TORONTO,
Aug. 13, 2013 /CNW/ -
Notice to Reader
Under National Instrument 51-102, Part 4,
subsection 4.3(3)(a), if an auditor has not performed a review of
the unaudited interim financial statements, they must be
accompanied by a notice indicating that the financial statements
have not been reviewed by an auditor.
The accompanying unaudited condensed interim
consolidated financial statements have been prepared by and are the
responsibility of the Corporation's management.
The Corporation's independent auditor has not
performed a review of these financial statements in accordance with
standards established by the Canadian Institute of Chartered
Accountants for a review of unaudited interim financial statements
by an entity's auditor.
Marathon Gold Corporation
Consolidated Balance Sheets
(Unaudited - Expressed in Canadian dollars)
|
June 30
2013 |
December 31
2012 |
|
$ |
$ |
Assets |
|
|
Current assets |
|
|
Cash |
1,928,070 |
5,187,475 |
Amounts receivable |
65,710 |
180,705 |
Loan receivable |
- |
62,427 |
Prepaids and deposits |
127,836 |
243,395 |
|
2,121,616 |
5,674,002 |
|
|
|
Non-current assets |
|
|
Investments (note 6) |
114,144 |
277,188 |
Property, plant and equipment |
144,336 |
108,729 |
Mineral exploration and evaluation assets (note
5) |
46,496,380 |
38,511,733 |
Total assets |
48,876,476 |
44,571,652 |
|
|
|
Liabilities |
|
|
Current liabilities |
|
|
Trade payables |
203,155 |
505,132 |
Flow-through share tax liability (note
9(b)(iii)) |
1,958 |
77,460 |
Total liabilities |
205,113 |
582,592 |
|
|
|
Equity |
|
|
Equity attributable to owners (notes 9, 10, and
11) |
43,690,261 |
43,989,060 |
Non-controlling interest in subsidiary |
4,981,102 |
- |
Total equity |
48,671,363 |
43,989,060 |
|
|
|
Total liabilities and shareholders'
equity |
48,876,476 |
44,571,652 |
Going concern (note 1)
These financial statements have been approved by the board of
directors and authorized for issue on August
12, 2013 and have been signed on their behalf.
"George D. Faught" |
|
|
|
|
|
"Phillip C. Walford" |
George D. Faught |
|
|
|
|
|
Phillip C. Walford |
Director |
|
|
|
|
|
Director |
Marathon Gold Corporation
Consolidated Statements of Operations, Loss and Comprehensive
Loss
For the three and six months ended June
30, 2013 and 2012
(Unaudited - Expressed in Canadian dollars)
|
Three months ended
June 30 |
Six months ended
June 30 |
|
2013 |
2012 |
2013 |
2012 |
|
$ |
$ |
$ |
$ |
Expenses: |
|
|
|
|
Exploration expenses (note 12) |
16,692 |
349,404 |
17,969 |
351,476 |
General and administrative expenses
(note 13) |
336,685 |
376,397 |
882,900 |
737,113 |
Interest income |
(8,500) |
(19,570) |
(19,892) |
(33,154) |
Unrealized loss on warrant derivative
investments |
519 |
23,987 |
3,208 |
82,750 |
Foreign exchange loss |
515 |
1,101 |
568 |
816 |
Loss before taxes |
345,911 |
731,319 |
884,753 |
1,139,001 |
Income taxes |
(15,284) |
(376,986) |
(75,502) |
(1,006,574) |
Loss (Income) for the period |
330,627 |
354,333 |
809,251 |
132,427 |
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
Items that may be
reclassified subsequently to net
income:
|
|
|
|
|
|
Currency translation adjustment |
(209,341) |
(104,070) |
(325,343) |
(7,818) |
|
Unrealized loss in fair value of
investments
classified as available for sale |
45,664 |
23,951 |
159,836 |
111,551 |
Comprehensive loss for the
period |
166,950 |
274,214 |
643,744 |
236,160 |
|
|
|
|
|
Attributable to: |
|
|
|
|
Owners of Marathon Gold
Corporation |
62,682 |
274,214 |
539,476 |
236,160 |
Non-controlling interest |
104,268 |
- |
104,268 |
- |
|
166,950 |
274,214 |
643,744 |
236,160 |
|
|
|
|
|
Basic and diluted loss (income) per
share |
0.006 |
0.01 |
0.013 |
0.004 |
|
|
|
|
|
Weighted average
number of common shares
outstanding |
59,939,411 |
29,871,928 |
59,939,411 |
29,871,928 |
|
|
|
|
|
Marathon Gold Corporation
Consolidated Statements of Cash Flow
For the six months ended June 30,
2013 and 2012
(Unaudited - Expressed in Canadian dollars)
|
|
|
2013 |
2012 |
|
$ |
$ |
Cash flows (used in) from operating
activities |
|
|
(Loss) Income for the period |
(809,251) |
(132,427) |
Add (deduct) items not involving
cash |
|
|
|
Income taxes |
(75,502) |
(1,006,574) |
|
Unrealized loss on warrant derivatives |
3,208 |
82,750 |
|
Depreciation |
28,264 |
28,996 |
|
Stock-based compensation charged to operations
(note 11) |
152,823 |
- |
|
(700,458) |
(1,027,255) |
Changes in non-cash working capital
items |
|
|
|
Decrease (Increase) in amounts receivable |
114,995 |
(39,350) |
|
Decrease in prepaid expenses |
119,773 |
20,450 |
|
Decrease in accounts payable |
(434,658) |
(166,520) |
|
(900,348) |
(1,212,675) |
|
|
|
Cash flows used in investing
activities |
|
|
|
|
|
Purchase of capital assets |
- |
(77,691) |
Cash acquired upon
acquisition of net assets of Golden Chest LLC |
32,056 |
- |
Repayment of loan |
62,427 |
- |
Expenditures on exploration and
evaluation assets |
(2,205,255) |
(4,366,335) |
Government assistance received |
100,000 |
100,000 |
|
(2,359,057) |
(4,344,026) |
Decrease in cash |
(3,259,405) |
5,556,701 |
Cash- beginning of period |
5,187,475 |
9,545,246 |
Cash- end of period |
1,928,070 |
3,988,545 |
|
|
|
Marathon Gold Corporation
Consolidated Statement of Changes in Equity
For the six months ended June 30,
2013 and 2012
(Unaudited - Expressed in Canadian dollars)
|
Share
Capital
(note 9) |
Warrants
(note 10) |
Contributed
Surplus
(note 11) |
Deficit |
Accumulated
Other
Comprehensive
Income |
Other
Reserve |
Equity
attributable to
owners of
Marathon Gold
Corporation |
Non-
Controlling
Interest |
Total
Shareholders'
Equity |
|
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
Balance - January 1,
2012 |
20,255,563 |
1,256,644 |
7,123,852 |
(5,190,746) |
181,955 |
- |
23,627,268 |
- |
23,627,268 |
Income for the period |
- |
- |
- |
(132,427) |
- |
- |
(132,427) |
- |
(132,427) |
Unrealized loss on
available-for-
sale investment |
- |
- |
- |
- |
(111,551) |
- |
(111,551) |
- |
(111,551) |
Currency translation
adjustment |
- |
- |
- |
- |
7,818 |
- |
7,818 |
- |
7,818 |
Balance - June 30,
2012 |
20,255,563 |
1,256,644 |
7,123,852 |
(5,323,173) |
78,222 |
- |
23,391,108 |
- |
23,391,108 |
|
|
|
|
|
|
|
|
|
|
Balance - January 1, 2013 |
41,051,338 |
1,999,401 |
7,469,352 |
(6,452,269) |
(78,762) |
- |
43,989,060 |
- |
43,989,060 |
Loss for the period |
- |
- |
- |
(809,251) |
- |
- |
(809,251) |
- |
(809,251) |
Stock based compensation |
- |
- |
203,546 |
- |
- |
- |
203,546 |
|
203,546 |
Unrealized loss on
available-for-
sale investments |
- |
- |
- |
- |
(159,836) |
- |
(159,836) |
- |
(159,836) |
Expiration of warrants |
- |
(196,576) |
196,576 |
- |
- |
- |
- |
- |
- |
Acquisition of net assets of
Golden Chest LLC |
- |
- |
- |
- |
- |
- |
- |
5,020,857 |
5,020,857 |
Dilution of non-controlling
interest (note 5) |
- |
- |
- |
- |
- |
141,399 |
141,399 |
(144,023) |
(2,624) |
Currency translation adjustment |
- |
- |
- |
- |
325,343 |
- |
325,343 |
104,268 |
429,611 |
Balance - June 30,
2013 |
41,051,338 |
1,802,825 |
7,869,474 |
(7,261,520) |
86,745 |
141,399 |
43,690,261 |
4,981,102 |
48,671,363 |
1) GOING CONCERN
The consolidated financial statements of Marathon Gold Corporation
(Marathon", the "Company", "we" or "us") have been prepared in
accordance with International Financial Reporting Standards
applicable to a going concern, which assumes continuity of
operations and realization of assets and settlement of liabilities
in the normal course of business for the foreseeable future.
Marathon has no sources of revenue, has incurred
losses amounting to $7.3 million
since its inception, and is dependent on financings to fund its
operations. In addition, as Marathon is in the development
stage, it is subject to the risks, uncertainties and challenges
similar to other companies in a comparable stage of
development. These include, but are not limited to, the
continuation of losses in future periods; the ability to raise
sufficient funds, and on acceptable commercial terms, to continue
its exploration programs; the ability to establish the economic
viability of mineral deposits on any of its mining properties; the
acquisition of required permits to mine; and the attainment of
profitable operations. These material uncertainties lend
significant doubt over the applicability of the going concern
assumption and ultimately the use of accounting principles
pertinent to a going concern. These consolidated financial
statements do not reflect the adjustments to the carrying values of
assets and liabilities, the reported expenses and balance sheet
classifications that would be necessary if the going concern
assumption were inappropriate. These adjustments could be
material.
Marathon funded its operations in the period
ended June 30, 2013 through the use
of its existing cash reserves obtained through an equity financing
completed on December 12, 2012.
In addition, Marathon continues to seek additional financing
opportunities in order to raise necessary funds for the advancement
of its properties. However there can be no assurance that the
Company will be successful in these efforts.
2) GENERAL INFORMATION
Marathon's primary business focus is the acquisition, exploration
and development of precious and base metal prospects, including the
further development of the Valentine Lake Project in the Province
of Newfoundland and Labrador in eastern Canada, the Golden Chest project in
Idaho, USA, and the Bonanza
project in Oregon, USA.
Marathon was incorporated under the Canada
Business Corporations Act on December 3,
2009. On December 3,
2010, Marathon's common shares commenced trading on the
Toronto Stock Exchange under the symbol "MOZ".
Marathon's registered address is 357 Bay Street,
Suite 800, Toronto, Ontario M5H
2T7.
Marathon's operations and level of spending on
its mining properties are impacted by seasonality, which at times
limits the ability of the Company or its exploration partners to
carry out drilling and other surface operations on its properties,
and by the extent of Marathon's working capital.
3) BASIS OF PRESENTATION
These condensed interim consolidated financial statements have been
prepared in accordance with IFRS as issued by the IASB applicable
to the preparation of interim financial statements, including
IAS34, Interim Financial Reporting. These condensed
interim consolidated financial statements 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 12, 2013.
4) ACCOUNTING POLICIES
The accounting policies followed in the preparation of these
condensed interim consolidated financial statements are consistent
with those followed in the previous financial year, except as
disclosed below.
Marathon has adopted the following new and
revised accounting standards, with effect from January 1, 2013.
IFRS 10 - Consolidated Financial
Statements
IFRS 10, Consolidated Financial Statements, 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.
Marathon 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.
IFRS 11 - Joint Arrangements
IFRS 11, Joint Arrangements, 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 (amended in
2011). The other amendments to IAS 28 did not affect the
Company.
Marathon assessed the applicability of this
standard to its accounting for its investment in Golden Chest LLC
and concluded that no change was required with respect to IFRS
11.
IFRS 13 - Fair Value Measurement
IFRS 13, Fair Value Measurement, provides a single framework
for measuring fair value. The measurement of the fair value of an
asset or liability is based on assumptions that market participants
would use when pricing the asset or liability under current market
conditions, including assumptions about risk. The Company adopted
IFRS 13 on January 1, 2013 on a
prospective basis. The adoption of IFRS 13 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 as at January 1,
2013.
IAS 1 Amendment - Presentation of Items of
Other Comprehensive Income
Marathon has adopted the amendments to IAS 1 effective January 1, 2013. These amendments required the
Company to group other comprehensive income items by those that
will be reclassified subsequently to profit or loss and those that
will not be reclassified. Marathon has reclassified comprehensive
income items of the comparative period. These changes did not
result in any adjustments to other comprehensive income or
comprehensive income.
5) MINERAL EXPLORATION AND EVALUATION
ASSETS
|
Valentine Lake
Gold Project,
Newfoundland |
|
Golden
Chest
Project,
Idaho USA |
|
Bonanza
Mine
Project,
Oregon
USA |
|
Total |
|
$ |
|
$ |
|
$ |
|
$ |
Balance - December 31, 2011 |
10,092,058 |
|
4,068,000 |
|
616,444 |
|
14,776,502 |
Property acquisition costs |
16,771,320 |
|
- |
|
- |
|
16,771,320 |
Deferred exploration costs |
6,236,841 |
|
834,436 |
|
10,632 |
|
7,081,909 |
Currency translation adjustment |
- |
|
(104,531) |
|
(13,467) |
|
(117,998) |
Balance - December 31, 2012 |
33,100,219 |
|
4,797,905 |
|
613,609 |
|
38,511,733 |
Deferred exploration costs |
2,155,978 |
|
344,016 |
|
- |
|
2,499,994 |
Acquisition of net assets of
Golden Chest LLC |
- |
|
5,056,632 |
|
- |
|
5,056,632 |
Currency translation adjustment |
- |
|
392,928 |
|
35,093 |
|
428,021 |
Balance June 30, 2013 |
35,256,197 |
|
10,591,481 |
|
648,702 |
|
46,496,380 |
a) Valentine Lake gold property, Newfoundland
In December 2009, Marathon PGM
Corporation ("MPGM"), the parent company of Marathon at the time,
entered into an option agreement with Mountain Lake Resources Inc.
("MOA") to earn an initial 50% interest in the Valentine Lake
property. In November 2010, the
option agreement and all of MPGM's rights and interests thereunder
were assigned to Marathon, and Marathon completed its earn-in on
January 24, 2011.
On July 9, 2012,
Marathon completed the purchase of the net assets of MOA pursuant
to an arrangement agreement (the "Arrangement"), which resulted in
Marathon increasing its ownership of the Valentine Lake project to
100%. A total of 20,309,586 common shares of Marathon were
exchanged for the common shares of MOA on the basis of 0.40 common
shares of Marathon for each MOA share.
The Valentine Lake property is subject to two
overlapping royalties, which cover the Leprechaun Gold Deposit but
not the entire Valentine Lake property.
The Reid Newfoundland Company retains a 7.5% net
profits interest ("NPI"). In addition, Xstrata Canada
Corporation retains a 2% net smelter return royalty ("NSR") on base
metals and a 3% NSR on precious metals, which is reduced from 3% to
1.5% over the life of production until the earlier of the
following:
- Cumulative production exceeding 250,000 ounces of gold,
and
- An amount becoming payable under the terms of the Reid
NPI.
Amounts payable in any period under the Xstrata
NSR's on precious and base metals are reduced by amounts payable in
the same periods under the Reid NPI.
b) Golden Chest gold property,
Idaho
At December 31, 2012 and at all times
prior to May 22, 2013 Marathon held
an undivided 50% interest in Golden Chest LLC ("GCLLC"), a company
formed to hold a 100% interest in the Golden Chest gold property
located near Kellogg, Idaho.
Exploration activity at the Golden Chest property is carried out by
New Jersey Mining Company ("NJMC"), the manager of the project.
Prior to May 22,
2013, Marathon and NJMC had each contributed cash and other
assets to GCLLC with fair values amounting to US $4,922,000. On May
22, 2013, Marathon provided funding amounting to US
$50,000 to GCLLC pursuant to a cash
call presented by NJMC, for which NJMC elected not to fund its
proportionate share. The default by NJMC in funding the
operations of GCLLC resulted in Marathon's interest in GCLLC
increasing to 50.50%, resulting in Marathon acquiring effective
control of the project. Accordingly, Marathon began to
consolidate the operating results, financial position and cash
flows of GCLLC with effect from May 22,
2013.
The fair values of the net assets acquired were
estimated by Marathon using a cost approach due to the nature of
the net assets acquired. The estimated fair values of the
assets and liabilities acquired are set out below.
|
|
$ |
Cash |
|
32,056 |
Prepaid expenses |
|
4,203 |
Capital assets |
|
67,771 |
Mineral exploration and evaluation assets |
|
10,178,921 |
Trade payables |
|
(139,804) |
|
|
10,143,147 |
|
|
|
The acquisition of the net assets of GCLLC was
financed
by: |
|
|
Marathon's investment in GCLLC prior to May 22,
2013 |
|
5,070,820 |
Marathon's investment in GCLLC May 22, 2013 |
|
51,470 |
Non-controlling interest |
|
5,020,857 |
|
|
10,143,147 |
On June 13, 2013,
Marathon provided funding to GCLLC amounting to US $150,000 pursuant to a cash call issued by NJMC
for which NJMC elected not to contribute its proportionate
share. This default by NJMC resulted in Marathon's interest
in GCLLC increasing to 51.99% at June 13,
2013. Marathon recognized a gain of $141,399 from the resulting diminution of NJMC's
non-controlling interest, which was charged to Other reserve.
GCLLC's title to certain patented mining claims
which make up a portion of the Golden Chest property is secured
against a non-interest bearing promissory note, which is repayable
according to the following schedule:
Date |
|
|
|
|
|
Amounts
Due |
|
|
|
|
|
|
US$ |
September 15, 2013 |
|
|
|
|
|
125,000 |
December 15, 2013 |
|
|
|
|
|
500,000 |
December 15, 2014 |
|
|
|
|
|
500,000 |
December 15, 2015 |
|
|
|
|
|
500,000 |
December 15, 2016 |
|
|
|
|
|
500,000 |
December 15, 2017 |
|
|
|
|
|
250,000 |
Total |
|
|
|
|
|
2,375,000 |
Marathon is not directly liable for repayment of
this note. In the event that GCLLC were unable to repay the
note, title to the claims would revert to the note holder.
c) Bonanza Mine gold property, Oregon
On December 16, 2011, Marathon
purchased a 100% interest in the Bonanza Mine gold property, a past
producing gold mine located in the Green Horn gold district of
Oregon, USA. The Bonanza
property at the time of this transaction consisted of 13 patented
lode claims and one patented parcel covering a total of
approximately 120 hectares.
On closing, Marathon paid the vendor US
$126,711 and 300,000 common shares
with a fair value of $345,000.
In connection with this acquisition, the vendor retained timber
rights to the patented claims for a period of 20 years and a 2% net
smelter returns royalty. Marathon has the right to purchase
1% of the royalty by paying the vendor US $1,000,000.
Concurrent with and subsequent to this property
acquisition, Marathon staked additional unpatented claims around
the Bonanza property. There are no royalties on the
unpatented claims.
6) INVESTMENTS
Marathon's investments at June 30,
2013 and December 31, 2012 are
summarized below.
|
|
|
Fair
Value |
Description |
Quantity |
|
June 30
2013 |
|
December 31
2012 |
|
|
|
$ |
|
$ |
Mountain Lake Minerals
Inc.: |
|
|
|
|
|
|
• Common shares |
1,500,000 |
|
30,000 |
|
75,000 |
|
• Warrants exercisable at a price of $0.30
per share and expiring on July 9, 2014 |
750,000 |
|
- |
|
3,208 |
New Jersey Mining Company: |
|
|
|
|
|
|
• Common shares |
2,000,000 |
|
84,144 |
|
198,980 |
|
|
|
114,144 |
|
277,188 |
Mountain Lake Minerals Inc.:
Under the terms of the Arrangement, Marathon
subscribed for a total of 1,500,000 common share units issued by
Mountain Lake Minerals Inc. ("MLM") at a price of $0.20 per unit for a total of $300,000, with each unit consisting of one common
share and one-half of one warrant. Each whole warrant is
exercisable at a price of $0.30 per
share and expiring on July 9,
2014.
Marathon's investment in common shares of MLM
was valued at the closing trading price of the shares on the
Canadian National Stock Exchange on June 30,
2013. The fair value of the warrants was estimated
using the Black Scholes option pricing model with the following
inputs:
|
|
|
June 30
2013 |
|
December 31
2012 |
Risk free interest rate |
|
|
1.13% |
|
1.14% |
Dividend rate |
|
|
Nil |
|
Nil |
Volatility |
|
|
100% |
|
100% |
Expected life |
|
|
12 months |
|
18 months |
Estimated fair value per warrant |
|
|
- |
|
$0.004 |
New Jersey Mining Company:
Marathon's investment in common shares of NJMC
was valued at the closing trading price of the shares on the OTC
Bulletin Board on June 30, 2013,
being US $0.04.
7) FINANCIAL INSTRUMENTS
Measurement categories
Marathon's financial assets and liabilities have been classified
into categories that determine their basis of measurement and, for
items measured at fair value, whether changes in fair value are
recognized in the statement of income or comprehensive income.
Those categories are: fair value through profit or loss; loans and
receivables; available for sale assets; and, for liabilities,
amortized cost. The following table shows the carrying values of
assets and liabilities for each of these categories at June 30, 2013 and December
31, 2012.
|
|
|
June 30
2013 |
|
December 31
2012 |
|
|
|
$ |
|
$ |
Fair value through profit and
loss |
|
|
|
|
|
Investment in warrant derivatives |
|
|
|
|
|
|
Expiring in 12 months or less |
|
|
- |
|
3,208 |
|
|
|
- |
|
3,208 |
Loans and receivables |
|
|
|
|
|
Cash |
|
|
1,928,070 |
|
5,187,475 |
Trade receivables |
|
|
- |
|
18,423 |
Loan receivable from NJMC |
|
|
- |
|
62,427 |
|
|
|
1,928,070 |
|
5,268,325 |
|
|
|
|
|
|
Available for sale |
|
|
|
|
|
Investment in equity securities |
|
|
114,144 |
|
273,980 |
|
|
|
114,144 |
|
273,980 |
Other financial
liabilities |
|
|
|
|
|
Trade payables due
within 12 months |
|
|
(203,155) |
|
(505,132) |
|
|
|
(292,416) |
|
(505,132) |
The carrying values of Marathon's cash, trade
receivables, loans, and trade payables approximate fair
value. The methods used to estimate the fair value of
Marathon's investments in warrants and equity securities are
detailed in note 6 to the financial statements.
Fair value hierarchy
The following table classifies financial assets and liabilities
that are recognized on the balance sheet at fair value in a
hierarchy that is based on significance of the inputs used in
making the measurements. The levels in the hierarchy are:
- Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities
- Level 2 - Inputs other than quoted prices included within level
1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices)
- Level 3 - Inputs for the asset or liability that are not based
on observable market data (that is, unobservable inputs).
|
|
|
|
|
|
|
|
|
June 30
2013 |
|
December 31
2012 |
|
|
|
$ |
|
$ |
Level 1 |
|
|
|
|
|
Investment in equity securities |
|
|
114,144 |
|
273,980 |
|
|
|
|
|
|
Level 2 |
|
|
|
|
|
Investment in warrants |
|
|
- |
|
3,208 |
8) CAPITAL MANAGEMENT
Marathon is not subject to externally imposed capital
requirements.
Marathon manages its capital structure and makes
adjustments to it based on the funds available to support the
acquisition, exploration and development of our mineral
properties. The Board of Directors does not establish
quantitative return on capital criteria for management but rather
relies on the expertise of management to sustain the future
development of the business.
Marathon's properties are in the exploration and
evaluation stages, and as such the Company depends on external
financing to fund its activities. In order to carry out its
exploration and development activities and to pay for
administrative costs, Marathon spends existing working capital and
raises additional amounts as needed. Management continues to
assess new properties and seeks to acquire interests in additional
properties if there is sufficient geologic or economic potential
and if Marathon has adequate financial resources to do so.
9) SHARE CAPITAL
a) Common shares issued and outstanding
Authorized:
Unlimited common shares without par value
Unlimited preference shares, issuable in
series
b) Issued and
outstanding:
|
|
|
Number of
shares |
|
Amount |
|
|
|
|
|
$ |
|
|
|
|
|
|
Balance - January 12, 2012 |
|
|
29,871,928 |
|
20,255,563 |
|
Issued pursuant to the acquisition of the net
assets of
Mountain Lake Resources Inc. (i) |
|
|
20,309,586 |
|
16,247,669 |
|
Issued in payment of professional advisory
services (ii) |
|
|
410,397 |
|
300,000 |
|
Issued for cash pursuant to private placement of
flow-
through common shares (iii) |
|
|
3,873,000 |
|
2,362,530 |
|
Issued for cash pursuant to private placement of
non-
flow through units, net of $476,343 allocated to
Warrants (iii) |
|
|
5,474,500 |
|
2,534,632 |
|
Share issue costs |
|
|
- |
|
(649,056) |
Balance - December 31, 2012 and
June 30, 2013 |
|
|
59,939,411 |
|
41,051,338 |
i. |
On July 9, 2012, Marathon issued 20,309,586 common shares with
a value of $0.80 per share to acquire the outstanding common shares
of MOA. |
|
|
ii. |
On September 24, 2012, Marathon issued 410,397 common
shares with a deemed value of $0.731 per share as payment for
professional advisory services in connection with the acquisition
of the net assets of MOA. |
|
|
iii. |
On December 12, 2012, Marathon closed a private placement of
3,873,000 flow-through common shares at a price of $0.63 per share
and 5,474,500 common share units at a price of $0.55 per unit, for
total gross proceeds of $5,450,965. |
|
|
|
The gross proceeds of the offering of flow-through shares were
allocated between Share capital and Flow-through share tax
liability using the residual method, which resulted in $77,460 of
gross proceeds being allocated to the liability portion of this
financing. |
|
|
|
Each unit consisted of one common share and one-half of one
share purchase warrant, with each whole warrant exercisable at a
price of $0.75 per share and expiring on December 12, 2014.
The gross proceeds of the offering of units were allocated between
Share capital and Warrants on the basis of relative fair value,
which resulted in $476,343 in proceeds being allocated to
Warrants. |
|
|
|
Marathon incurred costs in connection with this offering of
$658,412, of which $9,356 was attributed to the flow-through tax
liability on a pro rata basis and charged to operations. |
10) WARRANTS
The movements in the number and estimated fair value of outstanding
warrants are as follows:
|
|
|
Number |
|
Value |
|
|
|
|
|
$ |
Balance - January 1, 2012 |
|
|
2,140,995 |
|
1,256,644 |
Warrant obligations assumed pursuant to the
acquisition of the net assets of MOA (a) |
|
|
2,571,555 |
|
112,827 |
Issued pursuant to private placement of units
(b) |
|
|
2,737,250 |
|
476,343 |
Broker warrants (b) |
|
|
560,851 |
|
153,587 |
Expired |
|
|
(1,261,900) |
|
- |
Balance - December 31, 2012 |
|
|
6,748,751 |
|
1,999,401 |
Expired |
|
|
(866,650) |
|
(196,576) |
Balance - June 30, 2013 |
|
|
5,882,101 |
|
1,802,825 |
a) On July 9,
2012, Marathon assumed obligations with respect to the
potential issuance of 2,571,555 Marathon shares upon the exercise
of warrants issued by MOA and outstanding at closing, as set out
below.
Number of
Marathon
shares issuable |
|
|
Exercise price |
|
|
Estimated fair
value per warrant |
|
|
Expiry date |
|
|
|
$ |
|
|
$ |
|
|
|
861,900 |
|
|
1.59 |
|
|
- |
|
|
July 12, 2012 |
200,000 |
|
|
1.59 |
|
|
- |
|
|
August 5, 2012 |
200,000 |
|
|
2.55 |
|
|
- |
|
|
October 8, 2012 |
689,655 |
|
|
1.81 |
|
|
0.07 |
|
|
June 22, 2013 |
620,000 |
|
|
1.70 |
|
|
0.10 |
|
|
September 13, 2013 |
The fair value of these obligations was
estimated at July 9, 2012 using the
Black-Scholes option pricing model with the following weighted
average assumptions:
- risk free interest rate of 0.92%;
- expected dividend yield of nil;
- expected volatility of 80%; and
- expected term of 0.57 years,
which yielded an estimated weighted average fair value of
$0.04 per warrant.
b) Pursuant to a private placement which
closed on December 12, 2012, Marathon
issued 2,737,250 share purchase warrants exercisable at a price of
$0.75 per share and expiring on
December 12, 2014 and 560,851 broker
compensation warrants exercisable at a price of $0.58 per share, with both warrants expiring on
December 12, 2014. The fair
value of these warrants was estimated using the Black-Scholes
option pricing model with the following assumptions:
- risk free interest rate of 1.07%;
- expected dividend yield of nil;
- expected volatility of 80%; and
- expected term of 2 years,
which yielded an estimated fair value of $0.23 per share purchase warrant and $0.27 per broker compensation warrant.
The warrants outstanding at June 30,
2013 are set out below.
Exercise price |
|
|
Number of warrants |
|
|
Expiry date |
$1.70 |
|
|
620,000 |
|
|
September 13, 2013 |
$1.80 |
|
|
1,964,000 |
|
|
June 2, 2014 |
$0.75 |
|
|
2,737,250 |
|
|
December 12, 2014 |
$0.58 |
|
|
560,851 |
|
|
December 12, 2014 |
$1.18 |
|
|
5,882,101 |
|
|
|
11) STOCK BASED
COMPENSATION
Marathon has a stock option plan (the "Plan") which was adopted on
November 30, 2010, under which
Marathon may grant options to directors, officers, and
consultants. The number of shares reserved for issue under
the Plan may not exceed 10% of the number of issued and outstanding
common shares at any time.
The purpose of the Plan is to attract, retain
and motivate directors, officers, and external service providers by
providing them with the opportunity to acquire a proprietary
interest in Marathon and benefit from its growth. The options
granted under the Plan are non-assignable, have a term of up to 5
years and vest upon grant.
|
|
|
Six months ended |
|
|
Six months ended |
|
|
|
June 30, 2013 |
|
|
June 30, 2012 |
|
|
|
Number |
|
Weighted
average
exercise
price
per share |
|
|
Number |
|
Weighted
average
exercise
price
per share |
|
|
|
|
|
$ |
|
|
|
|
$ |
Balance - beginning of period |
|
|
4,276,000 |
|
1.14 |
|
|
2,689,000 |
|
1.47 |
Granted in the period |
|
|
1,244,000 |
|
0.52 |
|
|
- |
|
- |
Expired |
|
|
(239,000) |
|
1.00 |
|
|
(54,000) |
|
1.58 |
Balance - end of period |
|
|
5,281,000 |
|
1.00 |
|
|
2,635,000 |
|
1.47 |
Options to purchase common shares outstanding at
June 30, 2013 carry exercise prices
and remaining terms to maturity as follows:
Exercise price |
|
|
Options
Outstanding and
exercisable |
|
|
Contract Life (years) |
$ |
|
|
|
|
|
|
1.61 |
|
|
1,655,000 |
|
|
2.47 |
1.15 |
|
|
140,000 |
|
|
2.98 |
1.28 |
|
|
67,000 |
|
|
3.18 |
1.18 |
|
|
607,000 |
|
|
3.48 |
0.65 |
|
|
1,583,000 |
|
|
4.09 |
0.52 |
|
|
1,229,000 |
|
|
4.55 |
1.00 |
|
|
5,281,000 |
|
|
2.52 |
The fair value of the options granted by
Marathon in the three and six month periods ended June 30, 2013 and 2012 was estimated at the date
of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months
ended June 30 |
|
|
Six months
ended
June 30 |
|
|
|
2013 |
|
2012 |
|
|
2013 |
|
2012 |
Risk free interest rate |
|
|
- |
|
- |
|
|
1.11% |
|
- |
Dividend rate |
|
|
- |
|
- |
|
|
Nil |
|
- |
Volatility |
|
|
- |
|
- |
|
|
80% |
|
- |
Expected life |
|
|
- |
|
- |
|
|
1 year |
|
- |
Weighted average fair value
per
option granted in the period |
|
|
- |
|
- |
|
|
$0.16 |
|
- |
The Company recognized total stock based
compensation costs of $203,546 in the
period ended June 30, 2013 (2012 -
$Nil), of which $152,823 was charged
to operations and $50,723 was
capitalized as a component of Marathon's exploration and evaluation
assets.
12) EXPLORATION EXPENSES
|
|
|
Three months
ended
June 30 |
|
|
Six months
ended
June 30 |
|
|
|
2013 |
|
2012 |
|
|
2013 |
|
2012 |
|
|
|
$ |
|
$ |
|
|
$ |
|
$ |
Finger Pond Property, Newfoundland |
|
|
12,872 |
|
342,714 |
|
|
12,911 |
|
343,532 |
Baie Verte Property, Newfoundland |
|
|
3,820 |
|
737 |
|
|
3,861 |
|
1,991 |
Bonanza Property, Oregon |
|
|
- |
|
5,953 |
|
|
1,197 |
|
5,953 |
Total |
|
|
16,692 |
|
349,404 |
|
|
17,969 |
|
351,476 |
13) GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
Three months
ended
June 30 |
|
|
Six months ended
June 30 |
|
|
|
2013 |
|
2012 |
|
|
2013 |
|
2012 |
|
|
|
$ |
|
$ |
|
|
$ |
|
$ |
Wages, salaries and benefits (note 14) |
|
|
188,362 |
|
191,866 |
|
|
375,140 |
|
382,739 |
Professional fees |
|
|
25,381 |
|
9,546 |
|
|
59,259 |
|
66,885 |
Investor relations |
|
|
38,809 |
|
64,894 |
|
|
75,394 |
|
107,533 |
Depreciation |
|
|
12,821 |
|
15,443 |
|
|
28,264 |
|
28,996 |
Other expenses, net of operator
fees earned in
the period of $Nil (2012 - $77,988) |
|
|
71,312 |
|
94,648 |
|
|
192,020 |
|
150,960 |
Stock based compensation charged
to
operations (note 11) |
|
|
- |
|
- |
|
|
152,823 |
|
- |
|
|
|
336,685 |
|
376,397 |
|
|
882,900 |
|
737,113 |
14) WAGES, SALARIES AND BENEFITS
|
|
|
Three months
ended
June 30 |
|
|
Six months ended
June 30 |
|
|
|
2013 |
|
2012 |
|
|
2013 |
|
2012 |
|
|
|
$ |
|
$ |
|
|
$ |
|
$ |
Fees, salaries and wages paid to
employees, key
management and directors (note 15) |
|
|
356,519 |
|
658,490 |
|
|
791,019 |
|
1,162,184 |
Social security benefits |
|
|
27,613 |
|
58,203 |
|
|
67,541 |
|
113,161 |
|
|
|
384,132 |
|
716,693 |
|
|
858,560 |
|
1,275,345 |
|
|
|
|
|
|
|
|
|
|
|
Charged to general and administrative
expenses |
|
|
188,362 |
|
191,866 |
|
|
375,140 |
|
382,739 |
Charged to exploration expenses |
|
|
2,968 |
|
1,488 |
|
|
3,048 |
|
2,269 |
Charged to GCLLC |
|
|
- |
|
315 |
|
|
- |
|
3,923 |
Capitalized as a component of
mineral
exploration and evaluation assets |
|
|
192,802 |
|
523,024 |
|
|
480,372 |
|
886,414 |
|
|
|
384,132 |
|
716,693 |
|
|
858,560 |
|
1,275,345 |
15) COMMITMENTS
a) Operating leases
Marathon has the following commitments under operating leases.
Year ending June 30: |
|
|
|
$ |
2014 |
|
|
|
141,420 |
2015 |
|
|
|
141,885 |
2016 |
|
|
|
142,470 |
2017 |
|
|
|
89,044 |
Thereafter |
|
|
|
- |
|
|
|
|
514,819 |
b) Indemnities
In connection with the acquisition of the net assets of MOA,
Marathon indemnified past officers and directors of MOA against
liability arising from actions prior to the acquisition.
At December 31,
2012 and March 31, 2013 two
former directors of MOA were defendants in a securities action
brought against them by the Nova Scotia Securities Commission
("NSSC"). At March 31, 2013,
the costs of defending this action, both prior and subsequent to
Marathon's acquisition, amounted to approximately $81,000 and had been borne by MOA's liability
insurer on the basis of a waiver of its rights. If the
directors were found liable upon the exhaustion of due process,
Marathon could be liable to repay the legal costs incurred by the
insurer, as well as civil penalties imposed by the NSSC.
On May 7, 2013 the
NSSC dismissed the allegations against the two former
directors.
16) RELATED PARTY TRANSACTIONS
Key management
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Company, directly or indirectly. Key management
personnel include Marathon's executive officers, vice-presidents
and members of its Board of Directors.
Marathon incurred the following compensation
costs related to key management and directors in the normal course
of business.
|
|
|
|
|
|
|
|
|
|
Three months
ended
June 30 |
|
|
Six months
ended
June 30 |
|
|
|
2013 |
|
2012 |
|
|
2013 |
|
2012 |
|
|
|
$ |
|
$ |
|
|
$ |
|
$ |
Salaries and management fees paid
to
key management |
|
|
146,250 |
|
146,250 |
|
|
292,500 |
|
292,500 |
Fees paid to directors |
|
|
35,505 |
|
34,000 |
|
|
73,880 |
|
69,000 |
|
|
|
181,755 |
|
180,250 |
|
|
369,380 |
|
361,500 |
17) SUBSEQUENT EVENT
On July 3, 2013, Marathon provided
funding to GCLLC amounting to US $25,000 pursuant to a cash call issued by NJMC
for which NJMC elected not to contribute its proportionate
share. This default by NJMC resulted in Marathon's interest
in GCLLC increasing to 52.22%.
SOURCE Marathon Gold Corporation