ENTREE GOLD INC, 6-K filed on 5/12/2015
Report of Foreign Issuer
Document and Entity Information
3 Months Ended
Mar. 31, 2015
ShareBasedCompensationStockOptionFifteenMember
 
Entity Registrant Name
ENTREE GOLD INC 
Entity Central Index Key
0001271554 
Document Type
6-K 
Document Period End Date
Mar. 31, 2015 
Amendment Flag
false 
Current Fiscal Year End Date
--12-31 
Is Entity a Well-known Seasoned Issuer?
No 
Is Entity a Voluntary Filer?
No 
Is Entity's Reporting Status Current?
Yes 
Entity Filer Category
Smaller Reporting Company 
Document Fiscal Period Focus
Q1 
Document Fiscal Year Focus
2015 
CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)
Mar. 31, 2015
Dec. 31, 2014
Current
 
 
Cash and cash equivalents (Note 4)
$ 29,564,669 
$ 33,517,096 
Receivables
153,824 
133,729 
Prepaid expenses
584,514 
856,358 
Total current assets
30,303,007 
34,507,183 
Equipment (Note 6)
153,743 
177,566 
Mineral property interests (Note 7)
40,630,059 
44,419,538 
Reclamation deposits
478,614 
474,959 
Other assets
133,072 
111,252 
Total assets
71,698,495 
79,690,498 
Current
 
 
Accounts payable and accrued liabilities
893,797 
1,903,472 
Loans payable to Oyu Tolgoi LLC (Note 8)
6,419,817 
6,355,408 
Deferred revenue (Note 9)
31,563,511 
34,507,372 
Deferred income tax liabilities
2,700,268 
3,407,124 
Total liabilities
41,577,393 
46,173,376 
Stockholders' equity
 
 
Common stock, no par value, unlimited number authorized, (Note 10) 146,984,385 (December 31, 2014 - 146,984,385) issued and outstanding
177,138,693 
177,138,693 
Additional paid-in capital
20,346,551 
20,346,551 
Accumulated other comprehensive loss (Note 14)
(5,685,464)
(2,850,122)
Accumulated deficit
(161,678,678)
(161,118,000)
Total stockholders' equity
30,121,102 
33,517,122 
Total liabilities and stockholders' equity
$ 71,698,495 
$ 79,690,498 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Mar. 31, 2015
Dec. 31, 2014
Stockholders equity:
 
 
Common stock, par value
$ 0 
$ 0 
Common stock, Unlimited authorized shares
   1
   
Common stock, issued shares
146,984,385 
146,984,385 
Common stock, outstanding shares
146,984,385 
146,984,385 
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (USD $)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
EXPENSES
 
 
Exploration (Note 7)
$ 1,897,609 
$ 1,564,146 
General and administration
938,740 
1,144,090 
Consultancy and advisory fees
125,000 
285,672 
Depreciation
11,726 
17,675 
Foreign exchange gain
(1,748,949)
(1,071,457)
Loss from operations
(1,224,126)
(1,940,126)
Interest income
47,027 
83,226 
Interest expense (Note 5)
(64,289)
(64,861)
Loss from equity investee (Note 5)
(26,146)
(20,792)
Loss before income taxes
(1,267,534)
(1,942,553)
Current income tax expense
(113,230)
Deferred income tax recovery
706,856 
775,798 
Net loss
(560,678)
(1,279,985)
Comprehensive loss:
 
 
Net loss
(560,678)
(1,279,985)
Foreign currency translation adjustment (Note 14)
(2,835,342)
(1,696,288)
Comprehensive loss:
$ (3,396,020)
$ (2,976,273)
Basic and diluted net loss per share
$ 0.00 
$ (0.01)
Weighted average number of common shares outstanding
146,984,385 
146,734,385 
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (USD $)
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Total
Balance at Mar. 31, 2014
$ 177,065,075 
$ 20,095,161 
$ (1,230,673)
$ (153,728,797)
$ 42,200,766 
Balance, Shares at Mar. 31, 2014
146,734,385 
 
 
 
 
Mineral property interests
73,618 
   
   
   
73,618 
Mineral property interests, shares
250,000 
 
 
 
 
Foreign currency translation adjustment
   
   
1,439,608 
   
1,439,608 
Net loss
   
   
   
(2,925,791)
(2,925,791)
Balance at Jun. 30, 2014
177,138,693 
20,095,161 
208,935 
(156,654,588)
40,788,201 
Balance, Shares at Jun. 30, 2014
146,984,385 
 
 
 
 
Foreign currency translation adjustment
   
   
(1,879,527)
   
(1,879,527)
Net loss
   
   
   
(1,399,598)
(1,399,598)
Balance at Sep. 30, 2014
177,138,693 
20,095,161 
(1,670,592)
(158,054,186)
37,509,076 
Balance, Shares at Sep. 30, 2014
146,984,385 
 
 
 
 
Stock-based compensation
   
251,390 
   
   
251,390 
Foreign currency translation adjustment
   
   
(1,179,530)
   
(1,179,530)
Net loss
   
   
   
(3,063,814)
(3,063,814)
Balance at Dec. 31, 2014
177,138,693 
20,346,551 
(2,850,122)
(161,118,000)
33,517,122 
Balance, Shares at Dec. 31, 2014
146,984,385 
 
 
 
 
Foreign currency translation adjustment
   
   
(2,835,342)
   
(2,835,342)
Net loss
   
   
   
(560,678)
(560,678)
Balance at Mar. 31, 2015
$ 177,138,693 
$ 20,346,551 
$ (5,685,464)
$ (161,678,678)
$ 30,121,102 
Balance, Shares at Mar. 31, 2015
146,984,385 
 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
Net loss
$ (560,678)
$ (1,279,985)
Items not affecting cash:
 
 
Depreciation
11,726 
17,675 
Loss from equity investee
26,146 
20,792 
Interest expense
64,289 
64,861 
Deferred income tax recovery
(706,856)
(775,798)
Unrealized foreign exchange gain
(1,763,307)
(1,075,614)
Changes in assets and liabilities:
 
 
Receivables
(32,079)
176,426 
Prepaid expenses
202,415 
140,535 
Other assets
(58,212)
14,609 
Accounts payable and accrued liabilities
(862,752)
552,784 
Net cash used in operating activities
(3,679,308)
(2,143,715)
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
Reclamation deposits
(3,628)
83,428 
Acquisition of equipment
(2,997)
(2,841)
Net cash provided by (used in) investing activities
(6,625)
80,587 
Effect of foreign currency translation on cash and cash equivalents
(266,494)
(197,429)
Change in cash and cash equivalents during the period
(3,952,427)
(2,260,557)
Cash and cash equivalents, beginning of period
33,517,096 
46,701,216 
Cash and cash equivalents, end of period
29,564,669 
44,440,659 
Cash paid for interest during the period
Cash paid for income taxes during the period
$ 0 
$ 0 
1. NATURE AND CONTINUANCE OF OPERATIONS
Note 1. NATURE AND CONTINUANCE OF OPERATIONS

Entrée Gold Inc. was incorporated under the laws of the Province of British Columbia on July 19, 1995 and continued under the laws of the Yukon Territory on January 22, 2003. On May 27, 2005, Entrée Gold Inc. changed its governing jurisdiction from the Yukon Territory to British Columbia by continuing into British Columbia under the Business Corporations Act (British Columbia). The principal business activity of Entrée Gold Inc., together with its subsidiaries (collectively referred to as the “Company”), is the exploration of mineral property interests. To date, the Company has not generated significant revenues from its operations and is considered to be in the exploration stage.

 

All amounts are expressed in United States dollars, except for certain amounts denoted in Canadian dollars ("C$"), and Australian dollars ("A$").

 

These consolidated financial statements have been prepared on the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company currently earns no operating revenues. Continued operations of the Company are dependent upon the Company’s ability to secure additional equity capital or receive other financial support, and in the longer term to generate profits from business operations. Management believes that the Company has sufficient working capital to maintain its operations for the next fiscal year.

2. BASIS OF PRESENTATION
Note 2. BASIS OF PRESENTATION

The interim period financial statements have been prepared by the Company in conformity with generally accepted accounting principles in the United States of America. The preparation of financial data is based on accounting principles and practices consistent with those used in the preparation of annual financial statements, and in the opinion of management these financial statements contain all adjustments necessary (consisting of normally recurring adjustments) to present fairly the financial information contained therein. Certain information and footnote disclosure normally included in the financial statements prepared in conformity with generally accepted accounting principles in the United States of America have been condensed or omitted. These interim period statements should be read together with the most recent audited financial statements and the accompanying notes for the year ended December 31, 2014. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015.

3. SIGNIFICANT ACCOUNTING POLICIES
Note 3. SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements follow the same significant accounting principles as those outlined in the notes to the audited consolidated financial statements for the year ended December 31, 2014.

4. CASH AND CASH EQUIVALENTS
Note 4. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash at bank and in hand of $29,564,669 as at March 31, 2015 (December 31, 2014 - $33,517,096).

5. LONG-TERM INVESTMENTS
Note 5. LONG-TERM INVESTMENTS

Equity Method Investment

 

The Company accounts for its interest in a joint venture with Oyu Tolgoi LLC (“OTLLC”), a company owned 66% by Turquoise Hill Resources Ltd. (“Turquoise Hill”) and 34% by the Government of Mongolia (Note 7), as a 20% equity investment. The Company’s share of the loss of the joint venture is $26,146 for the three months ended March 31, 2015 (March 31, 2014 - $20,792) plus accrued interest expense of $64,289 for the three months ended March 31, 2015 (March 31, 2014 - $64,861).

6. EQUIPMENT
Note 6. EQUIPMENT
    March 31, 2015     December 31, 2014  
          Accumulated     Net Book           Accumulated     Net Book  
    Cost     Depreciation     Value     Cost     Depreciation     Value  
                                     
Office equipment   $ 74,377     $ 56,615     $ 17,762     $ 81,314     $ 60,877     $ 20,437  
Computer equipment     335,756       271,437       64,319       363,823       290,361       73,462  
Field equipment     198,521       134,145       64,376       217,036       141,797       75,239  
Buildings     44,602       37,316       7,286       48,762       40,334       8,428  
    $ 653,256     $ 499,513     $ 153,743     $ 710,935     $ 533,369     $ 177,566  
7. MINERAL PROPERTY INTERESTS
Note 7. MINERAL PROPERTY INTERESTS

Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral property interests. The Company has investigated title to its mineral property interests and, except as otherwise disclosed below, to the best of its knowledge, title to the mineral property interests is in good standing.

 

Material Properties

 

The Company’s two principal assets are the Ann Mason project (the “Ann Mason Project”) in Nevada and its interest in the Lookout Hill property in Mongolia.

 

Ann Mason, Nevada, United States

 

The Ann Mason Project is defined by a series of both unpatented lode claims on public land administered by the Bureau of Land Management, and title to patented lode claims. The project area includes the Ann Mason and the Blue Hill deposits, several early-stage copper porphyry targets including the Blackjack IP, Blackjack Oxide, Roulette and Minnesota targets, and the Minnesota, Shamrock and Ann South copper skarn targets.

 

Certain of the unpatented lode claims are leased to the Company pursuant to a mining lease and option to purchase agreement ("MLOPA") with two individuals. Under the MLOPA, the Company has the option to purchase the claims for $500,000, which, if exercised, will be subject to a 3% net smelter returns ("NSR") royalty (which may be bought down to a 1% NSR royalty for $2 million). The MLOPA also provides for annual advance minimum royalty payments of $27,500 which commenced in 2011 and will continue until the commencement of sustained commercial production. The advance payments will be credited against future royalty payments or the buy down of the royalty.

 

In September 2009, the Company entered into an agreement whereby the Company may acquire an 80% interest in certain unpatented lode claims formerly known as the Roulette property. In order to acquire its interest, the Company must: (a) incur expenditures of $1,000,000, make cash payments of $140,000 and issue 85,000 common shares of the Company within three years (completed); (b) make aggregate advance royalty payments totalling $375,000 between the fifth and tenth anniversaries of the agreement ($50,000 of which has been paid); and (c) deliver a bankable feasibility study before the tenth anniversary of the agreement.

 

In February 2013, the Company entered into an agreement with Sandstorm Gold Ltd. ("Sandstorm") whereby the Company granted Sandstorm a 0.4% NSR royalty over certain of the unpatented lode claims, including the claims covering the Ann Mason and Blue Hill deposits, in return for an upfront payment of $5 million (the "Sandstorm NSR Payment") which was recorded as a recovery to acquisition costs. In addition, certain of the patented lode claims are subject to a 2% NSR royalty.

 

Lookout Hill, Mongolia

 

The Lookout Hill property in the South Gobi region of Mongolia is comprised of two mining licences, Shivee Tolgoi and Javhlant, granted by the Mineral Resources Authority of Mongolia ("MRAM") in October 2009. Title to the two licences is held by the Company.

 

In October 2004, the Company entered into an arm’s-length Equity Participation and Earn-In Agreement (the "Earn In Agreement") with Turquoise Hill. Under the Earn-In Agreement, Turquoise Hill agreed to purchase equity securities of the Company, and was granted the right to earn an interest in what is now the eastern portion of the Shivee Tolgoi mining licence and all of the Javhlant mining licence (together the "Joint Venture Property"). Most of Turquoise Hill’s rights and obligations under the Earn-In Agreement were subsequently assigned by Turquoise Hill to what was then its wholly-owned subsidiary, OTLLC. The Government of Mongolia subsequently acquired a 34% interest in OTLLC from Turquoise Hill.

 

On June 30, 2008, OTLLC gave notice that it had completed its earn-in obligations by expending a total of $35 million on exploration of the Joint Venture Property. OTLLC earned an 80% interest in all minerals extracted below a sub-surface depth of 560 metres from the Joint Venture Property and a 70% interest in all minerals extracted from surface to a depth of 560 metres from the Joint Venture Property. In accordance with the Earn-In Agreement, the Company and OTLLC formed a joint venture (the "Entrée-OTLLC Joint Venture") on terms annexed to the Earn-In Agreement.

 

The portion of the Shivee Tolgoi mining licence outside of the Joint Venture Property ("Shivee West") is 100% owned by the Company, but is subject to a right of first refusal by OTLLC.

 

The conversion of the original Shivee Tolgoi and Javhlant exploration licences into mining licences was a condition precedent to the Investment Agreement (the "Investment Agreement") between Turquoise Hill, OTLLC, the Government of Mongolia and Rio Tinto International Holdings Limited. The licences are part of the contract area covered by the Investment Agreement, although the Company is not a party to the Investment Agreement. The Shivee Tolgoi and Javhlant mining licences were each issued for a 30 year term and have rights of renewal for two further 20 year terms.

 

On February 27, 2013, notice (the "Notice") was delivered to the Company that the Ministry of Mining had cancelled the July 2009 Order (the "2009 Order") registering the reserves on the Joint Venture Property. The Notice stated that the 2009 Order breached sections of the Minerals Law of Mongolia and Charter of the Minerals Resource Counsel that give the head of MRAM the authority to register reserves, rather than the Minister of Mineral Resources and Energy. The Notice further advised that the Company is temporarily restricted from transferring, selling or leasing the Shivee Tolgoi and Javhlant mining licences. On September 4, 2013, the Minister of Mining issued Order No. 179, advising the Minerals Professional Council to re-submit its previous conclusions regarding the reserves to MRAM for review and registration.

 

On September 6, 2013, the head of MRAM ordered that the reserves on the Joint Venture Property be registered. The Company was also subsequently advised that the temporary transfer restriction on the joint venture mining licences will be lifted.

 

As of March 31, 2015, the Entrée-OTLLC Joint Venture had expended approximately $26.9 million to advance the Joint Venture Property. Under the terms of the Entrée-OTLLC Joint Venture, OTLLC contributed on behalf of the Company its required participation amount charging interest at prime plus 2% (Note 8).

 

Other Properties

 

The Company also has interests in non-material properties in Australia, the United States and Peru.

 

Capitalized mineral property acquisition costs are summarized as follows:

 

   

March 31,

2015

   

December 31,

2014

 
             
Ann Mason   $ 40,215,646     $ 43,966,474  
Other     414,413       453,064  
                 
Total   $ 40,630,059     $ 44,419,538  

 

Ann Mason capitalized mineral property acquisition costs are net of the $5 million Sandstorm NSR Payment.

 

Expensed exploration costs are summarized as follows:

 

   

Three Months

Ended

March 31,

2015

   

Three Months

Ended

March 31,

2014

 
             
US   $ 1,531,747     $ 533,028  
Mongolia     348,390       946,310  
Other     17,472       84,808  
                 
Total all locations   $ 1,897,609     $ 1,564,146  
8. LOANS PAYABLE
Note 8. LOANS PAYABLE

Under the terms of the Entrée-OTLLC Joint Venture (Note 7), OTLLC will contribute funds to approved joint venture programs and budgets on the Company’s behalf. Interest on each loan advance shall accrue at an annual rate equal to OTLLC’s actual cost of capital or the prime rate of the Royal Bank of Canada, plus two percent (2%) per annum, whichever is less, as at the date of the advance. The loans will be repayable by the Company monthly from ninety percent (90%) of the Company’s share of available cash flow from the Entrée-OTLLC Joint Venture. In the absence of available cash flow, the loans will not be repayable. The loans are not expected to be repaid within one year.

9.DEFERRED REVENUE
Note 9.DEFERRED REVENUE

In February 2013, the Company entered into an equity participation and funding agreement with Sandstorm that provided an upfront deposit (the "Deposit") from Sandstorm of $40 million. The Company will use future payments that it receives from its mineral property interests to purchase and deliver metal credits to Sandstorm, in amounts that are indexed to the Company’s share of gold, silver and copper production from the Joint Venture Property as follows:

 

  · 25.7% of the Company’s share of gold and silver, and 2.5% of the Company’s share of copper, produced from the portion of the Shivee Tolgoi mining licence included in the Joint Venture Property; and

 

  · 33.8% of the Company’s share of gold and silver, and 2.5% of the Company’s share of copper, produced from the Javhlant mining licence.

 

The Company is not required to deliver actual metal, and the Company may use revenue from any of its assets to purchase the requisite amount of metal credits. The Company recorded the Deposit as deferred revenue and will recognize amounts in revenue as metal credits are delivered to Sandstorm, which is currently scheduled to commence in 2019.

10. COMMON STOCK
Note 10. COMMON STOCK

Share issuances

 

No shares were issued during the three months ended March 31, 2015.

 

Stock options

 

The Company has adopted a stock option plan (the "Plan") to grant options to directors, officers, employees and consultants. Under the Plan, the Company may grant options to acquire up to 10% of the issued and outstanding shares of the Company. Options granted can have a term of up to ten years and an exercise price typically not less than the Company's closing stock price on the last trading day before the date of grant. Vesting is determined at the discretion of the Board of Directors.

 

The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted. For employees, the compensation expense is amortized on a straight-line basis over the requisite service period which approximates the vesting period. Compensation expense for stock options granted to non-employees is recognized over the contract services period or, if none exists, from the date of grant until the options vest. Compensation associated with unvested options granted to non-employees is re-measured on each balance sheet date using the Black-Scholes option pricing model.

 

The Company uses historical data to estimate option exercise, forfeiture and employee termination within the valuation model. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company has not paid and does not anticipate paying dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. Companies are required to utilize an estimated forfeiture rate when calculating the expense for the reporting period. Based on the best estimate, management applied the estimated forfeiture rate of Nil in determining the expense recorded in the accompanying Statements of Operations and Comprehensive Loss.

 

Stock option transactions are summarized as follows:

 

    Number of Options    

Weighted Average Exercise Price

(C$)

 
Balance at December 31, 2013     14,400,500       1.22  
   Granted     2,815,000       0.21  
   Expired     (2,811,500 )     1.99  
   Forfeited     (625,000 )     1.43  
Balance at December 31, 2014     13,779,000       0.85  
   Expired     (80,000 )     0.46  
Balance at March 31, 2015     13,699,000       0.85  

 

The number of stock options exercisable at March 31, 2015 was 13,699,000.

 

At March 31, 2015, the following stock options were outstanding:

 

Number of

Options

   

Exercise

Price

(C$)

   

Aggregate

Intrinsic Value

(C$)

  Expiry Date  

Number of

Options

Exercisable

   

Aggregate

Intrinsic Value

(C$)

 
                             
  300,000       2.34       -   September 22, 2015     300,000       -  
  1,172,500       2.86       -   November 22, 2015     1,172,500       -  
  200,000       3.47       -   January 4, 2016     200,000       -  
  125,000       2.94       -   March 8, 2016     125,000       -  
  150,000       2.05       -   July 7, 2016     150,000       -  
  100,000       2.23       -   July 15, 2016     100,000       -  
  1,561,500       1.25       -   January 6, 2017     1,561,500       -  
  100,000       0.73       -   June 18, 2017     100,000       -  
  4,630,000       0.56       -   March 15, 2018     4,630,000       -  
  50,000       0.32       -   April 9, 2018     50,000       -  
  150,000       0.34       -   June 27, 2018     150,000       -  
  2,345,000       0.30       -   December 19, 2018     2,345,000       -  
  2,815,000       0.21       56,300   December 22, 2019     2,815,000       56,300  
  13,699,000             $ 56,300         13,699,000     $ 56,300  

 

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of C$0.23 per share as of March 31, 2015, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options vested and exercisable as of March 31, 2015 was $56,300. The total intrinsic value of options exercised during the three months ended March 31, 2015 was $Nil (March 31, 2014 - $Nil).

 

Subsequent to March 31, 2015, 30,000 stock options with an exercise price of C$0.21 were exercised.

 

Stock-based compensation

 

No stock options were granted during the three months ended March 31, 2015 and 2014.

11. SEGMENT INFORMATION
Note 11. SEGMENT INFORMATION

The Company operates in one business segment being the exploration of mineral property interests.

 

Geographic information is as follows:

             
   

March 31,

2015

   

December 31,

2014

 
             
Identifiable assets            
   USA   $ 41,677,656     $ 46,949,474  
   Canada     29,339,466       31,274,058  
   Mongolia     384,195       533,386  
   Australia     279,225       897,181  
   Other     17,953       36,399  
    $ 71,698,495     $ 79,690,498  
12. FAIR VALUE ACCOUNTING
Note 12.FAIR VALUE ACCOUNTING

Fair value measurement is based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value which are:

 

Level 1 — Quoted prices that are available in active markets for identical assets or liabilities.

 

Level 2 — Quoted prices in active markets for similar assets that are observable.

 

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

At March 31, 2015, the Company had Level 1 financial instruments, consisting of cash and cash equivalents, with a fair value of $29,564,669.

13. DISCLOSURES REGARDING FINANCIAL INSTRUMENTS
Note 13. DISCLOSURES REGARDING FINANCIAL INSTRUMENTS

The Company's financial instruments generally consist of cash and cash equivalents, receivables, deposits, accounts payable and accrued liabilities and loans payable. It is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values.

 

The Company is exposed to currency risk by incurring certain expenditures in currencies other than the Canadian dollar. In addition, as certain of the Company’s consolidated subsidiaries’ functional currency is the United States dollar, the Company is exposed to foreign currency translation risk. The Company does not use derivative instruments to reduce this currency risk.

14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (OCI(L))
Note 14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (OCI(L))
   

Three Months

Ended

March 31,

2015

   

Three Months

Ended

March 31,

2014

 
             
Accumulated OCI(L), beginning of period:            
Currency translation adjustment   $ (2,850,122 )   $ 465,615  
                 
Other comprehensive loss for the period:                
Currency translation adjustments   $ (2,835,342 )   $ (1,696,288 )
                 
Accumulated OCI(L), end of period:                
Currency translation adjustment   $ (5,685,464 )   $ (1,230,673 )
15. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Note 15. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

There were no significant non-cash transactions during the three months ended March 31, 2015 and 2014.

16. COMMITMENTS AND CONTINGENCIES
Note 16.COMMITMENTS AND CONTINGENCIES

The Company is committed to make lease payments for the rental of office space as follows:

 

2015   $ 205,242  
2016     181,280  
2017     74,721  
    $ 461,243  

 

The Company incurred lease expense of $94,443 (March 31, 2014 – $102,457) for the three months ended March 31, 2015.

 

In the event of a partial expropriation of the Company’s economic interest, contractually or otherwise, in the Joint Venture Property, which is not reversed during the abeyance period provided for in the equity participation and funding agreement, the Company will be required to return a pro rata portion of the Deposit (the amount of the repayment not to exceed the amount of the Unearned Balance) and the metal credits that the Company is required to deliver will be reduced proportionately. In the event of a full expropriation, the full amount of the Unearned Balance must be returned with interest.

18. SUBSEQUENT EVENTS
Note 18. SUBSEQUENT EVENTS

Subsequent to March 31, 2015, 30,000 stock options with an exercise price of C$0.21 were exercised.

3. SIGNIFICANT ACCOUNTING POLICIES (Policies)
Recent accounting pronoucements

These consolidated financial statements follow the same significant accounting principles as those outlined in the notes to the audited consolidated financial statements for the year ended December 31, 2014.

6. EQUIPMENT (Tables)
Equipment
    March 31, 2015     December 31, 2014  
          Accumulated     Net Book           Accumulated     Net Book  
    Cost     Depreciation     Value     Cost     Depreciation     Value  
                                     
Office equipment   $ 74,377     $ 56,615     $ 17,762     $ 81,314     $ 60,877     $ 20,437  
Computer equipment     335,756       271,437       64,319       363,823       290,361       73,462  
Field equipment     198,521       134,145       64,376       217,036       141,797       75,239  
Buildings     44,602       37,316       7,286       48,762       40,334       8,428  
    $ 653,256     $ 499,513     $ 153,743     $ 710,935     $ 533,369     $ 177,566  
7. MINERAL PROPERTY INTERESTS (Tables)
   

March 31,

2015

   

December 31,

2014

 
             
Ann Mason   $ 40,215,646     $ 43,966,474  
Other     414,413       453,064  
                 
Total   $ 40,630,059     $ 44,419,538  
   

Three Months

Ended

March 31,

2015

   

Three Months

Ended

March 31,

2014

 
             
US   $ 1,531,747     $ 533,028  
Mongolia     348,390       946,310  
Other     17,472       84,808  
                 
Total all locations   $ 1,897,609     $ 1,564,146  
10. COMMON STOCK (Tables)
    Number of Options    

Weighted Average Exercise Price

(C$)

 
Balance at December 31, 2013     14,400,500       1.22  
   Granted     2,815,000       0.21  
   Expired     (2,811,500 )     1.99  
   Forfeited     (625,000 )     1.43  
Balance at December 31, 2014     13,779,000       0.85  
   Expired     (80,000 )     0.46  
Balance at March 31, 2015     13,699,000       0.85  

Number of

Options

   

Exercise

Price

(C$)

   

Aggregate

Intrinsic Value

(C$)

  Expiry Date  

Number of

Options

Exercisable

   

Aggregate

Intrinsic Value

(C$)

 
                             
  300,000       2.34       -   September 22, 2015     300,000       -  
  1,172,500       2.86       -   November 22, 2015     1,172,500       -  
  200,000       3.47       -   January 4, 2016     200,000       -  
  125,000       2.94       -   March 8, 2016     125,000       -  
  150,000       2.05       -   July 7, 2016     150,000       -  
  100,000       2.23       -   July 15, 2016     100,000       -  
  1,561,500       1.25       -   January 6, 2017     1,561,500       -  
  100,000       0.73       -   June 18, 2017     100,000       -  
  4,630,000       0.56       -   March 15, 2018     4,630,000       -  
  50,000       0.32       -   April 9, 2018     50,000       -  
  150,000       0.34       -   June 27, 2018     150,000       -  
  2,345,000       0.30       -   December 19, 2018     2,345,000       -  
  2,815,000       0.21       56,300   December 22, 2019     2,815,000       56,300  
  13,699,000             $ 56,300         13,699,000     $ 56,300  
11. SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION
             
   

March 31,

2015

   

December 31,

2014

 
             
Identifiable assets            
   USA   $ 41,677,656     $ 46,949,474  
   Canada     29,339,466       31,274,058  
   Mongolia     384,195       533,386  
   Australia     279,225       897,181  
   Other     17,953       36,399  
    $ 71,698,495     $ 79,690,498  
14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (OCI(L)) (Tables)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (OCI(L))
   

Three Months

Ended

March 31,

2015

   

Three Months

Ended

March 31,

2014

 
             
Accumulated OCI(L), beginning of period:            
Currency translation adjustment   $ (2,850,122 )   $ 465,615  
                 
Other comprehensive loss for the period:                
Currency translation adjustments   $ (2,835,342 )   $ (1,696,288 )
                 
Accumulated OCI(L), end of period:                
Currency translation adjustment   $ (5,685,464 )   $ (1,230,673 )
16. COMMITMENTS AND CONTINGENCIES (Tables)
Lease payments
2015   $ 205,242  
2016     181,280  
2017     74,721  
    $ 461,243  
5. LONG-TERM INVESTMENTS (Details Narrative) (USD $)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
LONG-TERM INVESTMENTS
 
 
Company's share of the loss of the joint venture
$ 26,146 
$ 20,792 
Accrued interest expense
$ 64,289 
$ 64,861 
6. EQUIPMENT (Details) (USD $)
Mar. 31, 2015
Dec. 31, 2014
PropertyPlant and Equipment
 
 
Cost
$ 653,256 
$ 710,935 
Accumulated Depreciation
499,513 
533,369 
Net Book Value
153,743 
177,566 
Office equipment [Member]
 
 
PropertyPlant and Equipment
 
 
Cost
74,377 
81,314 
Accumulated Depreciation
56,615 
60,877 
Net Book Value
17,762 
20,437 
Computer equipment [Member]
 
 
PropertyPlant and Equipment
 
 
Cost
335,756 
363,823 
Accumulated Depreciation
271,437 
290,361 
Net Book Value
64,319 
73,462 
Field equipment [Member]
 
 
PropertyPlant and Equipment
 
 
Cost
198,521 
217,036 
Accumulated Depreciation
134,145 
141,797 
Net Book Value
64,376 
75,239 
Buildings [Member]
 
 
PropertyPlant and Equipment
 
 
Cost
44,602 
48,762 
Accumulated Depreciation
37,316 
40,334 
Net Book Value
$ 7,286 
$ 8,428 
7. MINERAL PROPERTY INTERESTS (Details) (USD $)
Mar. 31, 2015
Dec. 31, 2014
Capitalized mineral property acquisition Cost
$ 40,630,059 
$ 44,419,538 
Ann Mason [Member]
 
 
Capitalized mineral property acquisition Cost
40,215,646 
43,966,474 
Other [Member]
 
 
Capitalized mineral property acquisition Cost
$ 414,413 
$ 453,064 
7. MINERAL PROPERTY INTERESTS (Details 1) (USD $)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Total all locations
$ 1,897,609 
$ 1,564,146 
US [Member]
 
 
Total all locations
1,531,747 
533,028 
Mongolia [Member]
 
 
Total all locations
348,390 
946,310 
Other [Member]
 
 
Total all locations
$ 17,472 
$ 84,808 
10. COMMON STOCK (Details) (USD $)
3 Months Ended 12 Months Ended
Mar. 31, 2015
Dec. 31, 2014
Number of options
 
 
Beginning Balance
13,779,000 
14,400,500 
Granted
2,815,000 
Expired
(80,000)
(2,811,500)
Forfeited
(625,000)
Ending Balance
13,699,000 
13,779,000 
Weighted Average Exercise Price
 
 
Beginning Balance
$ 0.85 
$ 1.22 
Granted
$ 0 
$ 0.21 
Expired
$ 0.46 
$ 1.99 
Forfeited
$ 0 
$ 1.43 
Ending Balance
$ 0.85 
$ 0.85 
10. COMMON STOCK (Details 1) (USD $)
3 Months Ended
Mar. 31, 2015
Option Outstanding
 
Number of Options
13,699,000 
Aggregate Intrinsic Value, (C$)
$ 56,300 
Number of Options Exercisable
 
Number of Options Exercisable
13,699,000 
Aggregate Intrinsic Value ($C)
56,300 
Share Based Compensation Stock Option One [Member]
 
Option Outstanding
 
Number of Options
300,000 
Exercise Price, ($C)
$ 2.34 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Sep. 22, 2015 
Number of Options Exercisable
 
Number of Options Exercisable
300,000 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Two [Member]
 
Option Outstanding
 
Number of Options
1,172,500 
Exercise Price, ($C)
$ 2.86 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Nov. 22, 2015 
Number of Options Exercisable
 
Number of Options Exercisable
1,172,500 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Three [Member]
 
Option Outstanding
 
Number of Options
200,000 
Exercise Price, ($C)
$ 3.47 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Jan. 04, 2016 
Number of Options Exercisable
 
Number of Options Exercisable
200,000 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Four [Member]
 
Option Outstanding
 
Number of Options
125,000 
Exercise Price, ($C)
$ 2.94 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Mar. 08, 2016 
Number of Options Exercisable
 
Number of Options Exercisable
125,000 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Five [Member]
 
Option Outstanding
 
Number of Options
150,000 
Exercise Price, ($C)
$ 2.05 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Jul. 07, 2016 
Number of Options Exercisable
 
Number of Options Exercisable
150,000 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Six [Member]
 
Option Outstanding
 
Number of Options
100,000 
Exercise Price, ($C)
$ 2.23 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Jul. 15, 2016 
Number of Options Exercisable
 
Number of Options Exercisable
100,000 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Seven [Member]
 
Option Outstanding
 
Number of Options
1,561,500 
Exercise Price, ($C)
$ 1.25 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Jan. 06, 2017 
Number of Options Exercisable
 
Number of Options Exercisable
1,561,500 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Eight [Member]
 
Option Outstanding
 
Number of Options
100,000 
Exercise Price, ($C)
$ 0.73 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Jun. 18, 2017 
Number of Options Exercisable
 
Number of Options Exercisable
100,000 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Nine [Member]
 
Option Outstanding
 
Number of Options
4,630,000 
Exercise Price, ($C)
$ 0.56 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Mar. 15, 2018 
Number of Options Exercisable
 
Number of Options Exercisable
4,630,000 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Ten [Member]
 
Option Outstanding
 
Number of Options
50,000 
Exercise Price, ($C)
$ 0.32 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Apr. 09, 2018 
Number of Options Exercisable
 
Number of Options Exercisable
50,000 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Eleven [Member]
 
Option Outstanding
 
Number of Options
150,000 
Exercise Price, ($C)
$ 0.34 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Jun. 27, 2018 
Number of Options Exercisable
 
Number of Options Exercisable
150,000 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Twelve [Member]
 
Option Outstanding
 
Number of Options
2,345,000 
Exercise Price, ($C)
$ 0.30 
Aggregate Intrinsic Value, (C$)
   
Expiry Date
Dec. 19, 2018 
Number of Options Exercisable
 
Number of Options Exercisable
2,345,000 
Aggregate Intrinsic Value ($C)
   
Share Based Compensation Stock Option Thirteen [Member]
 
Option Outstanding
 
Number of Options
2,815,000 
Exercise Price, ($C)
$ 0.21 
Aggregate Intrinsic Value, (C$)
56,300 
Expiry Date
Dec. 22, 2019 
Number of Options Exercisable
 
Number of Options Exercisable
2,815,000 
Aggregate Intrinsic Value ($C)
$ 56,300 
11. SEGMENT INFORMATION (Details) (USD $)
Mar. 31, 2015
Dec. 31, 2014
SEGMENT INFORMATION
 
 
Identifiable Assets
$ 71,698,495 
$ 79,690,498 
USA [Member]
 
 
SEGMENT INFORMATION
 
 
Identifiable Assets
41,677,656 
46,949,474 
Canada [Member]
 
 
SEGMENT INFORMATION
 
 
Identifiable Assets
29,339,466 
31,274,058 
Mongolia [Member]
 
 
SEGMENT INFORMATION
 
 
Identifiable Assets
384,195 
533,386 
Australia [Member]
 
 
SEGMENT INFORMATION
 
 
Identifiable Assets
279,225 
897,181 
Other [Member]
 
 
SEGMENT INFORMATION
 
 
Identifiable Assets
$ 17,953 
$ 36,399 
14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (OCI(L)) (Details) (USD $)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Accumulated OCI(L), beginning of period:
 
 
Currency translation adjustment
$ (2,850,122)
$ 465,615 
Other comprehensive loss for the period
 
 
Currency translation adjustments
(2,835,342)
(1,696,288)
Currency translation adjustment
$ (5,685,464)
$ (1,230,673)
16. COMMITMENTS AND CONTINGENCIES (Details) (USD $)
Mar. 31, 2015
COMMITMENTS AND CONTINGENCIES
 
2015
$ 205,242 
2016
181,280 
2017
74,721 
Total
$ 461,243 
16. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Commitments And Contingencies Details Narrative
 
 
Lease expense
$ 94,443 
$ 102,457