Queenstake Resources Ltd.
Interim Consolidated Financial Statements
For the three month and nine month periods ended September 30, 2002
Table of Contents
Letter to Shareholders
Management's Discussion and Analysis
Consolidated Balance Sheets
Consolidated Statements of Loss and Deficit
Consolidated Statements of Cash Flows
Notes to Financial Statements
Corporate Directory
Dear Shareholders:
Queenstake Resources Ltd., the operator of the Magistral Joint Venture (the “MJV”), shipped its first 254 ounces of gold poured at Magistral on Wednesday, October 9, 2002. The gold was received at the Johnson Matthey refinery on October 11th and was sold at US$316.10 per ounce. By November 23, 2002 gold production had totaled 2,200 ounces and is not hedged.
Queenstake began stacking ore on the leach pad at the end of August and leaching began mid-September. Production is expected to gradually increase over the next few months to the anticipated average annual production rate of 40,000 ounces of gold per year. Mine life, based on the current reserves, is expected to be 8 years and gold recovery from the ore, over its 240 day leach cycle, is expected to be 73%. The proven and probable reserve base for the Magistral mine is 6,980,000 tonnes containing 465,100 ounces at an average grade of 2.07 grams of gold per tonne. The feasibility study forecast an estimated life-of-mine operating cost per ounce to be US$180 but the MJV expects this to be lower due to the high-grade nature of recently discovered additional reserves (NR02-06 June 4, 2002).
Queenstake’s strategy to grow to a mid-tier gold producer is comprised of three stages.
•
Stage one - cash flow from production at Magistral.
•
Stage two – acquire additional cash-flow producing gold assets.
•
Stage three - increase gold resources at Magistral and any newly acquired gold asset through exploration using cash flow from production
Management’s current focus is on investigating new acquisition opportunities. With the Company’s treasury intact by virtue of the financing used at Magistral, Queenstake is ready to advance to additional production opportunities. Chris Davie, Queenstake’s CEO said: “The first gold pour at any project is exciting but this has been particularly so, representing as it does the culmination of an extended period of project development and construction. When we completed financing of the project the gold price was $270 and many said it could not be done. I give my heartfelt thanks to everyone at the Company involved in making this dream a reality. We now have our principal asset in production at a time of rising gold prices and our first stepping stone to the Company’s future growth is complete”.
During the third quarter the Company’s treasury increased by the receipt of $959,380 gross proceeds for the exercise of 5,329,889 share purchase warrants and the receipt of $1.2 million as proceeds for the sale of its interest in the Taparko Joint Venture to High River Gold. The Company loaned the MJV US$1 million in the third quarter at 18% interest to be repaid from a first call on MJV cash flow.
The Company has increased its market awareness program by participating in a number of investor shows in Canada, the United States and London as well as increased visits to brokers and mining analysts. Please visit the Company’s web site at www.queenstake.com to read independent analyst reports on the Company.
The Company now enters the fourth quarter as a producer in a gold market that shows continued signs of strength amid turmoil in other markets. We look forward to the achievement of revenues, cash flow and continued exploration success while continuing to seek growth by means of appropriate acquisition opportunities.
(signed) Chris Davie
Chris Davie
President and Chief Executive Officer
November 27, 2002
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Consolidated Financial Statements for the Three Months and Nine Months ended September 30, 2002
These interim financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements and should be read in conjunction with the audited consolidated financial statements and management discussion and analysis of financial condition and results of operations for the year ended December 31, 2001.
Queenstake is operator and joint owner of the Magistral Joint Venture (“MJV”). In the first nine months of 2002 almost 100% of the Company’s efforts were directed towards constructing and placing into production the Magistral gold mine in Sinaloa, Mexico. The Magistral mine poured and shipped its first 254 ounce gold bar on October 9, 2002. This narrative will intertwine the Company’s results of operations and comments on the liquidity of the Company at September 30, 2002.
Queenstake’s interest in the MJV does not meet the Canadian general accepted accounting principles criteria to be accounted for as a joint venture and therefore its carrying value is reported as a long-term investment. The asset and liability accounts of the MJV are not consolidated in Queenstake’s financial statements.
Pursuant to the terms of the MJV agreement, Queenstake earned a US$300,000 fee (Cdn$472,305) for the construction period and will begin earning US$50,000 per month once targeted production is achieved, expected to be in November 2002.
In the third quarter 2002 the Company received $959,380 proceeds pursuant to the issuance of 5,329,889 shares issued upon exercise of share purchase warrants and $5,000 proceeds pursuant to the issuance of 50,000 shares upon exercise of stock options.
On December 27, 2001 the Company and Midwest Mining Inc. formalized the MJV agreement, committed to developing the Magistral project into a gold mine and Midwest converted its September 2001 loan of $986,563 (US$625,000) to equity in the MJV. Midwest funded the MJV with an additional US$6 million being the cash component necessary to construct the mine earning its effective 57.5% interest in the MJV. The Company contributed the Magistral project to the MJV. On January 31, 2002 Queenstake exercised its option to acquire Oro de Sotula SA de C.V. from Campbell Resources Inc. funded by and for the benefit of the MJV. Oro was acquired because it owns the past producing Santa Gertrudis project in Mexico and the plant and mobile equipment necessary to operate a heap-leach gold mine. The consideration for the shares of Oro was the assumption of the reclamation obligations at Santa Gertrudis, a Mexican tax liability, a note of US$1 million payable to Campbell, and a second contingent payment of US$1 million payable to Campbell in tranches at certain milestone gold prices ($315, $330 and $350 per ounce). In accordance with the MJV agreement, these assets and contingent liabilities were contributed to the MJV and are not included in these consolidated financial statements. In 2001, the MJV paid Campbell $197,034 (US$125,000) option payments. On September 9th, 2002, the first US$150,000 tranche of the contingent US$1 million note was triggered when the gold price for the preceding 120 calendar days averaged over US$315 per ounce. The Company satisfied the MJV obligation by the issuance of 978,500 shares to Campbell. The Company expects to recover the deemed value of the shares $234,840 (US$150,000) from the MJV after Midwest is repaid its preferred US$6,625,000.
Estimated Magistral construction capital budget overruns of US$2 million were loaned to the MJV equally between Queenstake and Midwest in the third quarter 2002. Each US$1 million loan, bearing interest at 18% per annum, will be repaid from a first call on 100% of Magistral cash flow and is secured by the assets of the MJV. The Company has accrued interest on this loan of $48,333 to September 30, 2002. Queenstake loaned an additional US$150,000 to the MJV in October 2002 to fund its 50% share of a US$300,000 working capital loan on the same basis.
In February 2001 the Company completed the acquisition of Incanore Gold Mines Ltd. and its mineral projects in Burkina Faso, of which the most significant asset was an 18.5% interest in the Taparko project. The Company’s partner, High River Gold Mines Ltd., had an option to purchase the Company’s interest in the Taparko project for $1.4 million until February 26, 2004. The Company accepted a discounted price of $1.2 million on July 15, 2002 rather than $1.4 million on February 26, 2004 resulting in a loss on sale of resource property of $298,161, representing the $200,000 difference between the acquisition price and the sale price and $98,161 of asset evaluation and exploration costs capitalized in 2001.
General and administration expenses were $1,050,166 for the first nine months of 2002 compared to $481,833 for the first nine months of 2001. On January 1, 2002 the Company hired a Controller and secretary both working from the Denver office to assist in the Company’s growth. With commencement of construction at Magistral the Company stopped capitalizing up to 50% of the salaries of its President and Vice President Exploration to the Magistral project, or about $130,000 (US$83,000) for the first nine months of 2001. In the third and fourth quarter of 2002 the Company has increased its market awareness program and budget and has participated in a number of investor shows throughout the United States, Canada and London. The majority of the Company’s general and administrative costs are now incurred in US dollars and paid for from a Canadian dollar treasury. The average Canadian to U.S. dollar exchange rate for the first nine months of 2002 was 1.571 compared to 1.538 for the first nine months of 2001 which contributed to the overall increase when comparing the two periods.
A significant item on the Statement of Loss is the non-cash expense of $679,634 relating to the early conversion of a note that would have matured in September 2003. The charge is calculated in accordance with the pronouncement of the CICA, EIC-96, Accounting for the Early Extinguishment of Convertible Securities Through Induced Early Conversion. The charge to earnings in the amount of $1,304 was calculated in accordance with the new requirements of CICA of accounting for stock-based compensation expense. Under this method, compensation expense on stock options granted to consultants is recorded as an expense in the period the options are vested. Stock options granted to consultants are accounted for using the fair value method. Stock options granted to employees and directors are reported on a pro-forma basis and are not included in the current loss.
Historically, Queenstake's capital needs have been met through sales of equity securities. There can be no assurance that such financing will continue to be available to Queenstake on favorable terms or at all. Queenstake expects to receive operator fees from revenue from production at Magistral during the next twelve months; however, if production is delayed or is not profitable, then there may be delays in receiving this anticipated income. Queenstake is subject to various risks and uncertainties, most of which are inherent to conducting mineral exploration and development activities. Foreign investments are subject to taxation as imposed at various levels within each country, capital investments and repatriation limitations, and the effects of changes in foreign currency rates. Environmental laws imposed presently or in the future may also result in additional costs of conducting mineral exploration or mining activities. Queenstake's Magistral project is its only mineral property with economically recoverable gold reserves. Its residual interests in its Peru Properties, through its shareholding in Monterrico Metals PLC, are in the exploration stage and it has not yet been determined whether the properties contain ore reserves that are economically recoverable or whether Monterrico will continue to be successful in raising the funds to explore its property portfolio to its full potential. Finally, amounts recorded by Queenstake as long-term investments are dependent upon future profitable operations of the underlying mineral properties.
Other than as discussed herein, the Company is not aware of any trends, demands, commitments, events or uncertainties that may result in the Company’s liquidity either materially increasing or decreasing at present or in the foreseeable future. Material increases or decreases in the Company’s liquidity will be substantially determined by the success or failure of placing its Magistral project into profitable production, the price of gold and the ability of the Company to successfully acquire and finance another mineral acquisition.
The Company’s cash at September 30, 2002 was $851,663, an increase of $496,871 compared to December 31, 2001 and working capital increased to $2,609,809 from $308,034 at December 31, 2001. In addition to the previously discussed loan made by the Company to the MJV, the Company had unbilled travel advances of $80,659 included in accounts receivable at September 30, 2002.
The working capital position combined with its management fee income, is sufficient to fund the next 12 months of planned operations of the Company with any increase in corporate activity or acquisitions to be funded by additional and associated external debt or equity financing.
QUEENSTAKE RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(In Canadian Dollars)
(unaudited – Prepared by Management)
As at | September 30, 2002 | December 31, 2001 | ||
| ||||
Current assets | ||||
Cash and short-term investments | $ | 851,663 | $ | 354,795 |
Loan to Magistral Joint Venture | 1,587,200 | - | ||
Interest on loan to Magistral Joint Venture | 48,333 | - | ||
Accounts receivable | 174,356 | 80,751 | ||
2,661,552 | 435,546 | |||
Long-term investments (Note 4) | 4,405,706 | 4,170,866 | ||
Resource properties (Note 5) | - | 1,498,161 | ||
Other capital assets, less accumulated depreciation (Note 6) | 59,658 | 36,054 | ||
$ | 7,126,916 | $ | 6,140,627 | |
|
LIABILITIES | ||||
Current liabilities | ||||
Accounts payable and accrued liabilities | $ | 51,743 | $ | 127,512 |
51,743 | 127,512 | |||
Convertible unsecured note (Note 7) | - | 864,450 | ||
Non controlling interest | 604,130 | 591,575 | ||
655,873 | 1,583,537 | |||
|
SHAREHOLDERS’ EQUITY | ||||
Share capital (Note 8) Authorized: unlimited common shares without par value | ||||
Issued: 67,984,045 (2001 – 48,002,294 shares) | 55,416,145 | 51,728,011 | ||
Contributed surplus | 227,232 | 227,232 | ||
Equity component of convertible notes | - | 163,953 | ||
Deferred stock option compensation (Note 8) | 1,303 | - | ||
Deficit | (49,173,637) | (47,562,106) | ||
6,471,043 | 4,557,090 | |||
$ | 7,126,916 | $ | 6,140,627 |
(See accompanying notes to the Consolidated Financial Statements)
Approved by the Board of Directors
/s/ James Mancuso
/s/ Chris topher Davie
J. Mancuso
C. Davie
Director
Director
QUEENSTAKE RESOURCES LTD.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(In Canadian Dollars)
(unaudited – Prepared by Management)
Three months ended | Nine months ended | |||||||
For the period ended | September 30, 2002 | September 30, 2001 | September 30, 2002 | September 30, 2001 | ||||
Revenue | ||||||||
Management fees | $ | - | $ | - | $ | 472,305 | $ | - |
Interest | 48,349 | 5,635 | 48,709 | 30,300 | ||||
Other income | 6,800 | (114) | 7,453 | 21,305 | ||||
55,149 | 5,521 | 528,467 | 51,605 | |||||
Costs and expenses | ||||||||
General and administrative | 331,508 | 131,463 | 1,050,166 | 481,833 | ||||
Corporate development | 5,068 | 50,667 | 6,145 | 102,506 | ||||
Current exploration | - | 4,241 | - | 71,509 | ||||
Depreciation | 3,055 | 2,403 | 8,512 | 14,573 | ||||
Interest | - | 29,263 | 4,850 | 91,690 | ||||
339,631 | 218,037 | 1,069,673 | 762,111 | |||||
Loss before the undernoted | (284,482) | (212,516) | (541,206) | (710,506) | ||||
Other (income) expense | ||||||||
Non-cash loss on early conversion of debt | - | - | 679,634 | - | ||||
Non-cash stock compensation | - | - | 1,303 | - | ||||
Gain on foreign exchange | (57,337) | (507) | (51,028) | (7,852) | ||||
Gain on sale of subsidiary | (8,750) | - | (8,750) | (28,500) | ||||
Loss on sale of resource property | 298,161 | - | 298,161 | - | ||||
Loss on sale of equipment | - | (5,396) | - | (5,259) | ||||
232,074 | (5,903) | 919,320 | (41,611) | |||||
Loss before non-controlling interest | (516,556) | (206,613) | (1,460,526) | (668,895) | ||||
Non-controlling interest | (12,555) | - | (12,555) | - | ||||
Net loss | $ | (529,111) | $ | (206,613) | $ | (1,473,081) | $ | (668,895) |
Net loss per share | $ | (0.01) | $ | (0.00) | $ | (0.02) | $ | (0.01) |
Weighted average number of shares outstanding |
63,770,119 |
47,668,961 |
62,929,272 |
46,334,072 | ||||
Deficit, beginning of period | $ | (48,644,526) | $ | (42,467,566) | $ | (47,562,106) | $ | (41,975,474) |
Net loss | (529,111) | (206,613) | (1,473,081) | (668,895) | ||||
Accretion of liability component of convertible secured note |
- |
(14,905) |
(138,450) |
(44,715) | ||||
Deficit, end of period | $ | (49,173,637) | $ | (42,689,084) | $ | (49,173,637) | $ | (42,689,084) |
(See accompanying notes to the Consolidated Financial Statements)
QUEENSTAKE RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Canadian Dollars)
(unaudited – Prepared by Management)
Three months ended | Nine months ended | |||||||
For the period ended | September 30, 2002 | September 30, 2001 | September 30, 2002 | September 30, 2001 | ||||
CASH FLOWS FROM (USED IN): OPERATING ACTIVITIES | ||||||||
Net loss | $ | (529,111) | $ | (206,613) | $ | (1,473,081) | $ | (668,895) |
Items not involving cash | ||||||||
Loss on early conversion of note | - | - | 679,634 | - | ||||
Stock based compensation expense | - | - | 1,303 | - | ||||
Interest paid in shares | - | - | 4,850 | - | ||||
Loss on sale of resource property | 298,161 | - | 298,161 | - | ||||
Depreciation | 3,055 | 2,403 | 8,512 | 14,573 | ||||
Loss on sale of equipment | -
| - | - | 137 | ||||
(227,891) | (204,210) | (480,621) | (654,185) | |||||
Net changes in non-cash working capital items: Accounts receivable Accounts payable and accrued liabilities Secured note | (71,109) (37,223) - |
14,089 44,728 - |
(93,606) (27,332) - |
12,836 (123,388) (483,145) | ||||
Loan to Magistral Joint Venture | (1,587,200) | - | (1,587,200) | - | ||||
Interest on loan to Magistral Joint Venture | (48,333) | - | (48,333) | - | ||||
(1,971,756) | (145,393) | (2,237,092) | (1,247,882) | |||||
FINANCING ACTIVITIES | ||||||||
Cost of acquisition, net of cash acquired | - | - | - | (85,138) | ||||
Share purchase warrants exercised | 959,380 | - | 1,588,880 | - | ||||
Cost to issue shares on conversion of note | (35,992) | (12,498) | (40,356) | (12,498) | ||||
Shares issued for stock options | 5,000 | - | 5,000 | - | ||||
Midwest Joint Venture contribution | - | 986,563 | - | 986,563 | ||||
Deferred share acquisition costs | - | - | - | 37,060 | ||||
928,388 | 974,065 | 1,553,524 | 925,987 | |||||
INVESTING ACTIVITIES | ||||||||
Proceeds from sales of resource property and equipment |
1,200,000 |
- |
1,200,000 |
500 | ||||
Minority interest change | 12,555 | - | 12,555 | - | ||||
Expenditures on resource properties and equipment |
(1,601) |
(293,128) |
(32,116) |
(521,529) | ||||
1,210,954 | (293,128) | 1,180,439 | (521,029) | |||||
Increase (decrease) in cash and short-term investments |
167,586 |
535,544 |
496,871 |
(842,924) | ||||
Cash and short-term investments, beginning of period |
684,080 |
952,206 |
354,795 |
2,330,674 | ||||
Cash and short-term investments, end of period |
$ |
851,666 |
$ |
1,487,750 |
$ |
851,666 |
$ |
1,487,750 |
(See accompanying notes to the Consolidated Financial Statements)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITY
In January 2002, the Company issued 9,687,830 common shares in exchange for conversion of a convertible note and 532,830 common shares as payment of $53,283 accrued interest on the convertible note. On September 11, 2002 the Company issued 978,500 common shares as payment of $234,840 to satisfy the first tranche of Magistral Joint Venture’s note payable to Campbell Resources Inc.
NOTES TO INTERIM FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2002 (in Canadian Dollars)
(unaudited – Prepared by Management)
1.
INTERIM UNAUDITED FINANCIAL STATEMENTS
These interim financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2001. Certain of the prior years’ comparative figures have been reclassified to the current year’s presentation.
2. CHANGES IN ACCOUNTING POLICIES
The Company has adopted the new policy of the Canadian Institute of Chartered Accountants (“CICA”) of accounting for stock-based compensation expense. Under this method, compensation expense on stock options granted to consultants is recorded as an expense in the period the options are vested. Stock options granted to consultants are accounted for using the fair value method.
The Company has elected to follow the intrinsic value method of accounting for stock options granted to directors and employees. Under this method, no compensation expense is recorded when stock or stock options are granted to directors and employees if the exercise price of the stock options is granted at market value. Any consideration paid by directors and employees on exercise of stock options or purchase of shares is credited to share capital. However, additional disclosure of the effects of accounting for stock based compensation to directors and employees as compensation expense, using the fair value method, is disclosed as pro-forma information.
The fair values of the options are estimated using the Black-Scholes Option Pricing Model.
3. BUSINESS ACQUISITIONS
Effective January 31, 2002, pursuant to a share purchase agreement and on behalf of and funded by the Magistral Joint Venture, Queenstake Resources Ltd. purchased all of the outstanding shares of Oro de Sotula S.A. de C.V. (“Oro”), a Mexican company. Oro was acquired because it owns the past producing Santa Gertrudis project in Mexico and the plant and mobile equipment necessary to operate a heap-leach gold mine. The consideration for the shares of Oro is the assumption of the reclamation obligations at Santa Gertrudis, a Mexican tax liability, a note of US$1 million payable to Campbell Resources Inc., and a second contingent payment of US$1 million payable to Campbell in tranches at certain milestone gold prices ($315, $330 and $350 per ounce). In accordance with the Magistral Joint Venture agreement, these assets and liabilities were contributed to the MJV and are not included in these consolidated financial statements.
4. LONG-TERM INVESTMENTS
September 30, 2002 | December 31, 2001 | ||
Magistral Joint Venture, Mexico | $ 4,375,706 | $ 4,140,866 | |
Monterrico Metals PLC, Peru | 30,000 | 30,000 | |
$ 4,405,706 | $ 4,170,866 |
5. RESOURCE PROPERTIES
September 30, 2002 | December 31, 2001 | ||
Taparko, Burkina Faso | $ - | $ 1,498,161 | |
$ - | $ 1,498,161 |
The Company’s partner, High River Gold Mines Ltd., had an option to purchase the Company’s interest in the Taparko project for $1.4 million until February 26, 2004. The Company accepted a discounted price of $1.2 million on July 15, 2002 rather than $1.4 million on February 26, 2004 resulting in a loss on sale of resource property of $298,161, representing the $200,000 difference between the acquisition price and the sale price and $98,161 of asset evaluation and exploration costs capitalized in 2001.
6. OTHER CAPITAL ASSETS
September 30, 2002 | December 31, 2001 | |||||||
Cost | Accumulated depreciation | Net book value | Net book value | |||||
Mining equipment | $ | 74,402 | $ | 62,361 | $ | 12,041 | $ | 12,041 |
Office equipment | 117,593 | 69,976 | 47,617 | 24,013 | ||||
$ | 191,995 | $ | 132,337 | $ | 59,658 | $ | 36,054 | |
7.
DEBT
September 30, 2002 | December 31, 2001 | |||
Debt component | ||||
Convertible unsecured note | $ | - | $ | 864,450 |
$ |
- | $ |
864,450 | |
Equity component | ||||
Convertible unsecured note | $ | - | $ | 163,953 |
$ | - | $ | 163,953 |
On January 15, 2002 the holder of the Company’s convertible unsecured note, issued on September 14, 2000 with a face value of $968,783 and a maturity date of September 15, 2003, agreed to an immediate conversion of the entire balance of the note if the Company would seek regulatory approval to adjust the conversion price to $0.10 per share from $0.18 per share. The Toronto Stock Exchange approved the modification and on January 31, 2002 the holder was issued 9,687,830 common shares and 1,779,864 share purchase warrants which were subsequently exercised at $0.18 on September 11, 2002. On January 31, 2002, the debt component of the convertible note in the amount of $864,450 and the equity component of the convertible unsecured note in the amount of $163,953 were transferred to share capital, and an additional non-cash amount of $679,634 was charged to operations with a corresponding increase in share capital in accordance with the pronouncement of the CICA, EIC-96, Accounting for the Early Extinguishment of Convertible Securities Through Induced Early Conversion. The note bore interest at the rate of 12% per year payable each July 31 in cash or, alternatively, in shares at the Company’s discretion with further regulatory approval being required at the time of payment. Accrued interest on the convertible note from August 1, 2001 to the deemed conversion date of January 15, 2002 amounted to $53,283 and on January 31, 2002 the holder was issued 532,830 common shares in satisfaction thereof. Of this $53,283 interest payment, $48,438 was recorded as a current liability on the consolidated balance sheet at December 31, 2001.
8. SHARE CAPITAL Authorized: Unlimited common shares
(a)
During the nine months ended September 30, 2002 changes in share capital were as follows:
September 30, 2002 | December 31, 2001 | |||
Shares | Amount | Shares | Amount | |
Balance beginning of period | 48,002,294 | $51,728,011 | 38,988,294 | $49,829,265 |
Issued during the period (net of issue costs) | ||||
For Incanore Gold Mines Ltd. | - | - | 7,600,000 | 1,314,569 |
Conversion of note(s) | 9,687,830 | 1,806,131 | 414,000 | 506,677 |
For interest on convertible note | 532,830 | 53,283 | 1,000,000 | 77,500 |
Shares issued to Campbell Resources Inc. | 978,500 | 234,840 | - | - |
For cash on exercise of incentive stock options | 50,000 | 5,000 | - | - |
For cash on exercise of warrants | 8,732,591 | 1,588,880 | - | - |
Balance end of period | 67,984,045 | $55,416,145 | 48,002,294 | $51,728,011 |
(b)
At September 30, 2002 the Company had two stock option plans, the 1995 Plan and the Santa Cruz plan. The Santa Cruz Plan will remain in place until all existing options are exercised, expire or are cancelled. The Company’s 1995 Plan is the only active incentive stock option plan. It was established on May 17, 1995, and amended most recently on May 30, 2002. A maximum of 5,800,000 five year options may be granted under the 1995 Plan at market value on the day before granting. One half of any options granted are exercisable immediately and the remainder one year later. At September 30, 2002, there were 4,995,162 options granted and 504,838 options available for granting under the 1995 Plan.
Options outstanding at September 30, 2002 are exercisable in the following amounts and exercise prices:
Exercisable in 2002 Number of Shares | Exercisable in 2003 Number of Shares | Exercise Price | Expiry Dates |
1,332,500 | 1,332,500 | $0.315 | June 3, 2007 |
50,000 | 50,000 | $0.19 | August 2, 2007 |
15,000 | 15,000 | $0.11 | January 14, 2007 |
650,000 | $0.09 | December 18, 2006 | |
410,000 | $0.155 | June 16, 2005 | |
755,000 | $0.25 | September 17, 2004 | |
51,750 | $0.97 | January 31, 2004 | |
152,287 | $1.24 | January 30, 2003 | |
46,575 | $2.61 | September 25, 2005 | |
134,550 | $3.86 | September 25, 2005 | |
3,597,662 | 1,397,500 |
Option activity for the preceding nine month period is as follows:
September 30, 2002 | December 31, 2001 | |||
Shares | Weighted Average Exercise Price $ | Shares | Weighted Average Exercise Price $ | |
Balance, beginning of period | 2,603,674 | 0.89 | 2,316,472 | 1.39 |
Granted | 2,845,000 | 0.31 | 650,000 | 0.09 |
Exercised | (50,000) | (0.10) | - | - |
Expired | (403,512) | (2.77) | (362,798) | (2.65) |
Balance, end of period | 4,995,162 | 0.41 | 2,603,674 | 0.89 |
Pursuant to the new CICA policy of accounting for stock based compensation, compensation expense on stock options granted to directors and employees using the fair value method is disclosed as pro-forma information.
The fair value of stock options used to calculate compensation expense is estimated using the Black-Scholes Option Pricing Model with the following assumptions made as the date of grant of January 1, 2002.
Risk-free interest rate
4.8%
Expected dividend yield
-
Expected stock price volatility
28%
Expected option life in years
5
The pro forma effect on net loss and loss per share for the period ended September 30, 2002 of the actual results had the Company accounted for the stock options granted to directors and employees using the fair value method is as follows:
Net loss for the period
Reported
$(1,473,081)
Pro forma
$(1,615,622)
Basic and diluted loss per share
Reported
$(0.02)
Pro forma
$(0.03)
Option pricing models require the input of highly subjective assumptions including the expected price volatility. 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.
(c)
As at September 30, 2002 the Company has no outstanding purchase warrants.
Warrant activity for the preceding nine month period is as follows:
September 30, 2002 | December 31, 2001 | |||
Shares | Weighted Average Exercise Price $ | Shares | Weighted Average Exercise Price $ | |
Balance, beginning of period | 8,955,430 | 0.18 | 8,955,430 | 0.18 |
Issued | 1,779,864 | 0.18 | - | - |
Exercised | (8,732,591) | 0.185 | - | - |
Expired | (2,002,703) | (0.185) | - | - |
Balance, end of period | - | - | 8,955,430 | 0.18 |
9.
SEGMENTED INFORMATION
The Company considers its business to consist of one operating and geographic segment in Mexico.
CORPORATE DIRECTORY
REGISTERED AND RECORDS OFFICE
Queenstake Resources Ltd. Suite 200, 204 Lambert Street Whitehorse, Yukon Y1A 3T2 Canada
EXECUTIVE OFFICE
Queenstake Resources Ltd. Suite 2940, 999 Eighteenth Street Denver, CO 80202 USA Phone: (303) 297-1557 Fax: (303) 297-1587 Email: usa@queenstake.com
CORPORATE & SHAREHOLDER RELATIONS OFFICE
Doris Meyer 712C – 12th Street New Westminster, BC V3M 4J6 Canada Phone: (604) 516-0566 Fax: (604) 516-0568 Email: dorism@telus.net
LEGAL COUNSEL
Gowling Lafleur Henderson LLP Suite 2300, Four Bentall Centre 1055 Dunsmuir Street, P.O. Box 49122 Vancouver, BC V7X 1J1 Canada
Anton, Campion, MacDonald, Oyler & Buchan Suite 200, 204 Lambert Street Whitehorse, Yukon Y1A 3T2 Canada
AUDITORS
Deloitte & Touche LLP Suite 2100, Four Bentall Centre 1055 Dunsmuir Street Vancouver, BC V7X 1P4 Canada
TRANSFER AGENT
CIBC Mellon Trust Company 1066 West Hastings Street Suite 1600, The Oceanic Plaza Vancouver BC Canada V6E 3X1 | DIRECTORS AND OFFICERS James Mancuso Director and (Non-Executive) Chairman Chris Davie Director and President, Chief Executive Officer Dorian (Dusty) Nicol Director and Vice President Exploration Doris Meyer Vice President Finance, Chief Financial Officer and Corporate Secretary Charles Andrews Controller Gordon Gutrath Director Hugh Mogensen Director Peter Bojtos Director Grant Edey Director WEBSITE
www.queenstake.com |