EX-99.2 4 ex992.htm MANAGEMENT'S DISCUSSION Management Discussion, Quarter ended December 31, 2006

Exhibit 99.2




PEDIMENT GOLD CORP.

(Formerly Pediment Exploration Ltd.)



MANAGEMENT’S DISCUSSION AND ANALYSIS



FOR THE NINE MONTHS ENDED

JUNE 30, 2010






Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



EXECUTIVE SUMMARY


Pediment Gold Corp (the “Company”) is a natural resource company engaged in the evaluation, acquisition, exploration and development and ultimately working towards commercial production of gold and silver in Mexico.  While none of the properties have reached commercial production; two projects, La Colorada and San Antonio, are moving through the advanced exploration stage toward development.  


The Company currently has no income from operations and relies on financing through the issuance of additional shares of its common stock until such time as it achieves sustained profitability through profitable mining operations, or the receipt of proceeds from the disposition of its mineral property interests.  


As at June 30, 2010, the Company had consolidated working capital of $12,104,458.  The Company has allocated $10 million to cover its operating expenses and to continue work on its San Antonio and La Colorada projects through fiscal 2011.  The Company has sufficient working capital to fund its 2010 operating and exploration expenditures.  


The San Antonio project is located in Baja California Sur, Mexico, adjacent to the historic mining town of San Antonio and 40 kilometers southeast from the port city of La Paz.  The 100%-owned project consists of 15 concessions and covers 114,480 acres and about nine miles of favorable geological trend.  A recently performed resource estimate for San Antonio comprises a global total of 1.53 million ounces gold in the Measured and Indicated category, plus 111,000 ounces gold in the Inferred category.  The Company has assembled an experienced pre-development mining team to complete relevant permitting, surface rights and water rights acquisitions relating to its San Antonio project.  


The La Colorada project is located on a main highway and electrical grid infrastructure some 40 km southeast of Hermosillo, which is the capital and main supply point of the State of Sonora State in north western Mexico.  The 100%-owned gold-silver project is a past-producing mine site with historic output from both underground vein and open-pit to heap leach operations.  The Company conducted a work program in the summer of 2009 to utilize both reverse circulation and diamond drilling in two work phases, totaling approximately 8,000 metres and results are expected in early fiscal 2010.  Based on studies of historic and new data, the Company plans to evaluate areas of near surface gold mineralization for its open pit heap leach potential, as well as explore extensions of vein-type, higher grade gold mineralization.  


As at August 10, 2010, the Company had the following common shares, stock options and warrants outstanding:


Common shares

47,998,812

Stock options (vested and unvested)

  3,622,500

Warrants

  1,611,500

Finder’s warrants

     386,760

Fully Diluted shares outstanding

53,619,572







- 2 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



1.0

INTRODUCTION


This Management’s Discussion and Analysis (“MD&A”) includes information from, and should be read in conjunction with, the annual audited consolidated financial statements of Pediment Gold Corp (“the Company” or “Pediment”) for the nine months ended June 30, 2010, 2009. The Company reports its financial position, results of operations and cash flows in accordance with Canadian generally accepted accounting principles (“GAAP”) in Canadian dollars. This MD&A was prepared with information available as of August 10, 2010. Additional information and disclosure relating to the Company can be found on SEDAR at www.sedar.com.


2.0

FORWARD LOOKING STATEMENTS


Certain statements contained in this MD&A constitute forward-looking statements.  All statements other than statements of historical fact may be forward-looking statements.  Forward-looking statements are often, but not always. Identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “designed”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, and similar expressions.  These statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements.  Based on current available information, the Company believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that those expectations will prove to be correct.  The forward-looking statements in this MD&A are expressly qualified by this statement, and readers are advised not to place undue reliance on the forward-looking statements.


3.0

DESCRIPTION OF BUSINESS


The Company is a natural resource company engaged in the evaluation, acquisition, exploration and development and ultimately is working towards commercial production of gold and silver in Mexico.  While none of the properties have reached commercial production; two projects, La Colorada and San Antonio, are moving through the advanced exploration stage toward development.  The Company has financed its current exploration and development activities principally by the issuance of common shares.


The recoverability of costs capitalized to mineral properties and the Company’s future financial success is dependent upon the extent to which economic gold and silver mineralized bodies can develop to producing entities or from the receipt of proceeds from disposition or a joint venture on its mineral property interests.  Such development may take years to complete and the amount of resulting income, if any, is difficult to determine with any certainty.  Many of the key factors for advancing the Company’s projects to production are dependent on outside factors; such as, obtaining the necessary rights and permitting which need to be granted from certain local and governmental agencies located in Mexico.  Additional risk factors that may affect the financial statements and the risk factors related to mineral exploration and development are set out in the Company’s Annual Report as filed via SEDAR on December 23, 2009, available at www.sedar.com and under the heading “Risks and Uncertainties” listed below.


The Company knows of no trends, demands, commitments, events or uncertainties outside of the normal course of business that may result in the Company’s liquidity either materially increasing or decreasing at the present time or in the foreseeable future.  Material increases or decreases in the Company’s liquidity are substantially determined by the success or failure of the Company’s exploration programs and overall market conditions for smaller resource companies.  The Company is not aware of any changes in the results of its operations that are other than those normally encountered in its ongoing business.




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Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



4.0

OVERALL PERFORMANCE


During the nine months ended June 30, 2010, the Company expended a total of $1,697,582 in exploration expenses relating to its mineral properties.  The total exploration expenses included $1,023,590 in expenditures on its San Antonio project and $597,934 on its La Colorada project, with the remaining $76,058 being expended on the annual tax payments relating to the Company’s other concessions.


During the nine months ended June 30, 2010, the Company purchased 260 hectares covering the Planes and Colinas mineral targets and surrounding area for an agreed upon price of $6,500,000 Pesos (CDN$581,826 - paid), which amount has been allocated to land.


Stock-based compensation expense, a non-cash item, was $474,794 during the nine months ended June 30, 2010.


5.0

PROJECT UPDATES


San Antonio Project



NI 43-101 Compliant Technical Report and Resource Update, San Antonio Gold Project, November 29, 2009

The company has released a NI 43-101 compliant Technical Report and Resource Update for the San Antonio Gold Project dated November 29, 2009.  This report updates project activities since the previous NI 43-101 compliant Technical Report and Mineral Resource Estimate dated June 30, 2008.  Primarily, the two items of the report that have changes are the Mineral Resource Estimate and Metallurgical Testing, and they are summarized below.



2009 Mineral Resource Estimate for Los Planes – Las Colinas

Subsequent to the 2008 NI 43-101 compliant technical report being completed for the San Antonio project, the Company completed an additional 16,699 metres of drilling. On August 25, 2009, the Company issued a news release announcing that an update to Chapter 17 of the original technical report had been conducted by independent consultant Gary Giroux of Giroux Consultants Ltd.

An updated resource estimate was recently performed by Giroux Consultants Ltd. of Vancouver BC, to incorporate infill drill holes not included in the first estimate, conducted by Derry Michener Booth and Wahl Consultants Ltd. in 2008 (previously announced July 15, 2008). This new estimate was based on 242 holes totaling 42,891 m and comprising 26,613 gold assays using Ordinary Kriging over a range of gold cut off values.

As seen in the table below, the new resource estimate for San Antonio comprises a global total of 1.53 million ounces gold in the Measured and Indicated category, plus 111,000 ounces gold in the Inferred category. The resource summarized below is based on a 0.4 g/t cut off. A 0.4g/t cut off was chosen as a possible open pit economic cutoff. It must be stressed that at this time no economic evaluations have been completed and the true economic cutoff is unknown.



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Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



San Antonio - Summary of Resources (2009) at 0.4 grams per tonne cutoff

Mineralization

Tonnes (MT)

Au (g/t)

Million Oz. Au

 

M&I

Inferred

M&I

Inferred

M&I

Inferred

Oxide

7.24

0.17

0.928

0.592

0.216

0.003

Mixed

6.61

0.19

1.066

0.588

0.227

0.004

Sulphide

33.50

5.03

1.018

0.640

1.096

0.104

Total

47.35

5.39

1.01

0.637

1.539

0.11



Surface and Access Rights


As reported December 1, 2009 the company has entered into agreements securing long-term surface and access rights for the ongoing exploration, and proposed development and operation of the San Antonio gold project with the Ejido San Antonio.


The first agreement is a rental agreement, called a “temporary occupation agreement”, for access, exploration and production activities.  The agreement has a term of 30 years and includes a one-time payment of $200,000 Pesos (CDN$16,230 – paid) for access and annual per hectare payments for areas subject to exploration or production activities within the Pediment concession holdings which total approximately 8,100 hectares.  The minimum annual payment under the terms of the agreement is 600,000 Pesos, or approximately CDN$47,000, plus annual inflation escalations. An advanced payment of 1,800,000 pesos ($146,070 paid) that covers the first three years of the agreement was required and has been included in prepaid expenses.


In addition, the parties have signed an agreement allowing Pediment to purchase outright 260 hectares covering the Planes and Colinas mineral targets and surrounding area for an agreed upon price of $6,500,000 Pesos (CDN$581,826 - paid). The parties also signed a separate agreement to transfer rights to certain waste rock or ‘dump’ material within the Company’s concession areas to the Ejido San Antonio.


The company is also working to acquire additional surface and access rights secondary to the San Antonio project.



Metallurgical Testing


In 2008 bottle roll tests were completed for Los Planes material, including mineralized rock from the oxide, mixed and sulphide zones. Samples were of unprocessed RC drill cuttings of up to 3/8 inch size. These tests were performed by SGS labs in Durango, Mexico and results were positive with recoveries of up to 88.63% in oxide after a 96-hour test. Sulphide material also had significant recoveries with up to 73.61% recovery after 96 hours.


In April 2009, the Company reported results from column leach testing of oxidized material from the Los Planes discovery within the San Antonio gold project. The column leach tests were performed on gold mineralized oxide material retained from portions of eight HQ core drill holes that were shipped as a composite sample to Metcon Research Laboratories.  Results of recently completed studies are presented below.






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Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



Metcon 2009 Column Leach Test Results on Los Planes Material

Sample

Type

Crush Size

Head Grade

Extraction

Consumption

 -

 -

- 

Au 
g/t

Ag 
g/t

Au 
%

Ag 
%

NaCN
Kg/t

CaO
Kg/t

CL-01

oxide

3/8

0.88

0.29

80.65

64.13

0.06

1.80

CL-02

oxide

1 ½

0.96

0.18

75.15

61.39

0.06

1.58

CL-03

mixed

3/8

0.85

0.11

71.87

35.59

0.33

1.84

CL-04

sulphide

3/8

2.73

0.99

47.10

26.21

0.45

0.92


As seen in the table, strong gold recoveries were achieved for Oxide and Mixed material, at 81% and 72% respectively, which supports the use heap leaching for these ore types. The results for Sulphide material were significantly lower, at 47%, which indicates that alternative processing methods, such as flotation or Carbon In Pulp leaching may be more suitable for this ore type. Additional work will be conducted to further characterize the mineralization at San Antonio and determine the most cost effective methods of gold extraction for the various ore types.



Current Work and Future Exploration


The company has engaged AMEC E&C Services Inc. ("AMEC"), a respected engineering group, to conduct a Preliminary Assessment ("PA"), also known as a Scoping Study, of its 100%-owned San Antonio gold project in Baja California Sur, Mexico.  AMEC's study will independently evaluate different development possibilities and assess the anticipated economic viability of the project. The results will be released in a NI 43-101 compliant report that is expected to be completed by the end of the third quarter of 2010. The report will also contain AMEC's recommendations for continued development of the San Antonio gold project.


Additionally, the Company has engaged Schlumberger Water Services - Mexico/Central America (Schlumberger) to conduct a Phase-I, water resource delineation and characterization of the San Antonio Project. Schlumberger is a technical division of the reservoir management segment of Schlumberger Limited, operating in Mexico under the entity of Dowell Schlumberger de Mexico SA de CV. Schlumberger's long-term objectives for this work are evaluating and recommending means of developing water resources for the project, developing and implementing a water-quality monitoring program, and developing and implementing groundwater control measures.


The Company has also commenced a +40,000-metre drill program to continue exploration and definition in its numerous exploration targets. These include the current resource zones of Los Planes, Colinas and Intermediate, as well as new exploration targets such as the northeast-southwest El Triunfo gold-silver-lead-zinc trend which is located within the concessions recently acquired from the Mexican Geological Survey. Surface exploration work has commenced in the Triunfo zone with reconnaissance geological work and rock-chip sampling of mineralized zones. The drill program also includes PQ-diameter core drilling to obtain sample for further metallurgical testing and HQ oriented-core drilling for geotechnical studies in the main resource areas.


The Company has assembled an experienced pre-development mining team to complete relevant, engineering, permitting, surface rights and water rights acquisitions that are all in progress.








- 6 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



La Colorada Project


2009 Resource Estimate for the El Crestón, La Colorada and Gran Central zones.


On December 18, 2009 The Company released its initial, bulk tonnage resource estimate for the La Colorada gold-silver mine project. The resource estimate has been generated for the Company by Mr. Gary Giroux and is presented in a NI 43-101 compliant technical report entitled "Geological Report on the La Colorada Property with a Resource Estimate on La Colorada and El Creston Mineralized Zones, Sonora, Mexico", dated November 30, 2009 prepared for the Company by independent consultants R.H. McMillan Ph.D., P.Geo., J.M. Dawson M.Sc., P. Eng. and Gary H. Giroux, M.A.Sc., P. Eng. (the "La Colorada Report") This initial estimate does not include the recently-drilled Mina Verde nor La Veta Madre targets, broken rock possible resources (waste and leach piles), or recent results of drill testing by the Company that were unavailable at the time of compilation for the estimation. This estimate is for bulk tonnage resources only and does not address deeper vein-type resource potential.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution. These mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to the measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied.

Resource estimates were made for the El Creston and La Colorada-Gran Central deposits by G. H. Giroux of Giroux Consultants Ltd. In both cases geologic solids were created by Pediment geologists to constrain the estimation process. Drill holes were compared to the solids and assays were tagged if inside or outside the solid. Gold and Silver grade distributions for both mineralized and waste assays were examined and capping levels picked to handle outliers. Composites 5 m in length were created to honour the solid boundaries and used to model the grade continuity using variography. Blocks 5 x 5 x 5 m in dimension were estimated by ordinary kriging in a series of passes with expanding search ellipses. Bulk density in each deposit was established from measured specific gravities. Estimated blocks were classified using grade continuity. The results for a 0.3 g/t Au cutoff, a reasonable cutoff for open pit extraction, are tabulated below.


Class

Au Cutoff 
(g/t)

Tonnes > Cutoff 
(tonnes)

Grade>Cutoff

Contained Metal

Au (g/t)

Ag (g/t)

Au (ozs)

Ag (ozs)

Measured

0.30

3,570,000

1.049

11.12

120,000

1,280,000

Indicated

0.30

15,690,000

0.963

7.65

485,000

3,860,000

M + I

0.30

19,250,000

0.978

8.30

605,000

5,130,000

Inferred

0.30

20,070,000

0.903

9.59

582,000

6,190,000


The combined Measured + Indicated resource in this initial estimate for the La Colorada project contains 605,000 ounces of gold and 5.13 million ounces of silver within 19.25 million tonnes averaging 0.98 g/t Au and 8.3 g/t Ag. An additional 582,000 ounces of gold and 6.19 million ounces of silver are contained within 20.07 million tonnes averaging 0.90 g/t Au and 9.6 g/t Ag and are classified as inferred at the same 0.3 g/t gold cut-off.




- 7 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



These estimates are based on 982 historic drill holes (both reverse circulation and core holes) plus 20 reverse circulation and 3 core holes generated by the Company. In the La Colorada mineralized zone a total of 11 samples were capped at 37 g/t gold and a total of 19 samples were capped at 178 g/t silver; while in the Gran Central mineralized zone a total of 14 samples were capped at 40 g/t gold and a total of 11 samples were capped at 267 g/t silver. At El Creston all mineralized rock was assumed to be oxidized and a bulk density of 2.47 was used. At La Colorada-Gran Central, bulk densities were based on 56 samples submitted by the Company that had been segregated into four categories (oxide, mixed oxide, sulphide and waste). Since proper oxide-sulphide boundaries have not yet been established the average specific gravity of 2.62 for the three mineralized categories was used for the mineralized portions of blocks, while the average 2.73 from the waste samples was used for the waste portions of blocks.

The authors of the La Colorada Report believe that there is excellent exploration potential on the large land position that Pediment has assembled surrounding the main La Colorada mining area. The authors have recommended that exploration/development programs continue on the property. Initially, the work should have two foci: one on detailed work on the areas with past mining activity and the second on regional evaluation of the 20 by 14 km. property. In addition, expenditure is required for:

1.

Engineering and pre-feasibility - specifically preliminary mining scenarios such as open pit versus underground,

2.

Metallurgical studies, coupled with documentation of the distribution of oxidized and unoxidized ore,

3.

Environmental impact studies, including sociological and community relationships,

4.

Permitting,

5.

Adjacent Property Evaluation and Acquisition

6.

Geostatistical analysis and mineral resource calculation. This work should include:

7.

For both El Creston and La Colorada-Gran Central, the oxide/mixed and mixed/sulphide surfaces should be modelled to allow for coding of each block in the model and to apply the appropriate bulk density value.

8.

Representative specific gravity measurements should be taken from samples representing each of the oxidation states and waste material in each deposit.

9.

The blast hole samples from La Colorada-Gran Central open pits should be located and brought into the data base for future estimations.


Report on recent exploration activities on La Colorada


During the nine months ended June 30, 2010, Pediment continued exploration at La Colorada during 2009 with further bench sampling and also RC- and diamond drilling. The objective of this program was to evaluate areas of near surface gold mineralization for its open-pit, heap-leach potential, as well as explore extensions of vein-type, higher grade gold mineralization. A total of 9,489.0 metres were drilled during 2009, of which 1,520.0 metres were diamond and 7,970.0 metres were RC. Highlight results for the La Colorada drill program are shown below (As reported on news release dated November 17, 2009):











- 8 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



Table of selected 2009 drill results for the Veta Madre gold zone. No well-defined dip has been measured for the Veta Madre zone, having an irregular shape to depth with a east-northeast strike. Intervals reported cannot be considered true widths.


Drill_Hole

From_m

To_m

Length_m

Au_ppm

Ag_ppm

R66

0.00

25.91

25.91

0.81

3.55

R69

3.05

28.96

25.91

0.59

2.15

R90

4.57

60.96

56.39

0.53

4.53

R91

0.00

25.91

25.91

1.08

2.94

R92

12.19

36.58

24.39

1.83

12.44

R94

0.00

39.62

39.62

1.11

2.68

R95

0.00

28.96

28.96

1.07

2.38

R96

32.00

41.15

9.14

1.12

2.93

R97

13.72

42.67

28.95

0.89

4.82


Table of results for the La Verde zone. La Verde has a east-northeast strike with a roughly -50 degree dip to the north. Widths are approximately true width for drill holes oriented to azimuth 160 and having a dip of -50 to the south (see website for full drill hole collar table).


Drill_Hole

From_m

To_m

Length_m

Au_ppm

Ag_ppm

R57

21.34

25.91

4.57

36.33

83.97

Including

21.34

22.86

1.52

93.05

82.00

Including

22.86

24.38

1.52

13.99

21.90

Including

24.38

25.91

1.52

1.95

148.00

R58

19.81

27.43

7.62

1.60

20.48

Including

22.86

24.38

1.52

3.03

29.50

R103

9.14

15.24

6.10

2.98

29.70

Including

10.67

13.72

3.05

5.21

49.60

R104

0.00

12.19

12.19

1.54

9.54

R105

3.05

13.72

10.67

0.75

6.90
























- 9 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



Table of results for the Gran Central vein zone. The vein zone has a dip of approximately -60 degrees to the north. The intercepts of drill holes dipping -45 to -50 degrees to the south will be near true width.


Drill_Hole

From_m

To_m

Length_m

Au_ppm

Ag_ppm

DH-01

176.00

198.00

22.00

1.93

77.56

DH-05

69.5

70.5

1

7.220

6.6

And

96.6

100.6

4

1.380

40.5

including

98.6

99.6

1

4.298

135.0

And

165.2

207

41.8

1.025

5.3

including

170.2

171.2

1

4.362

2.7

including

175.2

177.2

2

4.344

5.3

including

188

189

1

3.978

3.6

And

210

221

11

0.800

3.8

And

225

231.5

6.5

0.582

5.0

And

245.6

247.6

2

2.586

3.5

R76

22.86

30.48

7.62

0.40

3.10

And

91.44

105.16

13.72

1.25

17.82

including

92.96

94.49

1.52

5.67

97.00

And

141.73

144.78

3.05

0.98

41.00

And

155.45

158.50

3.05

1.22

3.40



The El Crestón zone has a vertical-dipping south vein and other veins to the north dipping approximately -45 degrees to the south. Widths reported are not true widths. Please visit Pediment's website for a full drill hole collar table.


R115

10.67

18.29

7.62

4.86

16.78

including

13.72

15.24

1.52

22.56

44.00

And

65.53

74.67

9.14

1.37

9.78

including

67.05

68.58

1.52

4.79

19.70

And

91.44

100.58

9.14

1.01

7.18

And

160.02

163.07

3.05

1.68

7.35

R116

32.00

48.77

16.76

0.48

7.72

And

54.86

57.91

3.05

3.42

6.00

And

57.91

59.44

1.52

106.18

28.80

And

59.44

68.58

9.14

0.44

7.53



The La Colorada vein has a dip of between -45 and -50 degrees to the north-northeast. The intercepts for drill holes dipping -45 or -50 to the south will be near true widths.


Drill_Hole

From_m

To_m

Length_m

Au_ppm

Ag_ppm

R71

103.63

115.82

12.19

0.85

0.86

And

137.16

143.26

6.10

4.94

15.85

including

137.16

138.68

1.52

3.34

14.30

including

138.68

140.21

1.52

4.93

13.90

including

140.21

141.73

1.52

8.42

23.60

including

141.73

143.26

1.52

3.07

11.60

R72

60.96

71.63

10.67

1.44

37.02

including

64.01

65.53

1.52

5.25

97.00

 



- 10 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010




Data Review and Potential for La Colorada


During the past twelve months, Pediment has recompiled data archives and pertinent production data into electronic databases with all available information merged with newly generated data. Data relevant to both open-pit potential and high-grade underground resources are being reviewed. Pediment is currently undertaking studies leading to environmental impact permitting and reactivation potential of existing surface workings.


Review of Underground Potential


Pediment is also reviewing several historic calculations made for prior operator Eldorado Gold Corp. of high-grade vein mineralization below the La Colorada and Gran Central open pits, using the results from drilling conducted primarily to assess the project's open pit potential. The Company considers these historic calculations relevant to its own exploration planning. However, the Company cautions that these calculations were completed prior to establishment of NI 43-101 guidelines for resource estimation. Consequently, these historic results have not been categorized mineral resources or mineral reserves in accordance with definitions described under NI 43-101. No "Qualified Person" as defined by NI43-101 has done sufficient work to classify the historical estimate as current mineral resources, the issuer is not treating the historical estimate as current mineral resources and the historical estimate should not be relied upon. The Company further cautions that though these historical calculations deal with different aspects of the high-grade potential, they may in part overlap with areas that had also been included in open pit resource historical calculations made prior to the cessation of pit mining. These historic calculations should not be considered in aggregate as material representations of current resource potential.

 
In 1997 the following historical estimate was completed by Duncan McBean for Eldorado using an 8 g/t cut-off grade, for the veins in sections directly below the "restricted pit limit" of La Colorada and Gran Central pits:


La Colorada (LC) Vein - 140,400 tons @ 19.98 g/t Au, for 90,178 gold ounces.

La Colorada Vein Possible - 213,400 tons @ 24.27 g/t Au, for 168,313 gold ounces

Gran Central-LC Vein Zones - 72,913 tons @ 13.05 g/t Au, for 30,595 gold ounces

Gran Central Extension - 30,750 tons @ 76.19 g/t Au, for 75,323 gold ounces.


The La Colorada and Gran Central veins had been partially mined during the 1874-1912 period of high-grade underground mining. The above historic calculations included were vein intersections from the La Colorada and Gran Central veins and between, but without regard to evidence of previous mining. In 1998, an internal scoping study coupled with additional historic resource calculations was completed by Eldorado assisted by MRDI Consulting that separated intersections which had no evidence of underground workings (un-mined) from those with evidence of workings (mined). Intersections located between the two main veins are referred to as "intermediate veins" and have no history of underground mining. The results of the 1998 historic study were calculated with 4 gram/tonne Au cut-off:


Intermediate Zone Resource 124,500 tons of 16.14 g per ton for 64,612 oz.

La Colorada Mined 187,425 tons of 8.11 g per ton for 48,875 oz.

La Colorada Un-mined 217,399 tons of 11.75 g per ton for 82,136 oz.

Gran Central Mined 497,390 tons of 6.30 g per ton for 100,757 oz.

Gran Central Un-mined 289,024 tons of 11.10 g per ton for 103,156 oz.


These historic calculations did not include the results of silver assaying. The Company considers silver also a potentially important by-product metal and will evaluate it in its on-going programs.



- 11 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



The data review also suggests there is untested high-grade potential in down-dip and on-trend extensions of the historic calculations, and that there may be further potential in both fault displaced portions of these same structures, and in other similar structures within its holdings. From this and newly developed data we are developing a mineralization model. Historic data also has records of numerous fluid inclusion samples that indicate epithermal boiling zone is present in the mineralization.


No estimate of high-grade potential has been located for the El Creston veins within the recently acquired concessions. Records indicate that the bulk of pre-1912 underground vein mining was done in the Creston and Gran Central mine area. Historic estimates of near surface bulk material and potential can be found in Pediment's news release dated October 22, 2007.



6.0

RESULTS OF OPERATIONS


The Company currently has no producing properties and consequently, has no operating income or cash inflows with the exception of investment and other income.


Effective October 1, 2009, the Company retrospectively changed its accounting policy for exploration expenditures from deferring exploration costs directly related to investigations of mineral properties to expensing such costs until such time as their development potential is evidenced by a positive economic analysis of the project.  The change is being made to facilitate consistent accounting policies amongst all of the companies in the consolidation group as the accounting policy for mineral properties in the foreign jurisdiction that the Company operates requires that exploration costs be expensed.


The Company’s accounting policy as it relates to its acquisition of its mineral properties is to capitalize all costs of acquiring natural resource properties until the properties to which they relate are placed into production, sold or abandoned or impaired.  


The Company currently does not have an operating or producing mineral property.  The Company has no earnings and therefore will finance its future exploration activities by the sale of common shares or units. Certain of the key risk factors of the Company’s operating results are the following: the state of capital markets, which affects the ability of the Company to finance its exploration activities; the write-down and abandonment of mineral properties as exploration results provide further information relating to the underlying value of such properties; and market prices for natural resources as well as the non-viability of the projects.


The Company is not a party to any material legal proceedings and is not in default under any material debt or other contractual obligations other than as disclosed in the financial statements.  No significant revenue generating contracts or cash commitments were entered into or undertaken by the Company during the period other than as set out herein or in the financial statements of the Company.


Three months ended June 30, 2010, compared to three months ended June 30, 2009


The Company recorded a net loss and comprehensive loss of $1,255,534 for the three months ended June 30, 2010 ($0.03 loss per share) compared to a net loss and comprehensive loss of $1,163,310 ($0.03 loss per share) for the three months ended June 30, 2009, an increase in net loss and comprehensive loss of $92,224, as explained in the following paragraphs.




- 12 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



Salaries expense and consulting fees were $302,317 in the three months ended June 30, 2010 compared to $273,154 in the same period in 2009, an increase of $29,163. The increase of $29,163 in 2010 when compared to 2009 is due to an increase in the number of employees and consultants engaged in the Company’s operations in Mexico when compared to the same period 2009.


Stock-based compensation, a non-cash item, is recorded when previously granted options vest.  This expense was $48,972 in the three months ended June 30, 2010 compared to $424,476, in the same period in 2009, a decrease of $375,504. Less options vested during the three months ended June 30, 2010 when compared to the three months ended June 30, 2009.


Travel expense was $59,439 during the three months ended June 30, 2010 compared to $53,217 in the three months ended June 30, 2009, a decrease of $6,222.  The increase is due to an increase in travel between the Company’s head office in Vancouver and its operations in Mexico.


Investor relations expense was $64,820 during the three months ended June 30, 2010 compared to $89,465 during the three months ended June 30, 2009, an decrease of $24,645.  The decrease is due to the Company’s reduced promotional activities when compared to the same period in 2009.


Transfer agent and filing fees was $2,529 in the three months ended June 30, 2010 compared to $23,248 in the three months ended June 30, 2009, a decrease of $20,719. In 2009, the Company incurred increased listing fees as a result of becoming listed on the TSX as of March 2, 2009.


Legal and audit fees were $2,657 during the three months ended June 30, 2010 compared to $27,366 during the three months ended June 30, 2009, a decrease of $24,709.  During the three months ended June 30, 2009, the Company engaged additional legal services to advise on corporate legal matters, resulting in a decrease of $24,709 when compared to the current three month period ending June 30, 2010.


due a reduction in services provided by legal counsel in both Canada and Mexico during 2010 compared to 2009.


Investment and other income was $17,012 during the three months ended June 30, 2010 compared to $83,503 in the three months ended June 30, 2009, an decrease of $66,491.  In December 2009, GIC’s that were earning in excess of 2% matured and were replaced by GIC’s earning approximately 0.6%.   As a result, the Company earned $66,491 less in interest income in the three months ended June 30, 2010 than it did during the same period 2009.


During the three months ended June 30, 2010 the Company expended $722,944 on exploration expenses compared to $314,985 during the three months ended June 30, 2009, an increase of $408,086.  The increase in exploration expenses are due to the directors approving an increased exploration budget during the three months ended June 30, 2010 when compared to the same period 2009.  An increase in exploration expense is expected to continue as a result of the recently approved exploration budget.


During the three months ended June 30, 2010 the Company recorded a $26,869 foreign exchange gain compared to a $75,819 foreign exchange gain during the three months ended June 30, 2009, an decrease of $48,950.  The Company’s two geographical business segments are Canada and Mexico with the Company’s operations in Mexico accounting for $7,399,192 of its $11,117,506 in total assets.  



- 13 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010




The changes in foreign exchange gains/(losses) is a result of the fluctuations in exchange rates between the Canadian dollar and Mexican peso during the three months ended June 30, 2010 when compared to the same period in 2009.  During the three months ended June 30, 2010, the average exchange rate was 12.22 with a high of 12.06 and a low of 12.35, compared to an average exchange rate of 11.42, a high of 10.62 and a low of 12.29 when compared to the same period in 2009.  During the three months ended June 30, 2010 exchange rates were relatively stable in comparison to the higher volatility in exchange rates that were experienced during the three months ended June 30, 2009.


Nine months ended June 30, 2010, compared to nine months ended June 30, 2009


The Company recorded a net loss and comprehensive loss of $3,711,359 for the nine months ended June 30, 2010 ($0.08 loss per share) compared to a net loss and comprehensive loss of $3,474,228 ($0.08 loss per share) in the year ended June 30, 2009, an increase in net loss and comprehensive loss of $237,131, as explained in the following paragraphs.


Salaries expense and consulting fees were $922,798 in the nine months ended June 30, 2010 compared to $1,013,931 in the same period in 2009, a decrease of $91,133. The decrease reflects the difference in the number of consultants retained for non mineral property related services during the first two quarters of fiscal 2010 when compared to the first two quarters of fiscal 2009, which was a result of the Company’s attempt to reduce expenses due to market conditions.  In the third quarter 2010, the directors approved a significant exploration budget that could result in increased salary and consulting fees in future periods.


Stock-based compensation, a non-cash item, is recorded when previously granted options vest.  This expense was $474,794 in the nine months ended June, 2010 compared to $1,142,115, in the same period in 2009, a decrease of $667,321. Less options vested during the nine months ended June 30, 2010 when compared to the nine months ended June 30, 2009.


Transfer agent and filing fees was $48,541 in the nine months ended June 30, 2010 compared to $127,624 in the nine months ended June 30, 2009, a decrease of $79,083. In 2009, the Company incurred increased listing fees as a result of becoming listed on the TSX as of March 2, 2009.


Legal and audit fees were $70,584 during the nine months ended June 30, 2010 compared to $84,103 during the nine months ended June 30, 2009, a decrease of $13,519. During the nine months ended June 30, 2009, the Company engaged additional legal services to advise on corporate legal matters, resulting in a decrease of $13,519 when compared to the current nine month period ending June 30, 2010.


Investment and other income was $105,058 during the nine months ended June 30, 2010 compared to $275,825 in the nine months ended June 30, 2009, an decrease of $170,767. In December 2009, GIC’s that were earning in excess of 2% matured and were replaced by GIC’s earning approximately 0.6%.   As a result, the Company earned $170,767 less in interest income in the nine months ended June 30, 2010 when compared to the same period 2009.


During the nine months ended June 30, 2010 the Company expended $1,697,582 on exploration expenses compared to $1,162,286 during the nine months ended June 30, 2009, an increase of $535,296.  The increase is due to the company completing a drill program on the Company’s La Colorada project in early 2010; as well as planning and commencing an extensive drill program on the Company’s San Antonio project in 2010.



- 14 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010




During the nine months ended June 30, 2010 the Company recorded a $52,000 foreign exchange gain compared to a $416,923 foreign exchange gain during the nine months ended June 30, 2009, a decrease of $364,923.  The Company’s two geographical business segments are Canada and Mexico with the Company’s operations in Mexico accounting for $7,399,192 of its $11,117,506 in total assets.  


The changes in foreign exchange gains/(losses) is a result of the fluctuations in exchange rates between the Canadian dollar and Mexican peso during the nine months ended June 30, 2010 when compared to the same period in 2009.  During the nine months ended June 30, 2010, the average exchange rate was 12.29 with a high of 11.97 and a low of 12.78, compared to an average exchange rate of 11.24, a high of 10.27 and a low of 12.29 when compared to the same period in 2009.  During the nine months ended June 30, 2010 exchange rates were relatively stable in comparison to the higher volatility in exchange rates that were experienced during the three months ended June 30, 2009.



7.0

SUMMARY OF QUARTERLY RESULTS


The following table summarizes information regarding the Company’s operations on a quarterly basis for the last eight quarters in accordance with Canadian GAAP. The Company’s reporting currency is Canadian dollars.


For the quarters ended


 

 

 

Restated

Restated

 

June 30, 2010

March 31, 2010

Dec. 31, 2009

Sept. 30, 2009

Total revenues (Interest & other income)

17,012

20,582

67,464

89,636

(Loss) for the quarter

(1,255,534)

(1,335,007)

(1,120,818)

(1,612,055)

(Loss) per share, basic and diluted

(0.03)

(0.03)

(0.02)

(0.04)

 

For the quarters ended


 

Restated

Restated

Restated

Restated

 

June 30, 2009

March 31, 2009

Dec. 31, 2008

Sept. 30, 2008

Total revenues (Interest & other income)

83,503

149,497

42,825

147,637

(Loss) for the quarter

(1,163,310)

(867,541)

(1,443,377)

(3,181,259)

(Loss) per share, basic and diluted

(0.03)

(0.02)

(0.03)

(0.08)

 

The Company only earns interest income from its cash and cash equivalents and short-term investments, which will vary from period to period depending on their relative balances and the rate at which the Company’s guaranteed investment certificates earn interest.


The nature of the Company’s operations has remained unchanged from prior periods.  Changes in operating expenses can increase/decrease depending on the Company’s level of activity.  Significant variations in the loss from one period to another is mainly due to the issuance and vesting of incentive stock options, which results in an increase in stock-based compensation, and the write down of previously capitalized mineral property expenditures.



- 15 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010





8.0

LIQUIDITY AND CAPITAL RESOURCES


At June 30, 2010, the Company had cash and cash equivalents of $10,946,821 (June 30, 2009 - $14,603,812) and working capital of $12,024,506 (June 30, 2009 - $15,360,032).  The Company has allocated $10 million over the next fifteen months for general and administrative expenses and for the continued development of its mineral properties. With working capital of $12,024,506 the Company has sufficient working capital to fund its 2010 operating and exploration expenditures and to continue its operations through fiscal 2011.


The Company’s cash equivalents are highly liquid, short-term investment grade securities held at major Canadian financial institutions in accordance with the Company’s investment policy.  The Company’s cash and cash equivalents are comprised of the following:


 

June 30,

2010

June 30,

2009

 

 

 

Held at major Canadian financial institutions:

 

 

Cash

$       117,317

$    4,229,833

Cash equivalents

10,773,000

10,023,000

 

10,890,317

14,252,833

Held at major Mexican financial institutions:

 

 

Cash

56,504

350,979

Total cash and cash equivalents

$  10,946,821

$  14,603,812


The Company currently has no income from operations and relies on financing through the issuance of additional shares of its common stock until such time as it achieves sustained profitability through profitable mining operations, or the receipt of proceeds from the disposition of its mineral property interests. Management has been successful in accessing the equity markets during the year, but there is no assurance that such sources will be available, on acceptable terms, or at all in the future. Factors which could impact management’s ability to access the equity markets include the state of capital markets, exploration results which provide further information relating to the underlying value the Company’s mineral properties, market prices for natural resources and the non-viability of the projects.



- 16 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010





9.0

TRANSACTIONS WITH RELATED PARTIES


(a)

The amounts due from/to related parties are non-interest bearing, unsecured and due on demand, and are due from/to officers of the Company and companies with common directors.


(i)

As at June 30, 2010, $44 (2009 - $16,344) is due from a company with common directors for its share of rent and improvements for shared office space.


(ii)

As at June 30, 2010, $66,379 (2009 - nil) is due to directors/officers of the Company for director and consulting fees.


(b)

As at June 30, 2010, $32,500 (2009 - $21,000) of prepaid expenses relates to a one month advance on consulting fees paid to a company with a common director.


(c)

Included in consulting fees is $356,218 (2009 - $317,427) of which $180,000 (2009 - $180,000) was charged by a company owned by a director and $176,218 (2009 - $137,427) by directors for consulting services.


(d)

Included in consulting fees is $69,995 (2009 – $62,000) paid to directors for directors’ fees.


(e)

Rent of $20,700 (2009 - $20,700) was recovered from companies with common directors for their respective share of the rent expense paid by the Company for shared office space.


The above transactions incurred in the normal course of operations and are recorded at the exchange amount, being the amount agreed upon by the related parties.


10.0

OFF-BALANCE SHEET ARRANGEMENTS


The Company does not have any off-balance sheet arrangements.


11.0

CONTRACTUAL OBLIGATIONS


The Company has a commitment relating to its head office lease.  The Company has an agreement to lease office space.  The future minimum lease payments by calendar year are as follows:

 



 


2010

$

26,529

2011

 

106,116

2012

 

106,116

2013

 

106,116

2014

 

106,116

2015

 

35,372

 

 


 

$

486,365




- 17 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010




In order for the remaining option agreement on the La Colorada project to remain in good standing, the option payments are due as follows:


Year

Cash

Shares

Total

2011

US$100,000

US$115,000

US$215,000


The Company has no material capital lease agreements and no material long term obligations other than those described above.



12.0

PROPOSED TRANSACTIONS


The Company has no proposed transactions.


13.0

RISKS AND UNCERTAINTIES


The Company is in the mineral exploration and development business and as such is exposed to a number of risks and uncertainties that are not uncommon to other companies in the same business.  Some of the possible risks include the following:


a)

The industry is capital intensive and subject to fluctuations in metal prices, market sentiment, foreign exchange and interest rates.  


b)

The only source of future funds for further exploration programs, or if such exploration programs are successful for the development of economic ore bodies and commencement of commercial production thereon, which are presently available to the Company are the sale of equity capital or the offering by the Company of an interest in its properties to be earned by another party carrying out further exploration or development.  Management was successful in accessing the equity markets during the period, but there is no assurance that such sources will be available, on acceptable terms, or at all in the future.


c)

Any future equity financings by the Company for the purpose of raising additional capital may result in substantial dilution to the holdings of existing shareholders.


d)

The Company must comply with environmental regulations governing air and water quality and land disturbance and provide for mine reclamation and closure costs.


e)

The operations of the Company will require various licenses and permits from various governmental authorities.  There is no assurance that the Company will be successful in obtaining the necessary licenses and permits to continue its exploration and development activities in the future.


f)

There is no certainty that the properties which the Company has capitalized as assets on its balance sheet will be realized at the amounts recorded.  These amounts should not be taken to reflect realizable value.


g)

The development and exploration activities of the Company are subject to various laws governing exploration, development, labour standards and occupational health, land use, water use, land claims of local people and other matters.  No assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could have an adverse effect on the Company’s financial position and results of operations.



- 18 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010




h)

The Company’s operations are currently conducted in Mexico, and as such the Company’s operations are exposed to various levels of political and other risks and uncertainties that are inherent to the country of Mexico.  These risks and uncertainties are not limited to, extreme fluctuations in currency exchange rates; high rates of inflation; labour unrest; changes in taxation policy; and changing political conditions, currency controls and governmental regulations that favour or require the awarding of contracts to local contractors or require foreign contractors to employ citizens of or purchase supplies from a particular jurisdiction.  The occurrence of these various factors and uncertainties cannot be accurately predicted and could have an adverse effect on the Company’s operations or profitability.


i)

Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company's title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.


Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, then actual results may vary materially from those described on any forward-looking statements.  The Company has not completed a feasibility study on any of its deposits to determine if it hosts a mineral resource that can be economically developed and profitably mined.


14.0

DEPENDENCE ON MANAGEMENT


The Company relies heavily on the business and technical expertise of its management team and it is unlikely that this dependence will diminish in the near term.


15.0

CRITICAL ACCOUNTING ESTIMATES


The preparation of financial statements requires the Company to select from possible alternative accounting principles, and to make estimates and assumptions that determine the reported amounts of assets and liabilities at the balance sheet date and reported costs and expenditures during the reporting period. Estimates and assumptions may be revised as new information is obtained, and are subject to change. The Company’s accounting policies and estimates used in the preparation of the consolidated financial statements are considered appropriate in the circumstances, but are subject to judgments and uncertainties inherent in the financial reporting process.


Property acquisition costs are deferred until the properties are placed into production, sold, abandoned, or written down, where appropriate. A write-down may be warranted in situations where a property is to be sold or abandoned; the exploration activity ceases on a property due to unsatisfactory results or insufficient available funding; or when it is determined that the carrying value exceeds the fair market value or the property. The Company’s accounting policy is to expense exploration costs until such time as their development potential is evidenced by a positive economic analysis of the project.  This policy is to facilitate consistent accounting policies amongst all of the companies in the consolidation group as the accounting policy for mineral properties in the foreign jurisdiction that the Company operates requires that exploration costs be expensed.  


Significant estimates are made in respect of the Company’s asset retirement obligations. The Company’s proposed mining and exploration activities are subject to various laws and regulations for federal, regional and provincial jurisdictions governing the protection of the environment. These laws are continually changing. The Company believes its operations are in compliance with all applicable laws and regulations. The Company expects to make, in the future, expenditures to comply with such laws and regulations but cannot predict the full amount or



- 19 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



timing of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. Reclamation and remediation obligations arise from the acquisition, development, construction and normal operation of mining property, plant and equipment. At present the Company has determined that it has no material asset retirement obligations.


Moreover, significant estimates are made in respect of accounting for stock-based compensation, which is calculated using the Black-Scholes option pricing model.  Option pricing models require the input of highly subjective assumptions, including the expected price volatility.  Expected volatilities are based on the Company’s trading history except where there is insufficient trading history and volatilities are based on industry comparables. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options granted/vested during the period. Changes in estimates would impact the value of stock-based compensation, mineral properties, contributed surplus and share capital.


Other areas requiring the use of management estimates include the collectability of amounts receivable, balances of accrued liabilities, the fair value of financial instruments, rates for amortization of equipment and the valuation allowance for future income tax assets.  While management believes that these estimates are reasonable, actual results could differ from those estimates and could impact future results of operations and cash flows.



- 20 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010





16.0

CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION



(a)

Change in Accounting Policy


Effective October 1, 2009, the Company retrospectively changed its accounting policy for exploration expenditures to more appropriately align itself with policies applied by other comparable companies at a similar stage in the mining industry.  Prior to October 1, 2009, the Company capitalized all such costs to mineral properties held directly or through an investment and only wrote down capitalized costs when the property was abandoned or if the capitalized costs were not considered to be economically recoverable.


Exploration expenditures are now charged to earnings as they are incurred until the mineral property reaches the development stage.  Significant costs related to property acquisitions, including allocations for undeveloped mineral interests, are capitalized until the viability of the mineral interest is determined.  When it has been established that a mineral deposit is commercially mineable and an economic analysis has been completed, the costs incurred to develop a mine on the property prior to the start of mining operations are capitalized.  The impact of this change on the previously reported June 30, 2010 consolidated financial statements is as follows:


 

As previously reported

Restatement

As restated

Mineral properties – Jun 30, 2009

14,205,063

(9,225,531)

4,716,904

 

 

 

 

Exploration expenses for the period ended Jun 30,2009

44,116

1,118,170

1,162,286

 

 

 

 

Loss for the period ended Jun 30, 2009

2,356,058

1,118,170

3,474,228

 

 

 

 

Loss per share for the period ended Jun 30, 2009

0.05

0.03

0.08

 

 

 

 

Deficit at Jun 30, 2009

36,704,010

9,225,531

45,929,541

 

 

 

 


The impact of this change on the previously reported deficits per the consolidated financial statements at September 30, 2009 and 2008 are as follows:


 

As previously reported

Restatement

As restated

 

 

 

 

Deficit at Sept 30, 2008

34,347,952

8,107,361

42,455,313

 

 

 

 

Deficit at Sept 30, 2009

37,620,962

9,829,158

47,450,120

 

 

 

 




- 21 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010





(b)

Future changes in accounting policies:


International Financial Reporting Standards (IFRS):


In February 2008, the Canadian Accounting Standards Board ("AcSB") confirmed that January 1, 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canadian GAAP.  The IFRS standards will be effective for the Company for interim and annual financial statements relating to the Company’s fiscal year beginning on or after October 1, 2011.  The effective date of October 1, 2011 will require the restatement for comparative purposes of amounts reported by the Company for the interim periods and year ended September 30, 2011.  


The Company is performing a detailed analysis of the differences between IFRS and the Company’s accounting policies as well as an assessment of the impact of various alternatives is being carried out.  The IFRS project plan is being completed in four phases: planning and analysis, identification of changes, solution development and implementation where necessary.


The Company has begun the planning and analysis phase of the transition to IFRS and intends to transition to IFRS financial statements during fiscal 2010.  


The Company is in the preproduction stage and therefore has not yet adopted accounting policies that a producing company needs.  In a number of cases, the Company will be adopting IFRS as an initial policy, rather than a change from existing policies to IFRS.  The current analysis indicates that there will be very little effect on financial reporting as a result of the adoption of IFRS.


Some of the specific areas reviewed and considered to date are:


Property, Plant and Equipment:  IFRS requires that the Company identify different components of its fixed assets.  As this has been the Company’s practice, compliance will not result in a change.  Assets have been identified in accordance with their useful lives in order to properly amortize their cost to operations.  


In accordance with normal practices within the mining industry, the estimated life of mine will affect the amortization rates in some categories, and this estimate is subject to change as the mine progresses through production, resulting in revised amortization rates from time to time.


IFRS allows the revaluation of assets at fair value.  IFRS allows the revaluation of assets at fair value.  The Company will make the election under IFRS and adopt the cost basis for determining the carrying value of equipment.


The carrying costs of the Company’s mineral properties reflect only the costs of acquisition; the carrying value does not reflect the costs of exploration, drilling, evaluation, testing and independent review.  IFRS permits the capitalization of exploration costs prior to the establishment of ore reserves that would support the economic viability of a project.  When it has been established that a mineral deposit is commercially mineable and an economic analysis has been completed, the costs incurred to develop a mine on the property prior to the start of mining operations are capitalized, which could potentially result in the understatement of the value of certain mineral properties that do reach the development stage.



- 22 -


Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010




Contributed Surplus: There are a number of small presentation and disclosure differences between Canadian GAAP and IFRS.  The small differences noted are not expected to have a significant difference on the Company.  However, the ‘Contributed Surplus’ should be described as ‘Other reserves’ or ‘Share-based payment reserves’ under IFRS.


Stock-based compensation:  There are a number of differences in accounting for stock-based compensation however the differences depend on the contractual nature of the stock based compensation and are not expected to have a material impact on the Company.


Financial Instruments:  The Company’s current financial instruments are simple and require no analysis.  Should the Company enter into hedging agreements on any future production; the requirements of IFRS will be followed.


Impairment tests:  Impairment tests have been applied on the carrying value of projects on a quarterly basis, as required under Canadian GAAP.  Although the methodology of testing for impairment under IFRS is slightly different, no material impact is expected on the transition to IFRS,


Asset Retirement Obligations:  Differences include the basis of estimation for undiscounted cash flows, the discount rate used, the frequency of liability remeasurement and recognition of a liability when a constructive obligation exists.  No material impact is anticipated.


Income Taxes:  An analysis of IFRS requirements will be done when the new standards become available.  With no current revenues or taxable income, and with no anticipated contentious issues regarding the tax value of assets or non-capital losses carried forward, no material impact is expected.


Financial Disclosure:  Based on publications to date, none of the requirements to comply with reporting under IFRS presents any foreseeable difficulty.


In summary, an analysis of the requirements for making the transition to IFRS and the subsequent compliance for financial reporting purposes indicates there should not be any difficulty, due to the simplicity of the Company’s current operations and the fact that IFRS will be adopted as initial policy in most cases, rather than a change from an existing policy.




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Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



17.0

MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING


The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  


Management has conducted an evaluation of the effectiveness of the internal controls over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2010.  Based on management’s assessment and those criteria, management has concluded that the internal controls over financial reporting as at June 30, 2010 were effective.


18.0

DISCLOSURE CONTROLS AND PROCEDURES


The Company’s management is responsible for establishing and maintaining disclosure controls and procedures to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to senior management, including Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), by others within those entities on a timely basis so that appropriate decisions can be made regarding public disclosure.  The CEO and CFO have evaluated the Company’s disclosure controls and procedures and have concluded that they are effective as of June 30, 2010.


19.0

LIMITATIONS ON CONTROLS


Management believes that any internal controls and procedures for financial reporting can only provide reasonable and not absolute assurance that the objectives of the control system are met. Control design is subject to resource constraints and cost benefit analysis. Because of the inherent limitations in all control systems the company’s control systems cannot provide absolute assurance that all issues and fraud will be prevented within the company and detected. Limitations also include the realities of judgments in decision making which could be faulty and simple errors and mistakes. In addition controls may be circumvented by individuals, collusion or unauthorized override of controls.  Finally, a control system is based on certain assumptions about the likelihood of future events and there can be no assurance that the stated goals of the control system will meet all future potential conditions.  In summary, because of the inherent limitations on a cost effective control system, misstatements due to error or fraud may occur and may not be detected.









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Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010



20.0

FINANCIAL INSTRUMENTS


The Company classifies its cash and cash equivalents as held-for-trading; amounts receivable (excluding taxes receivable) and due from related parties as loans and receivables; and due to related parties and accounts payable and accrued liabilities as other financial liabilities.


The carrying values of cash and cash equivalents, amounts receivable (excluding taxes receivable), and accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments.


The fair value of financial instruments at June 30, 2010 and September 30, 2009 is summarized as follows:


 

June 30, 2010

September 30, 2009

Financial Assets

 

Carrying Amount

 

Fair Value

 

Carrying Amount

 

Fair Value

 

 

 

 

 

 

 

 

 

Held-for-trading

 


 


 


 


Cash and cash equivalents

$

10,946,821

$

10,946,821

$

15,553,239

$

15,553,239

 

 


 


 


 


Loans and receivables

 


 


 


 


Amounts receivable (excluding taxes receivable)

$

36,464

$

36,464

$

25,726

$

25,726

Due from related parties

$

44

 

44

$

19,419

 

19,419

 

 


 


 


 


Financial Liabilities

 


 


 


 


Accounts payable and accrued liabilities

$

245,017

$

245,017

$

227,517

$

227,517

Due to related parties

$

66,397

 

66,397

$

26,380

 

26,380


The Company’s risk exposure and the impact on the Company’s financial instruments are summarized below:


(a)

Credit risk


The Company is exposed to credit risk with respect to its cash and cash equivalents.  Cash and cash equivalents have been placed on deposit with major Canadian financial institutions and major Mexican financial institutions.  The risk arises from the non-performance of counterparties of contracted financial obligations.


The Company is not exposed to significant credit risk on amounts receivable.


The Company manages credit risk, in respect of cash and cash equivalents, by purchasing highly liquid, short-term investment-grade securities held at major financial institutions with strong investment-grade ratings by a primary rating agency in accordance with the Company’s investment policy.  




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Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010




Concentration of credit risk exists with respect to the Company’s cash and cash equivalents as the majority of the amounts are held with only a few Canadian and Mexican financial institutions. The Company’s concentration of credit risk and maximum exposure thereto is as follows:



 

June 30

September 30

 

2010

2009

e

 

 

Held at major Canadian financial institutions:

 

 

     Cash

 $  117,317

 $       538,199

     Cash equivalents

 10,773,000

 12,779,530

 

 

 

 

 10,890,317

 13,317,729

Held at major Mexican financial institutions:

 

 

     Cash

 56,504

 109,629

 

 

 

Total cash and cash equivalents

 $10,946,821

 $13,427,358


Included in cash equivalents at June 30, 2010 are cashable guaranteed investment certificates earning interest between 0.6% and 0.7% (2009 - 2.00% and 3.25%) and maturing at various dates between September 8, 2010 and December 10, 2010 (2009 –

September 8, 2009 and December 10, 2009).


(b)

Liquidity risk


Liquidity risk is the risk that the Company will encounter difficulty in obtaining funds to meet commitments as they become due. The Company’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due.  The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities.  The Company believes it has sufficient cash and cash equivalents at June 30, 2010 in the amount of $10,946,821 (2009 - $14,603,812) in order to fund its 2010 operating and exploration expenditures and to continue operations through fiscal 2011.   At June 30, 2010, the Company had accounts payable and accrued liabilities of $245,017 (2009 - $161,208) and amounts due to related parties of $66,397 (2009 - $nil), which will become due for payment within three months.




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Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010





(c)

Market risk


Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.  Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk.


(i)

Interest rate risk


Interest rate risk consists of two components:


(a)

To the extent that payments made or received on the Company’s monetary assets and liabilities are affected by changes in the prevailing market interest rates, the Company is exposed to interest rate cash flow risk.


(b)

To the extent that changes in prevailing market rates differ from the interest rate for the Company’s monetary assets and liabilities, the Company is exposed to interest rate price risk.


The Company’s cash and cash equivalents consists of cash held in bank accounts and guaranteed investment certificates that earn interest at variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on estimated fair values as of June 30, 2010 and 2009.  Future cash flows from interest income on cash and cash equivalents will be affected by interest rate fluctuations.  The Company manages interest rate risk by maintaining an investment policy that focuses primarily on preservation of capital and liquidity.


(ii)

Foreign currency risk


The Company is exposed to foreign currency risk to the extent that monetary assets and liabilities held by the Company are not denominated in Canadian dollars.


The Company is exposed to foreign currency risk with respect to cash and cash equivalents, amounts receivable, and accounts payable and accrued liabilities as a portion of these amounts are denominated in US dollars and Mexican pesos. The Company has not entered into any foreign currency contracts to mitigate this risk.




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Pediment Gold Corp.

(Formerly Pediment Exploration Ltd.)

Management’s Discussion and Analysis

For the nine months ended June 30, 2010




The sensitivity analysis of the Company’s exposure to foreign currency risk at the reporting date has been determined based upon hypothetical changes taking place at June 30, 2010 and 2009, which includes a hypothetical change in the foreign currency exchange rate between the Canadian dollar and Mexican peso of 9% and 11%, respectively, and the effect on net loss and comprehensive loss.  


 

Reasonably Possible Changes

 

2010

2009

 

 

 

CDN $: MXN peso exchange rate variance

+9%

+11%

 

 

 

Net loss and comprehensive loss

$

130,929

$

95,416

 

 


 


CDN $: MXN peso exchange rate variance

-9%

-11%

 

 


 


Net loss and comprehensive loss

$

(156,827)

$

(134,369)



(iii)

Other price risk


Other price risk is the risk that the fair or future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Company is not exposed to significant other price risk.


21.0

CAPITAL MANAGEMENT


The Company’s primary objective when managing capital is to safeguard the Company’s ability to continue as a going concern in order to pursue the development and exploration of its mineral properties. The Company defines capital that it manages as cash and cash equivalents.


The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. The Company’s primary source of funds comes from the issuance of share capital. The Company does not use other sources of financing that require fixed payments of interest and principal due to lack of cash flow from current operations and is not subject to any externally imposed capital requirements.


Capital requirements are driven by the Company’s exploration activities on its mineral properties. To effectively manage the Company’s capital requirements, the Company has a planning and budgeting process in place to ensure that adequate funds are available to meet its strategic goals. The Company monitors actual expenses to budget on all exploration projects and overhead to manage costs, commitments and exploration activities.  


There have been no changes to the Company’s approach to capital management during the year.





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