Entourage Mining Ltd.: Exhibit 99.2 - Filed by newsfilecorp.com
ENTOURAGE MINING LTD.
(An
Exploration Stage Company)
MANAGEMENT DISCUSSION AND ANALYSIS
For The Period Ended September 30, 2012
This Management Discussion and Analysis of Entourage
Mining Ltd. (the “Company”) provides analysis of the Company’s interim financial
results for the period ended September 30, 2012. 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
November 23, 2012 and should be read in conjunction with the interim financial
statements and related notes for the period ended September 30, 2012 and the
audited financial statements and related notes for the year ended December 31,
2011. Except as noted, all dollar amounts contained in this management
discussion and analysis and in the audited 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
unaudited 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 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.
Mineral Projects
The Pires Gold Project (Brazil) – Interest sold during the
period ended September 30, 2012
Pires Property Description
The Company was 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 was rectangular in shape and was
approximately 8 kilometres long and 5 kilometres wide.
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:
Terms of the Pires Option agreement are as follows:
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). |
As at December 31, 2010, the Company
had earned 40% interest in the Pires Property.
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. |
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, (Any excess expended in years one and
two is to be applied against this $1,000,000 expenditure
requirement). |
Option to Purchase 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.
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 had the right to re-purchase 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.
On March 14, 2012, the Company agreed to repurchase the 10%
interest earned by Ansell Capital in the Pires Gold Project for $10,000 cash and
the issuance of 300,000 shares at a deemed value of $15,000 (issued). Concurrent
with this transaction, the Company has agreed to sell its 40% interest for
$100,000 payable in two tranches, the first on signing (received) and the second
no later than June 30, 2012 (received).
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 of 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:
| |
a. |
$35,000 and 12,500 common shares within ten business days
of the date of approval of the agreement (paid and issued); |
| |
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); |
| |
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 |
| |
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 September 30, 2012, 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. 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. 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.
To date, the Doran Showing, located at the south of Doran
(drilled in 2006 and 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.
In total, over 6,000 metres have been drilled on the Doran
property by our company and Abbastar and we 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 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 October 10, 2010 located on our website at
www.entouragemining.com.
Future Exploration and Development
The Company is currently contemplating future exploration and
development on its Doran Property subject to financing. As the Company has
fulfilled the terms of the original sub-agreement with the vendor, there is no
further required work to maintain this exploration property.
1.3 Selected
Annual Information
N/A
1.4A Results of Operations for
the three month period ended September 30, 2012
During the three month period ended September 30, 2012, the
Company reported a net loss of $21,829 or $0.00 per share, as compared to a net
loss of $69,450 or $0.01 per share for the three month period ended September
30, 2011. Expenses decreased from $41,383 in 2011 to $21,829 in the current
period, a decrease of $19,554. This decrease was mainly attributable to:
- Fair value adjustment of derivative liabilities decreased from a loss of
$28,067 for the three month period ended September 30, 2011 to $nil for the
three month period ended September 30, 2012. In the prior year the expiry date
of the warrants was extended one year to January 25, 2012 with no other
changes to the terms of the warrants. These warrants expired unexercised in
the first quarter of 2012. This is a non-cash expense.
- Mineral property costs decreased from $8,259 for the three month period
ended September 30, 2011 to a gain of $243 for the three month period ended
September 30, 2012. This change was due to the Company selling its interest in
the Pires Gold Project as previously disclosed.
- Professional fees decreased from $21,785 for the three month period ended
September 30, 2011 to $269 for the three month period ended September 30,
2012. This decrease was due to reduced use of the Company’s legal
representatives for the quarter.
1.4B Results of Operations for
the nine month period ended September 30, 2012
During the nine month period ended September 30, 2012, the
Company reported a net loss of $27,828 or $0.00 per share, as compared to a net
loss of $301,484 or $0.03 per share for the nine month period ended September
30, 2011. Expenses decreased from $181,504 in 2011 to $28,943 in the current
period, a decrease of $152,561. This decrease was mainly attributable to:
- Fair value adjustment of derivative liabilities decreased from a loss of
$119,980 for the nine month period ended September 30, 2011 to a gain of
$1,115 for the nine month period ended September 30, 2012. During the nine
month period ended September 30, 2011, the expiry date of the warrants was
extended one year to January 25, 2012 with no other changes to the terms of
the warrants. These warrants expired unexercised in the first quarter of 2012.
This is a non-cash expense.
- Mineral property costs decreased from $68,717 for the nine month period
ended September 30, 2011 to a gain of $70,169 for the nine month period ended
September 30, 2012. This decrease was due to the Company selling its interest
in the Pires Gold Project as previously disclosed.
Overall, the Company’s operating expenses decreased
significantly as compared to the prior period as a result of the sale of its
Pires Gold Project that occurred during the nine month period ended September
30, 2012. 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 interim financial statements.
1.5
Summary of Quarterly Results
In Canadian dollars
|
2012
Q3 |
2012
Q2 |
2012
Q1 |
2011
Q4 |
2011
Q3 |
2011
Q2 |
2011
Q1 |
2010
Q4 |
| Net sales |
$Nil |
$Nil |
$Nil |
$Nil |
$Nil |
$Nil |
$Nil |
$Nil |
| Loss/(Income) before other item |
$21,829 |
$26,388 |
$(19,274) |
$70,654 |
$41,383 |
$62,032 |
$78,089 |
$33,308 |
| Net (Income)/Loss |
$21,829 |
$26,388 |
$(20,389) |
$(111,981) |
$69,450 |
$89,301 |
142,733 |
$(601,247) |
| Net (Income)/Loss per share |
$0.00 |
$0.00 |
$(0.00) |
$(0. 01) |
$0.01 |
$0.01 |
$0.01 |
$(0.07) |
The Company’s interim financial statements are expressed in
Canadian dollars and have been prepared in accordance with U.S. generally
accepted accounting principles.
1.6 Liquidity
As of the date of this report, we have yet to generate any
revenues from our business operations.
On September 30, 2012, the Company had $15,216 in cash compared
to $1,278 on December 31, 2011. On September 30, 2012, the Company had a working
capital deficiency of $233,082 compared to a working capital deficiency of
$404,119 on December 31, 2011.
During the nine month period ended September 30, 2012, the
Company completed a private placement of 3,074,120 units for a total proceed of
$153,706 at CDN$0.05 per unit. Each Unit consists of one common share of the
Company and one half share purchase warrant. Each whole warrant is exercisable
on or before April 13, 2013 at a price of $0.10 per share and on or before April
13, 2014 at a price of US$0.15. All shares issued under the Offering and any
shares issuable on the exercise of the warrants have a hold period expiring
August 13, 2012 under applicable Canadian securities laws. The proceeds from the
Offering will be used for general working capital purposes.
During the nine month period ended September 30, 2012, the
Company agreed to re-purchase the previously optioned 10% interest in its Pires
Gold Project for $10,000 cash and the issuance of 300,000 shares at a deemed
value of $15,000. Concurrent with this transaction, the Company has agreed to
sell its Pires interest for $100,000 payable in two tranches, the first on
signing (received) and the second no later than June 30, 2012(subsequently
received). The Company has ceased all exploration activities in Brazil.
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, 2011. 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 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 September 30, 2012 of
$21,845 (December 31, 2011 - $128,771) is owing to directors, 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 September 30, 2012, the Company
incurred $15,000 (2011 - $45,000) in management fees to its directors. Effective
April 1, 2012, the directors of the Company agreed to waive their management
fees until the Company has the financial resources to extinguish the debt. In
accordance with U.S. GAAP, the Company has recorded $30,000 in management fees
as an increase to contributed surplus.
The Company received share subscriptions in the amount of
$108,400 from directors and officers of the Company for the private placement of
3,074,120 units completed on April 13, 2012 for a total proceed of $153,706 at
CDN$0.05 per unit. Each Unit consists of one common share of the Company and one
half share purchase warrant. Each whole warrant is exercisable on or before April 13, 2013 at a price
of $0.10 per share and on or before April 13, 2014 at a price of US$0.15.
The above transactions have been recorded at exchange amount
that is the amount of consideration established and agreed to by the related
parties.
1.10 Third Quarter
Third quarter results differ significantly from other quarters
due to the fair value adjustment of derivative liabilities in the third quarter
of 2011. Third quarter results also differ significantly from other quarters as
a result of the sale of the Company’s interest in the Pires Gold Project which
resulted in the discontinuance of mineral property expenditures on the Pires
Property during the third quarter of 2012.
1.11 Proposed Transactions
There are no pending transactions that have not been disclosed
previously in this MD&A.
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 engaged in the acquisition and exploration of
mineral properties. Mineral property exploration costs are expensed as incurred.
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 properties are capitalized. Carrying value
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 non-recoverable amount 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 assets and liabilities and their
respective tax basis together with information on 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 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, 2011, 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 7. 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).
Exploration Stage Company:
The Company has not produced any revenues from its principal
business or commenced significant commercial 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 activities
to conducting exploratory programs and developing business plans.
1.14 Financial
Instruments and Risk Management
The Company’s financial instruments consist of cash, other
receivable, accounts payable, loan payable 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.
Foreign Exchange Risk
The Company is subject to foreign exchange risk for purchases
denominated in foreign currencies. The Company operates outside of the U.S.
primarily in Canada and Brazil and is exposed to foreign currency risk due to
the fluctuation between the currency in which the Company operates and the
United States Dollars. Foreign currency risk arises from the fluctuation of
foreign exchange rates and the degree of volatility of these rates relative to
the United States dollar.
Fair Value of Financial Instruments
The Company accounts for the fair value measurement and
disclosure of financial instruments in accordance with FASB ASC topic 820 which
requires a publicly traded company to include disclosures about the fair value
of its financial instruments. Such disclosures include the fair value of all
financial instruments, for which it is practicable to estimate that value,
whether recognized or not in the statement of financial position.
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,
2010 |
|
10,268,103 |
|
$ |
13,306,807 |
|
$ |
3,263,866 |
|
| Issued for
mineral properties |
|
100,000 |
|
|
15,000 |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
| Balance, December 31, 2011 |
|
10,368,103 |
|
$ |
13,321,807 |
|
$ |
3,263,866 |
|
|
Issued for mineral properties |
|
300,000 |
|
|
15,000 |
|
|
- |
|
| Issued for
private placement |
|
3,074,120 |
|
|
153,706 |
|
|
- |
|
|
Recognition of management fees waived |
|
- |
|
|
- |
|
|
30,000 |
|
| |
|
|
|
|
|
|
|
|
|
| Balance, September 30, 2012 and November
23, 2012 |
|
13,742,223 |
|
$ |
13,490,513 |
|
$ |
3,293,866 |
|
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.
On March 30, 2012 the Company agreed to purchase the 10%
interest earned by Ansell Capital in the Pires Gold Project for $10,000 cash
(accrued) and the issuance of 300,000 shares from treasury (issued) with a fair
value of CDN$15,000.
On April 13, 2012, the Company announced that it closed a
private placement of 3,074,120 units at a price of CDN$0.05 per Unit for gross
proceeds of CDN$153,706. Each Unit consists of one common share of the Company
(a “Share”) and one-half share purchase warrant exercisable on or before April
13, 2013 at a price of CDN$0.10 per Share and on or before April 13, 2014 at a
price of $0.15.
During the period ended September 30, 2012, the Company
recorded $30,000 for management fees waived as an increase to contributed
surplus.
Warrants
| |
|
|
|
|
Weighted Average |
|
|
Weighted |
|
| |
|
Warrants |
|
|
Exercise Price |
|
|
Average |
|
| |
|
Outstanding |
|
|
(US$) |
|
|
Life
|
|
| Balance, December 31, 2010 and 2011 |
|
1,613,162 |
|
|
0.25 |
|
|
0.07 |
|
| Issued during the period |
|
1,537,060 |
|
|
0.10/0.15 |
|
|
1.00/2.00 |
|
| Exercised during the period |
|
- |
|
|
- |
|
|
- |
|
| Expired during the
period |
|
(1,613,162 |
) |
|
0.25
|
|
|
- |
|
| Balance, September 30, 2012 and November 23, 2012 |
|
1,537,060 |
|
|
0.10 |
|
|
0.53/1.53 |
|
*On January 25, 2010, the expiry date of 1,613,162 warrants
exercisable at $0.25 was extended one year to January 25, 2012 with no other
changes to the terms of the warrants. On January 25, 2012, 1,613,162 warrants
expired unexercised.
Stock Options
| |
|
|
|
|
|
|
|
Weighted |
|
| |
|
Options |
|
|
Weighted Average |
|
|
Average |
|
| |
|
Outstanding |
|
|
Exercise Price (U.S. $) |
|
|
Life
|
|
| Balance, December 31, 2010 |
|
720,000 |
|
|
0.35 |
|
|
3.60 |
|
| Options cancelled
during the year |
|
720,000 |
|
|
0.35 |
|
|
- |
|
| Balance, December 31, 2011, September 30, 2012 and November 23,
2012 |
|
- |
|
|
- |
|
|
- |
|
There has been no activity in number of options outstanding
during the nine month period ended September 30, 2012 or to the date of this
MD&A.
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
November 23, 2012
