A TA C A M A P A C I F I C
ATACAMA PACIFIC GOLD CORPORATION
Annual Report
2013
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3
ATACAMA PACIFIC GOLD CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED MARCH 31, 2013
This management’s discussion and analysis (“MD&A”) relates to the financial condition and results of
Atacama Pacific Gold Corporation (“Atacama”) together with its wholly owned subsidiaries, as of June 27,
2013, and should be read in conjunction with the audited consolidated financial statements for the year
ended March 31, 2013 (or “Fiscal 2013”). Readers are cautioned that the MD&A contains forward-looking
statements and that actual events may vary from management's expectations. Readers are encouraged to
read the Cautionary Statement on Forward-Looking Information included with this MD&A and to consult
Atacama’s audited consolidated financial statements for Fiscal 2013 and corresponding notes to the
financial statements. The financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”) and all dollar amounts are in Canadian dollars, unless otherwise noted. Atacama’s common
shares trade on the TSX Venture Exchange (“TSXV”) under the symbol “ATM” and its most recent filings
are available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) and can be
accessed through the Internet at www.sedar.com.
Carlos Guzmán, a mining engineer, Fellow of the Australasian Institute of Mining and Metallurgy and a
registered member of the Chilean Mining Commission, is the independent qualified person as defined by
National Instrument 43-101 ("NI 43-101") for the Preliminary Economic Assessment for the Cerro
Maricunga project. Mr. Guzmán is a Principal and Project Director with NCL Ingeneiría y Construcción
Ltda., Santiago, Chile. Michael Easdon, a professional geologist registered with the State of Oregon, USA,
is the independent qualified person for the current exploration program. John Wells, a mining engineering
with Alquimia Conceptos S.A., Chile, is the independent qualified person who prepared the information
related to processing and site infrastructure. Dr. Eduardo Magri, a mining engineer (University of
Witwatersrand) and a Fellow of the Southern African Institute of Mining and Metallurgy, is the independent
qualified person for the Cerro Maricunga resource estimate released September 25, 2012. The Cerro
Maricunga resource estimate was prepared under Canadian Institute of Mining, Metallurgy and Petroleum
Definition Standards (2005). NCL Ingeneiría y Construcción Ltda. undertook to prepare and is responsible
for the resource estimate under the supervision of Dr. Eduardo Magri and Antonio Couble (NCL Associate).
The US$1,400 pit constrained resource estimate was estimated through the use of economic and mining
parameters applied to the global resource.
1.
DESCRIPTION OF BUSINESS
Atacama’s business is the acquisition, exploration and development of precious metals resource properties
in Chile. Operating through its subsidiary, Minera Atacama Pacific Gold Chile Limitada (“Atacama Chile”),
Atacama’s principal mineral property is the Cerro Maricunga oxide-associated gold project (“Cerro
Maricunga Gold Project”), located in Region III, 140 kilometres (“km”) by road northeast of the city of
Copiapo. Atacama’s goal is to become a producer of gold through the exploration and development of the
Cerro Maricunga Gold Project. Atacama also has four other mineral properties within close proximity to the
Cerro Maricunga Gold Project and a sixth property in Chile’s Region I.
Since its incorporation, mineral exploration has been Atacama’s sole business. Atacama has not conducted
any revenue generating operations to date. As at March 31, 2013, Atacama had working capital of $7.2
million (including cash and cash equivalents of $10.7 million), exploration and evaluation assets of $60.5
million and no long-term debt.
4
Fiscal 2013
Management’s Discussion & Analysis
1
2.
SUMMARY OF MINERAL PROPERTIES
Atacama has acquired various mineral properties located within Chile’s primary mining areas, as
summarized below:
Mineral Properties
(1)
Mineral
Resource
Location
Owned
Gold
Gold
Gold
Gold
Gold
Gold
Region III
Region I
Region III
Region III
Region III
Region III
Owned 100%
Owned 100%
Owned 100%
Owned 100%
rd
Optioned to a 3 party
Under option to purchase
Cerro Maricunga Gold Project
Anocarire Project
Piedra Parada Project
Roca Prospect
(2)
Pircas Gold Project
(3)
Toro Prospect
(1) Under option to Gold Fields, subject to a 2.5% NSR on any minerals produced from the property with an effective 1.25%
payable to Atacama Chile; and
(2) Subject to a 0.6% NSR payable to an unrelated third party of any minerals produced from the property.
3.
MINERAL PROPERTY ACTIVITIES
3.1
Cerro Maricunga Gold Project
The Cerro Maricunga Gold Project is the focus of Atacama’s exploration activities and is located
approximately 700 km north of Santiago, the capital of Chile, and approximately 140 km by road northeast
of the City of Copiapo in Region III of northern Chile. The Project hosts a large oxide-associated, gold
deposit situated in the Maricunga Mineral Belt. The Cerro Maricunga Gold Project concessions comprise
generally contiguous or superposed exploration and mining concessions and cover over 15,800 hectares.
The Cerro Maricunga gold deposit presently comprises four zones of gold mineralization occurring over a
2.3 km strike length: the northern Lynx Zone, central Phoenix and offset Pollux Zones and southern Crux
Zone. The gold mineralization is located within the partially eroded Ojos de Maricunga stratovolcano and
hosted in intrusive subvolcanic rocks and genetically related breccias emplaced along a main northwest
striking structure. Gold is found in black/grey banded quartz veinlets associated with disseminated
magnetite as well as disseminated throughout of the host rocks as free grains. The mineralization is oxide
associated and sulphide mineralization is scarce.
Phase I Exploration
Atacama drilled a total of 2,142 metres (“m”) in eight angled drill holes at the Cerro Maricunga Gold Project
during March and April 2010. The drill hole results are described in Atacama’s initial public offering (“IPO”)
prospectus filed on SEDAR on November 2, 2010. This limited drilling served to confirm that the
mineralization at the Cerro Maricunga Gold Project is generally moderately to steeply dipping and that it is
contained within a northwesterly trending structural zone.
In 2008, Advanced Mineral Technology Laboratory Ltd. (“AMTEL”), London, Ontario, Canada performed six
cyanide bottle roll tests on three samples taken at the Cerro Maricunga Gold Project. Test data suggested
that the gold bearing material at the Cerro Maricunga Gold Project may be heap leachable with recoveries
varying from 77% to 91%.
Atacama’s metallurgical testing programs are managed by AMTEL.
Phase II Exploration – Drilling Program
Atacama completed 31,461 m of drilling during the Phase II exploration program, which extended from
October 2010 through to May 2011. Drilling consisted of 60 reverse circulation (“RC”) drill holes (24,580 m)
and 22 diamond drill holes (6,881 m) drilled along 50 m spaced lines oriented perpendicular to the
northwest-southeast striking Cerro Maricunga gold deposit.
Fiscal 2013
Management’s Discussion & Analysis
2
18
5
Phase II Exploration – Resource Estimate
On August 24, 2011 Atacama reported an initial resource estimate from the Cerro Maricunga Gold Project
of 92.8 million tonnes grading 0.54 grams per tonne gold (“g/t Au”) for 1.616 million ounces of gold in the
indicated resource category, at a 0.3 g/t Au cut-off, and a further 116.7 million tonnes grading 0.52 g/t Au
giving 1.949 million ounces in the inferred category.
The Lynx and Phoenix Zones hosted the entire 1.616 million ounce indicated resource at the Cerro
Maricunga Gold Project as well as the estimated inferred resource of 1.371 million ounces of gold (83.6
million tonnes grading 0.51 g/t Au). Drilling established that the Lynx and Phoenix Zones are essentially a
single 1.4 km mineralized zone, situated along two peaks within the Ojo de Maricunga volcanic complex. A
43-101 compliant technical report describing these results was filed on SEDAR on October 7, 2011.
Phase II Exploration - Metallurgical Testing
During the Phase II exploration program, six column tests and 68 bottle rolls tests were completed on
mineralized material from the Cerro Maricunga deposit. These column tests achieved gold recoveries
varying from 76% to 89% on material crushed from 19 millimeters (“mm”) to 25 mm. Three of the column
tests were run for 20 days and three were run for 57 days. Gold leach kinetics were fast with 75 to 90% of
the extractable gold removed during the first 7 days of column leaching. No cyanicides (Cu, S, etc.) or
deleterious elements such as Hg that go into solution were identified. Lime consumption in the tests range
from 2.3 to 4.1 kg/t.
Phase III Exploration
A Phase III exploration campaign, for the period from July 2011 to June 2012, providing for field work,
including engineering studies, was budgeted at US$24.5 million. A total of 45,975 m of combined diamond
and RC drilling was completed with the objective of expanding the existing resources along strike and to
depth as well as testing new targets within the volcanic complex identified during the Phase II exploration
program. Part of the drill program included infill drilling focused on converting the existing inferred category
gold ounces to the measured and indicated (“M&I”) categories.
Phase III Exploration – Drilling
Atacama commenced its Phase III Cerro Maricunga drill program in November 2011 with two drill rigs
ramping up to six rigs by early 2012. The Phase III drilling was initially focused on increasing the size of the
Crux Zone, which represents the southern centre of gold mineralization along the 2.3 km northwesterly
trending Cerro Maricunga deposit. In addition to outlining a higher grade core at the Crux Zone, the Phase
III drilling pushed the northeast contact of the gold mineralization outwards a further 100 m for a total width
in excess of 450 m and extended the mineralization to depth in the northeast area. As the drill season
progressed and additional drill rigs were mobilized, drilling was extended to the northwest along the 2.3 km
strike length of the Cerro Maricunga deposit. The majority of the drilling along the central Phoenix and
northern Lynx zones was focused on infill drilling on 50 m sections with the goal of improving the
confidence level of the interpretation of the current resource estimate as well as extending the
mineralization along the majority of the strike length. In the Phoenix and Lynx Zones, infill drill results were,
overall, largely as anticipated confirming the continuity of gold mineralization.
In addition to the infill drilling along the Crux, Phoenix and Lynx zones, targets drilled outside the deposit
area resulted in the discovery the Pollux Zone, located east of the Phoenix Zone. Eleven drill holes cut the
Pollux Zone during the Phase III program outlining a corridor of 0.3 to 0.5 g/t gold oxide mineralization over
a strike length of 400 and width of 200 m. The Pollux Zone may represent a block of Cerro Maricunga
mineralization from between the Phoenix and Crux Zones displaced to the northeast by faulting.
A total of 45,975 m of drilling were completed during the Phase III drill program compared to an initial
budget of 42,000 m. Good weather conditions combined with better than projected RC drilling rates
contributed to the increased metres drilled. Thirty-eight diamond holes were drilled for 14,361 m and 91 RC
holes were completed for 31,634 m drilled.
6
Fiscal 2013
Management’s Discussion & Analysis
3
On September 25, 2012, Atacama reported that the global unconstrained measured and indicated
resources at its Cerro Maricunga Gold Project had increased 65% to 2.667 million ounces of gold in 163.9
million tonnes grading 0.51 g/t Au, at a 0.3 g/t Au cut-off, with a further 1.810 million ounces of gold in 120.7
million tonnes grading 0.47 g/t Au in the inferred category. The entire Cerro Maricunga resource at the
100%-owned deposit is oxide associated. The related NI 43-101 compliant technical report was filed on
SEDAR on November 12, 2012. The current global resource is summarized below:
Cerro Maricunga Oxide Gold Project – Global Unconstrained Resource Estimate
Measured
Indicated
Measured and Indicated
Inferred
Cut-off
Tonnes
Grade
Tonnes
Grade
Tonnes
Grade
Gold
Ounces
Tonnes
Grade
Gold
Ounces
(g/t Au)
(mil.)
(g/t Au)
(mil.)
(g/t Au)
(mil.)
(g/t Au)
(000’s)
(mil.)
(g/t Au)
(000’S)
0.2
60.4
0.44
187.5
0.41
247.9
0.42
3,344
226.3
0.36
2,654
0.3
40.7
0.53
123.1
0.50
163.9
0.51
2,667
120.7
0.47
1,810
0.4
24.5
0.64
71.2
0.61
95.8
0.62
1,912
57.8
0.60
1,118
0.5
15.1
0.77
42.8
0.72
57.9
0.74
1,370
32.3
0.73
754
The contiguous Lynx and Phoenix zones combine to host the majority of the ounces of gold within the
Cerro Maricunga deposit with expansion of the Crux Zone and the discovery of the Pollux Zone contributing
to the growth of the overall resource estimate. The Lynx and Phoenix combine to host 73% of the 2.667
million ounce measured and indicated resource and 61% of the 1.810 million ounce inferred resource.
Overall gold grades fell slightly, from a 0.54 g/t indicated grade in 2011 compared to a current 0.51 g/t
measured and indicated grade (0.3 g/t Au cut-off grade), largely as a result of the incorporation of lower
grade mineralization from the Pollux and Crux zones into the resource.
The newly discovered Pollux Zone, located immediately north of the Crux Zone, added 162,000 ounces of
gold (11 million tonnes grading 0.46 g/t Au) to the overall measured and indicated resource category along
with a further 409,000 ounces of gold (28.8 million tonnes grading 0.44 g/t Au) to the total inferred resource.
Phase III Exploration – Metallurgical and Engineering
On January 10, 2012, Atacama reported that column percolation leach tests from Cerro Maricunga
achieved gold recoveries ranging from 77 to 86%. Eight column tests were completed on four master
composite samples comprised of average to low-grade oxide!associated gold mineralization. The
mineralized test material was crushed to 19, 50 or 100 mm.
In addition to the positive results from the representative resource grade tests, higher than anticipated gold
recoveries of 78 to 82% were achieved from lower grade (0.22 and 0.28 g/t Au) columns. These
metallurgical results allowed Atacama to consider the economic potential of the significant halo of lower
grade gold mineralization surrounding the Cerro Maricunga resource.
Ball mill grindability tests returned low to medium hardness results of 10.67, 10.49 and 9.77
kilowatts/hour/tonne, respectively. The results were in line with earlier test work.
Preliminary Economic Assessment
On December 15, 2011 Atacama reported that it engaged NCL Ingeniería y Construcción SA ("NCL"),
Santiago, Chile, as the lead contractor to prepare a preliminary economic assessment (“PEA”) on the Cerro
Maricunga Gold Project, in accordance with NI 43-101, to determine the optimum mining and processing
parameters and establishing, within limits, the associated capital expenditures and operating costs.
Atacama engaged several additional consulting firms for the completion of the PEA that was led by NCL,
which provided conceptual open pit design and establish mining related parameters. Alquimia Conceptos
Fiscal 2013
Management’s Discussion & Analysis
4
7
S.A., a metallurgical engineering firm, was responsible for processing and site infrastructure. International
environmental consultants Arcadis Chile S.A. provided input on environmental considerations. Other
specialized firms also contributed to the PEA.
On January 28, 2013, Atacama announced the results from the PEA on the Cerro Maricunga Gold Project.
The highlights included the following:
•
•
•
•
Potential for average annual gold production, over the first five years, of 298,000 ounces
Projected total gold production of 2.7 million ounces over a 10-year mine life
Life of mine estimated operating cash costs of US$652 per ounce gold ("/oz Au")
Preliminary initial capital cost estimate of US$514.6 million with sustaining capital of US$249.0
million
With a processing rate of over 80,000 tonnes per day and the potential for average annual production of
298,000 ounces of gold over the first 5 years, the Cerro Maricunga deposit is one of the largest oxide gold
projects under consideration for development. The high processing rate and positive metallurgical
characteristics combined with a low 1.6 to 1 strip ratio, cost effective open pit mining and heap leach
processing methods establish the potential for an economically strong project with quick payback on capital
expenditures for a project of this scale. Atacama anticipates moving forward towards a feasibility study and
will examine the opportunities, which could be derived by leaching coarser crushed material in a valley-fill
heap leach scenario.
Cerro Maricunga Oxide Gold Project Pit – Constrained Resource Estimate
Constrained at $1,400/oz Au
Tonnes
Grade
Gold Ounces
(millions)
(g/t Au)
(OOO’s)
Measured
48.6
0.43
668
Indicated
137.1
0.41
1,791
Measured and Indicated
185.8
0.41
2,460
75.4
0.39
938
Inferred
The PEA is preliminary in nature and includes Inferred Mineral Resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable them to be
categorized as Mineral Reserves. There is no certainty that the PEA results will be realized. The PEA is not
a preliminary feasibility study or feasibility study. The PEA has been completed to a level of accuracy of
+35% to -10%.
5%
The PEA calculates a base case pre-tax net present value at a 5% discount rate ("NPV ") of US$741
million, a pre-tax internal rate return ("IRR") of 33.9% and an average pre-tax cash flow from operations of
US$189 million per year. The base case was calculated at a gold price of US$1,450. The three-year
historical gold price, as of January 1, 2013, was approximately US$1,490/oz Au. The following operational
parameters and costs were used in the PEA:
•
•
•
•
•
Processing rate: 80,000 tonnes per day
Gold recoveries: 79.5%
Mining costs: US$1.43/tonne mined
Processing costs: US$2.56/tonne
G&A costs: US$0.53/tonne processed
The 43-101 compliant technical report for the PEA was filed on SEDAR on March 15, 2013.
8
Fiscal 2013
Management’s Discussion & Analysis
5
Phase IV Program
The Phase IV exploration campaign commenced in November 2012 and was initially planned to comprise
approximately 20,000 m of drilling along with a program of bulk metallurgical sampling for bench plant
testing . The majority of the drill program was dedicated to upgrading current inferred resources to the M&I
category. Exploration targets were also tested.
Phase IV Exploration – Drilling
On January 17, 2013 Atacama reported the first drilling results from the Phase IV drilling program.
Highlights from the infill drill program included:
•
•
•
132 m grading 0.70 g/t Au from the Crux Zone (CMD-228)
78 m grading 1.03 g/t Au from the Crux Zone (CMR-229) including 1.73 g/t Au over 36 m
68 m grading 0.39 g/t Au followed by 86 m grading 0.58 g/t Au from a new extension of the Crux
Zone (CMR-246)
Drill holes CMR-239 and CMR-241 (section 900), drilled between the Crux and Phoenix zones in an area
previously considered barren, returned significant intervals of +0.2 g/t Au mineralization including 62 m
grading 0.33 g/t Au and 44 m grading 0.47 g/t Au. This area was followed up with drill holes on section
950: CMR-271 (3 intervals including 78 m @ 0.42 g/t Au); CMR-323 (60 m @ 0.27 g/t Au and 50 m @ 0.23
g/t Au); and, CMR-325 (140 m @ 0.32 g/t Au). A single hole, CMR-294 (100 m @ 0.33 g/t Au) extended
the mineralization northwest to section 1050.
On April 12, 2013 Atacama reported further Phase IV drill results. Diamond drill hole CMD-262, cored into
the centre of the Lynx Zone cut four intervals of oxide mineralization including 24 m grading 0.28 g/t Au, 46
m grading 0.32 g/t Au and 80 m grading 0.53 g/t Au followed by 0.93 g/t Au over 114 m which expanded the
dimensions of the higher grade area on section 2350 previously intersected by CMR-124 (60 m @ 0.91 g/t
Au).
The drilling component of the Phase IV campaign was completed in April 2013. Originally planned for
20,000 m of drilling, the identification of additional infill targets within the Cerro Maricunga deposit
necessitated increasing the program to a total of 27,200 m. The final results from the drill program were
received report on June 18. In addition to infill drilling, during the Phase IV program condemnation holes
were drilled in the leach pad and plant areas and a sixth water monitoring well was also completed. Since
2010, over 105,000 m of drilling was been completed on the Cerro Maricunga Gold Project.
Overall, the current results of the Phase IV campaign have confirmed the interpretation of the resource
model with the exception of the Pollux Zone where the mineralization is orientated in an east-west direction
compared to the general northwest trend of the main deposit. Changes in the Pollux Zone interpretation are
not expected to have a significant impact on the Cerro Maricunga resource estimate.
Atacama completed three RC drill holes targeting a strong chargeability anomaly from an induced
polarization survey at the Santa Teresa property, located within the northwest corner of the Cerro
Maricunga property. All three drill holes intersected intervals of disseminated pyrite and fragments of quartz
veining were noted in the reverse circulation chips, however the assay results were discouraging and
Atacama has terminated the option on this property.
Phase IV Exploration – Metallurgical
On May 9, 2013 Atacama reported that column percolation leach tests from the Cerro Maricunga Gold
Project continued to achieve consistent positive gold recoveries. The test work was completed on gold
mineralization taken from across the Cerro Maricunga deposit with the goal of determining the impact of
gold grade, agglomeration and crush size (P100 25 and 50 mm)) on gold recoveries. Highlights from the test
work include:
Fiscal 2013
Management’s Discussion & Analysis
6
18
9
•
•
•
•
•
Average gold recoveries of 81.5% for non-agglomerated, 25 mm crushed mineralization
Majority of leachable gold extracted in the first twenty days at a 25 mm crush
Gold recoveries of 78% and 80% at a 50 mm crush
No significant variation in gold recoveries between the three main zones
No significant difference in recoveries between average grade and low grade mineralization
Gold recoveries from non-agglomerated mineralization crushed to 25 mm (approximately P80 = 19 mm)
ranged from 80% to 85%, averaging 81.5%, slightly higher than the average gold recovery of 79.5% used in
the PEA. The PEA envisioned a 3 stage crushing system to achieve a P80 = 19 mm crush. Leach kinetics,
time versus cumulative gold recoveries, were fast with the majority of the recoverable gold extracted within
the first twenty days,
3.2
Water Exploration Activities
On March 15, 2012, Atacama announced that it has entered into an option agreement with AMX de Chile
S.A. and related subsidiary companies (“AMX”) to explore for and acquire water use rights on a series of
contiguous water exploration concessions covering 267,000 hectares. The concessions are located
approximately 95 km north of Atacama’s Cerro Maricunga Gold Project.
Under the terms of the option agreement with AMX, Atacama will have 18 months to explore and make
application to the Chilean water authority, Dirección General de Aguas (“DGA”), for water use rights.
Albrecht Schneider, Atacama’s Executive Chairman, owns a non-controlling 13% stake in AMX through a
company controlled by him.
During the first three months of the option agreement, Atacama completed geophysical surveys to identify
drill targets. Upon completion of the geophysical surveys, Atacama has drilled water exploration holes over
the subsequent six month period followed by the drilling of production test wells over the following six
month period. After drilling of the production test wells, Atacama may terminate the option agreement with
no payment owed. After the completion of a production well, an application for water extraction rights may
be made to the DGA. Atacama will pay AMX US$30,000 per litre per second for the water under
application. Upon a grant of water use rights by the DGA, Atacama will pay AMX an additional US$10,000
per litre per second.
On January 17, 2013 Atacama announced the completion of two water exploration wells to depths of 185
and 224 m in two aquifers within the boundaries of its AMX water exploration concessions. Both exploration
wells hit water and a drill hole testing a third aquifer was underway. Two wells have been drilled to facilitate
pump tests to determine sustainable water flow rate as required for permitting and results are pending. As
part of the PEA, Atacama received a quote for the construction of the pipeline from the AMX concessions to
the Cerro Maricunga Gold Project.
3.3
Other Mineral Properties
Previous work and proposed exploration programs for these properties were summarized in Atacama’s
MD&A for the years ended March 31, 2011 and 2012.
On January 24, 2012, Atacama entered into an option agreement to acquire the Frontera claims located
approximately 70 km to the east of the Cerro Maricunga Gold Project. After analyzing initial exploration
results, Atacama decided to terminate the option agreement in December 2012 and write-off the capitalized
exploration and evaluation costs of $75,538.
10
Fiscal 2013
Management’s Discussion & Analysis
7
4.
MINERAL PROPERTY EXPENDITURES AND COMMITMENTS
Atacama’s expenditures on mineral properties for the year ended March 31, 2013 were as follows (in
millions):
Mineral Property
Balance
March 31,
2012
Option
payments
and
evaluation
costs
Exploration
and
evaluation
costs
Write off of
exploration
and
evaluation
costs
Balance
March 31,
2013
$36.3
$0.1
$22.2
$-
$58.7
Anocarire Project
1.0
-
-
-
1.0
Piedra Parada Project
0.6
-
-
-
0.6
Pircas Project
0.1
-
-
-
0.1
Toro Prospect
0.1
-
-
-
0.1
Frontera Project
0.1
-
-
(0.1)
-
$38.1
$0.1
$22.3
$(0.1)
$60.5
Cerro Maricunga Gold Project
Note: Amounts have been rounded to reflect the relative accuracy of the mineral property schedule included in Note 5 to the
accompanying audited consolidated financial statements for Fiscal 2013; therefore numbers may not total or cross add
correctly.
During the year ended March 31, 2013, Atacama incurred $22.3 million in capitalized expenditures on its
mineral properties, focused almost entirely on its flagship Cerro Maricunga Gold Project.
The expenditures on the Cerro Maricunga Gold Project for the year ended March 31, 2013 included the
costs related to the completion of the Phase III drilling and exploration program that ran from October 2011
to May 2012. A total of 45,995 m of drilling was completed during the Phase III drill program compared to a
budget of 42,000 m. Good weather conditions combined with better than projected RC drilling rates
contributed to the increased metres drilled. The Cerro Maricunga costs also include the majority of the
Phase IV exploration campaign. Phase IV drilling commenced in November 2012 and was originally
planned for 20,000 m of drilling, however, the identification of additional infill targets within the Cerro
Maricunga deposit necessitated increasing the program to a total of 27,200 m. A program of bulk
metallurgical sampling for bench plant testwork was completed as well. The majority of the drill program
was dedicated to upgrading the current inferred resource.
During the first nine months of the Phase IV exploration program at the Cerro Maricunga Gold Project
running from July 1, 2012 to March 31, 2013, the actual expenditures were $20.2 million (including VAT)
compared to a budgeted figure of $21.7 million. 25,886 m of drilling were completed during these nine
months, compared to a budget of 25,300 m. In addition, the PEA was completed, further metallurgical tests
were performed and a water exploration program was undertaken. The primary variances from budget
resulted from reduced costs per metre drilled due to drilling efficiencies, reduced fees associated with
engineering studies and additional costs incurred in water exploration.
Fiscal 2013
Management’s Discussion & Analysis
8
18
11
5.
QUARTERLY FINANCIAL INFORMATION
The following selected data for the past eight quarters has been prepared in accordance with IFRS and
should be read in conjunction with Atacama’s audited annual consolidated financial statements:
Operations
Interest income
Expenses
Write-down of exploration and evaluation
assets
Foreign exchange loss (gain)
Stock-based compensation
Gain on revaluation of foreign currency
denominated warrants
Deferred tax provision (recovery)
Loss (income)
Loss (income) per share – Basic and
fully diluted
Foreign exchange translation differences
Other comprehensive loss (income),
net of tax
Total comprehensive loss (income)
Quarter Ended
Mar. 31, 2013
Quarter Ended
Dec. 31, 2012
Quarter Ended
Sep. 30, 2012
Quarter Ended
Jun. 30, 2012
$44,796
462,161
$66,384
430,995
$75,199
392,896
$99,267
1,127,788
176
(1,051,963)
-
75,362
(343,712)
56,802
1,898,886
-
(1,848,224)
-
$(634,422)
$153,063
$2,216,583
(869,077)
$(1,688,780)
$(0.01)
993,963
(1)
$ 0.00
411,457
(1)
$ 0.04
(1,234,243)
(1)
$(0.03)
641,525
993,963
$359,541
411,457
$564,520
(1,234,243)
$982,340
641,525
$(1,047,255)
$10,723,349
157,825
19,584
$21,506,457
151,504
21,049
$26,592,749
64,621
22,514
$30,195,687
318,532
23,979
68,698,805
$79,599,563
58,591,111
$80,270,121
51,005,836
$77,685,720
48,592,657
$79,130,855
Quarter Ended
Mar. 31, 2012
Quarter Ended
Dec. 31, 2011
Quarter Ended
Sep. 30, 2011
Quarter Ended
Jun. 30, 2011
$326,928
465,783
538,920
885,383
$119,834
426,511
395,887
298,835
$85,414
463,798
(1,228,766)
2,191,650
$49,373
1,022,721
171,043
201,150
186,079
(318,738)
$1,430,499
(378,949)
$622,450
(525,889)
$815,379
170,141
$1,515,682
$ 0.03
(345,884)
(1)
$ 0.01
(320,057)
(1)
$ 0.02
1,221,681
(1)
$ 0.04
(103,521)
(345,884)
$1,084,615
(320,057)
$302,393
1,221,681
$2,037,060
(103,521)
$1,412,161
$35,529,899
672,745
25,444
$45,533,849
197,882
26,909
$47,353,482
271,236
28,374
$21,096,457
163,565
29,839
(1)
Total Assets
Cash and cash equivalents
Other current assets
Equipment
Exploration and evaluation assets and
value-added-tax receivable
Operations
Interest income
Expenses
Foreign exchange loss (gain)
Stock-based compensation
Loss (gain) on revaluation of foreign
currency denominated warrants
Deferred tax provision (recovery)
Loss
Loss per share – Basic and fully
diluted
Foreign exchange translation differences
Other comprehensive loss (income),
net of tax
Total comprehensive loss
(1)
Total Assets
Cash and cash equivalents
Other current assets
Equipment
Exploration and evaluation assets and
value-added-tax receivable
(1)
41,918,652
30,100,765
24,952,652
22,362,221
$78,146,740
$75,859,405
$72,605,744
$43,652,082
Fully diluted weighted average common shares outstanding, used in the calculation of fully diluted net loss per share, are
not reflective of the outstanding stock options and warrants at that time as their exercise would be anti-dilutive in the net
loss per share calculation.
The major variances in cash and total assets are mainly attributable to equity placements and the funding
of Atacama’s exploration and evaluation activities on its mineral properties as well as administrative
expenses. In the quarter ended December 31, 2010 Atacama closed its IPO, which provided net proceeds
12
Fiscal 2013
Management’s Discussion & Analysis
9
of $30.8 million. In Q2 2012, Atacama closed a bought deal financing that provided net proceeds of $28.3
million. As Atacama is in the exploration stage, Atacama does not generate operating revenue.
The increase in exploration and evaluation assets and VAT receivable is primarily a result of Atacama’s
exploration of the Cerro Maricunga Gold Project. Running from October 2010 through to April 2011,
Atacama began an aggressive Phase II exploration campaign and increased its exploration and evaluation
assets and VAT receivable during the three months ended December 31, 2010, March 31, 2011 and June
30, 2011. During the three months ended September 30, 2011, Atacama prepared for its upcoming Phase
III exploration program that began in October 2011 and ran through to May 2012. The increase in
exploration and evaluation assets and VAT receivable for the three months ended December 31, 2011,
March 31, 2012 and June 30, 2012 was attributable to Atacama’s aggressive Phase III exploration
campaign. Similarly, the increase during the three months ended December 31, 2012 and March 31, 2013
was a result of the activities carried out for Atacama’s Phase IV exploration program as further discussed in
Section 3.1 – Cerro Maricunga Gold Project.
Foreign exchange losses and gains are primarily a result of the fluctuations in the United States dollar
against the Canadian dollar. Any strengthening (or weakening) of the United States dollar against the
Canadian dollar results in foreign exchange gains (or losses) on Atacama’s United States dollar
denominated cash and cash equivalent balances as well as intercompany loans with its subsidiary.
Variances in stock-based compensation expense are the result of the timing of the grant of vested stock
options and their fair valuation using the Black-Scholes option pricing model.
The variance in the loss (or gain) on revaluation of foreign currency denominated warrants is a result of the
adjustment to fair value of warrants denominated in a foreign currency at each quarter end. Warrants
denominated in a currency other than Atacama’s functional currency are recorded as financial liabilities on
Atacama’s statement of financial position and are marked to market accordingly. These warrants were
exercised in April and June 2012 and none remain at March 31, 2013.
6.
RESULTS OF OPERATIONS
Three Months Ended
March 31
2013
2012
Operations
Salaries, benefits and director fees
Legal and audit and consulting fees
Office and administrative
Travel
Regulatory and shareholder information
Marketing and promotion
General exploration expenditures
Write-down of exploration and evaluation assets
Stock-based compensation
Amortization
Foreign exchange loss (gain)
Loss (gain) on revaluation of foreign currency
denominated warrants
Interest income
Deferred tax recovery
Loss (income) for the period
Loss (income) per share – basic and fully diluted
(1)
Years Ended
March 31,
2013
2012
$228,450
65,137
67,296
75,300
17,142
6,178
1,193
176
1,465
(1,051,963)
$215,464
52,983
61,010
44,812
23,646
41,759
24,644
885,383
1,465
538,920
$1,419,108
406,632
239,385
230,466
53,348
50,162
8,879
75,538
56,802
5,860
(1,345,013)
$1,475,046
337,450
236,402
107,438
57,919
119,014
39,684
3,577,018
5,860
(122,916)
(44,796)
186,079
(326,928)
(869,077)
(285,646)
(548,618)
(581,549)
-
(318,738)
-
(318,738)
$(634,422)
$1,430,499
$46,444
$4,384,010
$(0.01)
$0.03
$0.00
$0.10
$-
$-
$-
$2,493,459
Non-current financial liabilities:
(1)
Warrants denominated in a foreign currency
Fully diluted weighted average common shares outstanding, used in the calculation of fully diluted loss per share, are not
reflective of the outstanding stock options and warrants at that time as their exercise would be anti-dilutive in the loss per
share calculation.
Fiscal 2013
Management’s Discussion & Analysis
10
13
18
6.1
Year ended March 31, 2013 and 2012
Atacama’s results of operations for the year ended March 31, 2013 resulted in a loss of $46,444, compared
to a loss of $4.4 million for the prior year. Atacama’s corporate activities in Fiscal 2013 were similar to the
prior period and, as a result, most costs were comparable. Non-operating items were primarily responsible
for variances from the prior year. For the year ended March 31, 2013:
•
•
•
•
•
6.2
Stock-based compensation is affected primarily by the timing of stock option grants. During the
year ended March 31, 2013, few stock options were granted. In the prior period, a large number of
stock option grants resulted in stock-based compensation of $3.6 million; Foreign exchange gains
or losses are primarily a result of the fluctuations in the United States dollar against the Canadian
dollar. Any strengthening (or weakening) of the United States dollar against the Canadian dollar
results in foreign exchange gains (or losses) on Atacama’s United States dollar denominated cash
and cash equivalent balances as well as intercompany loans with its subsidiary. The increase in the
foreign exchange gain resulted from the strengthening of the United States dollar during Fiscal
2013 and as a result, Atacama’s United States dollar denominated items increased in value;
Gain on the revaluation of foreign currency denominated warrants resulted from the adjustment to
mark to market of Atacama’s warrants denominated in a currency other than Atacama’s functional
currency. These financial instruments are recorded as financial liabilities on Atacama’s statement of
financial position and are therefore adjusted to fair value at period end. These warrants were
exercised at the end of Q1 2013;
Variances in travel expenses are due to the timing of management presentations and meetings
within Canada and abroad in order to increase market exposure and travel costs associated with
management’s involvement in the exploration and engineering activities in the Chile;
Interest income was generated on Atacama’s cash balances during the year. Atacama’s cash and
cash equivalents include cash and cashable term deposits held at two of the largest Canadian
chartered banks and one large Chilean bank. The decreased amount of interest earned during the
year was a result of the lower average cash balance held through the year; and
In January 2012, Atacama entered into an option agreement to acquire the Frontera claims located
approximately 70 km to the east of the Cerro Maricunga Gold Project. After analyzing initial
exploration results, Atacama decided to terminate the option agreement in December 2012 and
write-off the capitalized exploration and evaluation costs.
Three months ended March 31, 2013 and 2012
Atacama’s results of operations for the three months ended March 31, 2013 resulted in income of $0.6
million, compared to a loss of $1.4 million for the same period in the prior year. Again, Atacama’s corporate
activities in Q4 2013 were similar to the prior period and, as a result, costs were similar. Non-operating
items were primarily responsible for variances from the prior period. For the three months ended March 31,
2013:
•
•
•
•
14
Stock-based compensation is affected primarily by the timing of option grants. During the three
months ended March 31, 2013 no stock options were granted, whereas in the prior period stock
options granted resulted in stock-based compensation of $0.9 million;
Foreign exchange gains or losses are primarily a result of the fluctuations in the United States
dollar against the Canadian dollar. Any strengthening (or weakening) of the United States dollar
against the Canadian dollar results in foreign exchange gains (or losses) on Atacama’s United
States dollar denominated cash and cash equivalent balances. The increase in the foreign
exchange gain resulted from the strengthening of the United States dollar during Fiscal 2013 and
as a result, Atacama’s United States dollar denominated items increased in value;
Gain on the revaluation of foreign currency denominated warrants resulted from the adjustment to
mark to market of Atacama’s warrants denominated in a currency other than Atacama’s functional
currency. These financial instruments are recorded as financial liabilities on Atacama’s statement of
financial position and are therefore adjusted to fair value at period end. These warrants were
exercised at the end of Q1 2013 and therefore there was no activity in Q4 2013; and
Interest income was generated on Atacama’s cash balances during the period. The decreased
Fiscal 2013
Management’s Discussion & Analysis
11
amount of interest earned during Q4 2013 compared to prior period was a result of the lower
average cash balance held through the period.
7.
LIQUIDITY AND CAPITAL RESOURCES
Atacama is wholly dependent on equity financing to complete the development of its mineral properties.
Atacama has not generated any revenue from operations and does not expect to generate any such
revenue in its current or next fiscal year.
Working capital at March 31, 2013 was $7.2 million compared to $32.1 million at March 31, 2012. The
decrease is primarily due to $26.4 million in direct cash expenditures incurred on the Cerro Maricunga Gold
Project’s Phase III and Phase IV exploration program (including VAT), as further detailed in Section 4 –
Mineral Property Expenditures and Commitments, plus other property expenditures and operating
expenses. This was partially offset by $3.4 million in cash proceeds from the exercise of warrants and stock
options during Q1 2013.
As of March 31, 2013, Atacama had approximately $10.7 million in cash and cash equivalents. Atacama
has sufficient cash to complete the funding of the Phase IV exploration program on its Cerro Maricunga
Gold Project. However, Atacama is dependent upon raising additional funds in order to fund future
exploration and development programs and continue operations. While there is no assurance these funds
can be raised, Atacama believes such financing will be available as required. Certain of Atacama's
discretionary exploration activities have considerable scope for flexibility in terms of the amount and timing
of exploration expenditure, and expenditures may be adjusted accordingly.
Atacama had no off balance sheet arrangements as at March 31, 2013.
8.
OUTLOOK
Atacama is in the exploration stage and is subject to risks and challenges similar to companies in a
comparable stage. These risks include, but are not limited to, the challenges of securing adequate capital in
view of exploration, development and operational risks inherent in the mining industry as well as global
economic and gold price volatility. There is no assurance that Atacama’s funding initiatives will continue to
be successful to fund its planned exploration activities, which are focused on the Cerro Maricunga Gold
Project.
9.
CRITICAL ACCOUNTING ESTIMATES
Atacama’s significant accounting policies are summarized in note 3 to the audited annual consolidated
financial statements for the year ended March 31, 2013. Atacama is in the exploration stage and is subject
to risks and challenges similar to companies in a comparable stage. The policies described below, and
estimates related to them, have the most critical effect in preparation and presentation of Atacama’s
consolidated financial statements.
9.1
Exploration and Evaluation Assets
Exploration and evaluation costs, including the costs of acquiring claims, are capitalized as exploration and
evaluation assets on an area of interest basis pending determination of the technical feasibility and the
commercial viability of the project. Capitalized costs include costs directly related to exploration and
evaluation activities in the area of interest. General and administrative costs are only allocated to the asset
to the extent that those costs can be directly related to operational activities in the relevant area of interest.
When a claim is relinquished or a project is abandoned, the related costs are recognized in profit or loss
immediately.
Exploration and evaluation assets are assessed for impairment if facts and circumstances suggest that the
carrying amount exceeds the recoverable amount. The carrying amounts of Atacama's non-financial
assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.
Fiscal 2013
Management’s Discussion & Analysis
12
15
18
An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount.
If the technical feasibility and commercial viability of the extraction of mineral resources in an area of
interest is demonstrable, exploration and evaluation assets attributable to that area of interest would be first
tested for impairment and then reclassified to mining property and development assets within property,
plant and equipment.
9.2
Share-Based Payment Transactions
The grant date fair value of share-based payment awards granted to employees is recognized as an
employee expense or capitalized to exploration and evaluation assets for grants to individuals working
directly on mineral properties. Accordingly, a corresponding increase in equity, over the period that the
employees unconditionally become entitled to the awards would be recorded. The amount recognized as
an expense is adjusted to reflect the number of awards for which the related service and non-market
vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is
based on the number of awards that do meet the related service and non-market performance conditions at
the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of
the share-based payment is measured to reflect such conditions and there is no true-up for differences
between expected and actual outcomes. Fair values of share-based payments (including stock options and
warrants) are determined based on estimated fair values at the time of grant using the Black Scholes option
pricing model.
10.
OUTSTANDING SHARE DATA
Number of Shares
Common shares outstanding – March 31, 2013 and June 27, 2013
Unexercised stock options (weighted average exercise price of $4.33 and weighted
average remaining life of 3.1 years)
Fully diluted common shares outstanding – June 27, 2013
10.1
50,937,410
4,824,500
55,761,910
Common Shares
Atacama has an authorized share capital consisting of an unlimited number of common shares with no par
value.
10.2
Warrants
As at March 31, 2013 there are no warrants or broker warrants outstanding.
10.3
Stock Options
As described in note 8 in Atacama’s audited consolidated financial statements for the year ended March 31,
2013, Atacama has a TSXV compliant stock option plan under which stock options may be granted to
Atacama’s Directors, senior officers, employees, consultants and consultant companies that provides the
maximum number of common shares reserved for issuance pursuant to options granted may not exceed
10% of the issued common shares.
During the year ended March 31, 2013, Atacama issued 110,000 stock options, which vested immediately,
30,000 stock options were exercised, and 52,500 stock options expired.
16
Fiscal 2013
Management’s Discussion & Analysis
13
11.
OTHER INFORMATION
11.1
Contractual Commitments
Atacama has no contractual commitments, other than the option agreement entered into with AMX (as
described in Section 3.2 – Water Exploration Activities) and the leases on offices and office equipment
entered into in the ordinary course of business. All other mineral property agreement commitments are at
Atacama’s option and Atacama can terminate the agreements prior to being required to make payments on
the properties.
11.2
Corporate Governance
Atacama’s Board of Directors follows corporate governance policies to ensure transparency and
accountability to shareholders.
The Audit Committee fulfills its role of ensuring the integrity of the reported information through its review of
the interim and audited annual consolidated financial statements prior to their submission to the Board of
Directors for approval.
11.3
Related Party Transactions
Dr. Albrecht Schneider, Atacama’s Executive Chairman and largest shareholder, manages Atacama’s
exploration activities in Chile and Atacama contracts with companies controlled by Dr. Schneider for various
administration, geological, water exploration consulting, accounting, other supervisory services and office
space in Chile. Mr. Antonio Ortuzar Jr., a director of Atacama, provides legal services to Atacama in Chile.
As such, transactions with related parties are significant. The transaction value for geological and
administrative costs provided companies controlled by Dr. Schneider for the year ended March 31, 2013
were $4,231,205 and the balance owing at March 31, 2013 was $349,490. The transaction value for legal
services provided by Mr. Ortuzar for the year ended March 31, 2013 were $76,988 and the balance owing
at March 31, 2013 was $12,610. The details of all these related party transactions for the year ended March
31, 2013 and balances owing at March 31, 2013 are disclosed in note 11 in Atacama’s audited
consolidated financial statements for the year ended March 31, 2013.
11.4
Risk Factors
Atacama is in the exploration stage and is subject to the risks and challenges similar to other companies in
a comparable stage. The risk factors set forth in Atacama’s Annual Information Form filed August 20, 2012,
copies of which are filed at SEDAR, could materially affect Atacama’s future operating results, the
successful development of Atacama’s mineral properties, including the Cerro Maricunga Gold Project, and
could cause actual events to differ materially from those described in forward-looking statements relating to
Atacama.
12.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, including predictions, projections and forecasts. Forwardlooking statements include, but are not limited to, statements with respect to the Preliminary Economic
Assessment, including the potential for annual gold production in the first five years of production of
298,000 ounces, total gold production of 2.7 million ounces over a 10.1 year mine life, initial life of mine
estimated operating cash costs of $652 /oz Au, preliminary initial capital cost estimate of $514.6 million with
sustaining capital of $249.0 million, pre-tax pay-back period of 2.5 years at $1,450/oz Au and 1.7 years at
$1,700/oz Au, pre-tax NPV of $741 million at $1,450/oz Au and a 5% discount rate After-tax NPV5% of
$531 million, pre-tax NPV5% of $1,247 million and an after-tax NPV5% of $923 million at $1,700/oz Au,
pre-tax IRR) of 33.9% at $1,450/oz Au (after-tax IRR of 26.6%), statements regarding the expectation to
increase mineral resources, statements regarding expectations for receipt of permits and environmental
approvals, exploration results (including with respect to water resources), the success of exploration
activities generally, mine development prospects, and potential future gold production. Often, but not
always, forward-looking statements can be identified by the use of words such as “plans”, “planning”,
Fiscal 2013
Management’s Discussion & Analysis
14
17
18
“expects” or “does not expect”, “continues”, “scheduled”, “estimates”, “forecasts”, “intends”, “potential”,
“anticipates”, “does not anticipate”, or “belief”, or describes a “goal”, or variation of such words and phrases
or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be
achieved.
Forward-looking statements include among others: the future development of the Cerro Maricunga Gold
Project, the timing and completion of the drilling and other exploration activities, the completion of the drill
program, and delineation of a mineral resource. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results, performance or achievements of
Atacama to be materially different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include, among others, general business,
economic, competitive, political and social uncertainties; the actual results of current exploration activities;
conclusions of economic evaluations and studies (including the Cerro Maricunga technical reports);
currency fluctuations; future prices of gold and other metals; possible variations of ore grade or recovery
rates; defects and adverse claims in the title to our properties; failure of equipment to operate as
anticipated; accidents, political instability, insurrection or war; changes in government regulations and
policies, including laws governing development, production, taxes, labour standards and occupational
health, safety, toxic substances, resource exploitation and other matters; delays in obtaining governmental
approvals or financing or in the completion of development or construction activities; insufficient insurance
coverage; liquidity and financing risks related to the global economic crisis, as well as those factors
discussed in the section entitled “Risk Factors” in this MD&A. Such forward-looking statements are based
on a number of material factors and assumptions, including: that contracted parties provide goods and/or
services on the agreed timeframes; the receipt of necessary approvals from the TSXV; that on-going
contractual negotiations will be successful and progress and/or be completed in a timely manner; that no
unusual geological or technical problems occur; that plant and equipment work as anticipated and that
there is no material adverse change in the price of gold. Although Atacama has attempted to identify
important factors that could cause actual actions, events or results to differ materially from those described
in forward-looking statements, there may be other factors that cause actions, events or results to differ from
those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the
date of this MD&A and Atacama disclaims any obligation to update any forward-looking statements,
whether as a result of new information, future events or results or otherwise, except as required by
applicable laws. There can be no assurance that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent
uncertainty therein.
18
Fiscal 2013
Management’s Discussion & Analysis
15
Consolidated Financial Statements of
ATACAMA PACIFIC GOLD CORPORATION
For the Years Ended
March 31, 2013 and 2012
Presented in Canadian Dollars
19
June 27, 2013
MANAGEMENT'S RESPONSIBILITY FOR CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Atacama Pacific Gold Corporation ("Atacama") were prepared by
management in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board. Management acknowledges responsibility for the preparation and presentation of the consolidated financial
statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles
and methods that are appropriate to Atacama's circumstances. Atacama's significant accounting policies are summarized in
note 3 to the consolidated financial statements.
Management has established systems of internal control over the financial reporting process, which are designed to provide
reasonable assurance that relevant and reliable financial information is produced.
The Board of Directors is responsible for reviewing and approving the consolidated financial statements and for ensuring that
management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this
responsibility. The Audit Committee meets with management to review the internal controls over the financial reporting
process, the consolidated financial statements and the auditors’ report. The Audit Committee also reviews Atacama's
Management’s Discussion and Analysis to ensure that the financial information reported therein is consistent with the
information presented in the consolidated financial statements. The Audit Committee reports its findings to the Board of
Directors for its consideration in approving the consolidated financial statements for issuance to the shareholders.
Management recognizes its responsibility for conducting Atacama's affairs in compliance with established financial standards,
and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.
20
(Signed) “Carl Hansen”
(Signed) “Thomas Pladsen”
President and Chief Executive Officer
Chief Financial Officer
1
KPMG LLP
Telephone
(416) 777-8500
Chartered Accountants
Fax
(416) 777-8818
Bay Adelaide Centre
Internet
www.kpmg.ca
333 Bay Street Suite 4600
Toronto ON M5H 2S5
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Atacama Pacific Gold Corporation
We have audited the accompanying consolidated financial statements of Atacama Pacific Gold
Corporation (the “Company”), which comprise the consolidated statements of financial position as at
March 31, 2013 and March 31, 2012, the consolidated statements of comprehensive loss, changes in
equity and cash flows for the years ended March 31, 2013 and March 31, 2012, and notes, comprising a
summary of significant accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Company as at March 31, 2013 and March 31, 2012, and its
consolidated financial performance and its consolidated cash flows for the years ended March 31, 2013
and March 31, 2012 in accordance with International Financial Reporting Standards.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
21
Page 2
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 1 in the financial statements which describes
that the Company has prepared the financial statements on the basis applicable for a going concern.
Matters as set forth in Note 1 indicate the existence of a material uncertainty that may cast significant
doubt about the Company’s ability to continue as a going concern.
Chartered Accountants, Licensed Public Accountants
June 27, 2013
Toronto, Canada
22
ATACAMA PACIFIC GOLD CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Expressed in Canadian Dollars
2013
As at March 31,
2012
ASSETS
Current assets
Cash and cash equivalents (note 14)
Accounts receivable and prepaid expenses
$ 10,723,349 $ 35,529,899
157,825
672,745
Non-current assets
Value-added-tax receivable (note 4)
Exploration and evaluation assets (note 5)
Equipment (note 7)
10,881,174
36,202,644
8,195,663
60,503,142
19,584
3,804,314
38,114,338
25,444
68,718,389
41,944,096
$ 79,599,563 $ 78,146,740
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities
Due to related parties (note 11)
$
3,284,240 $
362,100
3,648,993
450,458
3,646,340
4,099,451
Non-current liabilities
Warrants denominated in a foreign currency (note 8(b))
-
2,493,459
3,646,340
6,592,910
79,641,286
(18,925,717)
15,237,654
73,574,788
(18,879,273)
16,858,315
75,953,223
71,553,830
EQUITY
Share capital (note 8(a))
Accumulated deficit
Other components of equity
$ 79,599,563 $ 78,146,740
Nature of Operations and Going Concern (note 1)
Commitments (note 6)
The accompanying notes are an integral part of the consolidated financial statements
On behalf of the Board:
(Signed) “Scott Caldwell”
Director
(Signed) “Paul Champagne”
Director
4
23
ATACAMA PACIFIC GOLD CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Expressed in Canadian Dollars
2013
For the years ended March 31,
Expenses
Salaries, benefits and director fees
Consulting fees
Office and administrative
Travel
Legal and audit
Regulatory and shareholder information
Marketing and promotion
General exploration expenditures
Write-down of exploration and evaluation assets (note 5(d))
Stock-based compensation
Amortization
$
Other income
Foreign exchange
Gain on revaluation of foreign currency denominated warrants
Interest income
Loss before income taxes
2012
1,419,108 $
252,913
239,385
230,466
153,719
53,348
50,162
8,879
75,538
56,802
5,860
1,475,046
221,678
236,402
107,438
115,772
57,919
119,014
39,684
3,577,018
5,860
2,546,180
5,955,831
1,345,013
869,077
285,646
122,916
548,618
581,549
2,499,736
1,253,083
(46,444)
Deferred tax recovery (note 9)
-
Loss for the year
Other comprehensive loss
Foreign exchange translation differences
(4,702,748)
(318,738)
(46,444)
(4,384,010)
(812,702)
(452,219)
Total comprehensive loss for the year
$
(859,146) $
(4,836,229)
Loss per share (note 10):
Basic and fully diluted
$
0.00 $
(0.10)
The accompanying notes are an integral part of the consolidated financial statements
24
5
$
-
Currency translation adjustment
$
$
(18,925,717)
-
-
(46,444)
-
-
-
(18,879,273)
-
-
(4,384,010)
-
-
-
(14,495,263)
The accompanying notes are an integral part of the consolidated financial statements
79,641,286
-
Currency translation adjustment
Balance at March 31, 2013
-
59,910
Issuance of common shares on
exercise of stock options
Stock-based compensation
3,701,850
Issuance of common shares on
exercise of warrants
Loss for the year
2,304,738
Issuance of common shares on
exercise of warrants denominated in
foreign currency
73,574,788
-
Stock-based compensation
Balance at March 31, 2012
-
811,133
Issuance of common shares on
exercise of stock options
Loss for the year
2,547,515
Issuance of common shares on
exercise of warrants and broker
warrants
41,913,432
28,302,708
$
Issuance of common shares, net of
cash share issuance costs of
$2,147,292
Balance at March 31, 2011
Share capital
Accumulated
deficit
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Expressed in Canadian Dollars
ATACAMA PACIFIC GOLD CORPORATION
25
$
$
-
-
-
-
-
(1,042,475)
-
1,042,475
-
-
-
-
(689,936)
-
$
$
15,900,164
-
249,426
-
(14,910)
-
-
15,665,648
-
5,444,038
-
(221,833)
-
-
10,443,443
$
$
(662,510)
(812,702)
-
-
-
-
-
150,192
(452,219)
-
-
-
-
-
602,411
Other components of equity
Share-based
Foreign currency
payment reserve
translation reserve
1,732,411
Warrants and
broker warrants
6
$
$
75,953,223
(812,702)
249,426
(46,444)
45,000
2,659,375
2,304,738
71,553,830
(452,219)
5,444,038
(4,384,010)
589,300
1,857,579
28,302,708
40,196,434
Total equity
ATACAMA PACIFIC GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in Canadian Dollars
2013
For the years ended March 31,
2012
Cash provided by (used in)
Operations
Loss for the year
Items not involving cash:
Write-down of exploration and evaluation assets
Stock-based compensation
Amortization
Unrealized foreign exchange gain
Gain on revaluation of foreign currency warrants
Deferred tax recovery
Change in non-cash working capital:
Accounts receivable and prepaid expenses
Accounts payable and accrued liabilities
Due to related parties
Investing
Exploration and evaluation costs
Value-added-tax receivable
Option payments and acquisition costs
Equipment
Financing
Issuance of common shares for cash
Exercise of warrants
Exercise of stock options
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
(46,444) $
75,538
56,802
5,860
(812,702)
(869,077)
-
3,577,018
5,860
(452,219)
(548,618)
(318,738)
514,920
(70,214)
(88,358)
(521,317)
(721,553)
276,176
(1,233,675)
(3,087,401)
(22,417,295)
(4,391,349)
(148,962)
-
(16,697,216)
(2,313,446)
(108,932)
(1,700)
(26,957,606)
(19,121,294)
3,339,731
45,000
28,302,708
1,767,524
589,300
3,384,731
30,659,532
(24,806,550)
8,450,837
35,529,899
27,079,062
$ 10,723,349 $ 35,529,899
Supplementary Cash Flow Information (note 14)
The accompanying notes are an integral part of the consolidated financial statements
26
(4,384,010)
7
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
1.
NATURE OF OPERATIONS AND GOING CONCERN
Atacama Pacific Gold Corporation (“Atacama”) is an exploration stage entity engaged in the acquisition, exploration and
development of gold properties in Chile. Atacama was incorporated under the Canada Business Corporation Act on June
12, 2008. These consolidated financial statements include the results of Atacama's 100% owned subsidiary, Minera
Atacama Pacific Gold Chile Limitada (“Atacama Chile”), a company incorporated in Chile. Atacama's registered office is
located at Suite 1210, 330 Bay Street, Toronto, Ontario, Canada, M5H 2S8.
These consolidated financial statements were authorized for issue by Atacama's Board of Directors on June 27, 2013.
The business of mining for minerals involves a high degree of risk. Atacama is an exploration company and is subject to
risks and challenges similar to companies in a comparable stage. These risks include, but are not limited to, the
challenges of securing adequate capital in view of exploration, development and operational risks inherent in the mining
industry; changes in government policies and regulations; the ability to obtain the necessary environmental permitting;
challenges in future profitable production or, alternatively Atacama's ability to dispose of its mineral properties on an
advantageous basis; as well as global economic and gold price volatility; all of which are uncertain. There is no
assurance that Atacama's funding initiatives will continue to be successful.
Atacama incurred a loss of $46,444 in the current year and has an accumulated deficit of $18,925,717 as at March 31,
2013. In addition, Atacama had a working capital balance of $7,234,834 at March 31, 2013. Subsequent to year end,
significant further expenditures have been made, primarily relating to the exploration and evaluation of Atacama's Cerro
Maricunga Gold Project. Further financing beyond the level of available resources will be required to finance planned
expenditures, develop the properties and continue operations. While there is no assurance these funds can be raised,
Atacama believes such financing will be available as required. Certain of Atacama's discretionary exploration activities
have considerable scope for flexibility in terms of the amount and timing of exploration expenditure, and expenditures
may be adjusted accordingly.
These financial statements have been prepared on a basis which contemplates that Atacama will continue in operation
for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of
business. The certainty of funding future expenditures and availability of sources of additional financing in the future
cannot be assured at this time and accordingly, these uncertainties may cast a significant doubt about Atacama’s ability
to continue as a going concern. The consolidated financial statements do not include adjustments to the carrying values
and classifications of recorded assets and liabilities and related revenues and expenses that might be necessary should
Atacama be unable to continue as a going concern.
The underlying value of the mineral properties is dependent upon the existence and economic recovery of mineral
reserves and is subject to, but not limited to, the risks and challenges identified above. Changes in future conditions
could require material writedowns of the carrying value of exploration and evaluation assets.
2.
BASIS OF PRESENTATION
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and are presented in Canadian
dollars.
3.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below are in accordance with IFRS and have been applied consistently to all years
presented in these consolidated financial statements:
(a) Basis of Consolidation
The consolidated financial statements comprise the accounts of Atacama and the assets, liabilities, revenues and
expenses of its wholly-owned and controlled subsidiary, Atacama Chile, after the elimination of all material
intercompany balances and transactions.
8
27
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) Basis of Consolidation (continued)
Subsidiary
A subsidiary is an entity over which Atacama has the power to govern the financial and operating policies.
Subsidiaries are fully consolidated from the date on which control is transferred to the group until the date on which
control ceases.
The accounts of Atacama Chile, Atacama's only subsidiary, are prepared for the same reporting period as the parent
entity, using consistent accounting policies. Intercompany transactions and balances are eliminated. Unrealised
gains and losses are also eliminated.
(b) Functional and Presentation Currency
These consolidated financial statements are presented in Canadian dollars, which is Atacama’s functional currency.
The functional currency of Atacama’s foreign subsidiary is the United States dollar. The functional currency of each
of Atacama’s consolidated entities are measured using the currency of the primary economic environment in which
that entity operates.
Translation of transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at period end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognized in the statement of comprehensive loss.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the
statement of comprehensive loss within other income.
The results and financial position of all Atacama's entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
-
assets and liabilities for each statement of financial position presented are translated at the closing rate
at the date of that financial period end;
-
income and expenses for each statement of comprehensive loss are translated at average exchange
rates (unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the rate on
the dates of the transactions);
-
equity transactions are translated using the exchange rate at the date of the transaction; and
-
all resulting exchange differences are recognized as a separate component of equity.
On consolidation, exchange differences arising from the translation of functional to presentation currency, and of
borrowings and other currency instruments designated as hedges of such investments, are recognized directly in
other comprehensive income within the foreign currency translation reserve.
(c) Financial Instruments
(i)
Non-derivative financial assets
Atacama initially recognizes loans and receivables and deposits on the date that they are originated. All other
financial assets (including assets designated at fair value through profit or loss) are recognized initially on the
trade date at which the group becomes a party to the contractual provisions of the instrument.
28
9
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Financial Instruments (continued)
(i)
Non-derivative financial assets (continued)
Atacama derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in
transferred financial assets that is created or retained by the group is recognized as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position
when, and only when, the group has a legal right to offset the amounts and intends either to settle on a net basis
or to realize the asset and settle the liability simultaneously.
Atacama has the following non-derivative financial assets: financial assets at fair value through profit or loss,
held-to-maturity financial assets, loans and receivables and available-for-sale financial assets.
Financial assets at fair value through profit or loss
A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is
designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if
Atacama manages such investments and makes purchase and sale decisions based on their fair value in
accordance with Atacama’s documented risk management or investment strategy. Upon initial recognition
attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through
profit or loss are measured at fair value, and changes therein are recognized in profit or loss.
Held-to-maturity financial assets
If Atacama has the positive intent and ability to hold debt securities to maturity, then such financial assets are
classified as held-to-maturity. Held-to-maturity financial assets are recognized initially at fair value plus any
directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets are
measured at amortized cost using the effective interest method, less any impairment losses. Any sale or
reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity
would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent Atacama
from classifying investment securities as held-to-maturity for the current and the following two financial years.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are recognized initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective
interest method, less any impairment losses.
Loans and receivables comprise accounts receivable and prepaid expenses, and value-added-tax receivable.
Cash and cash equivalents comprise cash balances and call deposits with original maturities of 90 days or less.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale
and that are not classified in any of the previous categories. Atacama classifies investment in equity securities
and certain debt securities as available-for-sale financial assets. Subsequent to initial recognition, they are
measured at fair value and changes therein, other than impairment losses and foreign currency differences on
available-for-sale equity instruments, are recognized in other comprehensive income and presented within equity
in the fair value reserve. When an investment is derecognized, the cumulative gain or loss in other
comprehensive income is transferred to profit or loss.
10
29
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Financial Instruments (continued)
(i)
Non-derivative financial assets (continued)
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value hierarchy establishes three levels to
classify the inputs to valuation techniques used to measure fair value.
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in
active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest
rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency
and commodity contracts, volatility measurements used to value option contracts and observable credit default
swap spreads to adjust for credit risk where appropriate), or inputs that are derived principally from or
corroborated by observable market data or other means.
Level 3: Inputs are unobservable (supported by little or no market activity).
The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
At March 31, 2013, Atacama had no financial assets and financial liabilities measured at fair value.
(ii) Non-derivative financial liabilities
Atacama initially recognizes debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are
recognized initially on the trade date at which Atacama becomes a party to the contractual provisions of the
instrument.
Atacama derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire.
Non-derivative financial liabilities comprise accounts payable and accrued liabilities and due to related party.
Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective
interest method.
(iii) Derivative financial liabilities
Derivative instruments, including embedded derivatives, are recorded at their fair value on the date the derivative
contract is entered into. They are subsequently remeasured at their fair value at each statement of financial
position date, and the changes in the fair value are recognized in profit or loss. Fair values for derivative
instruments are determined using valuation techniques, using assumptions based on market conditions existing
at the statement of financial position date.
Issued share purchase warrants denominated in a foreign currency different from Atacama's functional currency
meet the definition of a derivative financial liability and are fair valued at each statement of financial position date
using the Black-Scholes option pricing model, with changes in the fair value recognized in profit or loss.
(iv) Share capital
Common shares
30
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares
and share options are recognized as a deduction from equity, net of any tax effects.
11
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Exploration and Evaluation Assets
Exploration and evaluation costs, including the costs of acquiring claims, are capitalized as exploration and
evaluation assets on an area of interest basis pending determination of the technical feasibility and the commercial
viability of the project. Capitalised costs include costs directly related to exploration and evaluation activities in the
area of interest. General and administrative costs are only allocated to the asset to the extent that those costs can be
directly related to operational activities in the relevant area of interest. When a claim is relinquished or a project is
abandoned, the related costs are recognized in profit or loss immediately.
Exploration and evaluation assets are assessed for impairment if facts and circumstances suggest that the carrying
amount exceeds the recoverable amount (note 3(f)).
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are
demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment
and then reclassified to mining property and development assets within property, plant and equipment.
(e) Equipment
(i)
Recognition and measurement
Items of equipment are stated at cost less accumulated amortization and impairment losses (note 3(f)). Cost
includes expenditure that are directly attributable to the acquisition of the asset.
(ii) Subsequent costs
Atacama recognizes the cost of replacing a part of an item in the carrying amount of an item of equipment, when
that cost is incurred, if it is probable that the future economic benefits embodied within the item will flow to
Atacama and the cost of the item can be measured reliably.
(iii) Amortization
The carrying amounts of equipment (including initial and subsequent capital expenditure) are amortized to their
estimated residual value over the estimated useful lives of the specific assets concerned or the estimated life to
the associated mine, if shorter. Amortization is calculated using a straight line method over the estimated useful
lives of each significant component.
The estimated useful lives for the current and comparative periods are as follows:
-
office equipment
5-12 years
Amortization methods, useful lives and residual values are reviewed at each financial year end and adjusted if
appropriate.
(iv) Disposal
Gains and losses on disposal of an item of equipment are determined by comparing the proceeds from disposal
with the carrying amount of equipment and are recognized net within “other income” in profit or loss.
(f) Impairment
(i)
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it
is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events
have had a negative effect on the estimated future cash flows of that asset.
12
31
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) Impairment (continued)
(i)
Financial assets (continued)
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount, and the present value of the estimated future cash flows discounted at the original
effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by
reference to its fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale
financial asset recognized previously in other comprehensive income is transferred to profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the
impairment loss was recognized. For financial assets measured at amortised cost and available-for-sale financial
assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets
that are equity securities, the reversal is recognised directly in other comprehensive income.
(ii) Non-financial assets
The carrying amounts of Atacama's non-financial assets, other than deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists then the
asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group
of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of
other assets or groups of assets (the cash-generating unit).
An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect
of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units
and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rata basis.
In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for
any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been
a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortization, if no impairment loss had been recognized.
32
13
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Share-Based Payment Transactions
The grant date fair value of share-based payment awards granted to employees (or directors or consultants) is
recognized as an employee expense or capitalized to exploration and evaluation assets for grants to individuals
working directly on mineral properties, with a corresponding increase in equity, over the period that the employees
unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the
number of awards for which the related service and non-market vesting conditions are expected to be met, such that
the amount ultimately recognized as an expense is based on the number of awards that do meet the related service
and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting
conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is
no true-up for differences between expected and actual outcomes. Fair values of share-based payments (including
stock options and warrants) are determined based on estimated fair values at the time of grant using the BlackScholes option pricing model using the management assumptions disclosed in these consolidated financial
statements.
Share-based payment arrangements in which Atacama receives goods or services as consideration for its own
equity instruments are accounted for as equity-settled share-based payment transactions.
(h) Provisions
A provision is recognized if, as a result of a past event, Atacama has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability. The unwinding of the
discount is recognized as finance cost.
(i) Income Tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss
except to the extent that it relates to a business combination, or items recognized directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the
following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in
subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable
future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of
goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when
they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax
assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they
relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but
they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized
simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax
assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related
tax benefit will be realized.
14
33
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
3.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(j) Loss Per Share
Atacama presents basic and fully diluted loss per share data for its common shares. Basic loss per share is
calculated by dividing the loss attributable to common shareholders of Atacama by the weighted average number of
common shares outstanding during the period, adjusted for own shares held. Fully diluted loss per share is
determined by adjusting the loss attributable to common shareholders and the weighted average number of common
shares outstanding, adjusted for own shares held, for the effects of all dilutive potential common shares, which
comprise outstanding warrants and stock options.
(k) Recent Accounting Pronouncements
Certain pronouncements were issued by the IASB or the International Financial Reporting Interpretations Committee
that are mandatory for accounting periods after December 31, 2010 or later periods. Many are not applicable or do
not have a significant impact to Atacama and have been excluded from the discussion below. The following have not
yet been adopted and are being evaluated to determine their impact on Atacama.
(i)
IFRS 9 ‘Financial Instruments’ (“IFRS 9”) was issued by the IASB in October 2010 and will replace IAS 39
Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 uses a single approach to determine
whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The
approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business
model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39
for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new
standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS
39. IFRS 9 is effective for annual periods beginning on or after April 1, 2015.
(ii)
IFRS 10 ‘Consolidated Financial Statements’ is effective for annual periods beginning on or after April 1, 2013,
with early adoption permitted, establishes principles for the presentation and preparation of consolidated financial
statements when an entity controls one or more other entities.
(iii) IFRS 11 ‘Joint Arrangements’ (“IFRS 11”) was issued by the IASB in May 2011 and will replace IAS 31 Interests
in Joint ventures and SIC 13 – Jointly Controlled Entities – Non-Monetary Contributions by Venturers. IFRS 11 is
effective for annual period beginning on or after April 1, 2013.
(iv) IFRS 12 ‘Disclosure of Interests in Other Entities’ is effective for annual periods beginning on or after April 1,
2013, with early adoption permitted, requires the disclosure of information that enables users of financial
statements to evaluate the nature of, and risks associated with its interests in other entities and the effects of
those interests on its financial position, financial performance and cash flows.
(v) IFRS 13 ‘Fair Value Measurement’ is effective for annual periods beginning on or after April 1, 2013, with early
adoption permitted, provides the guidance on the measurement of fair value and related disclosures through a
fair value hierarchy.
34
15
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
4.
VALUE-ADDED-TAX (“VAT”) RECEIVABLE
Non-current VAT receivable from the government of Chile is in respect of Atacama’s exploration and evaluation
activities. The actual timing of receipt is uncertain as VAT is typically refundable only upon commercial operations; VAT
receivable has therefore been classified as a non-current asset.
Amount
Balance - March 31, 2011
$
Additions
Effect of foreign exchange
2,295,601
17,845
Balance - March 31, 2012
$
Additions
Effect of foreign exchange
3,804,314
4,187,323
204,026
Balance - March 31, 2013
5.
1,490,868
$
8,195,663
EXPLORATION AND EVALUATION ASSETS
The following is a summary of the capitalized costs on the Atacama's exploration and evaluation assets as at March 31,
2013 and March 31, 2012:
Property
Cerro Maricunga Gold
Project
Anocarire Project
Piedra Parada Project
Pircas Project
Toro Prospect
Frontera Project
Option
payments and
acquisition
costs
Exploration
and
evaluation
costs
Balance
March 31,
2012
Option
payments and
acquisition
costs
Exploration
and
evaluation
costs
Balance
March 31,
2013
$
4,642,820 $ 31,682,106 $ 36,324,926 $
955,605
42,571
998,176
513,558
36,682
550,240
106,460
1,137
107,597
73,598
73,598
9,922
49,879
59,801
4,790,763 $ 53,917,993 $ 58,708,756
955,605
57,468
1,013,073
513,558
51,726
565,284
106,460
1,137
107,597
1,019
107,413
108,432
-
$
6,228,365 $ 31,885,973 $ 38,114,338 $
6,367,405 $ 54,135,737 $ 60,503,142
16
35
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
5.
EXPLORATION AND EVALUATION ASSETS (continued)
Cerro
Maricunga
Gold Project
Balance, March 31, 2011 $ 16,621,740 $
Option payments
Exploration and evaluation
costs
99,010
19,604,176
Balance, March 31, 2012
36,324,926
Option payments
Exploration and evaluation
costs
Impairment
147,943
22,235,887
-
Anocarire
Project
990,728 $
-
Piedra
Parada
Project
535,637 $
Pircas
Project
107,597 $
Toro
Prospect
Frontera
Project
56,034 $
-
Total
$ 18,311,736
-
-
-
9,922
108,932
7,448
14,603
-
17,564
49,879
19,693,670
998,176
550,240
107,597
73,598
59,801
38,114,338
-
-
-
1,019
-
14,897
-
15,044
-
-
33,815
-
15,737
(75,538)
Balance, March 31, 2013 $ 58,708,756 $ 1,013,073 $
565,284 $
107,597 $
108,432 $
-
148,962
22,315,380
(75,538)
$ 60,503,142
(1) Exploration and evaluations costs for the years ended March 31, 2013 includes $192,624 (2012 - $1,867,020) of capitalized stock
based compensation allocated to the Cerro Maricunga Gold Project.
Atacama's exploration and evaluation assets are comprised of option payments and acquisition costs to acquire mineral
properties and exploration and evaluation costs. All of Atacama’s mineral properties are located in northern Chile.
Atacama's primary focus is the Cerro Maricunga Gold Project.
(a) Cerro Maricunga Gold Project
The Cerro Maricunga Gold Project concessions comprise generally contiguous or superposed exploration and
mining claims, either acquired or staked by Atacama.
On August 31, 2011, and as amended on August 31, 2012, Atacama entered into an option agreement to acquire the
Santa Teresa claims which lie within the boundaries of the Cerro Maricunga Gold Project. The Santa Teresa option
agreement comprised total payments of US$3,000,000 over a period of three years with US$100,000 ($99,010) paid
upon signing and US$150,000 ($147,943) paid on August 31, 2012. Subsequent to year end, after analyzing initial
exploration results of the Santa Teresa claims, Atacama decided to terminate the option agreement in May 2013.
(b) Pircas Project
On January 13, 2010 Atacama Chile entered into an agreement to acquire 50% of a private Chilean company,
Sociedad Contractual Minera Aguas Heladas (“SCMAH”), for US$100,000. The other 50% of SCMAH is owned by a
private Chilean party. In July 2010, US$100,000 ($106,460) was paid under the terms of the agreement. The primary
asset of SCMAH is the Pircas claims. SCMAH has entered into an agreement with Gold Fields Chile S.A. under
which Gold Fields Chile S.A. can earn a 100% interest in the Pircas Project by spending US$6,799,000 on the
property by 2018. If the option is exercised SCMAH would retain a 2.5% net smelter return royalty ("NSR") from any
minerals produced from the property.
(c) Toro Prospect
On July 2, 2009, Atacama Chile entered into an agreement to acquire the Toro claims from a private Chilean party
for US$1,000 due by June 30, 2012 (paid), and a 0.6% NSR of any minerals produced from the property.
36
17
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
5.
EXPLORATION AND EVALUATION ASSETS (continued)
(d) Frontera Project
On January 24, 2012, Atacama entered into an option agreement to acquire the Frontera claims located
approximately 70 kilometers to the east of the Cerro Maricunga Gold Project. The Frontera option agreement
comprises total payments of US$3,000,000 over a period of three years with US$10,000 ($9,922) which was paid
within sixty days of signing. After analyzing initial exploration results, Atacama decided to terminate the option
agreement in December 2012 and write-off the capitalized exploration and evaluation costs. This resulted in a writedown of exploration and evaluation assets of $75,538.
6.
COMMITMENTS
On March 15, 2012, Atacama entered into an option agreement with AMX de Chile S.A. and related subsidiary
companies (“AMX”) to explore for and acquire water use rights on a series of contiguous water exploration concessions
covering 267,000 hectares. The concessions are located approximately 95 kilometres north of Atacama’s Cerro
Maricunga Gold Project.
Under the terms of the option agreement with AMX, Atacama will have 18 months to explore and make application to the
Chilean water authority, Dirección General de Aguas (“DGA”), for water use rights. Albrecht Schneider, the Executive
Chairman of Atacama, owns a non-controlling 13% stake in AMX through a company controlled by him.
During the first three months of the option agreement, Atacama completed geophysical surveys to identify drill targets.
Upon completion of the geophysical surveys, Atacama has drilled water exploration holes over the subsequent six month
period followed by the drilling of production test wells over the following six month period.
After the drilling of the production test wells, Atacama may terminate the option agreement with no payment owed. After
the completion of a production well, an application for water extraction rights may be made to the DGA. Atacama will pay
AMX US$30,000 per litre per second for the water under application. Upon a grant of water use rights by the DGA,
Atacama will pay AMX an additional US$10,000 per litre per second.
7.
EQUIPMENT
Cost
Office equipment
$
34,064 $
Cost
Office equipment
$
March 31, 2013
Accumulated
amortization
14,480 $
March 31, 2012
Accumulated
amortization
34,064 $
8,620 $
18
Net
19,584
Net
25,444
37
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
8.
SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY
(a) Share Capital
Authorized Capital - Unlimited common shares with no par value.
Issued
Number of
common
shares
Balance - March 31, 2011
Share
capital
41,047,883 $ 41,913,432
Common shares issued for cash on bought deal financing
Share issue costs
Exercise of warrants
Fair value of warrants exercised
Exercise of stock options
Fair value of stock options exercised
Balance - March 31, 2012
Exercise of warrants
Fair value of warrants exercised
Exercise of stock options
Fair value of stock options exercised
Balance - March 31, 2013
5,800,000
729,112
458,600
-
30,450,000
(2,147,292)
1,767,524
779,991
589,300
221,833
48,035,595
73,574,788
2,871,815
30,000
-
3,339,731
2,666,857
45,000
14,910
50,937,410 $ 79,641,286
On July 12, 2011, Atacama completed a bought deal financing of 6,100,000 common shares comprised of 5,800,000
common shares issued by Atacama from treasury (the “Treasury Offering”) and 300,000 common shares from an
existing shareholder (the “Secondary Offering”) at a price of $5.25 per common share. The gross proceeds from
the Treasury Offering were $30,450,000 and the proceeds from the Secondary offering were $1,575,000. Atacama
did not receive any proceeds from the Secondary Offering. Share issue costs incurred on the Treasury Offering were
$2,147,292 and included a cash commission payable to the underwriters of $1,827,000.
(b) Warrants
Balance - March 31, 2011
Exercise of warrants and broker warrants
Mark to market adjustment
Balance - March 31, 2012
Mark to market adjustment
Exercise of warrants
Number of
Value of
Warrants
warrants and warrants and denominated
broker
broker
in foreign
warrants
warrants
currency
3,600,927 $
1,732,411 $
(729,112)
-
(689,936)
-
3,132,132
(90,055)
(548,618)
2,871,815
1,042,475
2,493,459
(2,871,815)
(1,042,475)
(869,077)
(1,624,382)
Balance - March 31, 2013
-
$
-
$
-
Warrants denominated in a currency different from Atacama's functional currency met the definition of a financial
liability and accordingly were presented as such on Atacama's consolidated statement of financial position and fair
valued at each period end or exercise date using the Black-Scholes option pricing model.
38
At March 31, 2013, Atacama had no warrants or broker warrants outstanding.
19
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
8.
SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY (continued)
(c) Stock Options
Under Atacama's Stock Option Plan (the "Plan"), stock options may be granted to Atacama’s Directors, senior
officers, employees, consultants and consultant companies. The Plan: (i) provides that the number of common
shares reserved for issuance, within a one year period, to any one optionee, shall not exceed 5% of the outstanding
common shares; (ii) provides the maximum number of common shares reserved for issuance pursuant to options
granted may not exceed 10% of the issued common shares; (iii) provides for a vesting period at the discretion of
Atacama's Board of Directors; and (iv) contains other provisions to ensure the Plan is compliant with stock exchange
regulations.
As at March 31, 2013, Atacama had granted 4,824,500 stock options under the Plan. A summary of the stock option
activity for the year ended March 31, 2013 is as follows:
Number of
options
Balance - March 31, 2011
Granted
Exercised
Cancelled
Balance - March 31, 2012
Granted
Exercised
Expired
Weighted
Weighted
average
average
exercise date
exercise price
fair value
3,778,600 $
3.76 $
-
1,537,000
(458,600)
(60,000)
4.85
1.28
4.25
4.20
-
4,797,000
4.34
-
3.24
1.50
4.61
4.00
-
4.33 $
-
110,000
(30,000)
(52,500)
Balance - March 31, 2013
4,824,500 $
During the year ended March 31, 2013 the following stock options, which vested immediately, were issued and
valued using the Black-Scholes option pricing model parameters listed below (in each case with no dividends):
Number of
options
May 2
July 12
October 3
5,000
20,000
85,000
Exercise price
Grant date
stock price
$4.05
$3.00
$3.25
$4.05
$2.80
$3.08
Black-Scholes option pricing parameters
Risk-free
Expected life
Volatility
interest rate
(years)
factor(1)
1.62%
1.18%
1.25%
5.0
5.0
5.0
100%
100%
100%
110,000
(1) Due to Atacama’s limited trading history, Atacama has determined volatility based on a benchmark of similar companies
traded on the TSX Venture Exchange.
20
39
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
8.
SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY (continued)
(c) Stock Options (continued)
During the year ended March 31, 2012 the following stock options, which vested immediately, were issued and
valued using the Black-Scholes option pricing model parameters listed below (in each case with no dividends):
Number of
options
April 14
August 29
October 13
November 24
February 3
March 1
March 27
50,000
782,500
120,000
30,000
40,000
25,000
489,500
Exercise price
Grant date
stock price
$5.35
$5.25
$4.50
$4.00
$4.00
$4.00
$4.40
$5.35
$5.15
$4.08
$3.75
$3.85
$3.95
$4.40
Black-Scholes option pricing parameters
Risk-free
Expected life
Volatility
interest rate
(years)
factor(1)
2.38%
1.92%
1.30%
1.46%
1.25%
1.32%
1.32%
5.0
5.0
5.0
5.0
5.0
5.0
5.0
100%
100%
100%
100%
100%
100%
100%
1,537,000
(1) Due to Atacama’s limited trading history, Atacama has determined volatility based on a benchmark of similar companies
traded on the TSX Venture Exchange.
A summary of Atacama’s outstanding stock options at March 31, 2013 is presented below:
Issue date
April 23, 2010
November 16, 2010
February 25, 2011
March 18, 2011
April 14, 2011
August 29, 2011
October 13, 2011
November 24, 2011
February 3, 2012
March 1, 2012
March 27, 2012
May 2, 2012
July 12, 2012
October 3, 2012
40
Options
outstanding &
exercisable
Exercise price
Weighted average
remaining life
(years)
20,000
942,500
90,000
2,150,000
50,000
757,500
120,000
30,000
40,000
25,000
489,500
5,000
20,000
85,000
$1.50
$3.00
$4.00
$4.65
$5.35
$5.25
$4.50
$4.00
$4.00
$4.00
$4.40
$4.05
$3.00
$3.25
2.1
2.6
2.9
3.0
3.0
3.4
3.5
3.7
3.8
3.9
4.0
4.1
4.3
4.5
4,824,500
$4.33
3.1
21
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
9.
INCOME TAXES
The income tax expense (recovery) has been calculated as follows:
2013
$
Loss before income taxes
2012
(46,444) $
26.50 %
Canadian combined federal and provincial income tax rate
(4,702,748)
27.75 %
Expected income tax expense (recovery) at Canadian statutory rates
Stock option expense
Other items not tax deductible
Over provided in prior years
Change in tax benefit not recognized
Effect of reduction in tax rate on timing difference
Effect of tax rates in foreign jurisdiction
Effect of foreign exchange
Other
$
(12,308) $
15,100
(472,900)
920,229
(127,401)
(36,393)
(286,327)
-
Income tax expense (recovery)
$
-
$
(1,305,013)
992,622
(2,174,805)
(381,008)
3,345,107
233,566
(52,505)
(1,144,809)
168,107
(318,738)
The 2013 statutory rate of 26.5% differs from the 2012 statutory rate of 27.75% because of the reduction in both federal
and Ontario substantively enacted rates.
Atacama’s deferred tax assets have not been recognized in respect of the following items:
2013
$
Deductible temporary differences
Losses carried forward
2012
2,286,263 $ 10,401,687
10,005,777
15,222,205
$ 12,292,040 $ 25,623,892
At March 31, 2013, Atacama had unclaimed non-capital losses in Canada that expire as follows:
Year of Expiry
2030
2031
2032
2033
$
130,627
2,195,351
3,339,669
3,218,298
$
8,883,945
At March 31, 2013, Atacama had unclaimed non-capital losses in Chile of $52,257,267 which can be carried forward
indefinitely. The Chilean tax rate at March 31, 2013 for corporations was 20%.
22
41
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
10. LOSS PER SHARE
Loss per share has been calculated using the weighted average number of common shares outstanding during the years
ended March 31, 2013 and 2012 as follows:
2013
For the years ended March 31,
$
Loss for the year
Basic and fully diluted weighted average number of
shares outstanding during the year
Basic and fully diluted loss per share
$
(46,444) $
2012
(4,384,010)
50,286,672
45,590,650
0.00 $
(0.10)
Fully diluted weighted average common shares outstanding for the years ended March 31, 2013 and 2012 are not
reflective of the outstanding stock options and warrants as their exercise would be anti-dilutive in the loss per share
calculation.
11. RELATED PARTY DISCLOSURES
(a) Executive Management Compensation
Executive management did not receive any stock options during the year ended March 31, 2013. Executive
management received stock options during the year ended March 31, 2012 as follows:
Number of
options
Exercise
price
Grant date
stock price
Expiry date
455,000
170,000
$5.25
$4.40
$5.15
$4.40
Aug. 29, 2016
Mar. 27, 2017
Black-Scholes option pricing parameters
Risk-free Expected life
Volatility
interest rate
(years)
factor(1)
1.92%
1.32%
5.0
5.0
100%
100%
Fair value
$3.85
$3.28
(1) Due to Atacama’s limited trading history, Atacama has determined volatility based on a benchmark of similar companies
traded on the TSX Venture Exchange.
Executive management's compensation for the year ended March 31, 2013 and 2012 consisted of cash, stock
options and employment benefits. As a result, executive management's compensation comprised:
2013
Cash compensation
Employment benefits
Fair value of stock options
42
2012
$
1,268,750 $
5,187
-
1,341,250
18,018
2,309,350
$
1,273,937 $
3,668,618
23
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
11. RELATED PARTY DISCLOSURES (continued)
(b) Executive Management and Director Transactions
The aggregate value of transactions and outstanding balances relating to executive management and Directors and
entities over which they have control or significant influence were as follows:
Director
Transaction
Transaction value
for the years ended March 31,
Note
2013
2012
Balance outstanding as at
March 31,
March 31,
2013
2012
Albrecht Schneider
Geological and administration costs
(1)
(2)
4,231,205
3,281,801
349,490
439,690
Antonio Ortuzar Jr.
Legal costs
(1)
(3)
76,988
67,782
12,610
10,768
4,308,193 $
3,349,583 $
$
362,100 $
450,458
(1) Dr. Schneider is Atacama's Executive Chairman, a Director and 9.9% shareholder. Mr. Ortuzar Jr. is a Director and 9.4%
shareholder.
(2) Effective September 1, 2010, Atacama entered into a professional and administrative services agreement with SBX
Asesorias E Inversiones, a company controlled by Dr. Schneider. The agreement is renewed annually and provides
administration, geological, water exploration consulting, accounting, other supervisory services and office space in Chile.
For the year ended March 31, 2013, the fees paid under the terms of the agreement were $3,164,271 for geological support
and $1,066,934 for office administration (March 31, 2012 - $2,404,109 for geological support and $877,692 for office
administration). At March 31, 2013, the balance owed was $349,490 (March 31, 2012 - $439,690).
(3) During the year ended March 31, 2013, Atacama paid legal fees of $76,988 to Cruzat, Ortuzar, & Mackenna Ltda., the law
firm of Mr. Ortuzar Jr. (March 31, 2012 - $67,782). At March 31, 2013, the balance owed was $12,610 (March 31, 2012 $10,768).
These transactions have been recorded at the exchange amount, which is the consideration paid as established and
agreed to by the related parties.
12. MANAGEMENT OF CAPITAL RISK
Atacama’s capital management objective is to maximize investment returns to its shareholders within the context of
relevant opportunities and risks associated with Atacama’s Chilean mineral properties. Achieving this objective requires
management to consider the underlying nature of exploration and development activities, availability of capital, the cost
of various capital alternatives and other factors.
Establishing and adjusting capital requirements is a continuous management process. Exploration involves a high
degree of “discovery” risk and substantial uncertainties about Atacama's ultimate ability to achieve positive cash flow
from operations. Consequently, management primarily funds Atacama’s exploration activities and administrative costs by
issuing share capital rather than using other capital sources that require fixed repayments of principal or interest.
Atacama options certain exploration prospects to third parties as an additional means of funding exploration and to
provide Atacama with access to a broader number of exploration prospects. Atacama will continue to assess new
properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic
potential and if it has adequate financial resources to do so.
Development activities may begin once a property’s mineral reserves are estimated, economic feasibility is established,
and Atacama makes a positive production decision. At this point, management may consider other sources of financing
such as senior debt or convertible debentures as a means to reduce equity dilution.
Atacama’s capital under management at March 31, 2013 includes share capital of $79,641,286 (March 31, 2012 $73,574,788). There were no changes in the capital components of equity since its previous year end of March 31, 2012.
There were no changes in Atacama's approach to capital management during the year ended March 31, 2013 and
Atacama is not subject to any externally imposed capital requirements.
24
43
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
13. MANAGEMENT OF FINANCIAL RISK
Atacama’s financial instruments are exposed to financial risks as summarized below:
(a) Financial Instruments
At March 31, 2013, Atacama’s financial instruments consisted of cash and cash equivalents, accounts receivable
and prepaid expenses, VAT receivable, and accounts payable and accrued liabilities. With respect to all of these
financial instruments Atacama estimates that the fair value of these financial instruments approximates the carrying
values at March 31, 2013, due to their short term to maturity.
(b) Credit Risk
Atacama's credit risk is primarily attributable to its cash and cash equivalents and VAT receivable. This risk is
minimized with respect to cash and cash equivalents as it has been placed with large Canadian chartered and
Chilean banks. This risk is also minimized for VAT receivable, as it is recoverable from the government of Chile.
Concentration of credit risk exists as a significant amount is held at three financial institutions and one government
body; however, management believes the risk of loss to be remote.
(c) Liquidity Risk
Atacama's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when
due. As at March 31, 2013, Atacama had a cash and cash equivalents balance of $10,723,349 (March 31, 2012 $35,529,899) to settle current liabilities of $3,284,240 (March 31, 2012 - $3,648,993). All of Atacama's financial
liabilities have contractual maturities of 30 days or less and are subject to normal trade terms.
(d) Market Risk
(i)
Interest Rate Risk
Atacama holds its cash and cash equivalents in bank accounts that earn variable interest rates. Due to the shortterm nature of these financial instruments, fluctuations in market rates do not have a significant impact on
estimated fair values as of March 31, 2013. Future cash flows from interest income on cash and cash
equivalents may be affected by interest rate fluctuations. Atacama manages interest rate risk by maintaining an
investment policy for short-term investments. This policy focuses primarily on preservation of capital and liquidity.
Atacama monitors the investments it makes and is satisfied with the credit rating of its banks.
(ii) Foreign Currency Risk
Atacama's functional currency is the Canadian dollar. The functional currency of Atacama’s foreign subsidiary is
the United States dollar. Atacama is affected by currency transaction risk and currency translation risk.
Consequently, fluctuations of the United States dollar in relation to other currencies impact the fair value of
financial assets and liability and operating results. Financial assets and liabilities subject to currency translation
risk primarily include United States dollar denominated cash and cash equivalents and accounts payable and
accrued liabilities denominated in Chilean pesos. Atacama maintains United States dollar bank accounts in
Canada and Chile.
(iii) Sensitivity Analysis
For the year ended March 31, 2013, management estimates that if the US$ had weakened or strengthened by
10% against the Canadian dollar and Chilean pesos, assuming all other variables remained constant, loss for the
year would have increased or decreased by approximately $3,200,000.
(iv) Commodity Price Risk
Atacama is exposed to price risk with respect to the commodity price of gold. Future declines in this commodity
price may impact the valuation of long-lived assets.
44
25
ATACAMA PACIFIC GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expressed in Canadian Dollars
For the years ended March 31, 2013 and 2012
14. SUPPLEMENTARY CASH FLOW INFORMATION
Supplementary information with respect to the consolidated statements of cash flows is as follows:
2013
For the year ended March 31,
Interest received
$
285,646 $
2012
581,549
Non-cash investing and financing activities include the following:
2013
For the year ended March 31,
192,624
Stock-based compensation included in exploration and evaluation assets
2012
1,867,020
Cash and cash equivalents consist of the following:
2013
As at March 31,
Cash
Cash equivalents
$
2012
1,854,701 $
5,430,329
8,868,648
30,099,570
$ 10,723,349 $ 35,529,899
26
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