Published on March 3, 2014
GIYANI GOLD CORPORATION CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 2013 AND 2012 (Expressed in Canadian Dollars)
Consolidated Financial Statements For the period ended June 30, 2013 and June 30, 2012 (Expressed in Canadian Dollars) Index Page Management’s Responsibilities 3 Notice of No Auditor review 4 Consolidated Statements of Financial Position 5 Consolidated Statements of Comprehensive Loss 6 Consolidated Statements of Changes in Shareholders’ Equity 7 Consolidated Statements of Cash Flows 8 Notes to Consolidated Financial Statements 9 – 21
Management's Responsibility for Consolidated Financial Statements The accompanying consolidated financial statements of Giyani Gold Corp. (the "Company") are the responsibility of management and the Board of Directors. The consolidated financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the consolidated financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the balance sheet date. In the opinion of management, the consolidated financial statements have been prepared within acceptable limits of materiality and are in accordance with International Financial Reporting Standards appropriate in the circumstances Management has established processes, which are in place to provide it sufficient knowledge to support management representations that it has exercised reasonable diligence that (i) the consolidated financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of, and for the periods presented by, the consolidated financial statements and (ii) the consolidated financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented by the consolidated financial statements. The Board of Directors is responsible for reviewing and approving the consolidated financial statements together with other financial information of the Company 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 financial reporting process and the consolidated financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the consolidated financial statements together with other financial information of the Company for issuance to the shareholders. Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities. ON BEHALF OF THE BOARD “Ed Guimaraes” , Director “Scott Kelly” , Director
Notice of No Auditor Review of Condensed Interim Financial Statements Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The accompanying condensed unaudited interim consolidated financial statements of the Company have been prepared by, and are the responsibility of, the Company’s management.
Giyani Gold Corporation Condensed Consolidated Interim Statements of Financial Position (Expressed in Canadian dollars) (Unaudited) June 30, 2013 $ December 31, 2012 $ Assets Current Cash and cash equivalents Term deposit (Note 4) Restricted cash (Note 5) Amounts receivable Prepaids 349,800 3,052,333 200,000 75,499 31,472 3,709,105 94,048 3,121,836 5,680,292 12,605,281 791,033 50,777 841,810 465,242 6,000 471,242 17,278,342 4,518,646 4,372,660 (13,048) (15,270,147) 16,910,654 8,813,568 4,372,660 (13,048) (13,577,134) 10,886,452 12,134,040 11,728,262 Equipment (Note 6) Exploration and evaluation assets (Note 8) Investment jointly controlled entity Rock Island 641,047 1,010,681 200,000 220,874 60,179 2,132,780 84,816 3,830,374 5,680,292 11,728,262 12,605,281 Liabilities Current Accounts payable and accrued liabilities Due to related parties (Note 13) Shareholders’ Equity Share capital (Note 10) Contributed surplus Warrants Non-controlling interest Deficit Note 1: Nature of operations and going concern Note 15: Commitments ON BEHALF OF THE BOARD “Ed Guimaraes” , Director “Scott Kelly” , Director See notes to the consolidated financial statements. 5
Giyani Gold Corporation Condensed Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars) (Unaudited) Three Months Ended June 30 2013 2012 $ $ Six Months Ended June 30 2013 2012 $ $ Expenses Amortization Investor Relations Conferences and business development General exploration Management and consulting Office and rent Share-based payments Professional fees Telephone and internet Transfer agent and filing fees Travel 4,206 46,000 23,701 (585) 392,626 43,746 130,702 12,958 7,685 10,786 9,233 63,396 24,335 101 720,571 148,397 77,738 186,927 25,248 604,766 115,328 7,653 85,950 61,415 4,598 677,422 96,602 196,242 29,959 27,703 83,123 1,377,199 671,825 1,976,040 1,270,667 (183,840) (131,259) 18,779 2,956 (10,504) - (170,546) (131,259) 18,779 16,250 (10,504) - (296,321) Loss Before Interest and Other Items 5,786 3,446 6,621 (5,081) 435,775 95,541 77,738 121,387 8,247 584,748 42,991 (7,548) (283,027) (5,746) 1,080,878 664,277 1,693,013 1,276,413 0.02 0.02 0.03 0.03 54,364,497 40,916,458 54,364,497 39,428,278 Other Items Foreign exchange loss (gain) Interest and other income Taxes Net Loss and Comprehensive loss for the year Loss per share (basic and diluted) Weighted average number of common shares outstanding See notes to the consolidated financial statements. 6
Giyani Gold Corporation Condensed Consolidated Statements of Changes in Shareholders’ Equity (Expressed in Canadian dollars) (Unaudited) Six Months ended June 30, 2013 and 2012 Capital Stock Number of Shares Balance, January 1, 2013 54,224,828 Contributed Amount $ Warrants Surplus 16,910,654 $ 4,440,908 $ Shareholders’ Non-controlling Interest 4,372,660 $ Deficit (13,048) $ Equity (13,577,134) $ 12,134,040 Shares issued on exercise of warrants 153,750 130,688 - - - - 130,688 Shares issued on exercise of options and reallocation of contributed surplus 250,000 37,500 - - - - 37,500 - - - - - - - Private placement - Flow Through Shares of subsidiary issued to non-controlling interest 350,000 199,500 - - - - 199,500 Options - - 77,738 - - - 77,738 Share Issue Costs - - - - - - - Comprehensive loss - - - - - Balance, June 30, 2013 54,978,578 $ 17,278,342 $ 4,518,646 $ 4,372,660 Balance, January 1, 2012 37,208,181 $ 8,696,441 $ 2,619,916 Shares Issued – private placement (less finders fee) Warrants Issued Shares issued – warrant exercises Shares issued on exercise of options Net loss and Comprehensive loss Balance, June 30, 2012 2,150,913 - (1,693,013) (13,048) $ (15,270,147) $ 10,886,452 - 48,000 (8,044,371) $ 3,319,986 - - - - 2,409,803 391,466 - - - - 2,409,803 (391,466) $ (1,693,013) 1,562,500 461,459 - - - - 461,459 350,000 52,700 - - - - 52,700 - - - - - 3,011,382 - 41,271,594 $ 11,228,937 See notes to the consolidated financial statements. $ 7 48,000 $ (1,276,411) (9,320,782) (1,276,411) $ 4,967,537
Giyani Gold Corporation Condensed Consolidated Statements of Cash Flows For the period ended June 30, 2013, and 2012 (Expressed in Canadian dollars) (Unaudited) Six Months Ended June 30, 2013 $ Six Months Ended June 30, 2012 $ Operating Activities Net loss for the period Adjustment for items not involving cash Amortization Share-based payments (1,693,013) (1,276,411) 9,233 77,738 7,653 - (1,606,043) (1,268,759) (145,375) (28,707) 325,791 44,777 (76,669) 49,750 (351,466) (63,206) (283,168) (1,409,556) (1,993,518) 539,319 - (260,422) (1,388,745) (40,464) (509,038) (969,592) 30,281 (2,659,224) Financing Activities Proceeds from conversion of warrants and options Proceeds from issuance of shares (net of costs) 168,188 514,159 - 2,409,803 Cash provided by financing activities 168,188 2,923,962 (1,211,088) (1,728,780) 1,852,135 2,074,158 641,047 345,378 Changes in non-cash working capital Amounts receivable Subscription receivable Prepaids Accounts payable and accrued liabilities Due to related parties Cash used in operating activities Investing Activities Deferred acquisition costs Redemption (purchase) of term deposit Purchase of equipment Exploration and evaluation asset expenditures Cash used in investing activities Total (Outflow) inflow of cash Cash, beginning of year Cash, end of year See notes to the consolidated financial statements. 8
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) 1. NATURE OF OPERATIONS AND GOING CONCERN Giyani Gold Corp. (the "Company" or "Giyani") is engaged in the acquisition, exploration, evaluation and development of principally gold resource properties in South Africa and Canada. The Company’s primary focus is the development of the Company’s jointly controlled entity Rock island Gold Project and ongoing exploration for gold at its Northern Ontario Project. The Company is incorporated and domiciled in Canada and its shares are publicly traded on the Toronto Venture Stock Exchange. As at June 25, 2013, the Company listed on the Johannesburg Stock Exchange (“JSE”). As at July 4, 2013, the Company listed on the Namibian Stock Exchange (“NSX”). The registered address is Suite 403 - 277 Lakeshore Road East, Oakville, Ontario, L6J 6J3 These consolidated financial statements have been prepared using International Financial Reporting Standards (“IFRS”) applicable to a “going concern”, which assume that the Company 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 operations. The Company reported a net loss attributable to parent of $1,080,878 or $0.03 per share for the three month period ended June 30, 2013 versus $664,277 in the same period in 2012 and had an accumulated deficit of $15,270,147 at June 30, 2013 (December 31, 2012 - $13,577,134). Year to date, the Company reported a net loss attributable to parent of $1,693,013 versus $1,276,013 for the same period of the previous year. In addition to its ongoing working capital requirements, the Company must secure sufficient funding for existing commitments and obtain new cash resources sufficient to cover expected expenses. These circumstances may cast significant doubt as to the ability of the Company to meet its obligations as they come due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern Management plans to secure the necessary financing through a combination of the exercise of existing warrants for the purchase of common shares, the issue of new equity instruments and the entering into joint venture arrangements. Nevertheless, there is no assurance that these Initiatives will be successful. The recovery of amounts capitalized for exploration and evaluation assets at June 30, 2013 in the consolidated balance sheet is dependent upon the ability of the Company to arrange appropriate financing to complete the development and continued exploration of the properties and upon future profitable production or proceeds from their disposition. On an ongoing basis, the Company examines various financing alternatives to address future funding requirements. Although Giyani has been successful in these activities in the past, the Company has no assurance on the success or sufficiency of these initiatives in the foreseeable future. These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary should the going concern assumption be inappropriate, and those adjustments could be material. 9
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) 2. BASIS OF PRESENTATION a. Statement of compliance These condensed consolidated interim financial statement have been prepared in accordance with IFRS as issued by the IASB applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting, and should be read in conjunction with the audited annual financial statements for the year ended December 31, 2012, which were prepared in accordance with IFRS as issued by the IASB. These condensed interim consolidated financial statements were approved by the Board of Directors for issue on August 1, 2013. b. Basis of Presentation The consolidated financial statements have been prepared on a going concern basis using historical cost. The consolidated financial statements are presented in Canadian Dollars, which is the Company’s functional and presentation currency except where otherwise indicated. c. Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an invested entity so as to obtain benefits from its activities. All intercompany transactions, balances, income and expenses are eliminated on consolidation. The consolidated financial statements include the accounts of the Company and the following subsidiaries: Entity Name 2299895 Ontario Inc Alpha 111 Holdings Co Ltd Beta 222 Holdings Co Ltd Giyani Gold Holdings 333 (Pty Ltd Giyani Gold South Africa (Pty) Ltd Lexshell 831 Investments (Pty) Ltd GGC South Africa Mining 111 (Pty) Ltd Obliwize (Pty) Ltd Obliweb (Pty) Ltd Lexshell 837 investments (Pty) Ltd Rock Island Trading 17 (Pty) Ltd (1) Company Ownership 94.3% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 64.0% 28.8% Place of Incorporation Canada Barbados Barbados South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa Functional Currency Canadian dollar Canadian dollar Canadian dollar South African rand South African rand South African rand South African rand South African rand South African rand South African rand South African rand (1) Rock Island Trading 17 (Pty) Ltd is a jointly controlled entity. All inter-company transaction, balances, income and expenses are eliminated on consolidation. All South Africa corporations currently have a fiscal year-end of February. 10
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) 3. SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies followed in these condensed interim consolidated financial statements are consistent with those applied in the Company’s annual financial statements for the year ended December 31, 2012, except as described below. a. Accounting Standards Adopted The Company has adopted the following new and revised accounting standards, along with any consequential amendments, effective January 1, 2013. These changes were made in accordance with the applicable transitional provisions. International Financial Reporting Standard 10, Consolidated Financial Statements (“IFRS 10”) IFRS 10 replaces the guidance on control and consolidation in IAS 27 “Consolidated and Separate Financial Statements”, and SIC-12 “Consolidation – Special Purpose Entities”. IFRS 10 requires consolidation of an investee only if the investor possesses power over the investee, has exposure to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect its returns. Detailed guidance is provided on applying the definition of control. The accounting requirements for consolidation have remained largely consistent with IAS 27. The Company assessed its consolidation conclusions on January 1, 2013 and determined that the adoption of IFRS 10 did not result in any change in the consolidation status of any of its subsidiaries and investees. International Financial Reporting Standard 11, Joint Arrangements (“IFRS 11”) IFRS 11 supersedes IAS 31 “Interests in Joint Ventures” and requires joint arrangements to be classified either as joint operations or joint ventures depending on the contractual rights and obligations of each investor that jointly controls the arrangement. For joint operations, a company recognizes its share of assets, liabilities, revenues and expenses of the joint operation. An investment in a joint venture is accounted for using the equity method as set out in IAS 28 “Investments in Associates and Joint Ventures”. The Company has reviewed its joint arrangements and concluded that the adoption of IFRS 11 did not result in any changes in the accounting for its joint arrangements. International Financial Reporting Standard 12, Disclosure of Interest in Other Entities (“IFRS 12”) IFRS 12 was issued in May 2011 and it is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interest in other entities. The Company has not implemented any disclosure changes in these interim statements as a result of this standard. Additional disclosure will be required in the Company’s annual statements. International Financial Reporting Standard 13, Fair Value Measurement (“IFRS 13”) IFRS 13 establishes new guidance on fair value measurement and related disclosure requirements and clarifies that the measurement of fair value of an asset or liability is based on assumptions that 11
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) market participants would use when pricing the asset or liability under current market conditions, including assumptions about risk. The adoption of IFRS 13 by the Company did not require any adjustments to the valuation techniques used by the Company to measure fair value and did not result in any measurement adjustments; however, the adoption of this standard has resulted in additional disclosure about the fair value of financial instruments that are measured on a recurring basis as reported in the interim consolidated financial statements. b. Accounting Standards Issued But Not Yet Applied The Company has not yet adopted the following new accounting pronouncements which are effective for fiscal periods of the Company beginning on or after January 1, 2014: International Financial Reporting Standard 9, Financial Instruments (“IFRS 9”) IFRS 9 was issued in November 2009 and contained requirements for financial assets. This standard addresses classification and measurement of financial assets and replaces the multiple category and measurement models in IAS 39 for debt instruments with a new mixed measurement model having only two categories: amortized cost and fair value through profit or loss. IFRS 9 also replaces the models for measuring equity instruments, and such instruments are either recognized at fair value through profit or loss or at fair value through other comprehensive income. Where such equity instruments are measured at fair value through other comprehensive income, dividends are recognized in profit or loss to the extent not clearly representing a return of investment; however, other gains and losses (including impairments) associated with such instruments remain in accumulated comprehensive income indefinitely. Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements in IAS 39, Financial Instruments – Recognition and Measurement, except that fair value changes due to credit risk for liabilities designated at fair value through profit and loss would generally be recorded in other comprehensive income. This standard is required to be applied for accounting periods beginning on or after January 1, 2015, with earlier adoption permitted. The Company has not evaluated the impact of adopting this standard. 4. TERM DEPOSIT The Company has a term deposit with a carrying value of $1,010,681 (2012 – $3,052,333). The term deposit is redeemable in November 2013 and earns interest of approximately 1.65% (2010 – 2.05%). The fair value of the term deposit approximates its carrying value due to the short term to maturity. 5. RESTRICTED CASH The Company has credit cards with a major financial institution with an aggregate credit limit of $200,000. The financial institution holds a $200,000 (2011- Nil) deposit as collateral on the credit amount as long as the credit cards are active. The restricted cash amounts would change if there were any changes to the credit limits on the cards. 12
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) 6. EQUIPMENT Furniture and Fixtures Mining and Exploration Computer Equipment Phone Equipment Total COST Balance, January 1, 2011 Additions Depreciation Balance, December 31, 2011 $ - $ - $ - $ - $ - 22,922 32,922 12,852 2,852 71,548 1,637 2,976 2,142 285 7,040 29,946 $ 10,710 2,567 64,508 $ 21,285 $ $ Additions 8,264 10,662 10,513 17,531 46,970 Depreciation 3,631 6,210 5,322 2,266 17,429 34,938 $ 15,901 Balance, December 31, 2012 Additions Depreciation Balance, June 30, 2013 $ 25,918 $ $ 17,832 $ 94,049 - - - - - 1,851 2,948 2,650 1,783 9,233 31,450 $ 13,251 $ 24,067 $ $ 16,049 $ 84,816 7. REHABILITATION DEPOSIT The Department of Mineral Resources (“DMR”) in South Africa requires a deposit or bank guarantee as security for the duty to rehabilitate any mineral property. The funds will be refunded once the rehabilitation has been completed to the satisfaction of DMR. As at June 30, 2013 Giyani has recorded a deposit of $15,786 (2011- nil) included in exploration and evaluation assets. 13
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) 8. EXPLORATION AND EVALUATION ASSETS Killins Balance, January 1, 2012 $ Emerald - Current expenditures $ Abbie Lake - $ 368,112 Keating $ Thibodeau 177,150 $ South Africa 336,871 $ - Total $ 882,133 267,200 354,523 195,034 121,797 709,188 - 1,647,742 Exploration South Africa - - - - - 1,638,020 1,638,020 Asset write-down - - - - (1,046,058) - (1,046,059) Balance, December 31, 2012 $ 267,200 Balance, January 1, 2013 354,523 $ 563,146 $ 298,947 $ 267,200 $354,523 $ 563,146 $ 298,947 21,680 8,004 221,770 (54) - - - - - - 457,138 457,138 288,880 $ 362,527 0 $ 2,095,158 $ 3,830,374 Current expenditures Exploration South Africa Balance, June 30, 2013 $ $ $ 784,916 $ 298,893 $ $ $ - 0 $ 1,638,020 1,638,020 $ 3,121,836 $ 3,121,836 251,400 In October 2012, the Company made the decision not to renew the option agreement on the Thibodeau lands. The Company has identified impairment on the entire book value of the asset ($1,046,058). Pursuant to the joint venture agreement relating to the jointly controlled entity of Rock Island. The Company funds the joint venture with Corridor Mining Resources (“CMR”) on a 50:50 basis. Both parties are to share the costs evenly on an ongoing basis. Exploration costs are recorded in a loan account with Rock Island where interest is accrued at an agreed upon rate.. This loan will be repaid out of proceeds from the sale of the Rock Island asset. The loan is unsecured, with no fixed repayment terms and bears interest at South African prime +1%. 14
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) 9. INVESTMENT IN MINERAL PROPERTIES On October 26, 2012, the Company completed the execution of a revised binding agreement (the “Revised Agreement”) with Kytanite Development Corp. ("Kytanite") pursuant to which the Company has confirmed its entitlement to acquire Kytanite's interest in the Rock Island gold properties. The Company acquired 100% of Lexshell 831 (Pty) Ltd (“Lexshell 831”), a Company duly incorporated and registered in the Republic of South Africa. Lexshell 831 was the legal and beneficial owner of 80% of the issued and outstanding shares of Lexshell 837 (Pty) Ltd (Lexshell 837), a Company incorporated and registered in the Republic of South Africa. Lexshell 837 owns 50% of the shares of Rock Island Trading (Pty) Ltd, reducing to 45% once the Community trust is established. Total consideration paid was U$2,500,000 (CAN $2,497,792) and 2,500,000 common shares valued at $3,182,500 of the Company. Total acquisition costs of $5,680,292 have been capitalized. This amount is reviewed annually to identify any potential impairment in the asset. The exploration asset is proportionality consolidated and held at cost less impairment. On October 26, 2012, Lexshell 831 sold a further option for 16% of the Common Shares in Lexshell 837 to Malungani Resources (Pty) Ltd., a company representing the Community Trust for Rock Island. Total consideration is Rand 3,600,000. No receivable has been set up for this amount, as it will be paid for proceeds from the property. Balance January 1, 2012 Acquisition of jointly controlled entity Rock Island Balance December 31, 2012 Balance June 30, 2013 $ $ $ $ 5,680,292 5,680,292 5,680,292 10. SHARE CAPITAL AND CONTRIBUTED SURPLUS Authorized: unlimited common shares without par value Issued: Balance January 1, 2011 Shares issued on exercise of warrants Shares issued on exercise of options Private placement Balance December 31, 2011 Shares issued on exercise of warrants Shares issued on exercise of options Shares issued on property purchase Private Placements Less value ascribed to warrants Balance December 31, 2012 Shares issued on exercise of warrants Shares issued on exercise of options Shares of subsidiary issued to non-controlling interest Balance June 30, 2013 15 Number of Shares 32,950,414 2,736,644 285,210 1,235,913 37,208,181 2,323,987 390,500 2,500,000 11,802,160 54,224,828 153,750 250,000 350,000 54,978,578 Share Capital $ 6,461,646 851,359 77,109 1,306,327 8,696,441 1,108,724 105,350 3,182,500 8.190.299 (4,372,660) 16,910,654 130,688 37,500 199,500 17,278,342
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) Share option activities for the periods ended June 30, 2013 and December 31, 2012 are as follows: 2013 Weighted Number of Average Options Exercise Price 2012 Number of Options Weighted Average Exercise Price Balance – beginning of year Granted Exercised Forfeited 3,350,000 250,000 225,000 $1.43 $0.05 $1.63 2,525,000 1,675,000 (390,500) (459,500) $1.34 $1.30 $0.27 $1.47 Outstanding and exercisable – end of year 2,875,000 $1.52 3,350,000 $1.43 Expiry Date July 15, 2015 November 3, 2015 June 24, 2016 July 25, 2016 August 30, 2016 July 11, 2017 October 18, 2017 Weighted Average Remaining Contractual Life in Years Exercise Price 2.54 2.84 3.48 3.57 3.67 4.53 4.80 $ 0.15 $ 1.30 $ 2.00 $ 2.31 $ 2.35 $1.30 $1.30 2013 2012 2,875,000 16 575,000 450,000 250,000 75,000 1,425,000 100,000 250,000 575,000 450,000 325,000 75,000 1,575,000 100,000 3,350,000
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) 11. WARRANTS Warrants The following table summarizes the number of common shares reserved pursuant to warrant activities during the period ended June 30, 2013 and December 31, 2012: 2013 Weighted Average Exercise Price Number of Warrants 2012 Weighted Average Number of Exercise Warrants Price Outstanding – beginning of year Granted Exercised Expired 5,901,082 153,750 - $0.95 $0.85 - 2,363,358 5,901,082 (2,323,987) (39,371) $0.48 $0.95 $0.48 $0.85 Outstanding and exercisable – end of year 5,747,332 $0.95 5,901,082 $0.95 Expiry Date July 16, 2013 October 26, 2014 Weighted Average Remaining Contractual Life in Years Exercise Price 0.55 1.88 $ 1.40 $ 0.85 2013 2012 1,075,456 4,825,626 5,747,332 12. 1,075,456 4,671,876 5,901,082 RELATED PARTY TRANSACTIONS Management and consulting fees of $352,001 (2012 - $318,200) were paid to officers and directors or to companies controlled by officers or directors. In addition stock based payments awarded to officers and directors of the Company of $77,738 (2012 - $0) were expensed. The Company incurred services of $154,730 in 2013 (2012 - $90,560) from McCarthy Tétrault LLP, a law firm where one of the Company’s Directors is a Partner. At June 30, 2013, the Company owed $50,777 (2012 - $6,000) to related parties. 17
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) The Company is a 28.8% shareholder in jointly controlled entity Rock Island Trading (Pty) Ltd located in South Africa. Pursuant to the joint venture agreement relating to the assets of Rock Island. The Company funds the joint venture with Corridor Mining Resources (“CMR”) on a 50:50 basis. 50% of expenditures incurred by Giyani in respect of Rock Island are recoverable from CMR either by direct refund, from proceeds of any future sale of the property or from future production from the property. Both parties are to share the costs evenly on an ongoing basis. Exploration costs are recorded in a loan account with Rock Island where interest is accrued at an agreed upon rate. As at June 30, 2013 the Company had advanced $1,815,628 to Rock Island exploration work. This is net of a repayment by CMR of $401,400 in March 2013. This loan will be repaid out of proceeds from the sale of the Rock Island asset. The loan is unsecured, with no fixed repayment terms and bears interest at South African prime +1%. 13. JOINTLY CONTROLLED ENITY The Company has a 28.8% interest in the jointly controlled entity Rock Island Trading (Pty) Ltd., through Lexshell 837 (Pty) Ltd. The Company recognizes its interests in jointly controlled entities using the proportionate consolidation method. 14. SEGMENTED INFORMATION Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments and has been identified as the Company’s Chief Executive Officer. The Company has two operating segments: the exploration, evaluation and development of precious metal mining projects located in Ontario (“Ontario Mining”) and located in South Africa (“SA Mining”). The rest of the entities within the Company are grouped into a secondary segment (“Corporate”). The segmental report is as follows June 30, 2013 Ontario Mining Property and Equipment Exploration and Evaluation Total Assets Total Liabilities Total Loss Net Additions exploration and evaluation assets Impairment to exploration and evaluation assets 1,735,216 1735,216 78,910 66,429 251,400 - 18 SA Mining 2,095,158 7,025,762 589,458 632,634 457,138 - Corporate 84,816 2,967,284 173,443 993,950 -
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) June 30, 2012 Ontario Mining Property and Equipment Exploration and Evaluation Total Assets Total Liabilities Total Loss Net Additions exploration and evaluation assets Impairment to exploration and evaluation assets 15. 1,851,726 2,016,082 54,471 19,342 969,589 - SA Mining 216,949 29,646 - Corporate 97,319 3,086,237 297,260 1,227,423 - COMMITMENTS The Company has committed to approximately $1,015,896 over the next 5 years for obligations under operating leases, rent, exploration and option payments. 2013 Exploration commitments Option Payments Rent (Oakville office) Total 2014 2015 92,952 75,000 46,778 214,730 407,500 35,000 95,243 537,743 7,500 50,000 95,243 152,743 2016 2017 7,500 95,243 102,743 7,937 7,937 The rent payments are for the head office space located in Oakville, Ontario. This lease expires on January 31, 2017. There are no restrictions imposed on the Company with this lease. Abbie Lake, Ontario The Company’s executed an option agreement on September 19, 2011 (the “UCEL Agreement”) with Upper Canada Explorations Limited (the “Optionor”), an arm’s length party, to earn a 100% interest in certain surface and mineral rights (the “Abbie Lake Property”) near Sault. Ste. Marie, Ontario, Canada. The Company is required to pay the Optionor $50,000 upon receipt of the approval of the UCEL Agreement by the Exchange (the “Approval Date”). The UCEL Agreement also specifies payments to the Optionor in the amount of $50,000 within 12 months of the Approval Date and a further $50,000 within 24 months of the Approval Date. Pursuant to an amending agreement dated January 23, 2013, the Company renegotiated the Initial Work Program to be $600,000 prior to December 31, 2013 and a total of $1,000,000 by December 31, 2014. As at June 30, 2013, $514,548 has been incurred in expenses relating to the initial work program. Keating, Ontario The Company executed a licensing agreement (the “Michipicoten Agreement”) on November 1, 2011 with 3011650 Nova Scotia Limited, trading as Michipicoten Forest Resources (the “Licensor”), an arm’s length party, to acquire the license for an exploration area within the District of Algoma, Ontario, Canada. The term of the lease is 5 years and contains the option to extend the agreement for an additional 5 years. 19
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) The Company is required to pay $8,040 for the first year of the agreement and $500 multiplied by the number of grid claims that constitute the licensed area for the remaining four years of the agreement. For the renewal term, 2299895 is required to pay $600 multiplied by the number of grid claims that constitute the licensed area for the additional 5 years of the agreement. 2299895 is responsible for all taxes related to the licensed area during the term of the Michipicoten Agreement. 2299895 is required to incur minimum exploration expenditures during each license year. During each license year of the original term, an annual amount of $2,500 multiplied by the number of grid claims that constitute the licensed area must be incurred. During each license year of the renewal term, an annual amount of $3,000 multiplied by the number of grid claims that constitute the licensed area must be incurred. On March 21, 2012, the Company executed a agreement (the “Keating East Agreement”) with 2099840 Ontario Inc trading as Emerald Geological Services (the “Licensor”), an arm’s length party, to acquire an additional 985 Ha of claims (“the Lands”) in the form of certain surface and mineral rights situated in Keating Township, Ontario, contiguous to Giyani Gold's Abbie LakeKeating Property The agreement entitles 2299895 to acquire a 100% interest in the Lands in exchange for a combination of consideration comprised of: $126,600 in cash payable over three years; $100,000 in exploration expenditures and other work programs, and up to 200,000 shares in 2299895 over a period of three years, which shares are exchangeable into shares of Giyani Gold, subject to satisfaction of certain conditions. Under the terms of the agreement, Emerald has agreed to relinquish its license and rights in the Lands and to allow the Company to acquire its interest and rights in the Lands under license from a private arms-length corporate entity to the Company and the owner of the Lands, in exchange for an annual fee payable to that party and an annual work program. On July 12, 2012, the Company executed a licensing agreement with a private arm’s length party (“Killen agreement”). The agreement entitles the Company to acquire a 100% interest and rights in 39.5 square kilometers of surface and mineral rights situated in Keating Township, Ontario, in exchange for an annual fee payable and an annual work program South Africa The Company entered into a binding agreement (the “Madonsi Transaction”) to acquire a 74% interest in historically past-producing Madonsi Gold Mine located in the Giyani Greenstone belt of South Africa. The Madonsi Transaction will be structured as a purchase by the Company of 100% of the issued and outstanding common shares of Lexshell 845 Investments (Pty) Ltd. (“Lexshell”), which shares are currently held by Nokuthula Ngubeni (the “Seller”). Lexshell has entered into a sale of shares and claims agreement to acquire 74% of the issued and outstanding common shares of Hectocorp (Pty) Ltd. (“Hectocorp”), which has applied for a prospecting right (permit) for gold for the Madonsi Gold Mine to the Minister of Mines and Energy of the Republic of South Africa (“the Minister”). The remaining 26% interest in Hectocorp will on completion of the sale of shares and claims agreement be owned by local South African partners. As consideration for the acquisition of the interest in Madonsi Gold Mine, the Company will pay to the Seller a total of $2,000,000 plus a 5% finder’s fee to an arm’s length party. No costs have been deferred relating to this transaction. 20
Giyani Gold Corporation Notes to the Condensed Consolidated Financial Statements June 30, 2013 (Expressed in Canadian dollars, unless otherwise stated) As of the date of the MD&A, the Company has been advised that the Minister is not likely to issue the prospecting right to Hectocorp and its partners and, accordingly, believe that the likelihood of the Company acquiring the Madonsi Gold Mine as minimal. On November 17, 2011 the Company entered into a binding agreement to acquire prospecting rights from Sephaku Gold Exploration (Proprietary) Limited ("SGE"), the holder of the rights, which are located in the Giyani Greenstone Belt ("GGB"), South Africa. The transaction will be structured as an outright purchase of the prospecting rights from SGE, which owns the rights for the Khavagari and Siyandani gold projects. Upon the execution of a definitive sale agreement and closing of the transaction, the Company will have 100% interest in these projects. As consideration for the interest in the Khavagari and Siyandani gold projects, the Company will provide the vendor a nominal cash payment of approximately Rand 1,000,000. This transaction has not closed. 16. SUBSEQUENT EVENTS On February 4, 2013, Giyani announced the divesture of 2299895 Ontario Inc to C Level III Inc. (TSXV: CLV.P) ("C Level"), a capital pool company under the policies of the TSX Venture Exchange Inc. As a result of the proposed transactions, Giyani Gold will become the majority shareholder of C Level. C Level will continue to operate and expand the Canadian mining exploration activities independent of Giyani Gold. 21
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