UMJ
URSA Major
Minerals Incorporated
2004 Annual Report
Indicated resource of 12.0
million tonnes grading @ 0.35%
Ni, 0.36% Cu, 0.34 g/t Pt, 0.38
g/t Pd, 0.19 g/t Au
Shakespeare Deposit
Front cover: Shakespeare drill core showing nickel copper sulphide mineralization.
Inside cover: Schematic geology of Sudbury area projects, showing Ursa property boundaries.
URSA MAJOR MINERALS INCORPORATED
2004 Annual Report
Corporate Profile:
URSA Major Minerals Incorporated is a Canadian public company with a focus on
exploration for base and precious metals, particularly platinum group metals. URSA is
developing a significant near-surface nickel, copper and platinum group metal resource at
the Shakespeare project, west of Sudbury and has active exploration projects in the
Sudbury area, Canada and in Wyoming, U.S.A. URSA’s strategy for growth is to build
sustained shareholder value by advancing high quality exploration projects through
strong technical management. In addition to exploration projects, URSA has an interest in
Patricia Mining Corp., an Ontario based gold exploration company.
URSA Major Minerals Incorporated was founded in 1992 and became a public company in
August 2000, following the reorganization of URSA Major International Inc.
Highlights for year ended January 31, 2004
•
Completed an initial resource estimate on the Shakespeare east deposit, a near
surface nickel, copper, precious metals discovery made by the Company in 2002;
•
Earned a 75% interest in the Shakespeare property and is now the operator of the
project with Falconbridge Limited as joint venture participant;
•
Increased our contiguous property position to a total of 502 claim units or 8,032
hectares (19,847 acres) in Shakespeare, Baldwin, Porter and Hyman Townships,
Sudbury area, Ontario;
•
Strengthened the Company’s financial position through successful completion of
private placements and a short form prospectus offering to raise gross proceeds of
$5,371,890. Year-end working capital totaled $4,623,105;
•
Subsequent to year-end the Company reported an increase in the in-pit Indicated
Resource for the Shakespeare deposit to 12.0 million tonnes grading 0.35%
nickel, 0.36% copper, 0.02% cobalt, 0.19 g/t gold, 0.34 g/t platinum and 0.38 g/t
palladium having a gross in-situ value of CDN$79.59 at an average cut-off value
of CDN$43.65/tonne total in-situ metal based on 24-month average commodity
prices.
Letter to Shareholders
June 18, 2003
Dear Shareholders:
URSA Major Minerals has completed a very active year of exploration that resulted in the definition
of a significant new nickel, copper and platinum group metals deposit in the Sudbury area. As a
result of our exploration success, we have earned our 75% interest in the Shakespeare project ahead
of schedule and continued to expand our 100%-owned property position in this area through claim
staking and option agreements. Driven by a new and successful exploration model, URSA has
assembled a 19,800-acre land package in close proximity to the mining and mineral processing
infrastructure of Sudbury.
With a large, well-defined, in-pit resource at the Shakespeare deposit, our efforts will now focus
on a technical and economic evaluation of an open pit mining operation on this property. We
have recently initiated new metallurgical, geotechnical, environmental and engineering studies
with the objective of completing assessment of the mining potential. In addition, we continue to
drill and to extend the limits of the new mineralization. The current drilling will focus on a
strongly conductive anomaly identified in bore hole and surface electromagnetic surveys. This
anomaly appears to be an extension of a northeast plunging zone of higher grade mineralization
encountered in a number of drill holes.
Our discovery has resulted in a new exploration model in this area and we have acquired additional
claims in which the Company has 100% ownership to the east of the Shakespeare deposit. These
claims lie along a prospective structural and aeromagnetic trend toward the Sudbury Nickel Iruptive,
which hosts the Sudbury deposits of Inco and Falconbridge. Drilling in early 2004 confirmed the
presence of Shakespeare-type mineralization on this property. We plan to follow up with an airborne
EM and magnetic survey of the entire property and will conduct further prospecting and mapping
activities prior to further drilling.
In addition to our Sudbury projects, URSA continues to hold a nickel, copper and platinum group
metal project in Wyoming, U.S.A. and an investment in Patricia Mining Corp. (Patricia).
Our exploration results have enabled the Company to successfully complete several financings and
we are pleased to report further improvements in financial position over last year. In 2003, we
completed several financings including a $1.65 million short-form offering, a $1.65 million private
placement, and over $1.1 million in flow-through financings. The Company is well funded to meet
its planned exploration needs.
I am very pleased with the performance of Ursa Major in 2003 and confident of the prospects for the
Company heading into 2004. It is my pleasure to thank our directors and staff for their efforts in the
past year on behalf of the Company. I thank all of our shareholders for their support and I look
forward to keeping you informed of progress in the coming year.
On behalf of the board,
Richard H. Sutcliffe
President and Chief Executive Officer
Technical Review
Sudbury area
URSA’s Sudbury area projects are located in Shakespeare, Porter, Baldwin and Hyman
townships, approximately 50 kilometers west of Sudbury. The projects are close to the
Sudbury igneous complex which hosts one of the world's largest copper, nickel, and PGM
deposits. The Company's total land position in the Sudbury area is approximately 502 claim
units totaling 8,032 hectares (19,847 acres). Of this, 73 claim units form the Shakespeare
joint venture on which URSA has earned an interest from Falconbridge Limited. Exploration
at the Shakespeare project is currently proceeding on the basis of a joint venture between
URSA Major and Falconbridge Limited (Falconbridge) with URSA Major as the project
operator. Subject to certain back-in rights held by Falconbridge, URSA Major has a 75%
interest in the Shakespeare property. URSA has a 100% interest in an additional
approximately 429 claim units that are contiguous with the Shakespeare property. These latter
claims were acquired by staking or by option agreements and are 100% owned by URSA.
Shakespeare Property – URSA made a significant near surface nickel, copper, PGM
discovery on the Shakespeare property in 2002. Drilling to February 2004, on the property
has resulted in an in-pit Indicated Resource of 12.0 million tonnes grading 0.35% nickel,
0.36% copper, 0.02% cobalt, 0.19 g/t gold, 0.34 g/t platinum and 0.38 g/t palladium at an
average cut-off value of CDN$43.65/tonne total in-situ metal. Using 24-month average
commodity prices, the mineralization has a gross in-situ value of CDN$79.59/tonne. The
Indicated Resource includes the Shakespeare East deposit that was discovered by URSA
Major in 2002 and Shakespeare West deposit that was previously drilled by Falconbridge
Limited (Falconbridge).
The following table presents tonnage and grades for the two deposits. A small amount of
Inferred Resource is present in addition to the above Indicated Resource. The resource has
been estimated by Micon International Limited (Micon).
SHAKESPEARE DEPOSIT, MINERAL RESOURCE ESTIMATE
(At a $CDN43.65 Average(i), and $CDN24.09 Incremental(ii), Contained
Metal Value Cutoff)
Category
Shakespeare East Deposit
Indicated
Inferred
Shakespeare West Deposit
Indicated
Inferred
Grand Total
Indicated
Inferred
Ni
(%)
Cu
(%)
Co
(%)
Au
(g/t)
Pt
(g/t)
Pd
(g/t)
Contained Value/t
($CDN)
9,027,000
22,000
0.36
0.29
0.37
0.24
0.02
0.02
0.194
0.135
0.344
0.229
0.382
0.237
$82.33
$49.52
2,978,000
93,000
0.29
0.27
0.33
0.31
0.02
0.02
0.185
0.172
0.341
0.330
0.373
0.353
$71.27
$67.65
12,005,000
115,000
0.35
0.27
0.36
0.29
0.02
0.02
0.191
0.165
0.343
0.311
0.380
0.331
$79.59
$64.20
Tonnes (t)
(i) - Average cutoff grade from all blocks selected in Whittle optimized pit.
(ii) – Marginal cutoff grade at the pit rim, which only has costs applied for haulage, G&A and processing.
3
The mineral resource estimate is based on the following assumptions. The resources will be
mined by open pit methods at 5,000 tonnes/day, milled at existing facilities and 66% of the
contained metal value will be payable after concentrator losses and smelter charges. The
resources were reported from a block model with Gemcom software and a pit shell optimized
with Whittle 4X software using a $CDN1.75/tonne mining cost, 45o pit slope,
$CDN10.50/tonne processing cost, $CDN1.00/tonne G&A and a $CDN4.40/tonne road
haulage cost ($0.08/tonne-kilometre). No external dilution has been applied. Contained
metal value was calculated using 24-month-average commodity prices (nickel $US4.21/lb,
copper $US0.82/lb, cobalt $US10.48/lb, gold $US351.43/oz, platinum $US635.40/oz and
palladium $US300.31/oz) and an 18-month-average Canadian dollar exchange rate of
0.7067. The preceding assumptions are preliminary and will require further evaluation in
scoping and/or pre-feasibility studies.
This mineral resource has been estimated using Whittle software to define a pit shell. The
reported resource is entirely within the pit shell and represents a potential open pit resource.
The stripping ratio is 6.38:1. The estimate used drill results that were obtained by URSA to
February 2004, including 10,792 meters of drilling in 55 holes, as well as previous drilling by
Falconbridge. This resource estimate used an average cut-off value of $CDN43.65/tonne
total in-situ metal. The July 2003 estimate used a cut-off of CDN50/tonne, however, higher
commodity prices and exchange rates were used in the current study.
The average contained metal cut-off value of $CDN43.65 results from the inclusion of blocks
that are above the incremental cut-off grade (marginal cut-off grade at the pit rim). The use
of higher commodity prices and inclusion of blocks above the incremental cut-off has in part
contributed to higher tonnage and lower grade than the previous resource.
Estimation of the resource was conducted according to National Instrument (NI) 43-101
using the CIM definitions for mineral resources and reserves. The estimation was performed
on two separate geological domains within each of the deposits utilizing ordinary kriging and
inverse distance squared grade interpolation techniques. Grade was estimated into a block
model with 5x5x5 meter blocks. A strong correlation of assay values within and between
holes has resulted in a very high proportion of the resource being classified as Indicated
Resource. Only one nickel assay needed to be top cut and only limited cutting of other
assays was required. The resource estimate was conducted by Mr. Gene Puritch, P.Eng. and
Mr. Terrence Hennessey, P.Geo. Mr. Puritch and Mr. Hennessey are Qualified Persons as
defined by NI43-101. Dr. Richard Sutcliffe, P.Geo, supervised the drill program.
On the Shakespeare project, an economic and technical assessment of mining potential of the
current resource that will include further metallurgical, geotechnical and environmental test
work with be carried out.
The Company has recently initiated a 3,000-meter, 6-hole program that will primarily test a
strongly conductive anomaly extending northeast from the Shakespeare East deposit. The
conductor has been identified in both bore hole and surface time domain electromagnetic
(TDEM) surveys and appears to be an extension of a northeast plunging higher-grade zone of
mineralization identified in several recent drill holes. The planned drill holes will target the
north dipping conductor between L1700E and L2900E, a distance of 1200 feet (366 meters)
4
from the current resource. The planned drill holes are all step-out holes that are outside of
the current resource.
Agnew Lake area properties - During the year ended January 31, 2004, URSA Major carried
out grid cutting, geophysical surveys, prospecting, geological mapping and diamond drilling
on the Company’s 100% owned property in the Agnew Lake area. This work has confirmed
the presence of Shakespeare-style mineralization on the property. Drill hole U7-05, located
over 6 km northeast of Shakespeare intersected 4.6 meters grading .09% nickel, 0.18%
copper and 0.23 g/t precious metals. This mineralization is associated with disseminated
chalcopyrite-pyrrhotite mineralization in melagabbro in a layered sill consisting of quartz
diorite, gabbro and melagabbro. While not of economic grade, the intersection demonstrates
that rocks with similar characteristics and style of mineralization to the Shakespeare deposit
are present on the 100%-owned property.
The Company will conduct mapping, prospecting, and geophysical surveys on 100%-owned
properties that are contiguous with the Shakespeare Project. This work will follow up on
drilling that has confirmed the presence of Shakespeare-style mineralization on the property.
Wyoming properties
URSA has a PGM exploration property, totalling approximately 30 claims (600 acres) in
Carbon and Albany Counties, Wyoming. The claims are 100% owned by URSA and were
acquired by staking.
URSA's exploration program for PGM's in southern Wyoming is focused on a major geological
fault structure along which Proterozoic mafic rocks intrude older rocks of the Archean
Wyoming craton. Southern Wyoming contains a number of reported PGM occurrences and has
geological similarities with highly prospective early Proterozoic rocks in the Sudbury area of
Ontario. The Stillwater PGM deposit occurs on the northern margin of the Wyoming craton.
URSA’s exploration targets in southern Wyoming include high-grade shear zone related
mineralization on the West Rambler property and reef type mineralization in the Mullen Creek
Complex, a major layered intrusion with pyroxenite, troctolite, and gabbroic rocks.
The Company drilled 3 holes totaling approximately 500 meters on the West Rambler
property in Wyoming, U.S.A. The drill holes tested several geophysical and geochemical
targets but did not encounter significant mineralization. The Company will evaluate further
exploration options for potential high-grade copper-PGM mineralization on the property.
Interest in Patricia Mining Corp.
URSA holds a 3.6% interest in Patricia Mining Corp. (Patricia), a publically traded company
listed on the TSX Venture Exchange. Patricia's main asset is the Island Gold Project consisting
of 123 leased and patented mineral claims and additional staked claims, located approximately
50 kilometres northeast of Wawa, Ontario. The property includes the past producing Kremzar
mine with a modern fully permitted 650 tonnes per day carbon-in-pulp mill.
5
Patricia has a NI43-101 compliant resource estimate for the property which indicates an
Inferred Resource of 20.6 million tonnes grading 2.35 g/t gold for a total of 1,559,000 ounces
of gold at a cut-off grade of 0.75 g/t gold. This estimate includes a higher-grade Inferred
Resource of 2.03 million tonnes at a grade of 8.3 g/t gold for a total of 544,000 ounces of
gold at a cut-off grade of 5.0 g/t gold. In addition, the past-producing Kremzar Mine has
historical (pre NI43-101) Proven and Probable Reserves of 181,944 tonnes at 6.27 g/t gold
and Possible Reserves of 85,952 tonnes at 8.67 g/t gold.
In 2003, Richmont Mines Inc. was granted an option to earn a 55% undivided joint venture
interest in Patricia's Island Gold Project by placing the project into production or by
expending $10 million on the project. After vesting, and if further financing is required,
Richmont has agreed to provide additional financing to the joint venture up to a maximum of
$10 million. In September 2003, Patricia Mining completed a total of $3,737,500 in private
placement financings with the proceeds to finance a $2.5 million surface and underground
exploration program at the Island Gold Project. At the end of the program, Richmont may
elect to exercise its option.
6
Management Report
The following is Management’s Discussion and Analysis of the financial condition of the
Company, to enable a reader to assess material changes in financial condition and results of
operations for the year January 31, 2004, compared to the prior year. This Management’s
Discussion and Analysis has been prepared as of June 15, 2004. The Management’s
Discussion and Analysis should be read in conjunction with both the audited financial
statements for the year ended January 31, 2004, and the annual Management’s Discussion
and Analysis included in the 2003 Annual Report.
Liquidity and Capital Resources
As of January 31, 2004 the Company had cash and cash equivalents in the amount of
$4,623,105, marketable securities of $92,582 and a further $402,294 in long-term investments.
This compares to $1,047,899 in cash and short-term investments and $402,294 in long-term
investments for the year-end audited financial statements dated
January 31, 2003.
At this time, the Company has no operating revenues. The Company has raised funds in the
past through equity financing and the exercise of options and warrants to finance its operations.
During the year ended January 31, 2004, the Company raised $5,385,224 in cash from financing
activities. This compares with $1,800,395 for the same period last year. Financings
completed in the last fiscal year included a $1.65 million short form offering, a $1.65 million
private placement, and over $1.1 million in flow-through financings. The Company has
sufficient cash to meet its short-term working capital and exploration requirements, but may
seek new funding for future exploration and development.
Results of Operations
During the year ended January 31, 2004, the Company reported no operating revenue.
During the year, the Company had $607,264 in administrative and general expenses compared
to $245,982 for the previous year. The increase in operating costs largely reflects increased
financing activity, increased promotional activity, increased costs of compliance, and increased
non-cash stock option based compensation. Stock based compensation of $135,800 (2003 $27,300) is a non-cash item that reflects stock options granted to investor relations consultants
of the company.
In the year ended January 31, 2004, business development fees of $108,364 were paid to a
business development consultant and an investor relations consultant. In the previous year fees
of $26,559 were paid to a business development consultant. Increases in office and general fees
of $90,505 and accounting and legal fees of $75,207 reflect an increase in business activity.
Travel and promotion fees of $45,000 included participation in trade shows and property visits.
Management fees of $45,000 were paid to the officer of the company and consulting fees of
$28,552 were paid to a non-executive director of the company. Foreign exchange of $9,093 is a
non-cash item that reflects the increased value of the CDN$ relative to the US$.
7
As of January 31, 2004, $1,343,198 was spent on deferred exploration expenditures and mineral
property acquisitions. This compares with $555,951 spent on mineral properties in the previous
year. Capital assets of $19,918 were purchased during the year. These assets included
computer equipment, field equipment and field vehicles.
During the year ended January 31, 2004, most of the Company’s exploration activity was on
the Shakespeare Property and the contiguous properties near Sudbury, Ontario. On these
properties, the Company conducted grid cutting, prospecting, geological mapping,
geophysical surveys, and diamond drilling. The most significant exploration expenditure
was related to diamond drilling on the Shakespeare property and a substantial new nickel,
copper and platinum group metal resource was delineated. The Company also carried out
drilling on the West Rambler property in Wyoming, U.S.A.
The Company acquired additional claims in Shakespeare, Baldwin and Porter Townships,
Ontario by staking and by optioning the Stumpy Bay and D&H properties.
For the year ended January 31, 2004, the Company paid management and consulting fees of
$56,000 to a consulting corporation controlled by the President of the Company. The
company paid consulting fees of $24,000 to a consulting corporation controlled by a director
of the Company.
Risk Factors
The Company explores and develops properties for metals that have volatile market prices. In
particular, a decline in the price of nickel and precious metals may adversely affect the
Company’s ability to raise capital to explore and develop existing and new mineral properties.
Other risk factors that could affect the Company’s outlook include, but are not limited to:
problems related to geological, technical, environmental, mining, and processing issues; future
results of exploration programs; land title issues; government regulations and environmental
issues.
Management's Responsibility
The accompanying consolidated financial statements, the notes thereto and other financial
information contained in this Annual Report have been prepared by, and are the responsibility
of, the management of URSA Major Minerals Incorporated. These financial statements have
been prepared in accordance with generally accepted accounting principles, using
management’s best estimates and judgment’s where appropriate.
The Board of Directors is responsible for financial reporting and internal controls. The Audit
Committee, which is comprised of Directors, none of whom are employees or officers of the
Company, meets with management, as well as external auditors, to satisfy itself that the
management is properly discharging its financial reporting responsibilities and to review its
consolidated financial statements and the report of the auditors thereon. It reports its findings to
the Board of Directors, who approve the consolidated financial statements.
8
The Consolidated financial statements have been audited by McGovern, Hurley, Cunningham,
the Company's independent auditors, in accordance with generally accepted auditing standards.
The auditors have full and unrestricted access to the Audit Committee.
Richard H. Sutcliffe
President and Chief Executive Officer
June 15, 2004
9
AUDITORS' REPORT
To the Shareholders of
URSA MAJOR MINERALS INCORPORATED
We have audited the balance sheets of Ursa Major Minerals Incorporated as at January 31, 2004 and
2003 and the statements of operations and deficit and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we plan and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material respects, the financial position of
the Company as at January 31, 2004 and 2003 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted accounting principles.
McGOVERN, HURLEY, CUNNINGHAM, LLP
Chartered Accountants
TORONTO, Canada
March 31, 2004
URSA MAJOR MINERALS INCORPORATED
BALANCE SHEETS
AS AT JANUARY 31
2004
$
2003
$
4,577,821
33,698
16,037
92,582
4,720,138
1,047,899
35,386
39,252
1,122,537
DUE FROM RELATED COMPANY (Note 6)
33,520
18,833
EQUIPMENT (Note 3)
20,908
4,260
402,294
402,294
2,403,838
935,140
7,580,698
2,483,064
145,165
73,457
8,386,412
4,571,500
COMMON SHARES TO BE ISSUED
-
372,800
SPECIAL WARRANTS
-
365,000
1,925,295
83,640
-
7,200
164,000
27,300
ASSETS
CURRENT
Cash and cash equivalents
Amounts receivable
Prepaid expenses
Marketable securities (market value - $104,736)
LONG-TERM INVESTMENT (Note 4)
INTERESTS IN EXPLORATION PROPERTIES AND
DEFERRED EXPLORATION EXPENDITURES (Note 5)
LIABILITIES
CURRENT
Accounts payable and accrued liabilities
SHAREHOLDERS’ EQUITY
CAPITAL STOCK (Note 7(b))
SHARE PURCHASE WARRANTS (Note 7(d))
SHARE PURCHASE WARRANTS TO BE ISSUED
CONTRIBUTED SURPLUS (Note 7(e))
DEFICIT
(3,040,174)
(3,017,833)
7,435,533
2,409,607
7,580,698
2,483,064
APPROVED ON BEHALF OF THE BOARD:
Signed “RICHARD SUTCLIFFE”
Signed “ROBIN GOAD”
, Director
, Director
11
URSA MAJOR MINERALS INCORPORATED
STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE YEARS ENDED JANUARY 31
2004
$
ADMINISTRATIVE AND GENERAL EXPENSES
Stock-based compensation
Business development
Office and general
Accounting and legal
Travel and promotion
Management fees
Stock exchange and transfer agent fees
Consulting fees
Foreign exchange
Rent
Bank charges and interest (net)
Amortization
(Loss) before the undernoted
2003
$
135,800
108,364
90,502
75,207
72,037
45,000
30,529
28,552
9,093
7,085
1,825
3,270
(607,264)
Write down of exploration properties and deferred exploration expenditures
-
27,300
26,559
46,843
56,145
33,706
33,991
8,158
3,900
(763)
7,188
2,203
752
(245,982)
(14,169)
(Loss) before income taxes
(607,264)
(260,151)
Future income tax recovery
584,923
296,400
NET (LOSS) INCOME FOR THE YEAR
(22,341)
36,249
DEFICIT, beginning of year
(3,017,833)
(3,054,082)
DEFICIT, end of year
(3,040,174)
(3,017,833)
(LOSS) EARNINGS PER SHARE
Basic
Diluted
(0.00)
(0.00)
0.01
0.01
12
URSA MAJOR MINERALS INCORPORATED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31
2004
$
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income for the year
Charges to income not involving cash:
Amortization
Stock-based compensation
Future income tax recovery
Write down of interests in exploration properties and
deferred exploration expenditures
2003
$
(22,341)
36,249
3,270
135,800
(584,923)
752
27,300
(296,400)
(468,194)
14,169
(217,930)
1,688
23,215
(92,582)
(14,687)
71,708
(10,658)
(35,386)
(39,252)
(11,511)
34,643
(51,506)
(478,852)
(269,436)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of interests in exploration properties and
deferred exploration expenditures
Purchase of capital assets
(1,343,198)
(19,918)
(555,951)
(5,012)
Cash flows from investing activities
(1,363,116)
(560,963)
CASH FLOWS FROM FINANCING ACTIVITIES
Common shares
Common shares to be issued
Special warrants
Share purchase warrants
Share purchase warrants to be issued
Exercise of warrants
2,688,536
1,897,595
785,759
896,755
372,800
365,000
83,640
7,200
75,000
Cash flows from financing activities
5,371,890
1,800,395
Increase in cash and cash equivalents
3,529,922
969,996
Cash and cash equivalents, beginning of year
1,047,899
77,903
Cash and cash equivalents, end of year
4,577,821
1,047,899
125,500
-
10,000
-
Changes in non-cash working capital balances:
Decrease (increase) in amounts receivable
Decrease (increase) in prepaid expenses
(Increase) in marketable securities
(Increase) in amounts due from related parties
Increase (decrease) in accounts payable and accrued liabilities
Cash flows from operating activities
SUPPLEMENTAL INFORMATION
Shares issued for exploration properties
Income taxes paid
Interest paid
13
URSA MAJOR MINERALS INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2004
1.
NATURE OF OPERATIONS
Ursa Major Minerals Incorporated (the “Company”) is a development stage enterprise and is in the process of
exploring its properties for platinum metals group minerals, nickel, gold, copper and other resources and has not
determined whether the properties contain economically recoverable reserves. The recovery of the amounts shown for
the exploration properties and the related deferred expenditures is dependent upon the existence of economically
recoverable reserves, confirmation of the Company's interest in the underlying mineral claims, the ability of the
Company to obtain necessary financing to complete the development, and upon future profitable production.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company are in accordance with Canadian generally accepted accounting principles and
their basis of application is consistent with that of the previous year. Outlined below are those policies considered
particularly significant.
Long-term Investments:
Long-term investments are recorded at original cost. The carrying value of investments is written down below
cost if there is a loss of value which is considered to be other than temporary.
Equipment and Amortization:
Equipment is stated at acquisition cost.
following annual rates:
Equipment
Vehicles
Amortization is provided on the diminishing-balance basis at the
20%
30%
Foreign Currency Translation:
Accounts in foreign currencies have been translated into Canadian dollars using the "temporal" method. Under
this method, monetary assets and liabilities have been translated at the year-end exchange rate. Non-monetary
assets, which comprise equipment and interests in exploration properties and deferred exploration expenditures,
have been translated at the historical rate of exchange prevailing at the date of acquisition. Charges for
amortization and exploration expenditures written off have been translated at the same rate as the related assets.
Revenue and expenses have been translated at the average rate of exchange during the year. Realized and
unrealized foreign exchange gains and losses are included in operations.
Exploration Properties:
Exploration property acquisition, exploration and development expenditures are deferred until the properties are
placed into production, sold or abandoned. These deferred costs will be amortized over the estimated useful life
of the properties following the commencement of production or written-off if the properties are allowed to lapse
or abandoned.
Costs include the cash consideration and the fair market value of the shares issued for the acquisition of
exploration properties. Properties acquired under option agreements or by joint ventures, whereby payments are
made at the sole discretion of the Company, are recorded in the accounts at the time of payment.
Marketable Securities:
Marketable securities are recorded at the lower of cost and quoted market value.
General and Administrative Expenses:
The Company charges all general and administrative expenses not directly related to exploration activities to
operations as incurred.
14
URSA MAJOR MINERALS INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2004
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Asset Retirement Obligations:
During the course of acquiring and exploring potential mining properties, the Company must comply with
government regulated environmental evaluation, updating and reclamation requirements. The costs of complying
with these requirements are capitalized as incurred. The carrying value will be amortized over the life of the
related assets on a unit-of-production basis and the related liabilities are accreted to the original value estimate.
Asset retirement obligations, if any, cannot be determined at this time and no amount has been recorded in these
financial statements.
The present value of the reclamation liabilities may be subject to change based on management’s current
estimates, changes in remediation technology or changes to the applicable laws and regulations by regulatory
authorities, which affect the ultimate cost of remediation and reclamation. Such charges will be reflected in the
accounts of the Company as they arise.
Flow-Through Shares:
The Company has financed a portion of its exploration activities through the issue of flow-through shares, which
transfer the tax deductibility of exploration expenditures to the investor. Proceeds received on the issue of such
shares have been credited to capital stock and the related exploration costs have been charged to interests in
exploration properties and deferred exploration expenditures.
Resource expenditure deductions for income tax purposes related to exploration and development activities
funded by flow-through share arrangements are renounced to investors in accordance with income tax legislation.
When these expenditures are renounced, temporary taxable differences created by the renunciation will reduce
share capital.
Use of Estimates:
The preparation of financial statements in accordance with Canadian generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ from those reported. Management believes
that the estimates are reasonable.
(Loss) Earnings Per Share:
Basic loss per share is calculated using the weighted average number of shares outstanding. Diluted loss per share
is calculated using the treasury stock method. In order to determine diluted loss per share, the treasury stock
method assumes that any proceeds from the exercise of dilutive stock options and warrants would be used to
repurchase common shares at the average market price during the period, with the incremental number of shares
being included in the denominator of the diluted loss per share calculation. The diluted loss per share calculation
excludes any potential conversion of options and warrants that would increase earnings per share or decrease loss
per share.
Basic earnings (loss) from operations per common share is based on the weighted average number of shares
outstanding during the year of 12,802,883 (2003 - 6,730,723). Diluted earnings per share is based on the diluted
weighted average number of shares of 12,802,883 (2003 - 6,777,005).
Cash and Cash Equivalents:
Cash and cash equivalents represent investments in Guaranteed Investment Certificates, which are stated at cost
plus accrued interest. The carrying amounts approximate fair value as they mature in less than ninety days from
the date of purchase.
15
URSA MAJOR MINERALS INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2004
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-based Compensation Plan:
Effective February 1, 2002, the Company adopted the recommendations of CICA Handbook Section 3870, Stockbased Compensation and Other Stock-based Payments. This Section establishes standards for the recognition,
measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for
goods and services. These recommendations require that compensation for all awards made to non-employees
and certain awards made to employees be measured and recorded in the financial statements at fair value. This
Section also sets out a fair value based method of accounting for stock options issued to employees and applies to
awards granted on or after February 1, 2002.
The Company, as permitted by Section 3870, has chosen to continue its existing policy of recording no
compensation cost on the grant of stock options to employees. Any consideration paid by employees on exercise
of stock options is credited to capital stock. This plan is described in Notes 7(e) and 7(f). These financial
statements omit the effect of stock options granted before February 1, 2002.
Income Taxes:
The Company accounts for and measures future tax asset and liabilities in accordance with the asset and liability
method. Under this method, future tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Future tax assets and liabilities are measured using enacted or substantively enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the date of enactment or substantive enactment of the change.
When the future realization of income tax assets does not meet the test of being more likely than not to occur, a
valuation allowance in the amount of the potential future benefit is taken and no net asset is recognized.
3.
EQUIPMENT
Equipment
Vehicles
4.
Cost
$
19,918
5,012
24,930
Accumulated
Amortization
$
1,992
2,030
4,022
Net
2004
$
17,926
2,982
20,908
Net
2003
$
4,260
4,260
LONG-TERM INVESTMENT
The Company owns approximately 3.6% of Patricia Mining Corp. (“Patricia”) (2003 – 7.2%), a public company that
trades on the TSX Venture Exchange (“TSXV”).
The approximate market value of the investment at March 31, 2004 was $381,700 (2003 - $274,800).
The President and a director are also the former President and a director of Patricia Mining Corp.
16
URSA MAJOR MINERALS INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2004
5.
INTERESTS IN EXPLORATION PROPERTIES AND DEFERRED
EXPLORATION EXPENDITURES
Percentage
Interest
%
Description
Opening
Balance
$
Additions
$
Write Downs/
Receipts
$
Closing
Balance
$
CANADA
Sudbury, Ontario
D & H Option (a)
Shakespeare Township (b)
Stumpy Bay (c)
Agnew Lake (d)
100
75
100
100
28,331
598,112
84,167
-
35,356
769,049
366,125
205,311
-
63,687
1,367,161
450,292
205,311
100
244,306
98,447
-
342,753
U.S.A.
Wyoming
Carbon and Albany
Counties (e)
Interest income
954,916
(19,776)
1,474,288
-
(5,590)
2,429,204
(25,366)
935,140
1,474,288
(5,590)
2,403,838
CANADA
(a)
D & H Option, Sudbury, Ontario
Within the Porter Township area of interest the Company has entered into an agreement dated
July 21, 2003 to acquire three additional claims. The consideration for this option is as
follows:
$17,000
$20,000
$20,000
Cash payment on signing (paid)
Cash payment on July 21, 2004
Cash payment on July 21, 2005
20,000
20,000
20,000
Common shares on signing (issued)
Common shares on July 21, 2004
Common shares on July 21, 2005
The Company must also complete $130,000 of exploration expenditures prior to July 21,
2005.
The optionor has retained a royalty equal to 2% of the Raw Mine Value of Product removed
from the property. The Company has the right to purchase one-half of the royalty for
$750,000.
17
URSA MAJOR MINERALS INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2004
5.
INTERESTS IN MINERAL PROPERTIES AND DEFERRED
EXPLORATION EXPENDITURES (Continued)
(b)
Shakespeare Township, Sudbury, Ontario
The Company has entered into an option and joint venture agreement with Falconbridge
Limited (“Falconbridge”) to earn an interest in the Shakespeare nickel, copper, platinum
group metal deposit located in Shakespeare Township, 60 kilometres west of Sudbury,
Ontario. The property consists of 28 leased and patented claims plus additional staked claims
now included under the joint venture.
The Company has earned a 75% interest in the Shakespeare property by issuing 350,000
common shares and completing $1,200,000 in exploration expenditures. The Company and
Falconbridge have formed a joint venture to continue further exploration and development.
Falconbridge will retain certain back-in and mineral processing rights.
(c)
Stumpy Bay, Sudbury, Ontario
The Company entered into an option agreement dated March 21, 2003 to acquire four mineral
claims known as the Stumpy Bay Property located in Shakespeare and Baldwin Townships.
Consideration for this option is as follows:
$15,000
$20,000
$20,000
Cash payment on signing (paid)
Cash payment on March 21, 2005
Cash payment on March 21, 2006
30,000
30,000
30,000
Common shares on signing (issued)
Common shares on March 21, 2005
Common shares on March 21, 2006
The optionor has retained a 2% Net Returns Royalty. Advance royalty payments of $30,000
per year commence March 21, 2006. The Company has the right to purchase one-half of the
royalty for $750,000.
(d)
Agnew Lake, Sudbury, Ontario
The Company has staked approximately 200 claims in the Agnew Lake area that are
contiguous with the Shakespeare property noted in (b) above and are 100% owned by the
Company.
U.S.A.
(e)
6.
Carbon and Albany Counties, Wyoming
In 2002, the Company acquired a 100% interest in 58 claims in the Carbon and Albany
Counties, by staking claims at a cost of $15,700. This property is a platinum group metal
prospect.
DUE FROM RELATED COMPANY
The amount due from related company is unsecured, non-interest bearing with no fixed terms of
repayment.
Two directors of the Company are also directors of the debtor corporation.
18
URSA MAJOR MINERALS INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2004
7.
CAPITAL STOCK
(a) Authorized
Unlimited number of common shares
(b) Issued
18,920,245 Common shares
$8,386,412
Transactions are as follows:
Balance, January 31, 2002
Shares issued for exploration properties
Common shares
Flow-through common shares
Exercise of flow-through warrants
Share issue costs
Tax effects of issuing flow-through common shares
Shares
#
5,732,945
50,000
1,500,000
900,000
250,000
-
Amount
$
3,886,145
10,000
682,500
325,000
75,000
(110,745)
(296,400)
Balance, January 31, 2003
Shares issued for properties
Common shares
Flow-through common shares
Exercise of warrants
Share issue costs
Tax effects of issuing flow-through common shares
Balance, January 31, 2004
8,432,945
250,000
6,440,328
2,258,590
1,538,382
18,920,245
4,571,500
125,500
2,683,036
1,399,842
878,897
(687,440)
(584,923)
8,386,412
(c) Financings
During the year, the Company completed several financings as follows:
(i)
Private placement of 1,200,000 flow-through common shares for gross proceeds of
$600,000.
(ii)
Private placement of 350,000 units for gross proceeds of $175,000. Each unit consists of
one common share and one-half common share purchase warrant. Each full common
share purchase warrant entitles the holder to purchase one common share on or before
June 19, 2004 at a price of $0.65.
(iii)
Private placement of 1,941,000 units for gross proceeds of $1,649,850. Each unit
consists of one common share and one common share purchase warrant. Each common
share purchase warrant entitles the holder to purchase one common share on or before
April 28, 2005 at an exercise price of $0.85.
(iv)
Private placement of 470,590 flow-through units for gross proceeds of $400,001. Each
unit consists of one flow-through common share and one-half common share purchase
warrant. Each full common share purchase warrant entitles the holder to purchase one
common share on or before May 14, 2005 at a price of $1.10.
(v)
Pursuant to a short-form prospectus, the Company issued 1,941,000 units for gross
proceeds of $1,699,850. Each unit consists of one common share and one common share
purchase warrant. Each common share purchase warrant entitles the holder to purchase
one common share on or before May 14, 2005 at an exercise price of $1.10.
19
URSA MAJOR MINERALS INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2004
7.
CAPITAL STOCK (Continued)
(vi)
Private placement of 588,000 flow-through units for gross proceeds of 499,800. Each
unit consists of one flow-through common share and one-half common share purchase
warrant. Each full common share purchase warrant entitles the holder to purchase one
common share on or before May 14, 2005 at a price of $1.10.
(d) Share Purchase Warrants
As at January 31, 2004, the following share purchase warrants were outstanding:
Exercise Price
$
0.65
0.35
0.50
0.65
0.85
1.10
0.85
Shares
#
30,000
166,667
84,000
175,000
2,364,837
2,582,877
58,800
5,462,181
Value
$
2,700
25,000
15,960
26,250
945,923
882,884
26,578
1,925,295
Expiry Date
February 6, 2004
April 11, 2005
June 19, 2004
June 19, 2004
April 28, 2005
May 14, 2005
December 14, 2005
The warrants were valued using the Black-Scholes option pricing model with the following
assumptions: dividend yield of 0%, average expected volatility of 100%, average risk-free
interest rate of 2.3% and an expected average life of 1.5 years.
Warrant activity for the years ended January 31, 2004 and 2003 is summarized as follows:
Balance, January 31, 2002
Issued
Balance, January 31, 2003
Expired
Issued
Exercised
Balance, January 31, 2004
Warrants
#
918,800
918,800
(10,000)
6,050,603
(1,497,222)
5,462,181
Weighted Average
Exercise Price
$
0.60
0.60
0.65
0.89
0.52
0.94
(e) Stock-Based Compensation
The Company does not record compensation cost on the grant of stock options to employees, as
described in Note 2. Had compensation cost for the Company’s stock-based compensation plan
been determined based on the fair value at the grant dates for awards under the plan for options
awarded on or after February 1, 2002, the Company’s net income and earings per share would
have been decreased to the pro forma amounts indicated below:
20
URSA MAJOR MINERALS INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2004
7.
CAPITAL STOCK (Continued)
2004
Net (loss) income
As reported
Unrecorded stock option
compensation adjustment
Pro forma
Basic (loss) earnings per As reported - basic and diluted
share
Pro forma - basic and diluted
(22,341)
2003
$
36,249
(68,400)
(90,741)
(62,300)
(26,051)
(0.00)
0.01
(0.01)
(0.00)
For the purpose of pro forma disclosure above, the following assumptions were used under the
Black-Scholes option pricing model: expected dividend yield of 0% (2003 - 0%), expected
volatility of 100% (2003 - 272%) risk-free interest rate of 2.3% (2003 - 3.5%), and an expected
average life of 5 years (2003 - 5 years).
Stock options were also granted to non-employees of the Company. The fair value of these
options at the date of grant was estimated to be $135,800 using the Black-Scholes option-pricing
model above, and was credited to contributed surplus.
(f) Stock Options
The Company has granted options for the purchase of common shares to its directors, officers
and certain consultants. These options are valid for a maximum of 5 years from the date of
issue. Vesting terms and conditions are determined by the Board of Directors at the time of the
grant. The exercise price of each option equals the market price prevailing at the date of the
grant.
As at January 31, 2004, the Company had stock options outstanding as follows:
Stock Options
#
258,000
320,000
340,000
100,000
1,018,000
Exercise Price
$
0.28
0.55
0.50
1.00
Expiry Date
January 17, 2006
November 19, 2007
May 13, 2008
January 9, 2009
.
Stock option activity for the years ended January 31, 2004 and 2003 is summarized as follows:
Balance, January 31, 2002
Cancelled
Issued
Balance, January 31, 2003
Issued
Balance, January 31, 2004
Stock Options
#
358,000
(100,000)
320,000
578,000
440,000
1,018,000
Weighted Average
Exercise Price
$
0.28
0.28
0.55
0.40
0.84
0.59
21
URSA MAJOR MINERALS INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2004
8.
RELATED PARTY TRANSACTIONS
During the year, $56,000 (2003 - $46,000) was paid or accrued to a consulting corporation
controlled by the President of the Company. Also during the year, $24,000 (2003 - $2,000) was paid
to a consulting corporation controlled by a director of the Company. These fees are in the normal
course of operations and are measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
See Notes 4 and 6.
9.
FINANCIAL INSTRUMENTS
Fair Value:
Canadian generally accepted accounting principles require that the Company disclose
information about the fair value of its financial assets and liabilities. Fair value estimates are
made at the balance sheet date, based on relevant market information and information about the
financial instrument. These estimates are subjective in nature and involve uncertainties in
significant matters of judgement and therefore cannot be determined with precision. Changes in
assumptions could significantly affect these estimates.
The carrying amounts for cash and cash equivalents, marketable securities, amounts receivable,
due from related company and accounts payable and accrued liabilities on the balance sheet
approximate fair value because of the limited term of these instruments.
Foreign exchange risk:
Certain of the Company's expenses are incurred in United States dollars and are therefore
subject to gains or losses due to fluctuations in this currency.
Commodity Price Risk:
The ability of the Company to develop its properties and the future profitability of the Company
is directly related to the market price of certain minerals.
22
URSA MAJOR MINERALS INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 2004
10. INCOME TAXES
(a) The provision for (recovery of) income taxes differs from the amount that would have resulted
by applying Canadian federal and provincial statutory tax rates of 39% (2003 - 39%).
2004
2003
$
$
(Loss) income before taxes
(22,341)
36,249
Expected (benefit) income tax based on statutory
rate
Increase (decrease) resulting from:
Write down of interest in exploration
properties
and deferred exploration expenditures
Stock-based compensation
Share issue costs
Future tax assets not previously recognized
(8,713)
14,137
-
5,526
52,962
(44,154)
(585,018)
(584,923)
(14,999)
(301,064)
(296,400)
(b) The tax effects of temporary differences that give rise to future income tax assets (liabilities) as
at January 31, 2004 are as follows:
Future tax assets (liabilities) - Long-term portion
Resource properties
Share issue costs
Non-capital losses
Valuation allowance
Total
2004
$
2003
$
(442,322)
155,256
503,721
216,655
(216,655)
-
500,863
47,274
276,971
825,108
(825,108)
-
(c) At January 31, 2004, approximate non-capital losses of the Company amounted to $1,291,600.
Of the amount, $245,000 expires in 2005, $10,400 expires in 2007, $171,300 expires in 2009,
$283,500 expires in 2010 and $581,400 expires in 2011. These losses may be used to reduce
taxable income of future years.
The Company has approximately $218,000 of Canadian development expenditures, $1,051,600
of foreign exploration expenditures as at January 31, 2004 which, under certain circumstances,
may be utilized to reduce taxable income of future years.
23
Directors and Senior Management
Richard H. Sutcliffe, Ph.D., P.Geo., President, CEO and Director
C. Nigel Lees, Director
Robin E. Goad, M.Sc., P.Geo., Director
George D. Faught, C.A., Director
Donald Ross, Proposed Director
Corporate Information
Corporate Address:
URSA Major Minerals Incorporated
Suite 1300, 8 King Street East
Toronto, Ontario, Canada, M5C 1B5
Phone: 416-864-0615
Fax: 416-864-0620
Exchange:
TSX Venture Exchange
Symbol:
UMJ
Transfer Agent:
Equity Transfer Services Inc.
Suite 800, 120 Adelaide Street West,
Toronto, Ontario, Canada, M5H 3V1
Auditor:
McGovern, Hurley, Cunningham
2005 Sheppard Avenue East, Suite 503
North York, Ontario, M2J 5B4
Shares Outstanding:
18,920,245 (January 31, 2004)
Incorporation:
June 1, 1992, incorporated under the Business
Corporations Act (Province of Ontario)
Web Site:
www.ursamajorminerals.com
24
Analysts and
investors review
Shakespeare
samples on site,
September 2003
Shakespeare drill core showing
nickel copper sulphide
mineralization
Back cover: Nickel copper sulphide gossan at west end of Shakespeare deposit.
Corporate Address:
URSA Major Minerals Incorporated
8 King Street East, Suite 1300
Toronto, Ontario, Canada M5C 1B5
Incorporation: July 19, 1994
Transfer Agent:
Equity Transfer Services Inc.
120 Adelaide Street West, Suite #420
Toronto, Ontario, Canada M5H 4C3
Shareholder meeting:
July 22, 2004
The Board of Trade
Ketchum/Osgoode Room
1 First Canadian Place
Toronto, Ontario, Canada
4:30 p.m.
Trading Symbol: UMJ
Auditor:
McGovern, Hurley, Cunningham
2005 Sheppard Ave. E., Suite 503
North York, Ontario, Canada M2J 5B4
UMJ