
$33,308 |
$70,681 |
$130,316 |
$137,056 |
$460,811 |
$121,284 |
$99,882 |
| Net (Income)/Loss |
142,733 |
$(601,247) |
$70,681 |
$130,316 |
$137,056 |
$825,171 |
$121,284 |
$99,882 |
| Net (Income)/Loss per share |
$0.01 |
$(0.07) |
$0.00 |
$0.02 |
$0.02 |
$0.14 |
$0.02 |
$0.01 |
The Company’s financial statements are expressed in Canadian
dollars and have been prepared in accordance with U.S. generally accepted
accounting principles.
NOTE: Effective March 6, 2009, the Company completed a reverse
split of its shares of common shares at a ratio of one new share for every ten
old share held. On April 22, 2010, the Company increased it authorized share
capital from 100,000,000 common shares to unlimited. All previous references to
shares of common stock and weighted average common shares outstanding as well as
the basic and diluted loss per share have been restated to give affect to the
1:10 reverse stock split unless otherwise stated.
1.6 Liquidity
As of the date of this report, we have yet to generate any
revenues from our business operations.
On March 31, 2011, the Company had $2,049 in cash compared to
$3,217 on December 31, 2010. On March 31, 2011, the Company had a working
capital deficiency of $357,562 compared to a working capital deficiency of
$229,900 on December 31, 2010.
During the period ended March 31, 2010, the Company borrowed
$10,000 from a public company with directors and officers in common, at an
interest rate of 12% and a term of 3 months. Subsequent to March 31, 2011, the
Company extended the term of the loan to 6 months.
The Company anticipates it will require additional capital in
the future to finance ongoing exploration of its properties and general and
administrative expenses, such capital to be derived from the exercise of
outstanding stock options and warrants and/or the completion of private
placement financings. The Company may also seek short-term loans from directors
of the Company. There can be no assurance the Company will be able to obtain
required financing in the future on acceptable terms to the Company.
1.7 Capital Resources
Our auditors have issued a going concern opinion on our audited
financial statements for the year ended December 31, 2010. This means that there
is substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our bills. This is
because we have not generated any revenues and no revenues are anticipated until
we begin extracting, processing and selling minerals. Accordingly, we must raise
cash continuously from sources other than the sale of minerals found on the
properties. That cash must be raised from other sources. Our only other source
for cash at this time is investments by others in Entourage Mining Ltd. We must
raise cash to implement our projects and stay in business. Even if we raise
money, we do not know how long the money will last. The Company must raise
sufficient capital to fulfill its obligation on the Pires project. The Company
requires financial resources to fund its ongoing costs of operations.
Entourage has historically relied upon equity financings to
satisfy its capital requirements and will continue to depend heavily upon equity
capital to finance its activities. The Company has also received additional
funds pursuant to property option receipts. There can be no assurance the
Company will be able to obtain required financing in the future on acceptable
terms to the Company.
The Company anticipates it will need additional capital in the
future to finance ongoing exploration of its properties, such capital to be
derived from the exercise of outstanding stock options and warrants and/or the
completion of private placements. The Company may also seek short-term loans
from directors of the Company.
1.8 Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
1.9 Transactions with Related Parties
Amounts payable to related parties as of March 31, 2011 of
$85,650 (December 31, 2010 of $72,159) is owing to directors, former directors,
to a company controlled by an officer and to a public company with directors in
common, for management fees, consulting fees and for expenses paid on behalf of
the Company. The amounts are non-interest bearing, unsecured, and have no fixed
terms of repayment.
During the period ended March 31, 2011, the Company incurred
$15,000 (period ended March 31, 2010 - $19,500) in management fees to its
directors. The Company borrowed $10,000 from a public company with directors and
officers in common, at an interest rate of 12% and an original term of 3 months
which has subsequently been extended to a 6 month term.
The above transactions have been recorded at exchange amount
being the amount of consideration established and agreed to by the related
parties.
1.10 First Quarter
2011 first quarter results differ significantly from the 2010
fourth quarter results due to an accounting restatement during the year ended
December 31, 2009 and the associated adjustment of derivative liabilities in the
fourth quarter of 2010. The financial statements for the year ended December 31,
2009 have been restated to correct the accounting for warrants that were issued
in connection with a previous private placement. The exercise price of these
warrants are denominated in United States dollars, which differs from the
Company’s functional currency (Canadian dollars) and therefore these warrants
cannot be considered to be indexed to the Company’s own stock. Accordingly, the
fair value of the warrants must be accounted for as a derivative liability with
changes in fair value recorded in the statement of operations which were
recorded in the fourth quarters of 2009 and 2010. These were non-cash
transactions.
1.11 Proposed Transactions
There are no pending transactions to report.
1.12 Critical Accounting Estimates
This section is not applicable, as the Company has no material
accounting estimates. Material accounting estimates usually disclosed by
resource issuers such as assumptions regarding depletion, resource and
production values and capital write downs are not applicable to the Company as
it is still at an exploration and development stage.
1.13 Changes in Accounting Policies including Initial
Adoption
The Company has implemented all new accounting pronouncements
that are in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial statements.
Mineral Claim Payments and Exploration Expenditures
The Company is primarily engaged in the acquisition and
exploration of mining properties. Mineral property exploration costs are
expensed as incurred. Mineral property acquisition costs are initially
capitalized when incurred. The Company assesses the carrying cost for impairment
under the FASB ASC topic 360 at each fiscal quarter end. When it has been
determined that a mineral property can be economically developed as a result of
establishing proven and probable reserves, the costs subsequently incurred to
develop such property are capitalized. Such costs will be amortized using the
units-of-production method over the established life of the proven and probable
reserves. If mineral properties are subsequently abandoned or impaired, any
capitalized costs will be charged to operations.
Income Taxes:
Income taxes are accounted for under the asset and liability
method as stipulated by ASC 740. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the year in which those temporary
differences are expected to be recovered or settled. Under ASC 740, the effect
on deferred tax assets and liabilities or a change in tax rate is recognized in
income in the period that includes the enactment date. Deferred tax assets are
reduced to estimated amounts to be realized by the use of a valuation allowance. A valuation allowance is applied when in
management’s view it is more likely than not (>50%) that such deferred tax
will not be utilized.
In the event that an uncertain tax position exists in which the
Company could incur income taxes, the Company would evaluate whether there is a
probability that the uncertain tax position taken would be sustained upon
examination by the taxing authorities. Reserves for uncertain tax position would
then be recorded if the Company determined it is probable that a position would
not be sustained upon examination or if a payment would have to be made to a
taxing authority and the amount is reasonably estimable. As of December 31,
2010, the Company does not believe it has any uncertain tax positions that would
result in the Company having a liability to the taxing authorities.
Stock Based Compensation:
The Company has a stock-based compensation plan which is
described more fully in Note 6. The Company measures the compensation cost of
stock options and other stock-based awards to employees and directors at fair
value at the grant date and recognizes compensation expense over the requisite
service period for awards expected to vest.
Except for transactions with employees and directors, all
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable. Additionally, the Company has determined
that the dates used to value the transaction are either:
| |
(1) |
The date at which a commitment for performance by the
counter party to earn the equity instruments is established; or |
| |
|
|
| |
(2) |
The date at which the counter party’s performance is
complete. |
Basic and Diluted Loss Per Share:
Basic net loss per share is computed by dividing the net loss
attributable to the common stockholders by the weighted average number of shares
of common stock outstanding during the reporting period. Diluted net income per
common share includes the dilution that could occur upon the exercise of options
and warrants to acquire common stock, computed using the treasury stock method
which assumes that the increase in the number of shares is reduced by the number
of shares that the Company could have repurchased with the proceeds from the
exercise of options and warrants (which are assumed to have been made at the
average market price of the common shares during the reporting period).
On January 1, 2009, the Company adopted changes issued by the
FASB to the calculation of earnings per share. These changes state that unvested
share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share pursuant to the
two-class method for all periods presented. The adoption of this change had not
impact on the Company’s basic or diluted net loss per share because the Company
have never issued any share-based awards that contain nonforfeitable rights.
Potential shares of common stock are excluded from the diluted
loss per share computation in net loss periods as their inclusion would be
anti-dilutive.
At March 31, 2011, the Company had 10,368,103 (December 31,
2010 – 10,268,103) shares of common stock issued and outstanding, 1,613,162
(December 31, 2010 – 1,613,162) warrants outstanding and 720,000 (December 31,
2010 – 720,000) options outstanding.
Exploration Stage Company:
The Company has not produced any revenues from its principal
business or commenced significant operations and is considered an exploration
stage company as defined by SEC Guide 7 with reference to Financial Accounting
Standards Board (FASB) issued Accounting Standards Codification (ASC)
topic 915. In the exploration stage, management devotes most of its time to
conducting exploratory work and developing its business.
1.14 Financial Instruments and Other Risks
The Company’s financial instruments consist of cash, accounts
payable and accrued liabilities and amounts due to related parties. Unless
otherwise noted, it is management’s opinion that the Company is not exposed to
significant interest or credit risks arising from these financial instruments.
The fair value of the Company’s current assets and current liabilities are
estimated by management to approximate their carrying values based on the
immediate or short-term maturity of these instruments.
The Company is at risk for environmental issues and
fluctuations in commodity pricing. Management is not aware of and does not
anticipate significant environmental remediation costs or liabilities in respect
of its current operations other than those costs for reclamation disclosed under
“Environmental Law” herein.
The Company is not exposed to significant credit concentration
or interest rate risk.
The Company’s functional currency is the Canadian dollar. The
Company operates in foreign jurisdictions, giving rise to significant exposure
to market risks from changes in foreign currency rates. The financial risk is
the risk to the Company's operations that arises from fluctuations in foreign
exchange rates and the degree of volatility of these rates. Currently, the
Company does not use any hedging or derivative instruments to reduce its
exposure to foreign currency risk.
1.15 Other MD & A Requirements
Disclosure of Outstanding Share Capital
| |
|
|
|
|
|
|
|
Additional |
|
| |
|
Number |
|
|
|
|
|
Paid In |
|
| |
|
of
Shares |
|
|
Amount |
|
|
Capital |
|
| |
|
|
|
|
|
|
|
|
|
| Authorized |
|
|
|
|
|
|
|
|
|
| Unlimited common shares, without par
value |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Issued |
|
|
|
|
|
|
|
|
|
| Balance, December 31,
2009 |
|
7,738,693 |
|
$ |
12,828,348 |
|
$ |
3,263,866 |
|
| Issued for
private placement |
|
1,613,162 |
|
|
247,214 |
|
|
- |
|
|
Transfer derivative liability for warrants issued |
|
- |
|
|
(125,435 |
) |
|
- |
|
| Issued for
mineral properties |
|
150,000 |
|
|
62,260 |
|
|
- |
|
|
Warrants exercised at US$0.20 per share |
|
766,248 |
|
|
159,620 |
|
|
- |
|
| Transfer
derivative liability for warrants exercised |
|
- |
|
|
134,800 |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
| Balance, December 31, 2010 |
|
10,268,103 |
|
$ |
13,306,807 |
|
$ |
3,263,866 |
|
|
Issued for mineral properties |
|
100,000 |
|
|
15,000 |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
| Balance, March 31, 2011 and May 18,
2011 |
|
10,368,103 |
|
$ |
13,321,687 |
|
$ |
3,263,866 |
|
Effective March 6, 2009, the Company completed a reverse split
of its common shares at a ratio of one new share for every ten old share held.
All previous references to shares of common stock, weighted average common share
outstanding, stock options and warrants have been restated to give effect to the
1:10 reverse stock split unless otherwise stated. Effective April 22, 2010, the
Company increased its authorized share capital to unlimited.
During the year ended December 31, 2010, the Company closed a
private placement of 1,613,162 units (at a price of US $0.15 per unit) for gross
proceeds of US$241,974. Each unit consisted of one common share and one share
purchase warrant exercisable on or before January 25, 2011 at a price of US
$0.25 per share. The estimated fair value of the warrants is $125,435 using the Black Scholes
option pricing model using a 1 year term, an expected volatility of 467% and a
risk free interest rate of 0.28% . The fair value of the warrants is included in
Derivative liabilities. The Company paid a total $6,868 for legal fees which
have been recorded as share issue costs.
During the year ended December 31, 2010, 766,248 shares were
issued pursuant to the exercise of warrants at US$0.20 per share. $134,800 was
transferred from derivative liabilities to Capital Stock for the exercised
warrants.
Pursuant to the Mineral Property Option agreement for the Pires
Gold Project, on February 22, 2011, the Company issued 100,000 common shares
with a fair value of CDN$15,000.
Warrants
| |
|
|
|
|
Weighted Average |
|
|
Weighted |
|
| |
|
Warrants |
|
|
Exercise Price |
|
|
Average |
|
| |
|
Outstanding |
|
|
(US$) |
|
|
Life |
|
| Balance December 31, 2009 |
|
3,684,500 |
|
|
0.20 |
|
|
0.45 |
|
| Issued during the year |
|
1,613,162 |
|
|
0.25 |
|
|
- |
|
| Exercised during the year |
|
(766,248 |
) |
|
0.20 |
|
|
- |
|
| Expired during the
year |
|
(2,918,252 |
) |
|
0.20 |
|
|
- |
|
Balance, December 31, 2010,
March 31,
2011 and May 18, 2011 |
|
1,613,162 |
|
|
0.25 |
|
|
0.82 |
|
On January 25, 2010, pursuant to a private placement, 1,613,162
warrants at an exercise price of US$0.25 per share were issued. Each warrant is
exchangeable for one common share and expires on January 25, 2011. During the
period ended March 31, 2011, the Company extended the expiry date of the
warrants by one year to January 25, 2012 with no other changes to the terms of
the warrants.
Stock Options
Activity under the Stock Option Plan is summarized as follows:
| |
|
|
|
|
Weighted Average |
|
|
Weighted |
|
| |
|
Options |
|
|
Exercise Price |
|
|
Average |
|
| |
|
Outstanding |
|
|
(U.S. $) |
|
|
Life |
|
| Balance, December 31, 2009 |
|
720,000 |
|
|
0.35 |
|
|
4.60 |
|
Balance, December 31, 2010,
March 31, 2011
and May 18, 2011 |
|
720,000 |
|
|
0.35 |
|
|
3.35 |
|
During the three month period ended March 31, 2011 and period
ended May 18, 2011, no stock options were granted, repriced or exercised.
The current directors and officers of the Company are:
Dr. Paul Shatzko, Chairman of the Board, Director
Mr. Gregory F
Kennedy, President, CEO and Director
Mr. James A. Turner, Director
Mr. Pradeep
Varshney, Chief Financial Officer
Website
The Company maintains a website at www.entouragemining.com which serves as an information
source for its investors.
Entourage Mining Ltd.
“Gregory F. Kennedy”
Gregory F. Kennedy
President and Director
May 18,
2011
