Orosur Mining Inc. - Q3 2017 Results & Operations Update; YTD: $4.1M Profit, $8.7M Cash From Operations & First Quarter of New San Gregorio West UG Mine Production
Orosur Mining Inc. ("Orosur" or "the Company") (TSX/AIM: OMI), the South American-focused gold producer, developer and explorer is pleased to announce its unaudited results for the third quarter ended February 28, 2017 ("Q3 17" or the "Quarter") and an update of its exploration and development activities. All dollar amounts referred to in this announcement are stated in US dollars.
OPERATIONAL HIGHLIGHTS
- Successful completion of first full quarter of production of Orosur's new mine, San Gregorio West Underground ("SGW UG").
- Availability of services at SGW UG, such as water, power, access and ventilation as well as operational factors such as fortification and development works have been implemented successfully.
- Q3 2017 production was 7,820 oz of gold, in line with the 7,274 ounces produced during Q3 2016, and also in line with full year guidance of 35,000 to 40,000 oz. The Company views this positively considering production is typically lower during the ramp up of new mines.
FINANCIAL HIGHLIGHTS
- Quarterly cash operating costs were $858/oz (6% reduction from Q2), in line with expectations and guidance for FY 17, which remains $800 to $900/oz. As of a result of the additional development capex associate with the SGW UG mine, including ramp, access and ventilation shaft work, All-In-Sustaining Costs ("AISC") were $1,289/oz compared to $978 oz in Q3 16.
- Year to date ("YTD") aggregate capex of $9.0M due to the Company's higher than anticipated investments following the exploration successes at SG UG East and Central and the Company's strategy to develop a larger UG mine at and around SGW.
- The Company remains committed to developing SG UG without any external funding as planned and the total cash balance at Quarter end was $2.4M (compared to FY 16: $4.3M),with total debt remaining at $0.2M compared to $0.4M at May 31, 2016.
- Cash generated from operations YTD amounts to $8.7M (YTD 16: $5.9M).
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YTD net profit after tax is $4.1M (YTD 16: profit of $0.5M).
- Average gold price of $1,198/oz compared with $1,143/oz during Q3 2016
OUTLOOK
- Exploration drilling in and around the San Gregorio UG area has yielded positive results, successfully intersecting gold mineralization in every hole, which is expected to significantly enhance mine economics and increase reserves and resources in the short and medium term. Further drilling is underway and ongoing.
- In Colombia, the Company finalized a geological model of its high grade Anz?? gold project to determine the exploratory potential with the assistance of Mine Development Associates ("MDA") of Reno, Nevada. The results of this work were announced on January 19th, 2017.
- The Anz?? project includes a gypsum mine, which has environmental and mining permits granted by the Colombian authorities. As previously announced, Orosur has recently taken over operatorship of the mine. The gypsum permits can be readily expanded for additional tonnage, providing the ability for Orosur to fast-track permitting for future gold mining operations.
Ignacio Salazar, CEO of Orosur, said:
"Operations remain healthy and profitable, with $8.7M of cash generated in the first three quarters of our fiscal 2017. We are especially pleased with progress so far given this is the first quarter with SGW UG as the Company's primary source of ore feed to the plant in Uruguay, achieving a unit operating cost of $858/oz in the Quarter despite the normal constraints associated to the initial months of operation of a new mine.
As previously announced, SGW UG has been financed entirely from operational cash flow and the Company aims to maintain this financial discipline in its future expansion into SG UG East and Central, with the objective of developing a larger UG mine in, around and below the current SGW UG.
In Colombia, we have made significant progress in the geological interpretation and modelling of our high grade Anz?? gold project and we plan to commence a 15,000m - 30,000m drilling campaign. We are excited to be moving this project forward since taking over operatorship of the gypsum mine, which has now resumed operations after finalizing remediation work and improved operational standards during the quarter. With exploitation permits in place, the existing gypsum can be readily expanded, enabling Orosur to fast-track future gold mining operations."
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Operational & Financial Summary1 |
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| Q3 17 | Q3 16 | Diff | YTD 17 | YTD 16 | Diff | ||||||||||||||||
| Operating Results | |||||||||||||||||||||
| Gold produced | Ounces | 7,820 | 7,274 | 546 | 24,623 | 27,917 | (3,294) | ||||||||||||||
| Operating cash cost3 | US$/oz | 858 | 803 | 55 | 807 | 886 | (79) | ||||||||||||||
| AISC | US$/oz | 1,289 | 978 | 311 | 1,184 | 1,096 | 88 | ||||||||||||||
| Average price received | US$/oz | 1,198 | 1,143 | 55 | 1,263 | 1,131 | 132 | ||||||||||||||
| Financial Results (unaudited) | |||||||||||||||||||||
| Net profit after tax | US$ '000 | 363 | 3,071 | (2,708) | 4,064 | 475 | 3,589 | ||||||||||||||
| Cash flow from operations2 | US$ '000 | 1,674 | 4,804 | (3,130) | 8,703 | 5,902 | 2,801 | ||||||||||||||
| Cash & Debt Summary (unaudited) |
Feb. 28, |
May 31, |
Diff | ||||||||||||||||||
| Cash balance | US$ '000 | 2,400 | 4,320 | (1,920) | |||||||||||||||||
| Total debt | US$ '000 | 161 | 352 | (191) | |||||||||||||||||
| Cash net of debt | US$ '000 | 2,239 | 3,968 | (1,729) | |||||||||||||||||
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1 |
Results are based on IFRS and expressed in US dollars |
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2 |
Before non-cash working capital movements |
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3 |
Operating cash cost is total cost discounting royalties and capital tax on production assets. |
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Q3 2017 Operations and SGW Development
Q3 2017 production was 7,820 oz of gold, in line with the 7,274 oz produced during Q3 2016.
In Q2 2017 the Company transitioned from Arenal UG to SGW UG, following which Q3 2017 saw commissioning of the SGW UG new mine concluded successfully. Availability of services such as water, power, access and ventilation as well as operational factors such as fortification and development works have been implemented with approximately 60% of gold production for the Quarter coming from the SGW UG mine in this, its first quarter in production. Typically ore production and operational efficiencies are lower at the start of any new mine, especially underground operations, due to the low operational flexibility given the lack of available production stopes. As the SGW UG mine development advances, efficiency is expected to improve and the Company expects to see improvements as early as Q4 2017.
Q3 2017 Financial Summary
Average cash operating costs were of $858/oz, compared to $803/oz in Q3 2016. As previously announced in the Company's Q2 2017 results, with the new SGW UG mine commencing production in the Quarter, unit costs have begun to gradually reduce (cash operating costs in Q2 2017 were: $914/oz) and the Company expects the same trend to continue in Q4 2017 given more available production stopes and higher grades from SGW UG.
During the Quarter, the Company invested $3.2M in capex and $0.4M in exploration compared to $0.9M and $0.6M, respectively, in Q3 2016. The bulk of the investment for the construction of the SGW UG mine was concentrated in Q2 and Q3 2017 including work related to the ramp, access and the ventilation shaft. In addition, the Company completed construction of phase 4A of the tailings dam during the Quarter. As a result of the additional capex in SGW UG and phase 4A of the tailings dam, AISC were $1,289/oz compared to $978/oz in Q3 2016. This marks a reduction compared with Q2 2017 ($1,345/oz); a trend the Company expects to continue in Q4 2017 and beyond.
The average gold price realized for the Quarter was $1,198/oz (Q3 2016: $1,143/oz).
Net profit after tax was $0.4M compared to a profit of $3.0M in Q3 2016. The difference in profit between the two quarters was mainly due to the benefit of $2.5M recognized during Q3 2016 as a result of the settlement with the Government of Uruguay for the elimination of the benefit relating to the export of industrialized goods, as previously announced.
YTD profit after tax was $4.0M compared to a profit of $0.5M in the same period of the previous fiscal year. The improvement is mainly due to a higher realised price of gold ($1,263/oz) compared to ($1,131/oz) and lower overall costs of sales, which have been partially offset by lower relative production for the period; overall, resulting in more profitable production (Contribution margin YTD 2017: $9.3M compared to $5.2M in YTD 2016).
Cash flow from operations before working capital variations was $1.7M compared to $4.8M in Q3 2016 (which also included the $2.5M settlement explained above). YTD 2017 cash flow from operations before working capital variations was $8.7M compared to $5.9M for the prior year due to better operating performance in YTD 2017 as explained above.
The cash balance at the end of the Quarter was $2.4M compared with $4.3M at May 31, 2016. The decrease in cash was mainly due to increased investment in the development of the SGW UG (total investment in SGW UG during the period ended February 28, 2017 with total capitalised expenditure at period end of $5.2M compared to $1.0M as at May 31, 2016). The YTD total capex amounts to $9.0M as the Company is made higher than anticipated investments following the exploration successes in SG UG East and Central as Orosur plans to develop a larger UG mine in and around SGW UG. The Company remains committed to develop SG UG without any external funding, as planned, and the debt balance at the end of the Quarter remained $0.2M compared to $0.4M at May 31, 2016. The current debt outstanding is related to equipment leases.
Orosur has a $1.5M committed and undrawn line of credit with Banco Santander available as at February 28, 2017, and as of the date hereof.
FY17 Outlook & Guidance
The Company's forecast production guidance for FY17 remains between 35,000 to 40,000 oz of gold at operating cash costs of between $800 - $900/oz.
As in the past, variations in production and unit costs have been expected to occur, quarter on quarter, as the mine plan draws ore from multiple sources at varying grades, stages of development and stripping factors. As previously announced, the Company incurred higher unit costs during the transition and start of operations in SGW UG which are expected to decrease further in Q4 2017 given successful progress in the SGW UG development.
Uruguay Underground Exploration Projects - Potential for Significant Expansion of the SGW UG Mine
SGW UG is a continuation, at depth, of the historic San Gregorio open pit deposit which has produced approximately 536,000 oz at an average grade of 2.12 g/t. During FY17, the Company intends to add reserves and expand prospective SGW UG operations within three neighboring underground projects. These projects are the SGE Underground, SGW UG Deep Extension and the SG Central UG areas. The last two projects relate to areas which were not previously considered in the SGW UG mining plans and represent new opportunities with a strong potential for near term resource and reserve delineation.
A comprehensive and extensive drilling campaign is currently being carried out at San Gregorio. During FY 17, a total of 9,000m of drilling are planned in order to confirm and increase reserves and extend the SGW UG mine.
At the end of the Quarter, 6,000m, of the planned 9,000m have been drilled:
a) SGE UG: After finalizing a drilling program of 19 drill holes (totalling 3,803m) in this area, a geological and a block model has been built and the Company is currently working on reserves estimation. Drilling information indicates that this zone is still open in the East.
b) SGC UG: Four new holes have been drilled in the area, for a total of 16 holes (totaling 3,315m), with 2 holes (610m) remaining to be drilled in SGC UG for the remainder of FY 17.
The results of the new holes indicate:
| Hole ID | From (m) | To (m) | Intercept | ||||||
| SGDD16-84B | 310.25 | 313.40 | 3.15 m @ 4.20 g/t | ||||||
| SGDD16-081 | 243.70 | 249.30 | 5.60 m @ 1.14 g/t | ||||||
| SGDD17-080 | 272.00 | 282.55 | 10.55m @ 1.11 g/t | ||||||
| SGDD17-082B | 244.20 | 246.70 | 2.50m @ 1.13 g/t | ||||||
| SGDD17-083 | 268.40 | 271.85 | 3.45m @ 0.63 g/t | ||||||
Current results indicate the potential existence of additional reserves in the immediate area. There also appear to be strong indications that mineralization extends to the western part towards the SGW UG mine. Further drilling, planned in the current proposed drill program, is required to validate this.
To see a full PDF of the release with images, click here.
Uruguay Open Pit Exploration Projects
Veta Rey
An RC drilling campaign has been finalized at Veta Rey. A total of 19 holes totaling 983m were completed. Five of these holes were categorized as infill drilling; with the rest aimed to testing the continuity of central and south orebodies. Infill drilling has successfully validated the remaining reserves; however, exploratory drilling has failed, at this point, to prove the continuity of the mineralization between the two ore zones.
Sobresaliente Domain
To date, four holes, from a program of six, have been drilled at the Mantos Verdes project in the Sobresaliente domain with the following results:
| Hole ID | From (m) | To (m) | Intercept (m) | Total length (m) |
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including | ||||||||||||
| MVRC17-01 | 5 | 7 | 2 | 31 | 0.32 | |||||||||||||
| MVRC17-02 | 14 | 18 | 4 | 43 | 0.80 | 1 m @ 2.22 g/t | ||||||||||||
| MVRC17-03 | 19 | 22 | 3 | 32 | 0.96 | 1 m @ 2.2 g/t | ||||||||||||
| MVRC17-04 | 21 | 24 | 3 | 35 | 3.26 | 1 m @ 9.1 g/t | ||||||||||||
This drilling has identified a mineralized zone which currently is being economically reviewed.
Colombia
The Company continues to advance its high grade Anz?? gold project. During Q3 2017, the Company finalized a geological model. Based on this geological interpretation, an exploration target was formulated with the assistance of MDA and the results announced on January 19th, 2017.
During 2017, the Company plans to commence a 15,000m - 30,000m drilling campaign, culminating in the preparation and publishing of a maiden N.I. 43- 101 compliant resource report for the APTA project. Currently the Company is in the planning and tender process for the above mentioned drilling program.
The Anz?? project includes a gypsum mine, which has environmental and mining permits granted by the Colombian authorities. Historically, the gypsum mine was operated by a third-party contractor. As previously announced, Orosur recently took over operatorship of the mine. The Anza gypsum mine is back into operation after Orosur finalized remediation work and improved operational standards during Q3 2017. Current mining activities are focussed on operational development work required to re-start gypsum extraction. The gypsum permits can be readily expanded, providing the ability for Orosur to fast-track permitting for future gold mining operations. The Company anticipates that by operating a mine at Anz?? in parallel with the gold exploration drilling campaign should, allow Orosur to advance the gold project more swiftly and accurately towards feasibility.
Qualified Person's Statement
The technical information related to the current assets of Orosur in this presentation has been reviewed by Miguel Fuentealba, a Mining Engineer who is considered to be a Qualified Person under NI 43-101 reporting guidelines. Mr. Fuentealba is a graduate in Mining Engineering from the University of Santiago de Chile and is an AusIMM Member and Qualified Person of Chilean Mining Commission. Mr. Fuentealba has 20 years of professional experience in the field of mining engineering, mine development and management.
Forward Looking Statements
All statements, other than statements of historical fact, contained or incorporated by reference in this news release, including any information as to the future financial or operating performance of the Company, constitute "forward-looking statements" within the meaning of certain securities laws, including the "safe harbour" provisions of the Securities Act (Ontario) and the United States Private Securities Litigation Reform Act of 1995 and are based on expectations estimates and projections as of the date of this news release. There can be no assurance that such statements will prove to be accurate. Such statements are subject to significant risks and uncertainties, and actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements include, without limitation success of exploration activities; permitting time lines; the failure of plant; equipment or processes to operate as anticipated; accidents; labour disputes; requirements for additional capital title disputes or claims and limitations on insurance coverage. The Company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events and such forward-looking statements, except to the extent required by applicable law.
For more information, please visit www.orosur.ca
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ('MAR'). Upon the publication of this announcement via Regulatory Information Service ('RIS'), this inside information is now considered to be in the public domain.
About Orosur Mining Inc.
Orosur Mining Inc. is a fully integrated gold producer, developer and explorer focused on identifying and advancing gold projects in South America. The Company operates the only producing gold mine in Uruguay (San Gregorio) and has assembled an exploration portfolio of high quality assets in Uruguay, Chile and Colombia. The Company is listed in Canada (TSX: OMI) and London (AIM: OMI).
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Orosur Mining Inc. Condensed Interim Consolidated Statements of Financial Position Thousands of United States Dollars, except where indicated |
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As at February 28,
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As at May 31,
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| Assets | |||||||
| Cash | 2,400 | 4,320 | |||||
| Accounts receivable and other assets | 1,939 | 1,770 | |||||
| Inventories | 12,189 | 12,069 | |||||
| Total current assets | 16,528 | 18,159 | |||||
| Accounts receivable and other assets | 550 | 550 | |||||
| Property, plant and equipment and development costs | 14,686 | 10,106 | |||||
| Exploration and evaluation costs | 18,785 | 17,250 | |||||
| Deferred income tax assets | 2,534 | 2,534 | |||||
| Restricted cash | 228 | 221 | |||||
| Total non-current assets | 36,783 | 30,661 | |||||
| Total assets | 53,311 | 48,820 | |||||
| Liabilities and Shareholders' Equity | |||||||
| Trade payables and other accrued liabilities | 10,981 | 10,586 | |||||
| Current portion of long-term debt | 161 | 253 | |||||
| Environmental rehabilitation provision | 360 | 360 | |||||
| Total current liabilities | 11,502 | 11,199 | |||||
| Long-term debt | - | 99 | |||||
| Environmental rehabilitation provision | 5,232 | 5,327 | |||||
| Total non-current liabilities | 5,232 | 5,426 | |||||
| Total liabilities | 16,734 | 16,625 | |||||
| Capital stock | 61,110 | 60,751 | |||||
| Contributed surplus | 5,832 | 5,925 | |||||
| Deficit | (29,433) | (33,497) | |||||
| Currency translation reserve | (932) | (984) | |||||
| Total shareholders' equity | 36,577 | 32,195 | |||||
| Total liabilities and shareholders' equity | 53,311 | 48,820 | |||||
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Orosur Mining Inc. Condensed Interim Consolidated Statements of profit/(loss) and Comprehensive profit/(loss) Thousands of United States Dollars, except for loss per share amounts |
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Three months ended
February 28 February 29 |
Nine months ended
February 28 February 29 |
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| 2017 ($) | 2016 ($) | 2017 ($) | 2016 ($) | |||||||||
| Sales | 8,845 | 8,936 | 32,268 | 33,591 | ||||||||
| Cost of sales | (8,376) | (8,187) | (27,186) | (33,352) | ||||||||
| Gross profit | 469 | 749 | 5,082 | 239 | ||||||||
| Corporate and administrative expenses | (457) | (474) | (1,688) | (1,664) | ||||||||
| Restructuring costs | (144) | (217) | 144 | (1,911) | ||||||||
| Exploration expenses and exploration written off | (6) | (3) | (17) | (14) | ||||||||
| Obsolescence provision | (1) | - | (101) | - | ||||||||
| Other income | 471 | 2,722 | 1,328 | 3,467 | ||||||||
| Net finance cost | (53) | (68) | (143) | (205) | ||||||||
| Derivative loss | - | - | (412) | - | ||||||||
| Net foreign exchange gain/(loss) | 78 | 378 | (110) | 560 | ||||||||
| (112) | 2,338 | (999) | 233 | |||||||||
| Profit before income tax | 357 | 3,087 | 4,083 | 472 | ||||||||
| Recovery (provision) for income taxes | 6 | (16) | (19) | 3 | ||||||||
| Net profit for the period | 363 | 3,071 | 4,064 | 475 | ||||||||
| Other comprehensive profit/(loss) | ||||||||||||
| Cumulative translation adjustment | 109 | (144) | 52 | (951) | ||||||||
| Total comprehensive profit/(loss) for the period | 472 | 2,927 | 4,116 | (476) | ||||||||
| Profit per common share: | ||||||||||||
| Basic | 0.00 | 0.03 | 0.04 | 0.00 | ||||||||
| Diluted | 0.00 | 0.03 | 0.04 | 0.00 | ||||||||
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Orosur Mining Inc. Condensed Interim Consolidated Statements of Cash Flows Thousands of United States Dollars, except where indicated |
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Nine months ended |
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February 28 |
February 29 |
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| 2017 ($) | 2016 ($) | |||||
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Net inflow/(outflow) of cash related to the following |
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Cash flow from operating activities |
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| Net profit for the period | 4,064 | 475 | ||||
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Adjustments to reconcile net income to net cash provided |
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| Depreciation | 4,208 | 5,006 | ||||
| Exploration and evaluation expenses written off | 17 | 14 | ||||
| Obsolescence provision | 101 | - | ||||
| Fair value of derivatives | 181 | - | ||||
| Accretion of asset retirement obligation | 57 | 57 | ||||
| Stock based compensation | 49 | 28 | ||||
| Gain on sale of property, plant and equipment | (187) | (15) | ||||
| Other | 213 | 337 | ||||
| Subtotal | 8,703 | 5,902 | ||||
| Changes in working capital | ||||||
| Accounts receivable and other assets | (259) | (2,325) | ||||
| Inventories | (220) | 3,137 | ||||
| Trade payables and other accrued liabilities | 395 | (4,142) | ||||
| Net cash generated from operating activities | 8,619 | 2,572 | ||||
| Cash flow from financing activities | ||||||
| Loan payments | (191) | (1,066) | ||||
| Proceeds on sale of common shares of Anillo SPA | - | 710 | ||||
| Net cash used in financing activities | (191) | (356) | ||||
| Cash flow from investing activities | ||||||
| Purchase of property, plant and equipment and development costs |
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(8,829) | (2,638) | |||
| Environmental tasks | (152) | (198) | ||||
| Proceeds from the sale of property, plant and equipment | 240 | 33 | ||||
| Exploration and evaluation expenditure assets | (1,607) | (2,239) | ||||
| Net cash used in investing activities | (10,348) | (5,042) | ||||
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Decrease in cash |
(1,920) |
(2,826) |
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| Cash at the beginning of period | 4,320 | 4,787 | ||||
| Cash at the end of period | 2,400 | 1,961 | ||||
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Orosur Mining Inc. Condensed Interim Consolidated Statements of Changes in Shareholders' Equity Thousands of United States Dollars, except where indicated |
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Nine months ended |
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February 28 |
February 29 |
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2017 ($) |
2016 ($) |
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Capital stock |
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| Balance at beginning of period | 60,751 | 60,544 | ||||
| Termination consideration | - | 195 | ||||
| Exercise of stock options | 326 | - | ||||
| Grant of shares | 33 | - | ||||
| Balance at end of period | 61,110 | 60,739 | ||||
| Broker Warrants | ||||||
| Balance at beginning of period | - | 62 | ||||
| Balance at end of period | - | 62 | ||||
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Contributed surplus |
||||||
| Balance at beginning of period | 5,925 | 5,824 | ||||
| Stock based compensation recognized | 90 | 28 | ||||
| Exercise of stock options | (183) | - | ||||
| Balance at end of period | 5,832 | 5,852 | ||||
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Deficit |
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| Balance at beginning of period | (33,497) | (32,287) | ||||
| Net profit for the period | 4,064 | 475 | ||||
| Balance at end of period | (29,433) | (31,812) | ||||
| Currency translation reserve | (932) | (1,208) | ||||
| Shareholders' equity at end of period | 36,577 | 33,633 | ||||
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