UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D. C. 20549
FORM 20F
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£
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REGISTRATION STATEMENT Pursuant to Section 12(
b
)
or (
g
) of the Securities
Exchange Act of 1934
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OR
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T
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Annual Report Pursuant to Section 13 or 15(
d
)
of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 20154
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OR
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£
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Transition Report Pursuant to Section 13 or 15(
d
)
of the Securities Exchange Act of 1934
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OR
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£
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shell company
report pursuant to section 13 or 15
(d)
of the Securities Exchange
Act of 1934
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Date of event requiring this shell company
report:
Not Applicable
For the transition period from
to
Commission File Number
001-32670
MINCO GOLD CORPORATION
(Exact name of registrant as specified in
its charter)
british
Columbia, canada
(Jurisdiction of incorporation or organization)
Suite 2772, 1055 West Georgia Street, PO Box
11176, Vancouver, British Columbia, Canada
,
V6E 3R5
(Address of principal executive offices)
Jennifer Trevitt, Tel: (604) 688-8002 Ext.
107, Fax: (604) 688-8030, Suite 2772, 1055 West Georgia Street, PO Box 11176, Vancouver, British Columbia, Canada, V6E 3R5
(Name, Telephone, Facsimile number and/or
E-mail, and Address of Company Contact Person)
Securities registered or to be registered pursuant
to Section 12(b) of the Act:
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Common Shares
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NYSE MKT Equities, Toronto Stock Exchange, Frankfurt Stock Exchange
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Title of each class
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Name of each exchange on which registered
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Securities registered or to be registered pursuant
to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of
each of the issuer’s classes of capital or common stock as of December 31, 2015: 50,581,381 common shares.
Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.
Yes
£
No
T
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
Yes
£
No
T
Note – Checking the box above will not
relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
obligations under those Sections.
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
T
No
£
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes
£
No
£
N/A
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "Accelerated filer and large
accelerated file" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer:
£
Accelerated
file:
£
Non-accelerated filer:
T
Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
£
International
Financial Reporting Standards as issued Other
£
By the International Accounting
Standards Board
T
If "other" has been checked in
response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
£
Item 17
£
Item 18
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
£
No
T
TABLE OF CONTENTS
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INTRODUCTION AND USE OF CERTAIN TERMS
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4
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FORWARD-LOOKING STATEMENTS
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4
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CAUTIONARY NOTE ON RESOURCE AND RESERVE ESTIMATES
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5
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TECHNICAL INFORMATION
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5
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CURRENCY
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5
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PRESENTATION OF FINANCIAL INFORMATION
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5
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PART I
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5
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Item 1. Identity of Directors, Senior Management and Advisers
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5
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Item 2. Offer Statistics and Expected Timetable
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5
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Item 3. Key Information
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6
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Item 4. Information on the company
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11
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Item 4A Unresolved Staff Comments
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19
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Item 5 Operating and Financial Review and Prospects
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20
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Item 6. Directors, Senior Management and Employees
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27
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Item 7. Major Shareholders and Related Party Transactions
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31
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Item 8. Financial Information
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32
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Item 9. The Offer and Listing
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33
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Item 10. Additional Information
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34
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Item 11. Quantitative and Qualitative Disclosures About Market Risk
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40
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Item 12. Description of Securities Other than Equity Securities
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41
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PART II
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41
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Item 13. Defaults, Dividend Arrearages and Delinquencies
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41
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Item 14. Material Modifications to the Rights of Security Holder and Use of Proceeds
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41
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Item 15. Controls and Procedures
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41
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Item 16A Audit Committee Financial Expert
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41
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Item 16B Code of Ethics - Board of Directors and officers
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41
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Item 16C Principal Accountant Fees and Services
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42
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Item 16D Exemptions from the Listing Standards
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42
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Item 16E Purchases
of Equity Securities by the Issuer and Affiliate Purchasers
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42
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Item 16F Change in Registrant’s certifying accountant
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42
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Item 16G Corporate Governance
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42
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Item 16H Mine Safety
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42
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PART III
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43
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Item 17. Financial Statements
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43
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Item 18. Financial Statements
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43
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Item 19. Exhibits
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44
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INTRODUCTION
AND USE OF CERTAIN TERMS
Minco Gold Corporation (formerly "Minco
Mining & Metals Corporation") is incorporated under the laws of the province of British Columbia, Canada. In this document,
the terms "the Company", "we" our", "its" and "us" refer to Minco Gold Corporation
and its consolidated (former) subsidiaries. Where required, the term "Minco Gold" refers to Minco Gold Corporation as
a standalone entity. The Company’s consolidated financial statements are prepared in accordance with International Financial
Reporting Standards, as issued by the International Accounting Standards Board ("IFRS"), and are presented in Canadian
dollars ("$"). The Company files reports and other information with the Securities and Exchange Commission ("SEC"),
located at 100 F St. NE, Washington, D.C. 20549. Copies of the Company’s filings with the SEC may be obtained by accessing
the SEC’s website located at www.sec.gov. Further, the Company also files reports under Canadian securities regulatory requirements
on the System for Electronic Data Analysis and Retrieval ("SEDAR"). Copies of the Company’s reports filed on SEDAR
can be obtained by accessing SEDAR’s website at www.sedar.com. The principal executive office of the Company is located at
Suite 2772, 1055 West Georgia Street, PO Box 11176, Vancouver, British Columbia, Canada
,
V6E 3R5, Tel: 604-688-8002, Fax:
604-688-8030, email address info@mincomining.ca and website www.mincogold.com.
FORWARD-LOOKING
STATEMENTS
This document contains certain forward-looking
information and statements, including statements relating to matters that are not historical facts and statements of our beliefs,
intentions and expectations about developments, results and events which will or may occur in the future, which constitute "forward-looking
information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within
the meaning of the "safe harbor" provisions of the
United States Private Securities Litigation Reform Act of 1995
,
collectively referred to as "forward-looking statements". Forward-looking statements are typically identified by words
such as "anticipate", "could", "should", "expect", "seek", "may", "intend",
"likely", "will", "plan", "estimate", "believe" and similar expressions suggesting
future outcomes or statements regarding an outlook.
Forward-looking statements are included throughout
this document and include, but are not limited to, statements with respect to: the Company’s future growth, results of operations,
performance and business prospects, opportunities, future price of minerals and effects thereof, the estimation of mineral reserves
and resources, the timing and amount of estimated capital expenditures, the realization of mineral reserve estimates, costs and
timing of proposed activities, plans and budgets for and expected results of exploration timing of proposed activities, plans and
budgets for and expected results of exploration activities, exploration and permitting time-lines, requirements for additional
capital, government regulation of mining operations, environmental risks, reclamation obligation and expenses, the availability
of future acquisition opportunities and use of the proceeds from financing. These statements are, however, subject to known and
unknown risks and uncertainties and other factors. As a result, our actual results, performance or achievements could differ materially
from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of
the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits will be
derived therefrom. These risks, uncertainties and other factors include, among others: the Company’s ability to acquire new
mineral properties for the development into a profitable operation, our interest in our mineral properties may be challenged or
impugned by third parties or governmental authorities; economic, political and social changes in China; uncertainties relating
to the Chinese legal system; failure or delays in obtaining necessary approvals; exploration and development is a speculative business;
the Company's inability to obtain additional funding for the Company's projects on satisfactory terms, or at all; hazardous risks
incidental to exploration and test mining; the Company has limited experience in placing resource properties into production; government
regulation; high levels of volatility in market prices; environmental hazards; currency exchange rates; the Company's ability to
obtain mining licenses and permits in China; and the other risks and uncertainties set forth in more detail in the section of this
Annual Report entitled "
Item 3:
Key Information – D. Risk Factors
".
Although the Company has attempted to identify
important factors that could cause actual results to differ materially, there may be other factors that could cause results not
to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements containing forward looking
information will prove to be accurate as actual results and future events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on forward-looking statements. All of the forward-looking statements
contained in this document are expressly qualified, in their entirety, by this cautionary statement. The various risks to which
we are exposed are described in additional detail in this document under the section entitled "
Item 3: Key Information
– D. Risk Factors
". The forward-looking statements are made as of the date of this document and the Company undertakes
no obligation to update forward looking statements if circumstances or management’s estimates or opinions should change,
except as required by applicable law. Users of this Annual Report are cautioned not to place undue reliance on forward looking
statements.
CAUTIONARY
NOTE ON RESOURCE AND RESERVE ESTIMATES
As a reporting issuer in Canada, the Company
is required by Canadian law to provide disclosure respecting its mineral interests in accordance with National Instrument 43-101
– Standards of Disclosure for Mineral Projects ("NI 43-101"). Accordingly, readers are cautioned that the information
contained in this Annual Report may not be comparable to similar information made public by U.S. companies under the United States
federal securities laws and the rules and regulations thereunder. In particular, the terms "measured mineral resource",
"indicated mineral resource" and "inferred mineral resource" as may be used herein are not defined in SEC Industry
Guide 7, and are normally not permitted to be used in reports and registration statements filed with the SEC.
Readers are cautioned
not to assume that any part of or all mineral deposits in these categories will ever be converted into mineral reserves with demonstrated
economic viability.
In addition, the estimation of inferred resources involves far greater uncertainty as to their existence
and economic viability than the estimation of other categories of resources. Under Canadian rules, estimates of inferred mineral
resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. U.S. readers are cautioned not
to assume that part of or all of an inferred mineral resource exists, or is economically or legally minable.
Further, the terms "mineral reserve",
"proven mineral reserve" and "probable mineral reserve" are Canadian mining terms, the definitions of which
differ from the definitions of the SEC. Under SEC Industry Guide 7 standards, a "final" or "bankable" feasibility
study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate
reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.
TECHNICAL
INFORMATION
This Annual Report contains information of
a technical or scientific nature respecting the Company's mineral properties (the "Technical Information"). Technical
Information is primarily derived from the documents referenced herein. All Technical Information which appears in this Annual Report
has been reviewed and approved by Thomas Wayne Spilsbury, an independent director of Minco Silver Corporation (“Minco Silver”),
a company in which the Company held an 18.45% equity interest as at December 31, 2015. Mr. Spilsbury is a Member of the Association
of Professional Engineers and Geoscientists of British Columbia (P Geo), a Member of the Australian Institute of Geoscientists,
a Fellow of the Australasian Institute of Mining and Metallurgy CP (Geo) and is a "qualified person", as defined in NI
43-101. Minco Silver operates quality assurance and quality control of sampling and analytical procedures.
CURRENCY
Unless otherwise indicated, all references
in this document to "$" and "dollars" are to Canadian dollars, all references to "US$" and "US
dollars" are to United States dollars and all references to "RMB" are to the Chinese Renminbi.
PRESENTATION
OF FINANCIAL INFORMATION
Unless otherwise stated,
all financial information presented herein has been derived from financial statements prepared in accordance with IFRS as issued
by the IASB.
Due to rounding, numbers presented throughout
this document may not add up precisely to the totals we provide and percentages may not precisely reflect the absolute figures.
PART
I
Item
1. Identity of Directors, Senior Management and Advisers
Not Applicable.
Item
2. Offer Statistics and Expected Timetable
Not Applicable.
Item
3. Key Information
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A.
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SELECTED FINANCIAL DATA
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The following selected financial information
for the fiscal years ended December 31, 2015, 2014, 2013, 2012 and 2011 is derived from the audited financial statements of the
Company and the notes thereto, which are prepared in accordance with IFRS as issued by IASB, and should be read in conjunction
with such financial statements and with the information appearing under the heading "
Item 5: Operating and Financial Review
and Prospects
" and
“Item 18: Financial Statements”
The selected financial data and the information of the Company in the following table as at December 31, 2015, and
2014 and for the three years ended December 31, 2015 was derived from the audited consolidated financial statements
presented in this Form 20-F. The selected financial data and the information of the Company as at December 31, 2013, 2012 and
2011 and for the years ended December 31, 2012 and 2011 in the following table was derived from audited consolidated
financial statements of the Company which are not presented in this form 20-F.
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Fiscal Year ended December 31,
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2015
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2014
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2013
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2012
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2011
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$
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$
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$
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$
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$
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Operations
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Exploration expense
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793,081
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1,177,817
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1,550,251
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1,617,289
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1,963,874
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Exploration recovery
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-
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-
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(622,293)
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-
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-
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Operating loss
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2,115,169
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3,026,755
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3,662,049
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4,444,854
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6,275,689
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Finance and other income (expense)
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16,436,125
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(4,471,039)
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1,452,290
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614,636
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(128,474)
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Income (loss) from continuing operations
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14,320,556
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(7,497,794)
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(2,943,305)
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(4,871,432)
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862,446
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Income from discontinued operations
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-
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-
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-
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-
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-
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Net income (loss)
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14,320,556
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(7,497,794)
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(2,943,305)
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(4,871,432)
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862,446
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Income (loss) per Common share
from continuing operations
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-basic and diluted
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0.28
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(0.15)
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(0.06)
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(0.10)
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0.02
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Net income (loss) per Common share (basic and diluted)
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0.28
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(0.15)
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(0.06)
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(0.10)
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0.02
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Common shares used in calculations
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Basic
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50,566,749
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50,488,078
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50,348,215
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50,348,215
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50,228,592
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Diluted
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50,566,749
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50,488,078
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50,348,215
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50,348,215
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51,580,329
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Consolidated Balance Sheet Da
ta
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Total assets
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16,521,288
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9,405,439
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16,246,355
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19,171,997
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22,176,773
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Total liabilities
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566,852
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4,502,225
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4,304,484
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8,707,332
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7,715,102
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Non-controlling interest
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-
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4,988,512
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5,124,196
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2,425,368
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2,415,029
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Net assets
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15,954,436
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4,903,214
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11,941,871
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10,464,665
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14,461,671
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Share capital
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41,911,823
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41,882,757
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41,758,037
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41,758,037
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41,758,037
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Dividends
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0
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0
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0
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0
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0
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Exchange Rates
The following table sets forth information
as to the average, period end, high and low exchange rate for Canadian dollars and US dollars for the periods indicated based on
the Bank of Canada nominal noon exchange rates (USD to CAD) in Canadian dollars (US$1.00 = $1.30 as at March 30, 2016).
Year Ended December 31
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Average
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Period End
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High
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Low
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2015
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1.2787
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1.3840
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1.3390
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1.1728
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2014
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1.1045
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1.1601
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1.1643
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1.0614
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2013
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1.0299
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1.0636
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1.0697
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0.9839
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2012
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0.9996
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0.9949
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1.0418
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0.9710
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2011
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0.9891
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1.0162
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1.0604
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0.9449
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Month
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Average
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Period End
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High
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Low
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February 2016
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1.3796
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1.3523
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1.4040
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1.3523
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January 2016
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1.4223
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1.4080
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1.4589
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1.3969
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December 2015
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1.3705
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1.3840
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1.3999
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1.3360
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November 2015
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1.3280
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1.3333
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1.3360
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1.3095
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October 2015
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1.3073
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1.3083
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1.3242
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1.2904
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September 2015
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1.3277
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1.3394
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1.3414
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1.3148
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B.
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Capitalization and indebtedness
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Not Applicable.
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C.
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Reasons for the Offer and Use of Proceeds
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Not Applicable.
An investment in our securities should
be considered highly speculative and involves a high degree of financial risk due to the nature of our activities and the current
status of our operations. Readers and prospective investors should carefully consider the risks summarized below and all other
information contained in this Annual Report before making an investment decision relating to our shares. Some statements in this
Annual Report (including some of the following risk factors) are forward-looking statements. Please refer to the discussion of
forward-looking statements in the introduction to this Annual Report. Any one or more of these risks could have a material adverse
effect on the value of any investment in our Company and the business, financial position or operating results of our Company and
should be taken into account in assessing our activities. The risks noted below do not necessarily comprise all those faced by
us.
Risks Relating to the Company
Title to Properties
To the knowledge of the Company, none of
its property interests have been surveyed to establish boundaries. There can be no assurance that any governmental authority in
China could not significantly alter the conditions of or revoke the applicable exploration or mining authorizations held by the
Company or that the Company's interest in such properties will not be challenged or impugned by third parties or governmental authorities.
In addition, there can be no assurance
that the properties or other assets in which the Company has an interest are not subject to prior unregistered agreements, transfers,
pledges, mortgages or claims and title may be affected by undetected defects as it is difficult to verify that no agreements, transfers,
claims, mortgages, pledges or other encumbrances exist given the state of the legal and administrative systems in China.
China Political and Economic Considerations
The business operations of the Company
will be located in, and the revenues of the Company derived from activities in, China. The Company sold all of its interest in
the Changkeng property to Minco Silver in July 2015 and is currently searching for projects with merit. The Company still has two
mineral interests in China, which are held in trust by Minco China for the Company (more details are available in the Business
Overview section). Accordingly, the business, financial condition and results of operations of the Company may be affected by economic,
political and social changes in China. The Company is looking for acquisition of mineral properties in areas out of China. The
Company’s future financial conditions and results of operations may be affect by economic, political and social changes in
those areas too.
The economy of China has traditionally
been a planned economy, subject to five-year and annual plans adopted by the state, which set national economic development goals.
Since 1978, China has been moving the economy from a planned economy to a more open, market-oriented system. The economic development
of China is following a model of a market economy under socialism. Under this direction, it is expected that China will continue
to strengthen its economic and trading relationships with foreign countries, and that business development in China will follow
market forces and the rules of market economics.
However, the Chinese government continues
to play a significant role in regulating industry by imposing industrial policies. In addition, there is no guarantee that a major
turnover of senior political decision makers will not occur, or that the existing economic policy of China will not be changed.
A change in policies by China could adversely affect the Company's interests in China by changing laws, regulations or the interpretation
thereof, confiscatory taxation, restrictions on currency conversion, imports and sources of supplies or the expropriation of private
enterprises. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of mining
activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments
to current laws, regulations and permits governing operations and activities of companies engaged in mineral resource exploration
and development, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases
in capital expenditures or production costs or reduction in levels of production at producing properties or require abandonment
or delays in development of new mining properties. Companies with a foreign ownership component operating in China may be required
to work within a framework which is different to that imposed on domestic Chinese companies. The Chinese government is opening
up opportunities for foreign investment in mining projects and this process is expected to continue. However, if the Chinese government
should reverse this trend and impose greater restrictions on foreign companies, the Company's business and future earnings could
be negatively affected.
Chinese Legal System and Enforcement
Material agreements to which the Company
or Minco Silver are party with respect to mining assets in China are governed by Chinese law and some may be with Chinese governmental
entities. The Chinese legal system embodies uncertainties that could limit the legal protection available to the Company and its
shareholders. The outcome of any litigation may be more uncertain than usual because: (i) the experience of Chinese judiciary in
the industry in which we operate is relatively limited, and (ii) the interpretation of Chinese laws may be subject to policy changes
reflecting domestic political changes. The laws that do exist are relatively recent and their interpretation and enforcement involve
uncertainties, which could limit the available legal protections. Even where adequate laws exist in China, it may be impossible
to obtain swift and equitable enforcement of such laws or to obtain enforcement of judgments by a court of another jurisdiction,
which could have a material adverse impact on the Company. Many tax rules are not published in China, and those that are published
can be ambiguous and contradictory, leaving a considerable amount of discretion to local tax authorities. China currently offers
tax and other preferential incentives to encourage foreign investment. However, the tax regime of China is undergoing review and
there is no assurance that such tax and other incentives will continue to be available. There is also no guarantee that the pursuit
of economic reforms by the Government will be consistent or effective and as a result, changes in the rate or method of taxation,
reduction in tariff protection and other import restrictions and changes in state policies affecting the mining industry may have
a negative effect on our operating results and financial condition.
Government Regulation of Mineral Resources
and Ownership
Ownership of land in China remains with
the State, and the State, at the national, regional and local levels, is extensively involved in the regulation of exploration
and mining activities. Transfers and issuances of exploration and mining rights are also subject to governmental approval. Failure
or delays in obtaining necessary approvals could have a material adverse effect on the financial condition and results of operations
of the Company. Nearly all mining projects in China require government approval. There can be no certainty that any such approvals
will be granted (directly or indirectly) to the Company in a timely manner, or at all.
Exploration and Development is a Speculative
Business
Resource exploration and development is
a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting
not only from the failure to discover mineral deposits but also from finding mineral deposits that, though present, are insufficient
in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company
may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such
as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, the availability
of mining equipment and such other factors as government regulations, including regulations relating to royalties, allowable production,
importing and exporting of minerals and environmental protection, the combination of which factors may result in the Company not
receiving an adequate return of investment capital. The long-term profitability of the Company's operations will in part be directly
related to the costs and success of its exploration programs, which may be affected by a number of factors. Substantial expenditures
are required to establish reserves through drilling and to develop the mining and processing facilities and infrastructure at any
site chosen for mining. If our exploration costs are greater than anticipated, we will have fewer funds for our exploration activities
and for our general and administrative expenses, which in turn will adversely affect our financial condition and ability to pursue
our exploration programs. Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance
can be given that minerals will be discovered in sufficient quantities to justify commercial operations, that commercially viable
mineral deposits exist on our properties or that funds required for development can be obtained on a timely basis.
Future Financing
There is no assurance that additional
funding will be available to the Company for further exploration and development of its current and future projects in order for
the Company to achieve its long-term objectives. There can be no assurance that the Company will be able to obtain adequate financing
in the future or that the terms of such financing will be favourable. Failure to obtain such additional financing could result
in delay or indefinite postponement of further exploration and development of the Company's projects with the possible loss of
such properties.
Industry Specific Risks
The exploration, development, and production
of minerals are capital-intensive businesses, subject to the normal risks and capital expenditure requirements associated with
mining operations, which even a combination of experience, knowledge and careful evaluation may not be able to overcome.
Operations that we undertake will be subject
to hazardous risks incidental to exploration and test mining, including, but not limited to work stoppages, equipment failure and
possible environmental damage. Liabilities resulting from such events may result in us being forced to incur significant costs
that could have a material adverse effect on our financial condition and business prospects.
Limited Experience with Development-Stage
Mining Operations
The Company has limited experience in placing
resource properties into production, and its ability to do so will be dependent upon using the services of appropriately experienced
personnel or entering into agreements with other major resource companies that can provide such expertise. There can be no assurance
that the Company will have available to it the necessary expertise if the Company places its resource properties into production.
Factors Beyond Company's Control
Discovery, location and development of
mineral deposits depend upon a number of factors, not the least of which is the technical skill of the exploration personnel involved.
The exploration and development of mineral properties and the marketability of any minerals contained in such properties will also
be affected by numerous factors beyond the control of the Company. These factors include government regulation, high levels of
volatility in market prices, availability of markets, availability of adequate transportation and refining facilities and the imposition
of new, or amendments to existing, taxes and royalties. The effect of these factors cannot be accurately predicted.
Potential Conflicts of Interest
Certain members of the Company's board
of directors (the “Board”) and officers of the Company also serve as officers or directors of other companies involved
in natural resource exploration and development. Consequently, there exists the possibility that those directors and officers may
be in a position of conflict. In particular, Ken Z. Cai is a director of and serves in management in each of the Company, Minco
Silver and Minco Base Metals Corporation ("Minco Base Metals").
In addition, the Interim Chief
Financial Officer and the Corporate Secretary and the Director of Corporate Affairs of the Company are also the Interim Chief
Financial Officer and the Corporate Secretary and the Director of Corporate Affairs for Minco Silver and Minco Base Metals as
well. Any decision made by such directors and officers will be made in accordance with their duties and obligations to deal
fairly and in good faith with the Company and such other companies. In addition, such directors and officers will declare,
and refrain from voting on, any matter in which such directors or officers may have a conflict of interest. Nevertheless,
there remains the possibility that the best interests of the Company will not be served because its directors and officers
have other commitments. Matters between the Company and Minco Silver which put any of the directors or officers of the
Company in a position of conflict are approved by the audit committee of the Board, which is comprised solely of independent
directors.
In addition to the potential conflicts
described above, some of the directors and officers of the Company are also directors or officers of other reporting and non-reporting
issuers who are engaged in other industry sectors. Accordingly, conflicts of interest may arise which could influence the decisions
or actions of directors or officers acting on behalf of the Company.
Scope of Business
In China, companies are granted a business
license which specifies the scope of activities that they are permitted to undertake. The Company still has two mineral interests
in China, which are held in trust by Minco China for the Company Although
Minco China has taken steps to ensure that all of its business activities are within the scope of its business license,
there is no assurance that the relevant Chinese authorities will agree with such assessment. If Minco China is determined
to have exceeded the scope of its business license, it could be subject to penalties or other sanctions.
Uninsured Risks
The Company's mining activities are subject
to the risks normally inherent in mineral exploration, including, but not limited to, environmental hazards, industrial accidents,
flooding, periodic or seasonal interruptions due to climate and hazardous weather conditions, and unusual or unexpected formations.
Such risks could result in damage to or destruction of mineral properties or production facilities, personal injury, environmental
damage, delay in mining and possible legal liability. The Company may become subject to liability for pollution and other hazards
against which it cannot insure or against which it may elect not to insure because of high premium costs or other reasons. The
payment for such liabilities would reduce the funds available for exploration and mining activities and may have a material impact
on the Company's financial position.
Currency Exchange Rates
Historically, the Company has maintained
its accounts in Canadian dollar and RMB denominations. During the year ended December 31, 2015, the Company disposed of all of
its operating subsidiaries located in China. As a result, the Company’s cash balance as at December 31, 2015 was comprised
of only United States dollars and Canadian dollars. The Company is actively looking for new business opportunities and precious
metal assets with merit around the world. The Company is subject to foreign currency fluctuations, which may affect its financial
position and operating results if the Company acquires new business opportunities that are operated in a currency other than the
Canadian dollar. The Company does not currently have a formal hedging program to mitigate foreign currency exchange risks.
Competition
The precious metal minerals exploration
industry and mining business are intensely competitive. The Company competes with numerous other companies and individuals in the
search for and the acquisition of attractive precious metal mining properties. Many of these competitors have
substantially greater technical and financial resources than the Company. Competition could adversely affect the Company's ability
to acquire suitable properties or prospects in the future.
Uncertainty of Estimates
Resource and reserve estimates of minerals
are inherently imprecise and depend to some extent on statistical inferences drawn from limited drilling, which may prove unreliable.
Although estimated recoveries are based upon test results, actual recovery may vary with different rock types or formations in
a way which could adversely affect operations.
Reliance on Management and Directors
The success of the Company is currently
largely dependent on the performance of its officers. The loss of the services of these persons could have a materially adverse
effect on the Company's business, prospects, and financial position. There is no assurance that the Company can maintain the services
of its officers or other qualified personnel required to operate its business. Failure to do so could have a material adverse effect
on the Company and its prospects. The Company has not purchased any "key-man" insurance with respect to any of its directors
or officers as of the date hereof.
Fluctuating Mineral Prices
Factors beyond the control of the Company
may affect the marketability of metals discovered, if any. Metal prices have fluctuated widely, particularly in recent years. The
effect of these factors cannot be predicted. Fluctuations in the price of precious metal may also adversely affect our ability
to obtain future financing to fund our planned exploration programs.
The Mining Industry Is Highly Speculative
The Company is engaged in the exploration
for minerals, which involves a high degree of geological, technical and economic uncertainty because of the inability to predict
future mineral prices, as well as the difficulty of determining the extent of a mineral deposit and the feasibility of its extraction
without incurring considerable expenditures.
Environmental Considerations
Although China has enacted environmental
protection legislation to regulate the mining industry, due to the very short history of this legislation, national and local environmental
protection standards are still in the process of being formulated and implemented. The legislation provides for penalties and other
liabilities for the violation of such standards and establishes, in certain circumstances, obligations to rehabilitate current
and former facilities and locations where operations are being or have been conducted.
Although the Company intends to fully comply
with all environmental regulations, there is a risk that permission to conduct exploration and development activities could be
withdrawn temporarily or permanently where there is evidence of serious breaches of such standards.
Terrorist or Cyber-Attacks
Terrorist attacks and threats, cyber-attacks,
escalation of military activity or acts of war may have significant effects on general economic conditions and market liquidity,
each of which could materially and adversely affect the Company’s business. Future terrorist or cyber-attacks, rumors or
threats of war, actual conflicts involving the United States, Canada or their respective allies, or military or trade disruptions
may significantly affect the Company’s operations. The Company does not maintain specialized insurance for possible liability
resulting from a cyber-attack on its assets that may impact the Company’s business. It is possible that any of these occurrences,
or a combination of them, could have a material adverse effect on the Company’s business, financial condition and results
of operations.
Item
4. Information on the company
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A.
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HISTORY AND DEVELOPMENT OF THE COMPANY
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Name, Address and Incorporation
Minco Gold was incorporated under the
Business
Corporations Act
(British Columbia) on November 5, 1982, under the name "Caprock Energy Ltd." The Company changed
its name to "Minco Gold Corporation" on January 29, 2007. As at December 31, 2015, the Company did not have subsidiaries,
and had a 18.45% equity interest in Minco Silver. See "
Item C: Organizational Structure
".
The principal executive office and registered
office of the Company is located at Suite 2772, 1055 West Georgia Street, Vancouver, British Columbia, Canada,
V6E 3R5,
telephone number 604-688-8002, fax number 604-688-8030 and email address info@mincomining.ca. The Company's shares trade on the
Toronto Stock Exchange (the "TSX") under the trading symbol "MMM". The Company began trading on the NYSE MKT
on November 22, 2005 under the trading symbol "MMK". On February 1, 2007, the trading symbol on the NYSE MKT was changed
from "MMK" to "MGH". The Company began trading on the Frankfurt Stock Exchange on May 9, 2007 under the trading
symbol "MI5".
The Company is in the exploration stage
and had no operating revenue during the years ended December 31, 2015, 2014 and 2013. Since the signing of the Company's first
co-operation agreement in China in 1995, the Company has been active in mineral exploration, property evaluation and acquisition
in China. Over the years, the Company has established strong ties with Chinese governmental bureaus and also with Chinese mining
enterprises. The Company's senior management has in-depth experience with the intricacies of Chinese mining laws, permitting and
licensing procedures.
On May 22, 2015, the Company entered into
the share purchase agreement (the “SPA”) with Minco Silver and Minco Silver’s wholly-owned subsidiary, Minco
Resources Limited (“Minco Resources”). Pursuant to the SPA, the Company sold all of its shares in Minco Resources,
which holds Minco China. Minco China owns certain subsidiaries including Yuanling Minco Mining Ltd. ("Yuanling Minco"),
Tibet Minco Mining Co. Ltd. ("Tibet Minco"), Huanihua Tiancheng Mining Ltd. ("Huanihua Tiancheng"), legal ownership
of Foshan Minco Mining Co. Ltd. (“Foshan Minco”) and a 51% interest in Guangzhou Mingzhong Mining Co., Ltd. ("Mingzhong"),
which owns the Changkeng Gold Project (the “Disposition”)
Three assets previously owned by Minco
Resources have been excluded and are retained by the Company, namely the Longnan Property, the Gold Bull Mountain Property and
the contingent receivable from a legal settlement with 208 Team (as defined herein) (collectively, the “Retained Assets”).
The aggregate purchase price for the Disposition was $13,716,397, net of other adjustments of $15,863. In accordance with the SPA,
$3,700,000 was used to repay the amounts due from the Company to Minco Silver. The Disposition was completed on July 31, 2015 and
the Company has received the purchase proceeds from Minco Silver.
As the Company does not have a subsidiary
in China, the Company has entered into a trust agreement with Minco Silver and Minco China, whereby Minco China holds the Retained
Assets in trust for the Company (the “MC Trust Arrangement”).
After completion of the Disposition, the
Company intends to use the proceeds from the sale of its subsidiaries to pursue strategic mineral acquisitions, joint ventures
or other transactions outside of China while continuing to evaluate its current remaining Retained Assets and business activities
in China.
At present, the Company is an exploration-stage
company and further exploration will be required on its properties before final evaluations as to commercial feasibility can be
determined. None of the mineral properties owned by the Company have known reserves, and none of such properties are in commercial
development or production stage. No assurance can be given that any of the Company's properties will become commercially viable.
The Company has not generated cash flows from operations. These facts increase the uncertainty and risks faced by investors in
the Company. See "Item 3: Key Information – D. Risk Factors".
Overview for 2015
Changkeng Property – The Company
completed the sale of the Changkeng Property to Minco Silver in July 2015. The Company did not conduct any exploration activities
in the past three years for the Changkeng Property, other than as required to maintain the exploration permit.
Longnan Property - This is the first component
of the Retained Assets held by the Company after completion of the Disposition. Minco China is holding nine exploration permits
in the trust for the Company in the Longnan region, which is within the southwest Qinling Gold field that is in the southern Gansu
Province in China. The Longnan Property consists of three projects according to their geographic distribution, type and potential
of mineralization.
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Yejiaba:
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Includes four exploration permits along a regional structural belt parallel to the Yangshan gold
belt. There is potential in this area for polymetallic
mineralization (gold-silver-iron-lead-zinc). The Company completed the NI 43-101 compliant technical report (refer to above) on
Yejiaba Project, a copy of which is available on SEDAR.
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Yangshan:
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Includes four remaining exploration permits located in the northeast extension of the Yangshan
gold belt and its adjacent area.
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Xicheng East:
Includes one exploration permit for the east extension of the Xicheng Pb-Zn mineralization belt. There is potential in this
area for polymetallic mineralization (gold-silver-lead-zinc).
Gold Bull Mountain Property– This
is the second component of the Retained Asset. The Company did not conduct any exploration activities during 2015. The Company
is considering various options, including, but not limited to, the disposition of this property.
Equity Investment in Minco Silver - as
at December 31, 2015, the Company held a 18.45% equity interest in Minco Silver, a publicly traded company listed on the TSX under
the symbol “MSV”.
As at December 31, 2015, management evaluated its equity investment
in Minco Silver for indications that the impairment loss that had been recognized in the first quarter of fiscal 2015 either no
longer existed or had decreased. The company concluded that due to the positive developments in Minco Silver, which included the
acquisition of Minco Resources and the related activities associated with the Changkeng project, accompanied by a corresponding
increase in the market value of Minco Silver’s share price, that there were indicators that impairment
loss had reversed. As a result, management estimated the recoverable amount and reversed the previously recognized impairment.
Chinese Mining Regulations
Government Regulations of Mineral
Resources and Ownership
Exploration for and exploitation of mineral
resources in China are governed by the
Mineral Resources Law of China
of 1986, amended effective January 1, 1997, and the
Implementation Rules for the Mineral Resources Law of China
, effective March 26, 1994. In order to further implement these
laws, on February 12, 1998, the State Council issued three sets of regulations: (i)
Regulation for Registering to Explore Mineral
Resources Using the Block System
, (ii)
Regulation for Registering to Mine Mineral Resources
, and (iii)
Regulation
for Transferring Exploration and Mining Rights
(together with the mineral resources law and implementation rules, referred
to herein as the "Mineral Resources Law"). Under the Mineral Resources Law, Ministry of Land and Resources (“MOLAR”)
is charged with supervision nationwide of mineral resources prospecting and development.
The Mineral Resources Law provides for
equal legal status for domestic enterprises and enterprises with foreign investment, security and transferability of mineral titles
as well as the exclusivity of mining rights. The right to explore and exploit minerals is granted by way of exploration and mining
rights. The holder of an exploration right has the privileged priority to obtain the mining right to the mineral resources in the
exploration area, provided the holder meets the conditions and requirements specified in the law.
Foreign Investment
Direct foreign investment in China usually
takes the form of equity joint ventures ("EJVs"), cooperative joint ventures ("CJVs") and WFOEs. These investment
vehicles are collectively referred to as foreign investment enterprises ("FIEs"). An EJV is a Chinese legal person and
consists of at least one foreign party and at least one Chinese party. An EJV generally takes the form of a limited liability company.
It is required to have registered capital, to which each party to the EJV subscribes. Each party to the EJV is liable to the EJV
up to the amount of the registered capital subscribed by it.
Mineral Resources Permits
The
Provisions in Guiding Foreign Investment
and the Industrial Catalogue in Guiding Foreign Investment
, which was updated on April 1, 2002, January 1, 2005, October 31,
2007 and December 2011 (the "Investment Guiding Regulations"), govern foreign investment in China and categorize industries
into three types where foreign investment is: (i) encouraged, (ii) restricted, or (iii) prohibited. Industries not listed in any
of the three categories are deemed permitted.
In mining industries, "encouraged"
projects include the exploration and mining of coal (and its derived resources), iron, manganese, copper and zinc minerals, etc.
"Restricted" projects include the exploration and mining of the minerals of tin, antimony and other noble metals including
gold and silver, etc. "Prohibited" projects include the exploration and mining of radioactive minerals and rare earth.
Foreign investment is "permitted" if the exploration and mining of the minerals is not included in one of these three
categories. Subject to the Investment Guiding Regulations, foreign investment in the exploration and mining of minerals is generally
encouraged, in particular in relation to minerals in the western region of China.
Until January 2000, the production, purchasing,
distributing, manufacturing, using, recycling, import and export of silver was strictly regulated by the
Regulations of the
People's Republic of China on the Control of Gold and Silver
. Since then, China's silver market has been fully opened and silver
is now treated as a commodity not subject to any special control or restrictive regulation by the state. However, foreign investment
in the exploration and mining of silver remains restricted.
China has adopted, under the Mineral Resources
Law, a licensing system for the exploration and exploitation of mineral resources. MOLAR and its authorized provincial or local
departments are responsible for approving applications for exploration permits and mining permits. The approval of MOLAR is also
required to transfer those rights.
Applicants must meet certain conditions
for qualification set by the state. Pursuant to the Mineral Resources Law, the applicant for a mining right must present stated
documents, including a plan for development and use of the mineral resources and an evaluation report of the environmental impact
thereof. The Mineral Resources Law allows individuals to excavate sporadic resources, sand, rocks and clay for use as materials
for construction and a small quantity of mineral resources for sustenance. However, individuals are prohibited from mining mineral
resources that are more appropriate to be mined in scale by an enterprise, the specified minerals that are subject to protective
mining by the state and certain other designated mineral resources, as may be determined by MOLAR. Once granted, all exploration
and mining rights are protected by the state from encroachment or disruption under the Mineral Resources Law. It is a criminal
offence to steal, seize or damage exploration facilities, or disrupt the working order of exploration areas.
Exploration Rights
Exploration permits are registered and
issued to "licensees". The period of validity of an exploration permit can have a maximum term of three years. The exploration
permit is described by a "basic block". An exploration permit for metallic and non-metallic minerals has a maximum of
40 basic blocks.
When a mineral that is capable of economic
development is discovered, the licensee may apply for the right to develop such mineral. The period of validity of an exploration
permit can be extended by application and each extension can be no more than two years in duration. During the term of an exploration
permit, the licensee has the privileged priority to obtain the mining right to the mineral resources in the exploration area covered
by the exploration permit, provided it meets the conditions of qualification for mining rights holders. Further, the licensee has
the rights to, among other things: (i) explore without interference within the area under permit during the permit term, (ii) construct
exploration facilities, and (iii) pass through other exploration areas and adjacent ground to access the permitted area. After
the licensee acquires an exploration permit, the licensee is obliged to, among other things: (i) start exploration within the prescribed
term, (ii) explore according to a prescribed exploration work scheme, (iii) comply with state laws and regulations regarding labor
safety, water and soil conservation, land reclamation and environmental protection, (iv) make detailed reports to local and other
licensing authorities, (v) close and occlude the wells arising from prospect work, (vi) take other measures to protect against
safety concerns after the prospect work is completed, and (vii) complete minimum exploration expenditures as required by the
Regulations
for Registering to Explore or Mineral Resources Using the Block System
.
Transferring Exploration and Mining
Rights
A mining enterprise may transfer its exploration
or mining rights to others, subject to the approval of MOLAR or its authorized departments at the provincial or local level, as
the case may be. An exploration permit may only be transferred if the transferor has: (i) held the exploration permit for two years
as of the issue date, or discovered minerals in the exploration block, which are able to be explored or mined further, (ii) a valid
and subsisting exploration permit, (iii) completed the stipulated minimum exploration expenditure, (iv) paid the user fees and
the price for prospect rights pursuant to the relevant regulations, and (v) obtained the necessary approval from the authorized
department in charge of the minerals. Mining rights may only be transferred if the transferor needs to change the ownership of
such mining rights because it is: (i) engaging in a merger or split, (ii) entering into equity or cooperative joint ventures with
others, (iii) selling its enterprise assets, or (iv) engaging in a similar transaction that will lead to the alteration of the
property ownership of the enterprise. A mining permit may only be transferred if the transferor has: (i) commenced production for
no less than one year, (ii) a valid and subsisting mining permit without title dispute, and (iii) paid the user fees, the price
for the mining right, any applicable resource tax and any mineral resource compensation required pursuant to applicable laws.
Environmental Laws
The laws and policies for environmental
protection in China have moved towards stricter compliance and stronger enforcement. The basic laws in China governing environmental
protection in the mineral industry sector of the economy are the
Environmental Protection Law
, the
Environment Impact
Assessment Law
and the
Mineral Resources Law
. The State Administration of Environmental Protection and its provincial
counterparts are responsible for the supervision of implementation and enforcement of environmental protection laws and regulations.
Provincial governments also have the power to issue implementing rules and policies in relation to environmental protection in
their respective jurisdictions. Applicants for mining rights must submit environmental impact assessments and those projects that
fail to meet environmental protection standards will not be granted licenses.
In addition, after exploration the licensee
must perform water and soil maintenance and take steps towards environmental protection. After the mining rights have expired or
the concessionaire stops mining during the permit period and the mineral resources have not been fully developed, the concessionaire
shall perform water and soil maintenance, land recovery and environmental protection in compliance with the original development
scheme, or must pay the costs of land recovery and environmental protection. After closing, the mining enterprises shall perform
water and soil maintenance, land recovery and environmental protection in compliance with mine closure approval reports, or must
pay the costs of land recovery and environmental protection.
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C.
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Organizational Structure
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As at the date of this Annual Report and
as at December 31, 2015, the Company does not have any subsidiaries. The Company holds its mineral properties in China through
Minco China by the MC Trust Arrangement discussed above.
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D.
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DESCRIPTION OF PROPERTIES
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The following discussion summarizes information
regarding the properties that Minco Gold holds.
LOCATION
The Longnan project is the first component
of the Retained Assets. The properties are located at the southern part of Gansu province, 30km north-east from Longnan (Wudu)
City and 250km south-west from the nearest railway station and the airport in Tienshui city. The area is connected with the provincial
center Lanzhou and major cities with paved roads. A new highway and a railway are under construction to connect Longnan City with
Chengdu and Lanzhou. Construction is expected to be completed in 2015. The project area lies in the transition area of China's
steppes with the Southern Gansu Plateau in the west, Sichuan Basin in the south, Qinling Mountains and Hanzhong Basin in the east,
as well as the Loess Plateau in the north. The terrain is higher in the northwest and lower in the southeast. High Peneplenized
Mountains and deep valleys interweave with hills and basins. Elevations vary from 1900m to 2600m above sea level. Longnan area
has a temperate, monsoon-influenced semi-arid climate with chilly winters and hot, moderately humid summers. Due to the protected
valley location and the southerly location within the province, the area is one of the warmest in Gansu, with annual temperatures
ranging from 10 to 15 °C (50 to 59 °F). The annual precipitation is 400 to 1000 mm, while there are between 160
to 280 frost free days and the annual mean sunshine total is 1,850 sunlight hours. Rainfall tends to be greatest during the summer.
The population of Longnan district is
540,000 (estimated in 2004). The area surrounding the Yejiaba Project is sparsely populated by people in small scattered villages.
Labor is available locally. The area is rich with building materials. To the Company’s knowledge, no formal exploration work
had previously been undertaken on the Longnan Project.
Geological Map of Longnan District
OWNERSHIP
The focus of the Company's activities has
been the exploration of its projects in the Longnan region, in particular the Yejiaba Project. Minco China, the Company’s
former wholly-owned subsidiary, held nine exploration permits in the Longnan region in the south of Gansu Province in China. The
Longnan region consists of three projects according to their geographic distribution, type and potential of mineralization within
the southwest Qinling gold field.
Yejiaba: Includes four exploration permits
along a regional structural belt parallel to the Yangshan gold belt. There is potential in this area for polymetallic mineralization
(gold-silver-iron-lead-zinc). The Company completed a NI 43-101 compliant technical report on Yejiaba titled "
Independent
Technical Report on the Yejiaba Gold – Polymetallic Project – Gansu Province, P.R. China
", prepared by Calvin
R. Herron, P. Geo. Ontario, a consultant to the Company and a qualified person for the purposes of NI-43-101, dated effective April
29, 2012 and which has been filed on SEDAR. This report summarizes the work conducted on the Yejiaba project to April 2012 and
includes independently verified sampling.
Yangshan: Includes four exploration permits
located in the northeast extension of the Yangshan gold belt and its adjacent area. The primary potential in this area is for gold.
Xicheng East: Includes one exploration
permit for the east extension of the Xicheng Pb-Zn mineralization belt. There is potential in this area for polymetallic mineralization
(gold-silver-lead-zinc).
The Company renewed the above exploration
permits, which expire on March 30, 2017.
On December 13, 2013, Minco China entered
into an agreement with Gansu Yuandong Investment Co., Ltd (“YDIC”) pursuant to which Minco China agreed to sell two
exploration permits in the Xicheng East and Yangshan area to YDIC for RMB 800,000 ($140,000). The process of transferring title
to the two permits to YDIC is pending approval by Gansu Province and the proceeds from this sale have not been received as of the
date of this report.
On December 26, 2014, Minco China
entered into an agreement with Beijing Runlong Investment Limited Company (“Beijing Runlong”) in which Minco China
agreed to sell four exploration permits in the Yangshan area to Beijing Runlong for total cash proceeds of RMB 3,200,000 ($604,618).
Beijing Runlong must make the following
payments to Minco China:
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i)
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5% of the total cash proceeds within 20 working days from the date
of signing the agreement;
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ii)
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45% of the total cash proceeds upon receiving the approval of the
transfer from the Provincial land and resources administrative authority, before submitting to MOLAR; and
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iii)
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50% of the total cash proceeds within 5 days upon receiving the approved
exploration rights license.
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The process of transferring title
to the four permits to Beijing Runlong is pending approval by Gansu province and the proceeds from this sale have not been received
as of the date of this report. The Company did not record a receivable due to the uncertainty of collection and is actively following
up with collection through Minco China.
EXPLORATION ACTIVITIES
Yejiaba Project
The Yejiaba Project is located along the
collisional boundary separating the Huabei and Yangtze Precambrian cratons. This major east-west trending collision zone has localized
a number of large gold and polymetallic deposits within a geologic province that is often referred to as the Qinling Orogenic Belt.
Gold and polymetallic mineralization on the Company’s lease package is generally hosted in Silurian-Devonian, thin-bedded
limestone interbedded with phyllite. Mineralization is associated with shears and quartz veins, with higher grades typically found
along sheared contacts separating massive limestone from the thin-bedded limestone and phyllite unit. Granite porphyry and quartz
diorite dykes tend to be spatially associated with mineralization. Alteration accompanying mineralization consists of weak silicification
and pyritization with carbonate veining and secondary carbon. Small quartz veinlets are noted in several places. Associated metals
consist of silver, lead, antimony and arsenic.
Semi-regional geochemical anomalies were
first delineated by the Company in 2005, extending 10 km along a hydrothermally altered zone that follows a northeast trending
thrust and regional unconformity.
Subsequent work between 2006 and 2012 has
included traverse-line investigations, soil sampling, geologic mapping, geophysical surveys (ground magnetic and IP), trenching
and drilling.
To date, several targets have been identified
and tested including: Shanjinba (Zone 1 and 2), Yaoshang, Fujiawan, Baimashi, Bailuyao, Baojia and Paziba.
The Company engaged an independent consultant
to conduct a detailed review of the Yejiaba Project in April 2013, in particular to focus on the Baimashi North and East Targets.
The sample work performed on the Yejiaba project during 2013 consisted of 912 rock chip samples, 818 soil samples, 41 stream sediment
samples and 339 trench channels. The detailed results at the Baimashi North and East Targets are described in below.
Sampling and assaying
The channel samples taken in the trenches
are generally 10 cm wide, 5 cm deep lengths are typically 1m but can be slightly longer or shorter to match geological boundaries.
Only significant channel sample results are reported below, where composited gold grades are over 0.50 g/t. Reported composites
may comprise individual samples with gold assays lower than 0.5g/t if it is deemed that the geology and mineralization is continuous
over the interval. Channel sample intervals may not necessarily represent true thickness of the mineralization. Sample preparation
was performed by SGS-Tianjin, an independent laboratory, at their laboratory in Xian, China. SGS-Tianjin holds ISO 9001:2008 and
ISO/IEC 17025:2005 accreditations. Pulps are then analyzed at the SGS-Tianjin assay facility in Tianjin, China. Sample quality
assurance and quality control methods consisted of insertion of blank and duplicates in the field (one in twenty samples), while
SGS-Tianjin inserted analytical duplicates and reference standards into the sample stream at their laboratory.
Baimashi North Target
The Company’s 2014 exploration
program at its Yejiaba Gold Project in southern Gansu Province was concluded on January 1, 2015. Starting in July 2014, four diamond
holes were drilled for a total of 870.35m within the Baimashi North Target, testing an area of widespread artisanal mining activity
that displayed favorable potential for hosting a bulk-tonnage, low grade gold system. This scout drilling program evaluated a variety
of Au-As geochemical anomalies and Au-bearing structures identified by Minco’s 2013/2014 surface and underground sampling
within an area measuring 1000m long by 500m wide. As of the date hereof, assays received from SGS Tianjin for the first three drill
holes plus the upper half of the fourth hole are presented below. The bottom half of the fourth hole is still being processed.
The Baimashi drill results received
so far from SGS are tabulated as follows, bearing in mind only the assays for the top half of BMS-14-004 have been included:
|
Table 1. Significant gold intercepts in 2014 Baimashi North drill holes.
|
|
Hole #
|
From (m)
|
To (m)
|
Interval (m)
|
Au (g/t)
|
|
BMS-14-001 (223.57m TD)
|
9.00
|
22.02
|
13.02
|
0.346
|
|
191.94
|
192.74
|
0.8
|
6.948
|
|
192.74
|
196.37
|
3.63
|
0.902
|
|
198.50
|
199.44
|
4.96
|
1.156
|
|
BMS-14-002 (158.20m TD)
|
29.47
|
31.86
|
2.39
|
0.391
|
|
BMS-14-003 (182.23m TD)
|
33.80
|
36.00
|
2.20
|
0.331
|
|
82.75
|
84.82
|
2.07
|
0.392
|
|
BMS-14-004 (253.18m TD)
|
18.20
|
20.20
|
2.00
|
0.498
|
|
35.00
|
36.00
|
1.00
|
0.498
|
|
78.30
|
79.10
|
0.80
|
1.076
|
The first hole at BMS-14-004 hosts
the best gold results, with several stretches of low-grade mineralization punctuated by a high-grade vein (0.8m @ 6.948 g/t) hit
at 192m. The gold mineralization seen in our holes did not have the higher gold grades at depth that we hoped to encounter, which
greatly diminished the potential for a bulk tonnage deposit within North Baimashi target. Potential exists for low-tonnage, vein-type
mineralization of moderate grade (2.5g/t to 7g/t) along narrow (generally <1m thick), high-angle shears and dike contacts. Such
potential grade is conceptual in nature, there has been insufficient exploration to define a mineral resource and that it is uncertain
if further exploration will result in the target being delineated as a mineral resource. These targets may be of interest to small
mine operators.
Gold Mineralization Observed within
the Baimashi North Target
The Rock Gold Zone shown in Figure 1
represents the distribution of rock chip gold values exceeding 0.100ppm, and the zone boundaries were defined by combining the
rock chip and soil sample results together with the structural data. The gold-in-soil distribution fairly represents the gold zone.
Figure1. Outline of Baimashi North Gold
Mineralization Zone relative to soil samples results
In Figure 2, the same Rock Gold Zone is
shown relative to the distribution of rock chip sample results together with the mapped mineralized structures (shears, veins,
dikes). Here again, the sample data fits well within the zone boundaries, which suggests that the soil sample values generally
do a fair job of reflecting the rock sample data. The dominantly northeast-trending Rock Gold Mineralization Zone is approximately
1,200m long by 600m wide. It measures 317,000m2 in plain view and is open to the north.
Figure 2. Outline of Baimashi North Gold
Mineralization Zone relative to rock chip results and mineralized structures.
Samples collected within the Baimashi
North Target
Following the encouraging results found
in the third quarter of 2013 described below, a total of 589 soil samples and 39 rock samples were collected within this target
during the fourth quarter of 2013. The soil sample results show a gold range from 0.005 to 3.968 ppm (refer to Table 2).
|
Table 2. Summary of sample types collected within the Baimashi Targets
|
|
|
# of Samples
|
Gold Range (ppm)
|
Average Au (ppm)
|
|
Rock Chip
|
912
|
<0.005 – 47.115
|
0.729
|
|
Soil
|
818
|
<0.005 – 3.968
|
0.055
|
|
Trench Channels
|
339
|
<0.005 – 14.250
|
0.190
|
|
Stream Sediment
|
41
|
<0.005 – 0.226
|
0.015
|
During the year ended December 31,
2013, 247 rock chip samples, 125 soil samples and 41 stream sediment samples within Baimashi North Target were collected.
The 247 rock samples collected within the
Rock Gold Mineralization Zone range from 0.005 to 47.115ppm Au and average 1.49ppm, which is a potentially economic grade for an
open-pit operation if this grade can be maintained at depth. Such potential grade is conceptual in nature, there has been insufficient
exploration to define a mineral resource and it is uncertain if further exploration will result in the target being delineated
as a mineral resource. A rough analysis of the rock sample data is presented in Table 2, where a high percentage of samples (39%)
returned gold values exceeding 0.5 g/t, while 68% returned in excess of 0.1 g/t. Six samples included in the >3.0 ppm Au category
in Table 3 exceed 10ppm Au. If these six high-grade samples are excluded, the overall average grade drops to 1.00ppm, which illustrates
the weight carried by high-grade numbers in this zone.
|
Table 3. Summary of rock chip sample results (excludes dumps)
|
|
Sample Ranges
|
Number of Samples
|
% of Total Samples
|
Average Au (ppm)
|
Average As (ppm)
|
Average Sb (ppm)
|
|
>3.0 ppm Au
|
22
|
8
|
8.391
|
4292
|
99
|
|
1.0-3.0 ppm Au
|
48
|
17
|
1.764
|
2358
|
66
|
|
0.5-1.0 ppm Au
|
41
|
14
|
0.691
|
1797
|
54
|
|
0.1-0.5 ppm Au
|
83
|
29
|
0.276
|
1340
|
25
|
|
<0.1 ppm Au
|
94
|
32
|
0.027
|
241
|
8
|
The overall gold grade distribution is summarized
in Table 4.
|
Table 4. Distribution of gold grades in 247 rock samples collected at Baimashi North Target
|
|
Grade Range (ppm Au)
|
<0.1
|
0.1 -- 0.5
|
0.5 -- 2
|
2 -- 4
|
4 -- 6
|
6 -- 8
|
>8
|
|
% of Total
|
18
|
32
|
33
|
9.3
|
3.2
|
1.6
|
2.4
|
The rock samples collected within
this zone tested a variety of geologic features and they can be grouped into vein/fault, dike-related, and altered rock types.
The carbonate veins and altered faults usually range from 0.1m to 1.0m wide, and the sampling often includes some of the surrounding
low-grade wallrock. Altered dikes and dike margins were also sampled as a separate rock type, as were several zones of altered
phyllitic limestone (the “altered rock type”) hosting stockwork-type carbonate veinlets.
Averaged Au-As sample results for these
three rock groups are compared in Table 5. Based on the As:Au ratios, arsenic values look to be following the intrusive dikes and
sills, which suggests a congenetic relationship between the intrusive plumbing and Au-As mineralization. In contrast, the lower
As:Au ratio seen in the vein/fault type is attributed to post-intrusion mineralization in younger, more dilatant zones.
|
Table 5. Comparison of Au-As mineralization in major sample types at Baimashi North Target
|
|
Sample Type
|
Ave. Au (ppm)
|
Ave. As (ppm)
|
As/Au Ratio
|
|
V: Vein/Fault type
|
2.190
|
2185
|
997
|
|
D: Dike related
|
0.951
|
1726
|
1815
|
|
R: Altered rock type
|
0.958
|
1325
|
1383
|
Yangshan and Xicheng East
During 2015, the Company did not
conduct any exploration activities on these two projects except as required to maintain the exploration permits in respect of such
projects.
|
II.
|
|
TUGURIGE GOLD PROJECT
|
On December 16, 2010, Minco China entered
into a joint venture agreement (the "JV Agreement") with 208 Team, a subsidiary of China National Nuclear Corporation,
to acquire a 51% equity interest in the Tugurige Gold Project located in Inner Mongolia, China. 208 Team did not comply with certain
of its obligations under the JV Agreement. As a result, Minco China commenced legal action in China seeking compensation.
On March 25, 2013, Minco China settled
its claim against 208 Team relating to the JV Agreement for RMB 14 million ($2.4 million). The Company received RMB 5 million ($801,395)
during 2013 and RMB 4 million ($699,688) in 2014.
As at December 31, 2015, the remaining
RMB 5 million ($1,014,734) balance due under the legal settlement had not been received. The Company has not recognized the receivable
due to the uncertainty of collection. Any amounts that may be recovered in the future belong to the Company as it is the third
component of the Retained Assets as discussed above. Minco China, which is no longer a wholly-owned consolidated subsidiary of
Minco Gold, advises that they have recommenced legal action in China seeking compensation.
|
III.
|
|
GOLD BULL MOUNTAIN PROPERTY
|
This is the second component of the Retained
Assets. The Company has not conducted exploration activities since 2008. The Company is assessing different options including the
disposition of the property.
Item
4A Unresoloved Staff Comments
There are no unresolved comments between
the Company and the staff of the SEC’s Division of Corporation Finance.
Item
5 Operating and Financial Review and Prospects
This discussion and analysis of the operating
results and the financial position of the Company for the financial years ended December 31, 2015, 2014 and 2013 should be read
in conjunction with the Company's consolidated financial statements and the related notes.
General
The Company is in the exploration stage
and had no operating revenue during the years ended December 31, 2015, 2014 and 2013. Since the signing of the Company’s
first co-operative agreement in China in 1995, the Company has been active in mineral exploration, property evaluation and acquisition
in China and plans to acquire a portfolio of precious metals properties in areas out of China
Results of Operations
For the years ended December
31, 2015 and 2014
Net income for the year ended December
31, 2015 was $14,320,556 (earnings of $0.28 per share) compared to a net loss of $7,497,794 (loss of $0.15 per share) for the comparative
period in 2014. The increase during the year was mainly due to the gain of $15,060,170 on the sale of Minco Resources (2014 - $Nil)
and share of gain from its equity-accounted for investment in Minco Silver (2014 – share of loss of $321,972), partially
offset by having exploration expense of $793,081(2014 - $1,177,817) and administrative expenses of $1,322,484 (2014 - $1,848,938)
The Company’s administrative expenses
in 2015 decreased by $526,450 as compared to 2014, which was mainly due to a decrease in share-based compensation of $217,340 (which
depends on timing of the grant and vesting of stock options) and an increase in foreign exchange gain of $226,470 (which depends
on the fluctuation of foreign exchange of Canadian dollar against RMB and US$).
For the years ended December
31, 2014 and 2013
The net loss for the year ended December
31, 2014 was $7,497,794 (loss of $0.15 per share) compared to a net loss of $2,943,305 (loss of $0.06 per share) for the comparative
period of 2013. The increase in net loss during the year was mainly due to the impairment recorded on the equity investment in
Minco Silver of $4,205,816 and the loss on the partial disposal of investment in Minco Silver of $399,536 recorded in 2014. The
net loss for the year ended December 31, 2013 included a gain of $1.34 million on a legal settlement with 208 Team and also an
exploration costs recovery of $622,293 received by Mingzhong.
The Company’s administrative expenses
in 2014 were $1,848,938, compared to $2,734,091 in the comparative period in 2013. The decrease was mainly due to a decrease in
share-based compensation.
Exploration costs
The following is a summary of exploration
costs incurred by each project for the periods indicated.
|
|
|
Accumulative to
|
|
|
Year Ended December 31,
|
December 31,
|
|
|
2015
|
2014
|
2013
|
2015
|
|
|
$
|
$
|
$
|
$
|
|
Longnan property
|
626,815
|
894,646
|
1,262,074
|
12,367,711
|
|
Changkeng Property (i) (ii)
|
122,652
|
244,784
|
(361,010)
|
8,285,703
|
|
Gold Bull Mountain (ii)
|
43,508
|
36,862
|
24,031
|
2,316,611
|
|
Miscellaneous (iii)
|
106
|
1,525
|
2,863
|
6,099
|
|
|
793,081
|
1,177,817
|
927,958
|
22,976,125
|
|
|
|
|
|
|
|
(i)
The Changkeng gold property was sold to Minco Silver on July 31, 2015. The amount presented in 2015 represents the amount
incurred up to July 31, 2015.
|
|
(ii)
|
During the year ended December 31, 2015 and 2014, the Company did not conduct any exploration activities
on the Changkeng and Gold Bull Mountain projects, except for maintaining the exploration permits.
|
|
|
(iii)
|
Miscellaneous exploration costs incurred for grass-root projects which are not significant to the
Company.
|
Administrative expenses
The Company’s administrative expenses
include overhead associated with administering and financing the Company’s development activities.
The following table is a summary of the
Company’s administrative expenses for the years ended December 31, 2015, 2014 and 2013.
|
|
December 31,
|
December 31,
|
December 31,
|
|
|
2015
|
2014
|
2013
|
|
Administrative expenses
|
$
|
$
|
$
|
|
Accounting and audit
|
152,777
|
105,423
|
111,905
|
|
Amortization
|
34,781
|
67,180
|
66,746
|
|
Consulting
|
78,267
|
11,633
|
30,453
|
|
Directors’ fees
|
73,124
|
54,188
|
49,749
|
|
Foreign exchange (gain) loss
|
(209,493)
|
16,977
|
19,692
|
|
Investor relations
|
37,051
|
24,726
|
116,814
|
|
Legal and regulatory
|
144,844
|
140,727
|
132,506
|
|
Office administration expenses
|
384,804
|
366,836
|
360,894
|
|
Property investigation
|
81,407
|
74,948
|
112,863
|
|
Salaries and benefit
|
388,887
|
618,926
|
655,585
|
|
Share-based compensation
|
80,248
|
297,588
|
993,331
|
|
Travel and transportation
|
75,791
|
69,786
|
83,553
|
|
|
1,322,488
|
1,848,938
|
2,734,091
|
Significant changes in administrative
expenses are as follows:
Accounting and auditing
Accounting and auditing expenses for the
year ended December 31, 2015 were $152,777 compared to $105,423 for the comparative period in 2014. The increase was due to additional
professional services provided in connection with the SPA.
Consulting fees
Consulting fees for the year ended December
31, 2015 were $78,267 compared to $11,633 for the comparative period in 2014. The increase was due to having a new Chief Financial
Officer in 2015.
Consulting fees for the year ended December
31, 2014 were $11,633 compared to $30,453 for the comparative period in 2013. The decrease was due to the reduction in the use
of external consultants in China in 2013.
Investor relations
Investor relations expenses for the year
ended December 31, 2015 were $37,051 compared to the $24,726 for the comparative period in 2014. The small increase was a result
of more activities in 2015.
Investor relations expenses for the year
ended December 31, 2014 were $24,726 compared to $116,814 for the comparative period in 2013. The decrease was mainly due to the
resignation of the Vice President of Corporate Communication during the third quarter of 2013.
Legal and regulatory
Legal, regulatory and filing expenses for
the year ended December 31, 2015 were $144,844, which is consistent with the $140,727 expense for the comparative period in 2014.
Legal, regulatory and filing expenses for
the year ended December 31, 2014 were $140,727, which was consistent with the $132,506 expense for the comparative period in 2013.
Property investigation
Property investigation expenses for the
year ended December 31, 2015 were $81,407, which was consistent with $74,948 for the comparative period in 2014.
Property investigation expenses for the
year ended December 31, 2014 were $74,948 compared to $112,863 for the comparative period in 2013. The decrease was due to the
Company’s Vice President of Business Development reducing his time spent on the Company’s operations during 2014.
Salaries and benefit
Salaries and benefit expense for the year
ended December 31, 2015 were $388,887 compared to $618,926 for the comparative period in 2014. The decrease was due to the closing
of our Chinese offices in 2015 after the completion of SPA.
Salaries and benefit expense for the year
ended December 31, 2014 were $618,926 compared to $655,585 for the comparative period in 2013. The decrease was due to a one-time
management bonus recorded in 2013 and the departure of our former Chief Financial Officer during 2014.
Share-based compensation
Share-based compensation expense for the
year ended December 31, 2015 were $80,248 compared to $297,588 for the comparative period in 2014. The decrease was due to less
options vesting in 2015.
Share-based compensation expense for the
year ended December 31, 2014 was $297,588 compared to $993,331 for the comparative period in 2013. The decrease was due to a lower
number of stock options being granted and a lower fair value of stock options granted based on the Black-Scholes option pricing
model in 2014 compared to 2013.
To date, the Company has been in the exploration
stage and has not earned revenue from operations. Income earned has included interest, rental and sundry income.
Finance and other income (expense)
For the year ended December 31, 2015, the
net amount of finance and other income was $15.18 million compared to the finance and other expenses of $4.07 million for the comparative
period in 2014. The other gain in 2015 represents a gain from legal settlements of $51,745 (2014-$148,739), interest income of
$64,819 (2014 - $17,570), a gain on the sale of Minco Resources and its subsidiaries of $15.06 million (2014 - $Nil), a net of
a loss of $Nil million (2014 - $4.21 million) from the impairment in the equity investment in Minco Silver, and a loss of partial
disposition of investment in Minco Silver of $Nil (2014 – loss of $400,000).
For the year ended December 31, 2014, the
net amount of finance and other expense was $4,070,890 compared to the finance and other income of $1,452,290 for the comparative
period in 2013. The other loss in 2014 was due to the partial disposal and impairment in the equity investment in Minco Silver
of $4,605,352 offset against a gain on the sale of an exploration permit.
Summary of quarterly results
|
|
2015 (unaudited)
|
2014 (unaudited)
|
|
|
Q4
|
Q3
(revised)
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
|
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Exploration recovery
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Exploration costs
|
194,428
|
124,814
|
208,905
|
264,934
|
322,904
|
348,045
|
236,981
|
269,886
|
|
Administrative expenses
|
107,728
|
263,730
|
502,614
|
448,416
|
427,621
|
372,313
|
501,224
|
547,780
|
|
Operating loss
|
(302,156)
|
(388,544)
|
(711,519)
|
(713,350)
|
(750,525)
|
(720,358)
|
(738,205)
|
(817,666)
|
|
Gain on legal settlement
|
-
|
-
|
-
|
51,745
|
148,739
|
-
|
-
|
-
|
|
Loss on partial disposition of equity investment in Minco Silver
|
-
|
-
|
-
|
-
|
-
|
-
|
(399,536)
|
-
|
|
Recovery (impairment) of equity investment in Minco Silver
|
2,205,638
|
966,009
|
295,027
|
(3,466,674)
|
(4,205,816)
|
-
|
-
|
-
|
|
Gain on sale of exploration permits
|
-
|
-
|
-
|
-
|
376,937
|
-
|
-
|
-
|
|
Gain (loss) on sale of Minco Resources
|
(69,000)
|
15,129,170
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Finance and other income
|
26,778
|
19,790
|
10,092
|
8,159
|
8,359
|
2,871
|
5,321
|
1,018
|
|
Impairment of property, plant and equipment
|
-
|
-
|
-
|
-
|
(48)
|
-
|
(8,736)
|
-
|
|
Gain (loss) for the period before loss from equity investment and dilution loss
|
(131,734)
|
15,726,425
|
(406,400)
|
(4,120,120)
|
(4,422,354)
|
(717,487)
|
(1,141,156)
|
(816,648)
|
|
Dilution loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(78,177)
|
|
Share of income (loss) from equity investment in Minco Silver
|
46,784
|
326,989
|
674,879
|
283,699
|
(47,126)
|
(3,194)
|
(216,378)
|
(55,274)
|
|
Net income (loss) before tax for the period
|
(84,950)
|
16,053,414
|
268,479
|
(3,836,421)
|
(4,469,480)
|
(720,681)
|
(1,357,534)
|
(950,099)
|
|
Net income(loss) for the period
|
(84,950)
|
16,053,414
|
268,479
|
(3,836,421)
|
(4,469,480)
|
(720,681)
|
(1,357,534)
|
(950,099)
|
|
Other comprehensive income (loss)
|
143,350
|
15,440
|
(557,969)
|
1,888,973
|
(102,109)
|
326,492
|
(418,682)
|
282,515
|
|
Comprehensive income (loss) for the period
|
58,400
|
16,068,854
|
(289,490)
|
(1,947,448)
|
(4,571,589)
|
(394,189)
|
(1,776,216)
|
(667,584)
|
|
Basic and diluted loss per share
|
0.00
|
0.32
|
0.01
|
(0.08)
|
(0.09)
|
(0.01)
|
(0.03)
|
(0.02)
|
|
Weighted average number of shares outstanding
|
50,561,381
|
50,017,670
|
50,581,381
|
50,536,264
|
50,488,078
|
50,501,567
|
50,498,215
|
50,436,548
|
Amendment to Quarterly Results
The Company has revised in the table
above its previously reported September 30, 2015 unaudited condensed consolidated interim financial statements to correct
the amount of the gain on sale of Minco Resources. In the quarter ended September 30, 2015, the Company recorded a gain
of $18,536,407. However, in connection with the preparation of its consolidated financial statements for the year ended
December 31, 2015, the Company corrected the gain to eliminate the portion related to the Company’s investment in Minco
Silver, the acquiring company. The elimination was recorded against the carrying value of the investment in Minco Silver. The
change had no impact on the statement of Financial Position, as the investment in Minco Silver was carried at the
estimated recoverable amount as at September 30, 2015.
The impact of these adjustments on the
September 30, 2015 unaudited condensed consolidated interim financial statements as a result of the change are presented in the
tables that follow:
|
Condensed Consolidated Interim Statement of Income (Loss) Impact
|
Three Months Ended September 30, 2015
|
|
|
As Reported
$
|
Adjustment
$
|
As Amended
$
|
|
Gain on sale of Minco Resources
|
18,536,407
|
(3,407,237)
|
15,129,170
|
|
(Impairment) recovery of equity investment in Minco Silver(1)
|
(2,441,228)
|
3,407,237
|
966,009
|
|
Net gain for the period
|
16,053,414
|
-
|
16,053,414
|
|
Net gain attributable to the Shareholders of the Company
|
16,057,986
|
-
|
16,057,986
|
|
Loss per share: Basic and Diluted
|
0.32
|
-
|
0.32
|
|
Condensed Consolidated Interim Statement of Income (Loss) Impact
|
Nine Months Ended September 30, 2015
|
|
|
As Reported
$
|
Adjustment
$
|
As Amended
$
|
|
Gain on sale of Minco Resources
|
18,536,407
|
(3,407,237)
|
15,129,170
|
|
(Impairment) recovery of equity investment in Minco Silver
|
(5,612,875)
|
3,407,237
|
(2,205,638)
|
|
Net gain for the period
|
12,485,472
|
-
|
12,485,472
|
|
Net gain attributable to the Shareholders of the Company
|
12,526,258
|
-
|
12,526,258
|
|
Loss per share: Basic and Diluted
|
0.25
|
-
|
0.25
|
1) In the first quarter of 2015, the Company recorded aggregate impairment for its equity investment in
Minco Silver of $
3,466,674. A
s
a result of the adjustment to the gain on the sale of Minco Resources, the amount of impairment for the third quarter was eliminated
and a net recovery of $966,009 was recorded as described in note 4 to the financial statements.
2) see Item 15, “controls
and procedures”.
Foreign
currency translation
(i) Functional and presentation currency
The financial statements of each
entity in the group use the currency of the primary economic environment in which the entity operates (the "functional currency").
The Company's consolidated financial statements are presented in Canadian dollars.
The functional currency of Minco
Gold is the Canadian dollar.
The functional currency of the
Company’s former Chinese subsidiaries is the RMB.
The financial statements of the
Company’s former Chinese subsidiaries ("foreign operations") were translated into the Canadian dollar presentation
currency as follows:
·
Assets and liabilities – at the closing rate at the date of the statement of financial position
|
|
·
|
Income and expenses – at the average rate of the period (as this is considered a reasonable
approximation to actual rates).
|
All resulting changes are recognized
in other comprehensive income as cumulative translation adjustments.
When the settlement of a monetary
item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange
gains and losses arising from the item are considered to form part of the net investment in a foreign operation and are recognized
in other comprehensive income.
When an entity disposes of its
entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the
foreign currency gains or losses accumulated in other comprehensive income related to the foreign operation are recognized in profit
or loss. If an entity disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount
of foreign currency gains or losses accumulated in other comprehensive income related to the subsidiary are reallocated between
controlling and non-controlling interests.
(ii) Transactions and balances
Foreign currency transactions
are translated into the functional currency of an entity using the exchange rates prevailing at the dates of the transactions.
Generally, foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation
at year-end exchange rates of monetary assets
and liabilities denominated in
currencies other than an operation’s functional currency are recognized in the statement of income (loss).
Inflation
The
Company does not believe that inflation has had or will have a material effect on its financial condition. However, no assurance
can be given that the Company will not experience a material adverse effect on its financial condition due to a substantial increase
in inflation.
Exploration
and evaluation costs
Exploration and evaluation costs include
costs to acquire the rights to explore, geological studies, exploratory drilling and sampling and directly attributable administrative
costs.
Exploration
and evaluation costs relating to non-specific projects or properties or those incurred before the Company has obtained legal rights
to explore an area are expensed in the period incurred. In addition, exploration and evaluation costs, other than direct acquisition
costs, are expensed before a mineral resource is identified as having economic potential.
Exploration
and evaluation costs are capitalized as mineral interests when a mineral resource is identified as having economic potential on
a property. A mineral resource is considered to have economic potential when it is expected that documented resources can be legally
and economically developed considering long-term metal prices. Therefore, prior to capitalizing such costs, management determines
that the following conditions have been met:
|
|
i)
|
there is a probable future benefit that will contribute to future
cash inflows;
|
|
|
ii)
|
the Company can obtain the benefit and control access to it;
and
|
|
|
iii)
|
the transaction or event giving rise to the benefit has already
occurred.
|
Once
the technical feasibility and commercial viability of the extraction of resources from a particular mineral property has been determined,
mineral interests are reclassified to mine properties within property, plant and equipment and carried at cost until the properties
to which they relate are placed into commercial production, sold, abandoned or determined by management to be impaired in value.
Costs
relating to any producing mineral interests would be amortized on a unit of production basis over the estimated ore reserves. Costs
incurred after the property is placed into production that increase production volume or extend the life of a mine are capitalized.
Proceeds from the sale of properties
or cash proceeds received from option payments are recorded as a reduction of the related mineral interest or, if no amounts are
capitalized, then the proceeds are recorded in the statement of income (loss).
Critical
Accounting Estimates
The
preparation of financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions
about the future. Estimates and other judgments are continuously evaluated and are based on management’s experience and other
factors, including expectations about future events that are believed to be reasonable in the circumstances. The following discusses
the most significant accounting judgments and estimates that the Company has made:
Significant Influence on Minco Silver
Management has assessed the level of influence
that the Company has on Minco Silver and determined that it has significant influence even though its shareholdings, as of December
31, 2016 and the date of this report, are below 20%. This is due to our representation on Minco Silver’s board, common Chief
Executive Officer and other shared key management personnel.
Impairment
At each reporting date, management conducts
a review to determine whether there is any objective evidence that the investment in associate is impaired. This determination
requires significant judgment. In making this judgment, management evaluates among other factors, the movements in the trading
share price of Minco Silver and other commercial activities impacting Minco Silver.
If a test is performed, then the Company
recognizes an impairment loss in the statement of income (loss) to the extent that the estimated recoverable amount is less than
the carrying value.
As at December 31, 2015, management evaluated its equity investment
in Minco Silver for indications that the impairment loss that had been recognized in the first quarter of fiscal 2015 either no
longer existed or had decreased. The company concluded that due to the positive developments in Minco Silver, which included the
acquisition of Minco Resources and the related activities associated with the Changkeng project, accompanied by a corresponding
increase in the market value of Minco Silver’s share price, that there were indicators that impairment
loss had reversed. As a result, management estimated the recoverable amount and reversed the previously recognized impairment.
Share-based
payments
The Company grants stock options to directors,
officers, employees and service providers. Each tranche in an award is considered a separate award with its own vesting period.
The Company applies the fair-value method of accounting for share-based payments and the fair value is calculated using the Black-Scholes
option pricing model.
Share-based payments for employees and
others providing similar services are determined based on their grant date fair value. Share based payments for non-employees are
determined based on the fair value of the goods/services received or options granted, measured at the date on which the Company
obtains such goods/services or grants such options.
Compensation expense is recognized over
each tranche’s vesting period, in earnings or capitalized as appropriate, based on the number of awards expected to vest.
If stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.
Significant
Accounting Policies
The Company’s other significant accounting
policies are described in the notes to the audited financial statements for the year ended December 31, 2015.
B. LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
|
|
Year ended December 31,
|
|
|
2015
|
2014
|
|
|
$
|
$
|
|
Operating activities
|
(1,751,341)
|
(2,721,600)
|
|
Investing activities
|
4,822,688
|
2,583,260
|
|
Financing activities
|
17,290
|
331,804
|
Operating activities
For the year ended December 31, 2015,
the Company used $970,259 less in operating activities comparing to the same period of 2014. As the Company sold all of its operating
subsidiaries on July 31, 2015, the Company incurred less exploration cost and administration expense in 2015.
Investing activities
For the year ended December 31, 2015, the
Company generated $4,822,688 from investing activities. During the year, the Company’s cash balance was reduced by $1.35
million as subsidiaries which carried these cash balances were sold to Minco Silver. The Company received a short-term investment
as consideration for the sale of its Chinese subsidiaries and redeemed $6,068,564 from these short-term investments. In addition,
the Company received RMB 500,000 ($94,472) proceeds from the legal settlement with 208 Team.
In the comparative period in 2014, the
Company received RMB 4 million ($720,095) proceeds from the legal settlement with 208 Team. The Company also obtained proceeds
of $1,500,000 from the disposition of 2 million Minco Silver shares in 2014.
Financing activities
For the year ended December 31, 2015, the
Company received $17,290 cash from the exercise of stock option. In the comparative period in 2014, the Company received cash of
$73,333 from the exercise of stock options and $258,471 cash advanced from non-controlling shareholders.
Capital Resources and Liquidity Risk
As at December 31, 2015, the Company’s
working capital increased to $9,261,637, compared to a working capital deficiency of $2,093,361 for the comparative period in 2014.
The increase in working capital was due primarily to the proceeds received from the Disposition.
The Company does not generate revenues
and relies on equity and debt financing for its working capital requirements to fund exploration, permitting and administrative
activities. As at December 31, 2015, the Company believes that it has sufficient working capital to meet its current operational
requirements when they come due.
Equity Investment in Minco Silver
As at December 31, 2015, the Company owned
11,000,000 common shares of Minco Silver (December 31, 2014 - 11,000,000 common shares). As at December 31, 2015, the Company held
an 18.45% (December 31, 2014 – 18.45%) equity interest in Minco Silver.
On April 22, 2014, the Company sold 2,000,000
common shares of Minco Silver for cash proceeds of $1,500,000, which decreased the Company’s equity interest in Minco Silver
from 21.81% to 18.45%. The Company determined that it continued to hold significant influence over Minco Silver despite the Company’s
ownership being less than 20% of the voting rights of Minco Silver. The Company continues to have the ability to influence Minco
Silver through its board representation, common CEO and other key management personnel. As a result, the Company continues to account
for its investment in Minco Silver with the equity method after this share sale. Upon the completion of the Disposition on July
31, 2015, the Company’s ownership of Minco Silver’s common shares remained unchanged at 18.45% and the Company continued
to maintain significant influence on Minco Silver through its board representation and common key management team.
As at December 31, 2015, management evaluated its equity investment
in Minco Silver for indications that the impairment loss that had been recognized in the first quarter of fiscal 2015 either no
longer existed or had decreased. The company concluded that due to the positive developments in Minco Silver, which included the
acquisition of Minco Resources and the related activities associated with the Changkeng project, accompanied by a corresponding
increase in the market value of Minco Silver’s share price, that there were indicators that impairment
loss had reversed. As a result, management estimated the recoverable amount and reversed the previously recognized impairment.
|
The following is a summary of Minco Silver’s financial information as at and for the year ended December 31, 2015 and 2014:
|
December 31, 2015
|
December 31, 2014
|
|
|
$
|
$
|
|
Assets
|
123,353,022
|
92,564,638
|
|
Liabilities
|
638,550
|
419,592
|
|
Revenues
|
-
|
-
|
|
Net income (loss)
|
6,680,947
|
(1,665,516)
|
As at December 31, 2015, Minco Silver had
59,631,418 common shares, 6,485,667 stock options and 735,000 performance share units outstanding, for a total of 66,852,085 common
shares outstanding, on a fully diluted basis.
Repatriation
of funds from China
The Company may face delays repatriating
funds held in China if the Company receives money in RMB when the Retained Assets are sold in the future.
|
C.
|
|
Research and Development, Patents and Licenses
|
The Company does not engage in research
and development activities and does not have any patents or licenses.
As the Company is an exploration company
with no producing properties, information regarding trends in production, sales and inventory and similar are not meaningful.
|
E.
|
|
Off-Balance Sheet Arrangements
|
The Company does not have any off-balance
sheet arrangements.
|
F.
|
|
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
|
The Company has contractual
commitments requiring payments in the amounts as follows, as at December 31, 2015:
|
Contractual obligations
|
Total
|
Less than 1 year
|
1 to 3 years
|
|
|
$
|
$
|
$
|
|
Operating leases (1)
|
485,065
|
207,885
|
277,180
|
|
Other obligations (2)
|
566,852
|
566,852
|
-
|
|
Total contractual obligations
|
1,051,917
|
774,737
|
277,180
|
|
|
(1)
|
Office rental payments – Canada. The Company shares an office in Canada with Minco Silver
and Minco Base Metal Corporation, which are related to the Company, for office rent and operating expenses. The Company has a contract
subject to renewal annually to recover 70% of the operating lease from these two related parties.
|
|
|
(2)
|
Other obligations are comprised of payable to related parties, accounts payable and accrued liabilities
that are current as at December 31, 2015.
|
G. SAFE HARBOR
We intend that all forward-looking statements
we make will be subject to safe harbor protection of the federal securities laws pursuant to Section 27A of the
Securities
Act of 1933
, as amended, and Section 21E of the
Securities Exchange Act of 1934
, as amended (the "Exchange
Act").
Readers are referred to the Risk Factors
section of this Annual Report and the various other documents filed by the Company with the relevant securities regulatory authorities,
specifically the most recent quarterly reports, annual report and material change reports, each as it may be amended from time
to time, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking
statements.
Item
6. Directors, Senior Management and Employees
A. DIRECTORS AND SENIOR MANAGEMENT
The following table sets forth all current
directors and executive officers of the Company as of March 31, 2016, with each position and office held by them with the Company,
their terms of office and the period of service as such. Each director’s term of office expires at the next annual general
meeting of shareholders to be held later this year. The Company is not party to any arrangement or understanding with a major shareholder,
customer, supplier or others, pursuant to which any person referred to below was selected as a director or member of senior management.
|
Name
|
Present Position
|
|
|
|
|
Ken Z. Cai
|
President, CEO and Director
|
|
Robert Callander
(1)(2)(3)
|
Director
|
|
Michael Doggett
(1)(2)(3)
|
Director
|
|
Malcolm Clay
(1)(2)(3)
|
Director
|
|
Larry Tsang
|
Interim Chief Financial Officer
|
Notes:
|
|
(1)
|
Member of the Audit Committee
|
|
|
(2)
|
Member of the Compensation Committee
|
|
|
(3)
|
Member of the Nominating Committee
|
The business background and principal
occupations of the Company’s officers and directors are as follows:
Ken Z. Cai
President, Chief Executive Officer and
Director
Dr. Cai, age 52, has served as president, chief
executive officer and a director of the Company since February 29, 1996. Dr. Cai holds a Ph.D. in mineral economics from Queen's
University in Kingston, Ontario. Dr. Cai has 28 years' experience in mineral exploration, project evaluation, corporate financing
and company management. Dr. Cai is also currently the Chief Executive Officer and a director of Minco Base Metals and Minco Silver.
Robert Callander
Director
Mr. Callander, age 71, has been a director
of the Company since August 1996. He holds an MBA from York University in Toronto, Ontario, as well as a Chartered Financial Analyst
accreditation from the Institute for Investment Management, Charlotte, Virginia. Mr. Callander has worked for Caldwell Securities
Ltd. since 1992 and currently serves as a vice-president with that firm. Prior to his engagement with Caldwell Securities Ltd.,
Mr. Callander served as a corporate finance analyst with Burns Fry Ltd.
Michael Doggett
Director
Dr. Doggett, age 55, has been a director
since July 2007. Dr. Doggett is a mineral economics consultant based in Vancouver. He is also an Adjunct Professor at the Department
in Geological Sciences and Geological Engineering at Queen’s University. He holds degrees in geology and mineral economics
from Mount Allison University and Queen’s University. Dr. Doggett has taught professional development seminars in exploration
and project evaluation to more than 1,500 industry participants in a dozen countries and has carried out a range of consulting
activities with mining companies, governments and international agencies.
He currently sits as a Director of Pacific Link Mining Corp., and Riverside Resources Inc.
Malcolm F. Clay
Director
Mr. Clay, age 75, was appointed a director
of the Company and Chairman of the Audit Committee on November 16, 2007. Mr. Clay is a Chartered Professional Accountant (FCPA)
and was a partner of KPMG and its predecessor firms for 27 years, retiring in 2002. As a public accountant, he served as lead audit
or concurring partner for public companies listed on both American and Canadian exchanges. He was the Partner-in-Charge of the
KPMG Vancouver Audit practice for ten years. In 1997, he was elected as the non-executive Chairman of KPMG Canada. During his career
he acted as an accountant and advisor for numerous private companies and is currently the Chairman of the audit committee for four
TSX Venture Exchange-listed companies. He currently serves as a director of Hanwei Energy Services Corp., Oakmont Minerals
Corp. and Wolverine Minerals Corp.
Larry
Tsang
Interim Chief Financial Officer
Larry Tsang, CPA, CA age 58, was appointed
the Interim Chief Financial Officer on January 18, 2015. Mr. Tsang holds a Bachelor’s Degree in Technology (Accounting) from
British Columbia Institute of Technology in Canada and served as a senior accountant for four years with Ernst and Young LLP, Vancouver,
Canada. His experience includes more than 11years working in auditing, accounting, taxation, and finance for both private and public
companies. Mr. Tsang is currently the Interim CFO of Minco Based Metal, Minco Silver; CFO of Chimata Gold Corp. and Musgrove Mineral
Resources Corp.
Directors and officers of the Company are
required to file insider reports with the System for Electronic Disclosure by Insiders (“SEDI”) at www.sedi.ca and
file their reports individually. To the best of the Company’s knowledge, as at December 31, 2015, the directors and officers
of the Company, as a group, beneficially owned, directly or indirectly, 4,661,013 common shares of the Company, representing approximately
9.21% of the issued and outstanding common shares of the Company.
Family Relationships
There are no family relationships between
any of our directors and executive officers.
B. Compensation
Executive Officers
The following table provides a summary of
compensation paid by us during the fiscal year ended December 31, 2015 to the senior management of the Company:
|
Name and principal position
|
Year
|
Salary
($)
|
Share
-based awards
($)
|
Option-
based awards
($)
(6)
|
Annual non-equity incentive plan compensation
($)
|
Pension value
($)
|
All Other Compensation
($)
|
Total Compensation
($)
|
Ken Z. Cai
Chairman and CEO
(1)(2)
|
2015
|
83,333
|
N/A
|
68,631
(7)
|
-
|
N/A
|
11,372
(9)
|
163,336
|
Samson Siu
Former Interim CFO
(3)
|
2015
|
15,600
|
N/A
|
N/A
|
-
|
N/A
|
14,400
(10)
|
30,000
|
Peter Voulgaris
Vice President of Business Development
(4)
|
2015
|
3,750
|
N/A
|
N/A
|
-
|
N/A
|
11,250
(11)
|
15,000
|
|
David Li
Former CFO
(5)
|
2015
|
25,021
|
N/A
|
23,941
(8)
|
-
|
N/A
|
17,000
(12)
|
65,962
|
|
Larry Tsang
Interim CFO
(13)
|
2015
|
_
|
N/A
|
-
|
-
|
N/A
|
-
|
-
|
|
|
(1)
|
As a management director of the Company, Dr. Cai does not collect
any director's fees relating to his role as a director.
|
|
|
(2)
|
Fees are paid to Sinocan Capital Limited, companies controlled by
Dr. Cai.
|
|
|
(3)
|
Mr. Siu ceased as an Interim Chief Financial Officer of the Company
effective May 15, 2015.
|
|
|
(4)
|
Mr. Voulgaris ceased as Vice President Business Development on February
3, 2015.
|
|
|
(5)
|
Mr. Li was appointed as Chief Financial Officer on August 1, 2015
and ceased as Chief Financial Officer on November 30, 2015.
|
|
|
(6)
|
The Black Scholes valuation methodology was used to determine fair
value on the date of grant.
|
|
|
(7)
|
Represents options to purchase up to 430,000 common shares of the
Company, which are exercisable at a price of $0.24 per common share and expire on March 9, 2020.
|
|
|
(8)
|
Represents options to purchase up to 150,000 common shares of the
Company, which were exercisable at a price of $0.24 per common share and expired on March 9, 2020. These options were cancelled
on December 1, 2015.
|
|
|
(9)
|
Represents life insurance premiums paid during the year.
|
|
|
(10)
|
Amounts represent termination benefits paid.
|
|
|
(11)
|
Amounts represent termination benefits paid.
|
|
|
(12)
|
Amounts represent termination benefits paid.
|
|
|
(13)
|
Larry Tsang was appointed on January 18, 2016, thus did not incur
fees in 2015.
|
Directors' Compensation
The following table provides a summary of compensation
paid by us during the fiscal year ended December 31, 2015 to the non-management directors of the Company:
|
Name
|
Fees earned
($)
|
Share-based awards
($)
|
Option-based awards
($)
|
Non-equity incentive plan compensation
($)
|
Pension value ($)
|
All other compensation
($)
|
Total
($)
|
|
Robert M. Callander
|
19,500
|
N/A
|
23,941(1)
|
Nil
|
N/A
|
Nil
|
43,441
|
|
Malcolm Clay
|
21,500
|
N/A
|
19,951(2)
|
Nil
|
N/A
|
Nil
|
41,451
|
|
Michael Doggett
|
18,000
|
N/A
|
19,951(3)
|
Nil
|
N/A
|
15,000
|
52,951
|
|
|
(1)
|
Represents options to purchase up to 150,000 common shares of the
Company, which are exercisable at a price of $0.24 per common share and expire on September 9, 2020.
|
|
|
(2)
|
Represents options to purchase up to 125,000 common shares of the
Company, which are exercisable at a price of $0.24 per common share and expire on September 9, 2020.
|
|
|
(3)
|
Represents options to purchase up to 125,000 common shares of the
Company, which are exercisable at a price of $0.24 per common share and expire on September 9, 2020.
|
Pension
Plan Benefits
As of December 31, 2015, the Company did
not have any defined benefit, defined contribution or deferred compensation plans for any of its senior officers or directors.
Directors are elected annually at the annual
general meeting of shareholders. The Company has no contract with any of its directors that provides for payment upon termination.
The following table sets forth the date since which each current director has served as such:
|
Name of Director
|
Director Since
|
|
Ken Z. Cai
|
February 29, 1996
|
|
Robert Callander
|
August 23, 1996
|
|
Michael Doggett
|
July 16, 2007
|
|
Malcolm Clay
|
November 16, 2007
|
Audit Committee
The Audit Committee consists of Messrs.
Callander, Doggett and Clay. The Board has determined that Mr. Clay is an "audit committee financial expert" and is "independent"
as such terms are used in Section 303A.02 of the NYSE Listed Company Manual. Please refer the section of this Annual Report entitled
"
Item 6: Directors, Senior Management and Employees
-
A. Directors and
Senior Management
" for Mr. Clay's complete bio.
The Audit Committee
is a standing committee of the Board whose primary function is to assist the Board in fulfilling its oversight responsibilities
relating to:
|
|
(a)
|
the integrity of the Company’s financial statements;
|
|
|
(b)
|
the Company’s compliance with legal and regulatory requirements, as they relate to the Company’s
financial statements;
|
|
|
(c)
|
the qualifications, independence and performance of the Company’s auditor;
|
|
|
(d)
|
internal controls and disclosure controls;
|
|
|
(e)
|
the performance of the Company’s internal audit function; and
|
|
|
(f)
|
consideration and approval of certain related party transactions.
|
Compensation
Committee
The Company has a compensation committee
(the "Compensation Committee"), consisting of Messrs. Callander, Doggett and Clay. The primary purpose of the Compensation
Committee is to:
|
|
(a)
|
establish, review and recommend to the Board compensation and incentive plans and programs; and
|
|
|
(b)
|
review and approve compensation and awards under compensation and incentive plans and programs
for the CEO and senior officers
|
with the intention of attracting, retaining
and appropriately rewarding employees in order to motivate their performance in the achievement of the Company’s business
objectives and align their interests with the long-term interests of the Company’s shareholders.
As at December 31, 2015, the Company shared
offices in Vancouver and Beijing and shared 19 employees and consultants with Minco Silver, of which 6 were located in its Vancouver
office in British Columbia and the other 13 were located in Beijing, China. In addition, the Company had 15 employees in China
who were employed at the Longnan and Changkeng projects.
The following table sets forth, as at March
30, 2016, common stock held by the Company’s officers and directors and all outstanding options and warrants to purchase
common shares of the Company held by those individuals:
|
Name and Title
|
Common
Shares Held
|
Percentage of Common Shares Outstanding at December 31, 2015
|
Stock Options Held
|
|
Ken Cai, President, Chief Executive Officer and Director
|
4,618,736
(1)
|
9.14%
|
2,285,000
(2)
|
|
Robert Callander, Director
|
30,277
|
< 1%
|
750,000
(3)
|
|
Michael Doggett, Director
|
12,000
|
< 1%
|
625,000
(4)
|
|
Malcolm Clay, Director
|
30,000
|
< 1%
|
625,000
(5)
|
|
TOTAL
|
4,691,013
|
9.28%
|
4,285,000
|
Note:
|
(1)
(2)
(3)
(4)
(5)
|
3,634,052 common shares held by Pacific Canada
Resources Inc., a private company, over which Dr. Cai exercises control or direction.
Represents 430,000 options exercisable at $0.24
and which expire on March 9, 2020, 430,000 options exercisable at $0.26 and which expire on January 17, 2019; 525,000 options exercisable
at $0.45 and which expire on December 4, 2017; 425,000 options exercisable at $0.46 and which expire on January 14, 2018; and 475,000
options exercisable at $0.67 and which expire on March 28, 2017.
Represents 150,000 options exercisable at $0.24
and which expire on March 9, 2020, 150,000 options exercisable at $0.26 and which expire on January 17, 2019; 150,000 options exercisable
at $0.45 and which expire on December 4, 2017; 150,000 options exercisable at $0.46 and which expire on January 14, 2018; and 150,000
options exercisable at $0.67 and which expire on March 28, 2017.
Represents 125,000 options exercisable at $0.24
and which expire on March 9, 2020, 125,000 options exercisable at $0.26 and which expire on January 17, 2019; 125,000 options exercisable
at $0.45 and which expire on December 4, 2017; 125,000 options exercisable at $0.46 and which expire on January 14, 2018; and 125,000
options exercisable at $0.67 and which expire on March 28, 2017.
Represents 125,000 options exercisable at $0.24
and which expire on March 9, 2015, 125,000 options exercisable at $0.26 and which expire on January 17, 2019; 125,000 options exercisable
at $0.45 and which expire on December 4, 2017; 125,000 options exercisable at $0.46 and which expire on January 14, 2018; and 125,000
options exercisable at $0.67 and which expire on March 28, 2017.
|
Stock Option Plan
The Company adopted the Option Plan for certain
directors, employees and consultants (collectively, the "Eligible Persons") of the Company or any of its affiliates on
June
27, 2013
(the "Option Plan"). The Option Plan provides that Options may
be granted to Eligible Persons on terms determined within the limitations set out in the Option Plan. The maximum number of common
shares to be reserved for issuance at any one time under the Option Plan is 15% of the issued and outstanding common shares of the Company.
As of the date of this Annual Report, there were 6,589,834 issued and outstanding Options, representing 86.89% of the total amount
issuable under the Option Plan. Under the terms of the Option Plan, the maximum number of common shares that may be reserved for
issuance to insiders of the Company as a group within any 12-month period shall not exceed 10% of the number of common shares
then outstanding. In addition, the aggregate number of common shares issuable to insiders under the plan and any other security
based compensation arrangement of the Company shall not exceed 10% of the issued and outstanding common shares of the Company.
The exercise price for an Option (as such term is defined in the Option Plan) granted under the Option Plan may not be less than
the Market Price (as such term is defined in the Option Plan) of the Company's common shares on the date of the grant. Options
granted under the Option Plan are subject to vesting requirements. One third of the Options granted vest within six months of the
grant date, one third of the Options granted vest within 12 months of the grant date and the final one third of the Options granted
vest within 18 months of the grant date. Options granted under the plan may include stock appreciation rights ("SARs").
A SAR granted under the Option Plan shall entitle the Eligible Person to elect to surrender to the Company an unexercised Option,
or any portion thereof, and to receive from the Company in exchange for that number of shares having an aggregate value equal to
the excess of the market value of one share over the purchase price of one share specified in such Option, multiplied by the number
of shares called for by the Option, or portion thereof, which is so surrendered. To date, no SARs have been issued under the Option
Plan.
Options will be granted for a period which
may not exceed five years from the date of grant (unless otherwise extended in accordance with the terms of the Option Plan) but
will expire within 30 days of an Eligible Person ceasing to be a director, employee of or consultant to the Company in most circumstances.
In cases of death, Options granted shall be exercisable by the Eligible Person's heirs or legal representatives within 12 months
of the Eligible Person's death. No rights under the Option Plan and no Options awarded pursuant to the provisions of the Option
Plan are assignable or transferable by any Eligible Person.
Item
7. Major Shareholders and Related Party Transactions
As of March 31, 2016, the Company believes
that 4,631,820 (approximately 9.2%) of the Company's 50,591,381 issued and outstanding common shares were held by 48 registered
shareholders with addresses in the United States and (approximately 79.95%) of the outstanding commons shares were held by 41 registered
shareholders with addresses in Canada.
As far as known to the Company, and except
as disclosed herein, the Company is not directly or indirectly owned or controlled by another corporation(s) or by any foreign
government. The following table sets forth, as of March 30, 2016, information with respect to (i) any person who is known to the
Company to be the owner of more than 5% of any class of the Company’s outstanding voting securities and (ii) the total amount
of any class of the Company’s voting securities owned by the officers and directors as a group.
|
Title of Class
|
Identity of Holder
|
Amount Owned
|
Percent of Class
|
|
Common shares
|
Ken Z. Cai
|
4,618,736
|
9.13%
(1)
|
|
Common shares
|
IDG – Accel China Growth Fund II LP
|
5,040,000
|
9.96%
|
|
|
(1)
|
3,634,052 common shares are held by Pacific Canada Resources Inc., a private company, over which
Dr. Cai exercises control or direction.
|
The voting rights of our major shareholders
do not differ from the voting rights of holders of our Company's common shares.
To the extent known to the Company, as at March
30, 2016, the Company is not directly or indirectly owned or controlled by another corporation(s), by any foreign government or
by any other natural or legal person(s).
|
B.
|
|
Related Party Transactions
|
In addition to the Disposition
transaction with Minco Silver that is discussed in note 1 to the consolidated financial statments, the Company has the following
transactions with the related parties:
Shared expenses
Minco Gold and Minco Silver shared offices
and certain administrative expenses in Beijing up to July 31, 2015, when the Disposition was completed. Minco Silver, Minco Based
Metal Corp. (“MBM”), a company with which the Company’s Chief Executive Officer has significant influence over,
and Minco Gold share offices and certain administrative expenses in Vancouver.
As at December 31, 2015, the Company recorded
$177,330 due to Minco Silver (December 31, 2014 – $3,603,848), which represents shared office expenses, and expenses in relation
to the Retained Assets that were held in trust by Minco China. In 2014, the amount due to Minco Silver consisted of $3,700,000
debt to Minco Silver and $96,152 of shared expenses due from Minco Silver. A $3,700,000 debt was settled as part of the Company’s
sale of the Chinese properties. Please refer to section 1.
As at December 31, 2015, the Company recorded
$12,387 due from MBM (December 31, 2014 - $47,696), for shared office expenses.
The amounts due are unsecured, non-interest
bearing and payable on demand.
Key Management compensation
Key management includes the Company’s
directors and senior management. Their compensation is included in exploration costs and administrative expenses.
For the three months ended and the
years ended December 31, 2015, 2014 and 2013, the following compensation was paid to such key management:
|
|
|
|
|
|
For the year ended December 31,
|
|
|
2015
|
2014
|
2013
|
|
|
$
|
$
|
$
|
|
Cash remuneration
|
333,729
|
270,693
|
341,537
|
|
Share-based compensation
|
67,405
|
215,202
|
736,294
|
|
Total
|
401,134
|
485,895
|
1,077,831
|
The above transactions were conducted
in the normal course of business.
|
C.
|
|
INTEREST OF EXPERTS and COUNSEL
|
Not Applicable.
Item
8. Financial Information
Consolidated Statements and Other Financial
Information
The following financial statements of the
Company are attached to this Annual Report:
|
·
Audited consolidated financial statements for the Company as at December 31, 2015 and 2014 and for the year ended December
31, 2015 (in Canadian dollars),with comparative figures for the years ended December 31, 2014 and 2013.
·
Audited consolidated financial statements of Minco Silver Corporation as at December 31, 2015 and 2014 and for the year
ended December 31, 2015 (in Canadian dollars) with comparative figures for the years ended December 31, 2014 and 2013.
|
Dividend Policy
The Company has never paid any dividends
and does not intend to pay any dividends in the near future.
Legal Proceedings
Minco China commenced legal action seeking
compensation for breach of the JV Agreement by 208 Team on March 19, 2012. On March 25, 2013, Minco China settled
this claim for RMB 14 million ($2.3 million). As at the date of this Annual Report, Minco China has received RMB 9 million ($1.5
million) of this amount. The remaining receivable of RMB 5 million ($1,014,734) is the third component of the Retained Assets that
is held in trust by Minco China for the Company. The Company, through Minco China, has recommenced legal action against 208 Team
to recover the remaining unpaid balance.
On March 23, 2015, Royal Centre (BOPC) Inc.
(“Royal Centre”) filed a notice of civil claim against the Company stating that the Company agreed to extend the office
lease from May 1, 2015 to September 30, 2020 (the “Extension Period”). Royal Centre seeks a declaration that the lease
agreement is valid and that the Company is obligated to pay all rent and other payments during the entire Extension Period. It
was the Company’s position that the office lease had been extended from May 1, 2015 to April 30, 2016. This matter
was settled on April 21, 2015.
Significant Changes
There have been no significant changes
since the date of the annual financial statements included in this document
.
Item
9. The Offer and Listing
|
A.
|
|
Offer and Listing Details
|
Since February 24, 1998, the Company’s
common shares have been listed on the TSX and currently trade under the trading symbol "MMM". The Company began trading
on the NYSE MKT on November 22, 2005, under the trading symbol "MMK". On February 1, 2007, the Company's trading symbol
on the NYSE MKT was changed from “MMK” to “MGH.” The Company began trading on the Frankfurt Stock Exchange
on May 9, 2007 under the trading symbol "MI5". The following tables set forth the reported high and low prices of the
Company’s common shares for the five most recent fiscal years (Table A), each quarterly period for the past two fiscal years
(Table B) and each month for the past six months (Table C on the TSX and the NYSE MKT).
Table A
High and low market price for the five most
recent fiscal years.
|
YEAR
ENDED DECEMBER 31,
|
TSX
(cdn$)
High
|
TSX
(cdn$)
Low
|
NYSE
MKT
(US$)
High
|
NYSE
MKT
(US$)
Low
|
|
2015
|
0.39
|
0.14
|
0.32
|
0.12
|
|
2014
|
0.68
|
0.18
|
0.62
|
0.16
|
|
2013
|
0.50
|
0.14
|
0.52
|
0.12
|
|
2012
|
0.97
|
0.35
|
0.98
|
0.34
|
|
2011
|
2.85
|
0.64
|
2.97
|
0.62
|
Table B
High and low market prices for each quarterly
period for the past two fiscal years ended December 31, 2015 and 2014.
|
Quarter Ended
|
TSX
(cdn$)
High
|
TSX
(cdn$)
Low
|
NYSE
MKT
(US$)
High
|
NYSE
MKT
(US$)
Low
|
|
December 31, 2015
|
0.27
|
0.14
|
0.21
|
0.12
|
|
September 30, 2015
|
0.30
|
0.21
|
0.25
|
0.17
|
|
June 30, 2015
|
0.36
|
0.25
|
0.29
|
0.21
|
|
March 31, 2015
|
0.39
|
0.25
|
0.32
|
0.21
|
|
December 31, 2014
|
0.44
|
0.30
|
0.40
|
0.25
|
|
September 30, 2014
|
0.47
|
0.40
|
0.44
|
0.36
|
|
June 30, 2014
|
0.48
|
0.30
|
0.45
|
0.26
|
|
March 31, 2014
|
0.68
|
0.18
|
0.62
|
0.16
|
Table C
High and low prices for each month for the
past six months.
|
MONTH/year
|
TSX
(cdn$)
High
|
TSX
(cdn$)
Low
|
NYSE
MKT
(US$)
HigH
|
NYSE
MKT
(US$)
Low
|
|
February 2016
|
0.46
|
0.18
|
0.40
|
0.13
|
|
January 2016
|
0.23
|
0.15
|
0.16
|
0.12
|
|
December 2015
|
0.23
|
0.17
|
0.17
|
0.13
|
|
November 2015
|
0.25
|
0.14
|
0.17
|
0.12
|
|
October 2015
|
0.27
|
0.20
|
0.21
|
0.15
|
|
September 2015
|
0.25
|
0.21
|
0.19
|
0.17
|
N
ot
applicable.
Please
refer to item 9.A's description of the markets on which Minco Gold stock trades.
Item
10. Additional Information
Not Applicable.
|
B.
|
|
Memorandum and Articles of Association
|
Our Articles of Incorporation (our "Articles")
do not contain a description of our objects and purposes.
Our Articles restrict a director's power
to vote on a proposal, arrangement or contract in which the director is materially interested unless all the directors have a disclosable
interest in that contract or transaction, in which case any or all of those directors may vote on such resolution. There is no
mandatory retirement age for our directors and our directors are not required to own securities of our company in order to serve
as directors.
Our authorized capital consists of an unlimited
number of common shares without par value.
Holders of our common shares are entitled
to vote at all meetings of shareholders, receive any dividend declared by us and, subject to the rights, privileges, restrictions
and conditions attaching to any other class of shares, receive the remaining property of our company upon dissolution.
Subject to the
Business Corporations
Act
(British Columbia), the Company may by special resolution: (i) create special rights or restrictions for, and attach those
special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have
been issued; or (ii) vary or delete any special rights or restrictions attached to the shares of any class or series of shares,
whether or not any or all of those shares have been issued.
Each director holds office until the expiry
of his term or until his successor is elected or appointed, unless his office is earlier vacated in accordance with our Articles
or with the provisions of the
Business Corporations Act
(British Columbia). At each annual meeting of our company, directors
are elected to hold office until the next annual meeting of shareholders. A director appointed or elected to fill a vacancy on
the Board holds office until the next annual general meeting of shareholders.
An annual meeting of shareholders must
be held at such time in each year that is not later than fifteen months after the last preceding annual meeting and at such place
as our Board may from time to time determine. The holders of not less than five percent of our issued shares that carry the right
to vote at a meeting may requisition our directors to call a meeting of shareholders for the purposes stated in the requisition.
The quorum for the transaction of business at any meeting of shareholders is two shareholders, or one of more proxyholders representing
two shareholders, or one shareholder and a proxyholder representing another shareholder. Only persons entitled to vote, our directors
and auditors and others who, although not entitled to vote, are otherwise entitled or required to be present, are entitled to be
present at a meeting of shareholders.
Except as provided in the
Investment
Canada Act
, there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws
of Canada or British Columbia, or in our charter documents. See the section of this Annual Report entitled "
Exchange Controls
"
below for a discussion of the principal features of the
Investment Canada Act
for non-Canadian residents proposing to acquire
our common shares.
Our Articles do not contain any provisions
governing the ownership threshold above which shareholder ownership must be disclosed or any provisions that would prevent a change
of control of the Company).
Our Articles are not significantly different
from the requirements of the
Business Corporations Act
(British Columbia), and the conditions imposed by our Articles governing
changes in capital are not more stringent than what is required by the
Business Corporations Act
(British Columbia).
The only material contracts not in the ordinary
course of business entered into by the Company during the most recent two financial years were:
|
|
1.
|
On July 31, 2015 the Company entered into an Amended and Restated Declaration of Trust and Agency
Agreement with Minco Silver, Minco China, Yuanling Minco and Huanihua Tiancheng.
|
|
|
2.
|
On May 22, 2015, the Company entered into the SPA with Minco Silver and Minco Silver’s wholly-owned
subsidiary, Minco Resources. Pursuant to the SPA, the Company sold all its shares of Minco Resources, which holds Minco China.
Minco China owns certain subsidiaries including Yuanling Minco, Tibet Minco, Huanihua Tiancheng, legal ownership of Foshan Minco
and a 51% interest in Mingzhong, which owns the Changkeng Property; and
|
|
|
3.
|
On December 26, 2014, Minco China entered into an agreement with Beijing Runlong in which the Company
agreed to sell four exploration permits in the Yangshan area to Beijing Runlong for total cash proceeds of RMB 3,200,000 ($604,618).
The process of transferring the titles to the four permits to Beijing Runlong is pending approval by Gansu Province and the proceeds
from this sale have not been received, as at December 31, 2015.
|
Pursuant to the sale agreement,
Beijing Runlong agreed to pay the total cash price to Minco China as follows:
|
|
·
|
5% of the total cash proceeds within 20 working days from the date of signing the agreement;
|
|
|
·
|
45% of the total cash proceeds upon receiving the approval of the transfer from the Provincial
land and resources administrative authority, before submitting to the Ministry of Land and Resources; and
|
|
|
·
|
50% of the total cash proceeds within 5 days upon receiving the approved exploration rights license.
|
Except as provided in the
Investment
Canada Act
, there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws
of Canada or British Columbia or in our charter documents. The following summarizes the principal features of the
Investment
Canada Act
for non-Canadian residents proposing to acquire our common shares.
This summary is of a general nature only
and is not intended to be, and should not be construed to be, legal advice to any holder or prospective holder of our common shares,
and no opinion or representation to any holder or prospective holder of our common shares is hereby made. Accordingly, holders
and prospective holders of our common shares should consult with their own legal advisors with respect to the consequences of purchasing
and owning our common shares.
The
Investment Canada Act
governs
the direct or indirect acquisition of control of an existing Canadian business by non-Canadians. Under the
Investment
Canada Act
, non-Canadian persons or entities acquiring "control" (as defined in the
Investment Canada
Act
) of a corporation carrying on business in Canada are required to either notify, or file an application for review
with, Industry Canada, unless a specific exemption, as set out in the
Investment Canada Act
, applies. Industry Canada
may review any transaction which results in the direct or indirect acquisition of control of a Canadian business, where the
gross value of corporate assets exceeds certain threshold levels (which are higher for investors from members of the World
Trade Organization, including United States residents, or World Trade Organization member-controlled companies) or where the
activity of the business is related to Canada's cultural heritage or national identity. No change of voting control will be
deemed to have occurred, for purposes of the
Investment Canada Act
, if less than one-third of the voting control of a
Canadian corporation is acquired by an investor. In addition, the
Investment Canada Act
permits the Canadian
government to review any investment where the responsible Minister has reasonable grounds to believe that an investment by a
non-Canadian could be injurious to national security. No financial threshold applies to a national security review. The
Minister may deny the investment, ask for undertakings, provide terms or conditions for the investment or, where the investment has already been made,
require divestment. Review can occur before or after closing and may apply to corporate re-organizations where there is no change
in ultimate control.
If an investment is reviewable under the
Investment Canada Act
, an application for review in the form prescribed is normally required to be filed with Industry Canada
prior to the investment taking place, and the investment may not be implemented until the review has been completed and the Minister
responsible for the
Investment Canada
Act
is satisfied that the investment is likely to be of net benefit to Canada.
If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian applicant must
not implement the investment, or if the investment has been implemented, may be required to divest itself of control of the Canadian
business that is the subject of the investment. The Minister is required to provide reasons for a decision that an investment is
not of net benefit to Canada.
Certain transactions relating to our common
shares will generally be exempt from the
Investment Canada Act
, subject to the Minister's prerogative to conduct a national
security review, including:
|
|
(a)
|
the acquisition of our common shares by a person in the ordinary course of that person's business
as a trader or dealer in securities;
|
|
|
(b)
|
the acquisition of control of our Company in connection with the realization of security granted
for a loan or other financial assistance and not for a purpose related to the provisions of the
Investment Canada Act
; and
|
|
|
(c)
|
the acquisition of control of our Company by reason of an amalgamation, merger, consolidation or
corporate reorganization following which the ultimate direct or indirect control in fact of our Company, through ownership of our
common shares, remains unchanged.
|
Canadian Federal Income Tax Consequences
The following summarizes the principal
Canadian federal income tax consequences applicable to the holding and disposition of common shares in the capital of the Company
by a United States resident who holds common shares solely as capital property (a "US Holder", as defined below). This
summary is based on the current provisions of the
Income Tax Act
(Canada) (the "Tax Act"), the regulations thereunder,
all amendments thereto publicly proposed by the government of Canada, the published administrative practices of Canada Revenue
Agency, and the current provisions of the Canada-United States Income Tax Convention, 1980, as amended (the "Treaty").
Except as otherwise expressly provided,
this summary does not take into account any provincial, territorial or foreign (including without limitation, any US) tax law or
treaty. It has been assumed that all currently proposed amendments will be enacted substantially as proposed and that there is
no other relevant change in any governing law or practice, although no assurance can be given in these respects. Each US Holder
is advised to obtain tax and legal advice applicable to such US Holder’s particular circumstances. Every US Holder is liable
to pay a Canadian withholding tax on every dividend that is or is deemed to be paid or credited to the US Holder on the US Holder’s
common shares. The statutory rate of withholding tax is 25% of the gross amount of the dividend paid. The Treaty reduces the statutory
rate with respect to dividends paid to a US Holder for the purposes of the Treaty. Where applicable, the general rate of withholding
tax under the Treaty is 15% of the gross amount of the dividend, but if the US Holder is a company that owns at least 10% of the
voting stock of the Company and beneficially owns the dividend, the rate of withholding tax is 5% for dividends paid or credited
after 1996 to such corporate US Holder. The Company is required to withhold the applicable tax from the dividend payable to the
US Holder, and to remit the tax to the Receiver General of Canada for the account of the US Holder.
Pursuant to the Tax Act, a US Holder will not be subject to Canadian capital gains tax on any capital gain realized on
an actual or deemed disposition of a common share, including a deemed disposition on death, unless such shares are "taxable
Canadian property" within the meaning of the Tax Act and no relief is afforded under the Treaty. The shares of the Company
would be taxable Canadian property if (i) the US Holder held the common share as capital property used in carrying on a business
in Canada, or if (ii) the U. S. Holder and persons with whom the US Holder did not deal at arm's length (alone or together)
owned or had the right or an option to acquire 25% or more of the issued shares of any class of the Company at any time in
the five years immediately preceding the disposition, and more than 50% of the fair market value of the shares of the Company
was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, Canadian
resource properties (as defined in the Tax Act), timber resource properties (as defined in the Tax Act) or an option, an interest
or right in such property, whether or not such property exists.
In addition, Canada may tax capital gains realized by a US Holder on the disposition of shares of the Company if the following
conditions are met:
• the US Holder was an individual resident in Canada for 120 months during any period of 20 consecutive
years preceding, and at any time during the 10 years immediately preceding, the disposition of shares; and the individual
owned the shares when he ceased to be resident in Canada.
United States Tax Consequences
The following summarizes the principal
U.S. federal income tax consequences to the holding and disposition of common shares in the capital of the Company by US Holders
and who holds their shares as capital assets within the meaning of Section 1221 of the U.S. Internal Revenue Code (the "Code").
US Holders
As used herein, a "US Holder"
includes a holder of common shares of the Company who is a citizen or resident of the United States, a corporation (including any
other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United
States or of any political subdivision thereof, and an estate whose income is subject to US federal income taxation regardless
of its source, and a trust (a) if a U.S. court is able to exercise primary supervision over the administration
of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) that has
elected to be treated as a U.S. person under applicable U.S. Treasury Regulations. If a partnership (including for this purpose
any entity treated as a partnership for U.S. federal income tax purposes) holds common shares, the tax treatment of a partner generally
will depend upon the status of the partner and the activities of the partnership. If a US Holder is a partner in a partnership
that holds the common shares, the US Holder should consult its tax advisor regarding the specific tax consequences of owning and
disposing of its shares. A US Holder does not include: (1) those who own (directly, or indirectly by attribution) 10% or more of
the share capital or voting power of the Company; (2) persons subject to the alternative minimum tax; (3) persons holding shares
of the Company as part of a straddle, hedging or conversion transaction; and (4) persons subject to special provisions of federal
income tax laws, such as tax exempt organizations, qualified retirement plans, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations
whose ownership of shares of the Company is effectively connected with the conduct of a trade or business in the United States
and shareholders who acquired their Company stock through the exercise of employee stock options or otherwise as compensation.
The following discussion is based upon
the sections of the Code, Treasury Regulations, published Internal Revenue Service rulings, published administrative positions
of the Internal Revenue Service and court decisions that are currently applicable, any or all of which could be materially adversely
changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both
adverse and beneficial, of recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis,
at any time. This discussion does not address all U.S. federal income tax matters that may be relevant to a US Holder in light
of its particular circumstances, and it does not address any state, local and non-U.S. tax consequences of purchasing, owning and
disposing of the common shares of the Company. Each US Holder should consult with his or her own tax advisor with respect to the
tax considerations relevant to such US Holder and its particular circumstances.
Dividends and
Other Distributions on the Common Shares
Subject to the passive foreign investment
company rules discussed below under "Passive Foreign Investment Company", the gross amount of all our distributions to
a US Holder with respect to the common shares (including any Canadian taxes withheld there from) will be included in the US Holder’s
gross income as foreign source ordinary dividend income on the date of receipt by the US Holder, but only to the extent that
the distribution is paid out of our current or accumulated earnings and profits (as determined under US federal income tax
principles). To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits, it will
be treated first as a tax-free return of a US Holder’s tax basis in its common shares, and to the extent the amount
of the distribution exceeds the US Holder’s tax basis, the excess will be taxed as capital gain. We do not currently,
and we do not intend to, calculate our earnings and profits, if any, under US federal income tax principles. Therefore, a
US Holder should expect that a distribution, if any, will be treated as a dividend. The dividends will not be eligible for
the dividends-received deduction allowed to corporations in respect of dividends received from other US corporations.
With respect to non-corporate US Holders
for taxable years beginning before January 1, 2012, dividends may constitute "qualified dividend income" that is
taxed at the lower applicable capital gains rate, provided that (1) the common shares of the Company are readily tradable
on an established securities market in the United States or we are eligible for the benefits of the income tax treaty, (2) we
are not a passive foreign investment company (as discussed below) for either our taxable year in which the dividend was paid or
the preceding taxable year, (3) certain holding period requirements are met and (4) the US Holder is not under an
obligation to make related payments with respect to positions in substantially similar or related property. US Treasury guidance
indicates that our common shares, which are listed on NYSE MKT Equities, are readily tradable on an established securities market
in the United States. There can be no assurance that our common shares will be considered readily tradable on an established securities
market in later years. US Holders should consult their tax advisors regarding the availability of the lower rate for dividends
paid with respect to our common shares. There can be no assurance that the Company’s dividends will be considered qualifying
dividend income because there can be no assurance of the Company’s PFIC (as defined below) status in either the year of the
distribution or the year preceding the distribution.
Subject to certain limitations, Canadian
taxes withheld from a distribution to a US Holder will be eligible for credit against such US Holder’s US federal
income tax liability. If a refund of the tax withheld is available to the US Holder under the laws of Canada or under the
Treaty, the amount of tax withheld that is refundable will not be eligible for such credit against the US Holder’s US federal
income tax liability (and will not be eligible for the deduction against the US Holder’s US federal taxable income).
If the dividends are qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes
of calculating the foreign tax credit limitation will in general be limited to the gross amount of the dividend, multiplied by
the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible
for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with
respect to common shares generally will constitute "passive category income" but could, in the case of certain US Holders,
constitute "general category income". The rules relating to the determination of the US foreign tax credit are complex,
and US Holders should consult their tax advisors to determine whether and to what extent a credit would be available. A US Holder
that does not elect to claim a foreign tax credit with respect to any foreign taxes for a given
taxable year may instead claim an itemized deduction for all foreign taxes paid in that taxable year.
Sale, Exchange, or Dispotiton of
Common Shares
Subject to the PFIC rules discussed below,
upon the sale, exchange or other disposition of the Company’s common shares, a US Holder generally will recognize capital
gain or loss equal to the difference between the amount realized upon the sale, exchange or other disposition of the common shares
and the US Holder’s adjusted tax basis in the common shares. The capital gain or loss generally will be long-term capital
gain or loss if, at the time of sale, exchange or other disposition, the US Holder has held the common shares for more than one
year. Net long-term capital gains of non-corporate US Holders, including individuals, are eligible for reduced rates of taxation.
The deductibility of capital losses is subject to limitations. Any gain or loss that a US Holder recognizes generally will be treated
as gain or loss from sources within the United States for purposes of the US foreign tax credit limitation discussed above.
If the Company pays distributions on its
common shares in Canadian dollars, the US dollar value of such distributions should be calculated by reference to the exchange
rate prevailing on the date of actual or constructive receipt of the distributions, regardless of whether the Canadian dollars
are converted into US dollars at that time. If Canadian dollars are converted into US dollars on the date of actual or constructive
receipt of such distributions, a US Holder’s tax basis in such Canadian dollars will be equal to their US dollar value on
that date and, as a result, the US Holder generally will not be required to recognize any foreign currency exchange gain or loss.
Any gain or loss recognized on a subsequent conversion or other disposition of the Canadian dollars generally will be treated as
US source ordinary income or loss for purposes of the U.S. foreign tax credit limitation discussed above.
Passive Foreign Investment Companies
We believe we
were a passive foreign investment company ("PFIC") for US federal income tax purposes for our taxable year ended
December 31, 2015. A non-U.S. corporation is considered to be a PFIC for any taxable year if either:
|
|
§
|
at least 75% of its gross income is passive income which includes dividends, interest, royalties,
rents (other than rents and royalties derived in the active conduct of a trade or business and not derived from a related person),
certain gains from the sales of commodities, annuities and gains from assets that produce passive income, or
|
|
|
§
|
at least 50% of the value of its assets (based on an average of the quarterly values of the assets
during a taxable year) is attributable to assets that produce or are held for the production of passive income (the "asset
test").
|
There can be no
assurance that in any given year 75% or more of the Company's gross income will not be passive income and we will not become a
PFIC in that or any future taxable year.
We will be treated
as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which
we own, directly or indirectly, 25% or more (by value) of the stock.
A determination
of the Company’s PFIC status should be done on an annual basis (assuming that we can continue to be a publicly traded entity).
As a result, our PFIC status may change. In particular, because the total value of our assets for purposes of the asset test will
be calculated using the market price of our common shares (assuming that we continue to a publicly traded corporation for purposes
of the applicable PFIC rules), our PFIC status will depend in large part on the market price of our common shares. Accordingly,
fluctuations in the market price of our common shares may result in our being a PFIC for any year. If we are a PFIC for any year
during which a US Holder holds our common shares, we generally will continue to be treated as a PFIC for all succeeding years
during which such US Holder holds our common shares, absent a special election. For instance, if we cease to be a PFIC, a
US Holder may avoid some of the adverse effects of the PFIC regime by making a deemed sale election with respect to the common
shares. If we are a PFIC for any taxable year and any of our non-US subsidiaries is also a PFIC, a US Holder would be
treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these
rules. US Holders are urged to consult their tax advisors about the application of the PFIC rules to any of our subsidiaries.
For purposes of the PFIC provisions, passive income generally includes dividends, interest, royalties, rents (other than rents
and royalties derived in the active conduct of a trade or business and not derived from a related person), certain gains from the
sales of commodities, annuities and gains from assets that produce passive income.
If we are a PFIC for any taxable year during
which a US Holder holds our common shares, such US Holder will be subject to special tax rules with respect to any "excess
distribution" that it receives and any gain it realizes from a sale or other disposition (including a pledge) of the common
shares, unless the US Holder makes a "mark-to-market" election as discussed below. Distributions received by a US Holder
in a taxable year that are greater than 125% of the average annual distributions such US Holder received during the shorter
of the three preceding taxable years or its holding period for the common shares will be treated as an excess distribution. Under
these special tax rules:
§
the excess distribution or gain will be allocated ratably over the US Holder’s holding period for the common
shares,
§
the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we became
a PFIC, will be treated as ordinary income, and
§
the amount allocated to each other year will be subject to the highest tax rate for the US Holder in effect for that year
and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each
such year.
The tax liability
for amounts allocated to years prior to the year of disposition or "excess distribution" cannot be offset by any net
operating losses for such years and gains (but not losses) realized on the sale of our common shares cannot be treated as capital,
even if the US Holder holds the common shares as capital assets.
Alternatively,
a US Holder of "marketable stock" (as defined below) in a PFIC may make a mark-to-market election with respect to
shares of a PFIC to elect out of the tax treatment discussed above. If a US Holder makes a valid mark-to-market election for
our common shares, the US Holder will include in income each year an amount equal to the excess, if any, of the fair market
value of the common shares as of the close of its taxable year over its adjusted basis in such common shares. The US Holder
is allowed a deduction for the excess, if any, of the adjusted basis of the common shares over their fair market value as of the
close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the common shares
included in the US Holder’s income for prior taxable years. Amounts included in a US Holder’s income under
a mark-to-market election, as well as gain on the actual sale or other disposition of the common shares, are treated as ordinary
income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the common shares, as well
as to any loss realized on the actual sale or disposition of the common shares, to the extent that the amount of such loss does
not exceed the net mark-to-market gains previously included for such common shares. A US Holder’s basis in the common
shares will be adjusted to reflect any such income or loss amounts. If a US Holder makes such an election, the tax rules that ordinarily
apply to distributions by corporations that are not PFICs would apply to distributions by us, except that the lower applicable
capital gains rate for "qualified dividend income" discussed above under "Dividends and Other Distributions on the
Common Shares" would not apply.
The mark-to-market
election is available only for "marketable stock", which is stock that is traded in other than de minimis quantities
on at least 15 days during each calendar quarter on a qualified exchange, including NYSE MKT Equities, or other market, as
defined in applicable US Treasury regulations. We expect that our common shares will continue to be listed on NYSE MKT Equities
and, consequently, the mark-to-market election would be available to US Holders of common shares were we to be a PFIC.
If a non-US corporation
is a PFIC, a holder of shares in that corporation can avoid taxation under the rules described above by making a "qualified
electing fund" election to include its share of the corporation’s ordinary earnings and net capital gain income on a
current basis. However, a US Holder can make a qualified electing fund election with respect to its common shares of the Company
only if we furnish the US Holder annually with certain tax information. We intend to prepare or provide such information.
A US Holder
that holds our common shares in any year in which we are a PFIC will be required to file Internal Revenue Service (“IRS”)
Form 8621 regarding distributions received on the common shares and any gain realized on the disposition of the common shares.
US Holders
are urged to consult their tax advisors regarding the application of the PFIC rules to the ownership and disposition of our common
shares.
Other Consequences
To the extent a shareholder is not subject
to the tax regimes outlined above with respect to foreign corporations that are PFICs, the following discussion describes the United
States federal income tax consequences arising from the holding and disposition of the Company’s common shares.
Foreign Tax Credit
A US Holder may be entitled to claim a
US foreign tax credit for, or deduct, Canadian taxes that are withheld on distributions received by the US Holder, subject to applicable
limitations in the Code. Dividends paid on our common shares will be "passive category income" or "general category
income" for US foreign tax credit purposes. The amount of foreign income taxes that may be claimed as a credit in any year
is subject to complex limitations and restrictions, which must be determined on an individual basis by each US Holder. A US Holder
that does not elect to claim a foreign tax credit with respect to any foreign taxes paid for a given taxable year may instead claim
a deduction for all foreign taxes paid in that taxable year. US Holders are urged to consult their tax advisors regarding the availability
of the US foreign tax credit in their particular circumstances.
Information Reporting and Backup Withholding
Dividends on common shares and the proceeds
of a sale or redemption of a common share may be subject to information reporting to the IRS and possible US backup withholding
at a current rate of 28%, unless the conditions of an applicable exemption are satisfied. Backup withholding will not apply to
a US Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise
exempt from backup withholding. US Holders who are required to establish their exempt status can provide such certification
on IRS Form W-9. US Holders should consult their tax advisors regarding the application of the U.S. information
reporting and backup withholding rules.
Backup withholding is not an additional
tax. Amounts withheld as backup withholding may be credited against a US Holder’s US federal income tax liability,
and a US Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely
filing the appropriate claim for refund with the IRS and furnishing any required information.
US HOLDERS
ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE US FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES
AS WELL AS THE STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES.
|
F.
|
|
Dividends and Paying Agents
|
Not Applicable.
Not Applicable.
The Company files annual reports and furnishes
other information with the SEC. You may read and copy any document that we file at the SEC's Public Reference Room at 100 F St.
NE, Washington, D.C. 20549 or by accessing the SEC's website (www.sec.gov). The Company also files its annual reports and other
information with the Canadian Securities Administrators via SEDAR (www.sedar.com). Copies of the Company’s material contracts
are kept in the Company’s administrative headquarters at Suite 2772, 1055 West Georgia Street, Vancouver, BC. V6E 3P3. Documents
relating to Minco Silver referred to herein can be found under its profile on SEDAR.
|
I.
|
|
Subsidiary Information
|
Not applicable – the Company does not
have subsidiary as at December 31, 2015 and as at the date of this report.
Item
11. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk, primarily
related to foreign exchange. The Company uses the Canadian dollar as its reporting currency and is therefore exposed to foreign
exchange movements in China where the Company is conducting exploration activities.
Credit
risk
Counterparty credit risk is the risk that
the financial benefits of contracts with a specific counterparty will be lost if the counterparty defaults on its obligations under
the contract. This includes any cash amounts owed to the Company by these counterparties, less any amounts owed to the counterparty
by the Company where a legal right of set-off exists and also includes the fair value contracts with individual counterparties
which are recorded in the consolidated financial statements. The Company considers the following financial assets to be exposed
to credit risk:
|
|
·
|
Cash and cash equivalents– In order
to manage credit and liquidity risk the Company places its cash with major financial institutions in two major banks in Canada
(subject to deposit insurance up to $100,000). As at December 31, 2015, total cash of $5,593,669 was placed with two institutions.
|
|
|
·
|
Short-term investment – The Company
places its short-term investment with a major financial institution in a major bank in Canada. As at December 31, 2015, total short-term
investment was $4,048,341 (December 31, 2014 - $Nil).
|
Foreign exchange
risk
The Company’s
functional currency is the Canadian dollar in Canada. The foreign currency risk is related to US dollar funds held in the entity.
Therefore the Company’s net earnings are impacted by fluctuations in the valuation of the US dollar in relation to the Canadian
dollar.
The Company does not hedge its exposure
to currency fluctuations. The Company has completed a sensitivity analysis to estimate the impact that a change in foreign exchange
rates would have on the net loss of the Company, based on the Company’s net US$5.6 million monetary assets as at December
31, 2015. This sensitivity analysis shows that a changed of +/- 10% in US$ foreign exchange rate would have a -/+ US$0.6 million
impact on net loss.
Interest rate risk
The effective interest rate on financial
liabilities (accounts payable) ranged up to 1%. The interest rate risk is the risk that the fair value of future cash flows of
a financial instrument fluctuates because of changes in market interest rates. Cash entered into by the Company bear interest at
a fixed rate thus exposing the Company to the risk of changes in fair value arising from interest rate fluctuations. A 1% increase
in the interest rate in Canada will have a net (before tax) income effect of $96,000 (2014 - $21,000), assuming the foreign exchange
rate remains constant.
Year Ended December 31, 2015
The following table sets forth the principal
components of the Company' balance sheet at December 31, 2015, showing such components' sensitivity to exchange risk:
|
|
|
Total Value
in $
|
Effect of a 10% Change in Exchange Rate – in $
|
|
|
|
|
Cash and cash equivalents
|
$ 182,889
|
USD3,901,348
|
5,593,669
|
541,078
|
|
|
|
|
|
|
The following table sets forth the principal
components of the Company's statement of operations for the year ended December 31, 2015 showing such components' sensitivity to
exchange risk:
|
|
Denominated in
|
Total Value
in $
|
Effect of a 10% Change in Exchange Rate – in $
|
|
$
|
RMB
|
|
Exploration costs
|
146,409
|
3,184,536
|
793,081
|
64,667
|
|
Administrative expenses
|
908,614
|
2,382,975
|
1,322,488
|
48,390
|
|
Other gains (losses), net
|
16,694,052
|
354,923
|
16,436,125
|
7,207
|
We believe that the selected rate change of
10% is reasonably possible in the near term. The Company has not entered into any material foreign exchange contracts to minimize
or mitigate the effects of foreign exchange fluctuations on the Company’s operations. The Company exchanges Canadian dollars
to fund its Chinese operations. The Company has no long-term debt. Therefore, the Company does not believe that the interest rate
market risk is material.
Item
12. Description of Securities Other than Equity Securities
Not Applicable.
PART
II
Item
13. Defaults, Dividend Arrearages and Delinquencies
Not Applicable.
Item
14. Material Modifications to the Rights of Security Holder and Use of Proceeds
Not Applicable.
Item
15. Controls and Procedures
|
(a)
|
|
Disclosure controls and procedures
|
Disclosure controls and procedures
are designed to ensure that information required to be disclosed by the Company is collected and communicated to management, as
appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report,
the fiscal year ended December 31, 2015, an evaluation was carried out under the supervision of, and with the participation of,
the Company’s management, including the Company’s Chief Executive Officer (CEO) and Interim Chief Financial Officer
(CFO), of the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period December 31, 2015 covered by this Annual Report
on Form 20-F. As described below, a material weakness was identified in the Company’s internal control over financial reporting.
A material weakness as a significant deficiency, or combination of significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
As a result of this material weakness, the Company’s
CEO and CFO have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and
procedures were not effective to ensure that information required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the applicable
Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including
the Company’s CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
|
(b)
|
|
Management’s annual report
on internal controls over financial reporting
|
Management is also responsible for
establishing and maintaining adequate internal controls over financial reporting. Any system of internal control over financial
reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation.
Management evaluated the effectiveness of internal control
over financial reporting based on the control framework established in Internal Control - Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based upon that assessment, management identified a material
weakness in the Company’s internal control over financial reporting described below and, as a result, management concluded
that the Company’s internal control over financial reporting was not effective as of December 31, 2015.
The material weakness identified by management relates
to the lack of financial management oversight of accounting processes around the application of IFRS as it relates specifically
to the calculation of the gain on sale of its subsidiary to an associate. This material weakness led to a material post-closing
adjustment of $3.4 million which was appropriately corrected in the consolidated financial statements for the year ended December
31, 2015.
|
(c)
|
|
Attestation report of the registered public accounting firm
|
This annual report does not include an
attestation report of the Company’s independent auditor regarding internal controls regarding the effectiveness of the Company’s
internal controls over financial reporting. Management’s report was not subject to attestation by the Company’s independent
auditor pursuant to current rules of the SEC that exempt non-accelerated filers from the requirement to include auditor attestation
on the effectiveness of internal control over financial reporting, thus permitting the Company to provide only management’s
report on internal control over financial reporting in this Annual Report.
|
(d)
|
|
Changes in internal controls over financial reporting
|
Other than the material weakness described above, there
were no changes in the Company’s internal control over financial reporting that occurred during the year ended December
31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Remediation Plan
To remediate the material weakness described above,
management plans to strengthen the control procedures relating to accounting for more complex transactions. The Company has recently
appointed a new Chief Financial Officer who is tasked with developing and implementing more robust review and oversight processes
when there are non-routine and more complex accounting issues.
Item
16A Audit Committee Financial Expert
The Company’s Board has determined that
the Company has at least one Audit Committee financial expert serving on its Audit Committee and that the individual is "independent",
as such term is used in Section 303A.02 of the NYSE Listed Company Manual. Mr. Malcolm F. Clay, Chairman of the Audit Committee
serves as the Audit Committee’s financial expert. He is a Chartered Accountant with over 30 years' experience in both public
and private companies.
Item
16B Code of Ethics - BOARD OF DIRECTORS AND officers
The Company has established a Code of Ethics
for the Board and senior officers including chief executive officer, chief financial officer, and the controller. The Code of Ethics
is available on the Company's website (www.mincogold.com). A hard copy of the Code of Ethics may be requested from the Company
by writing to the Company's Corporate Secretary at Suite 2772, 1055 West Georgia Street, Vancouver, B.C. V6E 3R5.
Item
16C Principal Accountant Fees and Services
During the past two fiscal years, the Company
has paid the following fees to its principal accountants, PricewaterhouseCoopers LLP.
|
|
2015
|
2014
|
|
|
$
|
$
|
|
Audit fees
(1)
|
124,700
|
87,000
|
|
Audit-related fees
(2)
|
5,350
|
9,400
|
|
Tax fees
(3)
|
-
|
-
|
|
All other fees
(4)
|
-
|
-
|
|
Total
|
130,050
|
96,400
|
|
|
|
|
|
|
|
|
|
|
|
Notes
:
(1)
The aggregate fees billed for audit services.
(2)
The aggregate fees billed for consultation, assurance and related services that are reasonably
related to the performance of the audit or review of the Company's financial statements.
|
|
(3)
|
The aggregate fees billed for tax compliance, corporate income tax
returns, tax advice, tax compliance, and tax planning services.
|
(4)
The aggregate fees billed for professional services other than those listed in the other columns
items.
It is within the mandate of the Audit Committee
to approve all audit and non-audit related fees and all fees for the last two fiscal years were approved. The Audit Committee has
pre-approved specifically identified non-audit related services. The auditors also present the estimate for the annual audit related
services to the Audit Committee for approval prior to undertaking the annual audit of the financial statements.
Item
16D ExemptionS from the Listing Standards
for
Audit CommitteeS
Each member of the Audit Committee is "independent"
from management.
Item
16E PurchaseS of Equity SecuritIES by the Issuer and Affiliate PurchaserS
None.
Item
16F Change in Registrant’s certifying accountant
Not Applicable.
Item
16G Corporate Governance
Not Applicable.
Item
16H Mine Safety
Not Applicable.
PART
III
Item
17. Financial Statements
Not applicable. Please see Item 18.
Item
18. Financial Statements
Attached hereto.
Financial Statements
|
Document
|
Page
|
|
Audited consolidated Financial Statements
of the Company as at December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, including the Report
of Independent Auditors
Audited consolidated Financial Statements
of Minco Silver as at December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013, including the Report
of Independent Auditors
|
75-108
109-139
|
Minco Gold Corporation
(An exploration stage enterprise)
Consolidated
Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(Canadian dollars)
Management's Responsibility for Financial
Reporting
The consolidated financial statements are
the responsibility of the Board of Directors and management. The consolidated financial statements have been prepared by management
in accordance with International Financial Reporting Standards as issued by International Accounting Standard Board and include
certain estimates that reflect management’s best judgments on information currently available. In the opinion of management,
the accounting practices utilized are appropriate in the circumstances and the consolidated financial statements fairly reflect
the financial position and results of operations of the Company within reasonable limits of materiality.
The Audit Committee of the Board of Directors
is composed of three Directors and meets quarterly and annually with management and the independent auditors to review the scope
and results of the annual audit and to review the consolidated financial statements and related financial reporting matters prior
to submitting the consolidated financial statements to the Board of Directors for approval.
The consolidated financial statements have
been audited by PricewaterhouseCoopers LLP, Chartered Accountants, who were appointed by the shareholders. The independent auditor’s
report outlines the scope of their examination and their opinion on the consolidated financial statements.
Dr. Ken Cai Larry Tsang, CPA, CA
President and CEO Interim Chief Financial Officer
Vancouver, Canada
March 31, 2016
March 31, 2016
Independent
Auditor’s Report
To the Shareholders of Minco Gold Corporation
We have audited the accompanying consolidated
financial statements of Minco Gold Corporation, which comprise the consolidated statements of financial position as at December
31, 2015 and 2014 and the consolidated statements of income (loss), comprehensive income (loss), changes in equity and cash flows
for each of the years in the three-year period ended December 31, 2015, and the related notes, which comprise a summary of significant
accounting policies and other explanatory information.
Management’s responsibility for the
consolidated financial statements
Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted
auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
from material misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.
An audit involves performing procedures to
obtain audit evidence, on a test basis, about the amounts and disclosures in the consolidated financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. We were not engaged to perform an audit of the company’s internal control
over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting principles and policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have
obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of Minco Gold Corporation as at December 31, 2015 and
December 31, 2014 and its financial performance and its cash flows for each of the years in the three-year period ended December
31, 2015 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
|
Index
|
|
|
|
|
|
|
|
Page
|
|
Consolidated Financial Statements
|
|
|
5 - 9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Financial Position
|
|
|
5
|
|
|
Consolidated Statements of Income (Loss)
|
|
|
6
|
|
|
Consolidated Statements of Comprehensive Income (Loss)
|
|
|
7
|
|
|
Consolidated Statements of Changes in Equity
|
|
|
8
|
|
|
Consolidated Statements of Cash Flow
|
|
|
9
|
|
Notes to the Consolidated Financial Statements
|
|
|
10 - 35
|
|
1
|
General information and significant transaction with Minco Silver
|
|
|
10
|
|
2
|
Basis of preparation
|
|
|
10
|
|
3
|
Summary of significant accounting policies
|
|
|
11
|
|
4
|
Critical accounting estimates and judgments
|
|
|
18
|
|
5
|
Cash and cash equivalents
|
|
|
19
|
|
6
|
Short-term investment
|
|
|
19
|
|
7
|
Property, plant and equipment
|
|
|
20
|
|
8
|
Mineral interests
|
|
|
21
|
|
9
|
Equity investment in Minco Silver Corporation
|
|
|
23
|
|
10
|
Gain on legal settlement
|
|
|
25
|
|
11
|
Non-controlling interest
|
|
|
26
|
|
12
|
Share capital
|
|
|
27
|
|
13
|
Income tax
|
|
|
29
|
|
14
|
Commitments
|
|
|
31
|
|
15
|
Related party transactions
|
|
|
31
|
|
16
|
Geographical information
|
|
|
32
|
|
17
|
Financial instruments and fair values
|
|
|
32
|
|
18
|
Capital management
|
|
|
34
|
Minco Gold Corporation
(An exploration stage enterprise)
Consolidated
Statements of Financial Position
(in Canadian dollars)
|
|
December 31,
|
December 31,
|
|
|
2015
|
2014
|
|
Assets
|
$
|
$
|
|
Current assets
|
|
|
|
Cash and cash equivalents (note 5)
|
5,593,669
|
2,117,038
|
|
Short-term investment (note 6)
|
4,048,341
|
-
|
|
Receivables
|
11,122
|
103,174
|
|
Due from related parties (note 15)
|
12,387
|
47,696
|
|
Prepaid expenses and deposits
|
162,970
|
140,956
|
|
|
9,828,489
|
2,408,864
|
|
|
|
|
|
Long-term deposit
|
51,277
|
51,277
|
|
Property, plant and equipment
(note 7)
|
10,428
|
125,298
|
|
Equity investment in Minco Silver
(note 9)
|
6,631,094
|
6,820,000
|
|
|
16,521,288
|
9,405,439
|
|
Liabilities
|
|
|
|
Current liabilities
|
|
|
|
Accounts payable and accrued liabilities
|
389,522
|
444,914
|
|
Advance from non-controlling interest (note 8(a))
|
-
|
453,463
|
|
Due to related party (note 15)
|
177,330
|
3,603,848
|
|
|
566,852
|
4,502,225
|
|
Equity
|
|
|
|
Equity attributable to owners of the parent
|
|
|
|
Share capital (note 12(a))
|
41,911,823
|
41,882,757
|
|
Contributed surplus
|
9,247,685
|
9,179,213
|
|
Accumulated other comprehensive income
|
2,763,940
|
1,183,086
|
|
Deficits
|
(37,969,012)
|
(52,330,354)
|
|
|
15,954,436
|
(85,298)
|
|
Non-controlling interests
(note 11)
|
-
|
4,988,512
|
|
Total equity
|
15,954,436
|
4,903,214
|
|
|
16,521,288
|
9,405,439
|
|
Commitments (note 14)
|
|
|
|
|
|
|
|
Approved by the Board of Directors
|
|
|
(signed) Malcolm Clay Director
(signed)
Robert Callander Director
The accompanying notes are an integral part
of these consolidated financial statements.
Minco Gold Corporation
(An exploration stage enterprise)
Consolidated
Statements of Income (Loss)
For the years
ended December 31, 2015, 2014, and 2013
(in Canadian dollars, except per share data)
|
|
2015
|
2014
|
2013
|
|
|
$
|
$
|
$
|
|
Exploration recovery
(note 8(a))
|
-
|
-
|
(622,293)
|
|
Exploration costs
(note 8)
|
793,081
|
1,177,817
|
1,550,251
|
|
|
793,081
|
1,177,817
|
927,958
|
|
Administrative expenses
(note 15)
|
|
|
|
|
Accounting and audit
|
152,777
|
105,423
|
111,905
|
|
Amortization
|
34,781
|
67,180
|
66,746
|
|
Consulting
|
78,267
|
11,633
|
30,453
|
|
Directors' fees
|
73,124
|
54,188
|
49,749
|
|
Foreign exchange loss (gain)
|
(209,493)
|
16,977
|
19,692
|
|
Investor relations
|
37,051
|
24,726
|
116,814
|
|
Legal and regulatory
|
144,844
|
140,727
|
132,506
|
|
Office and miscellaneous
|
384,804
|
366,836
|
360,894
|
|
Property investigation
|
81,407
|
74,948
|
112,863
|
|
Salaries and benefits
|
388,887
|
618,926
|
655,585
|
|
Share-based compensation (note 12(b))
|
80,248
|
297,588
|
993,331
|
|
Travel and transportation
|
75,791
|
69,786
|
83,553
|
|
|
1,322,488
|
1,848,938
|
2,734,091
|
|
Operating loss
|
(2,115,569)
|
(3,026,755)
|
(3,662,049)
|
|
Gain on legal settlement (note 10)
|
51,745
|
148,739
|
1,343,638
|
|
Gain on sale of exploration permit (note 8(b)(c))
|
-
|
376,937
|
-
|
|
Gain on sale of Minco Resources (note 8)
|
15,060,170
|
-
|
-
|
|
Loss on partial disposal of investment in Minco Silver (note 9)
|
-
|
(399,536)
|
-
|
|
Impairment of equity investment in Minco Silver (note 9)
|
-
|
(4,205,816)
|
-
|
|
Unrealized loss on marketable securities
|
-
|
-
|
(1,470)
|
|
Impairment of property, plant and equipment
|
-
|
(8,784)
|
-
|
|
Finance income
|
64,819
|
17,570
|
110,122
|
|
Share of gain (loss) from equity investment in Minco Silver (note 9)
|
1,259,391
|
(321,972)
|
(656,132)
|
|
Dilution loss (note 9)
|
-
|
(78,177)
|
(77,414)
|
|
Net income (loss) for the year
|
14,320,556
|
(7,497,794)
|
(2,943,305)
|
|
Net income (loss) attributable to:
|
|
|
|
|
Shareholders of the Company
|
14,361,342
|
(7,354,162)
|
(3,144,525)
|
|
Non-controlling interest
|
(40,786)
|
(143,632)
|
201,220
|
|
|
14,320,556
|
(7,497,794)
|
(2,943,305)
|
|
Net Income (loss) per share:
|
|
|
|
|
basic and diluted
|
0.28
|
(0.15)
|
(0.06)
|
|
Weighted average number of common shares outstanding:
basic and diluted
|
50,566,749
|
50,488,078
|
50,348,215
|
The accompanying notes are an integral part
of these consolidated financial statements.
Minco Gold Corporation
(An exploration stage enterprise)
Consolidated
Statements of Comprehensive Income (Loss)
For the years
ended December 31, 2015, 2014 and 2013
(in Canadian dollars)
|
|
2015
|
2014
|
2013
|
|
|
$
|
$
|
$
|
|
Net income (loss) for the year
|
14,320,556
|
(7,497,794)
|
(2,943,305)
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss:
|
|
|
|
|
Realized gain from reclassification of currency translation adjustments upon disposition of Minco Resources
|
(479,324)
|
-
|
-
|
|
Realized gain reclassified to net loss on partial disposal of equity investment in Minco Silver (note 8)
|
-
|
(158,797)
|
-
|
|
Share of other comprehensive income of Minco Silver equity accounted investment
|
1,958,940
|
115,462
|
726,975
|
|
Exchange differences on translation from functional
to
presentation currency
|
101,238
|
131,551
|
126,295
|
|
|
|
|
|
|
Total comprehensive income (loss) for the year
|
15,901,410
|
(7,409,578)
|
(2,090,035)
|
|
Comprehensive income (loss) attributable to:
|
|
|
|
|
Shareholders of the Company
|
15,904,973
|
(7,273,894)
|
(2,214,953)
|
|
Non-controlling interest
|
(3,563)
|
(135,684)
|
124,918
|
|
|
15,901,410
|
(7,409,578)
|
(2,090,035)
|
The accompanying notes are an integral part
of these consolidated financial statements.
Minco Gold Corporation
(An exploration stage enterprise)
Consolidated
Statements of Changes in Equity
For the years
ended December 31, 2015, 2014 and 2013
(in Canadian dollars)
|
|
|
Attributable to equity owner of the Company
|
|
|
|
|
Number of shares
|
Share capital
|
Contributed surplus
|
Accumulated other comprehensive income
|
Deficits
|
Subtotal
|
Non-controlling interest
|
Total equity
|
|
|
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Balance – January 1, 2013
|
50,348,215
|
41,758,037
|
7,939,681
|
173,246
|
(41,831,667)
|
8,039,297
|
2,425,368
|
10,464,665
|
|
Net income (loss) for the year
|
-
|
-
|
-
|
-
|
(3,144,525)
|
(3,144,525)
|
201,220
|
(2,943,306)
|
|
Contribution from non-controlling interest (note 11)
|
-
|
-
|
-
|
-
|
-
|
-
|
2,573,910
|
2,573,910
|
|
Other comprehensive income (loss)
|
-
|
-
|
-
|
929,572
|
-
|
929,572
|
(76,302)
|
853,270
|
|
Share-based compensation
|
-
|
-
|
993,331
|
-
|
-
|
993,331
|
-
|
993,331
|
|
Balance – December 31, 2013
50,348,215
|
41,758,037
|
8,933,012
|
1,102,818
|
(44,976,192)
|
6,817,675
|
5,124,196
|
11,941,871
|
|
Balance - January 1, 2014
|
50,348,215
|
41,758,037
|
8,933,012
|
1,102,818
|
(44,976,192)
|
6,817,675
|
5,124,196
|
11,941,871
|
|
Net loss for the year
|
-
|
-
|
-
|
-
|
(7,354,162)
|
(7,354,162)
|
(143,632)
|
(7,497,794)
|
|
Other comprehensive income
|
-
|
-
|
-
|
80,268
|
-
|
80,268
|
7,948
|
88,216
|
|
Proceeds on issuance of shares from exercise of options
|
166,666
|
124,720
|
(51,387)
|
-
|
-
|
73,333
|
-
|
73,333
|
|
Share-based compensation
|
-
|
-
|
297,588
|
-
|
-
|
297,588
|
-
|
297,588
|
|
Balance - December 31, 2014
|
50,514,881
|
41,882,757
|
9,179,213
|
1,183,086
|
(52,330,354)
|
(85,298)
|
4,988,512
|
4,903,214
|
|
|
|
|
|
|
|
|
|
|
|
Balance - January 1, 2015
|
50,514,881
|
41,882,757
|
9,179,213
|
1,183,086
|
(52,330,354)
|
(85,298)
|
4,988,512
|
4,903,214
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the year
|
-
|
-
|
-
|
-
|
14,361,342
|
14,361,342
|
(40,786)
|
14,320,556
|
|
Other comprehensive income
|
-
|
-
|
-
|
1,580,854
|
-
|
1,580,854
|
37,223
|
1,618,077
|
|
Elimination of non-controlling interest related to sale of Minco Resources
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,984,949)
|
(4,984,949)
|
|
Proceeds on issuance of shares from exercise of options
|
66,500
|
29,066
|
(11,776)
|
-
|
-
|
17,290
|
-
|
17,290
|
|
Share-based compensation
|
-
|
-
|
80,248
|
-
|
-
|
80,248
|
-
|
80,248
|
|
Balance - December 31, 2015
|
50,581,381
|
41,911,823
|
9,247,685
|
2,763,940
|
(37,969,012)
|
15,954,436
|
-
|
15,954,437
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
Minco Gold Corporation
(An exploration stage enterprise)
Consolidated Statements of Cash Flow
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
|
2015
|
2014
|
2013
|
|
Cash flow provided by (used in)
|
$
|
$
|
$
|
|
Operating activities
|
|
|
|
|
Net income (loss) for the year 14,320,556
|
(7,497,794)
|
(2,943,305)
|
|
Adjustments for:
|
|
|
|
|
Amortization
|
34,363
|
67,180
|
66,746
|
|
Equity loss (gain) on investment in Minco Silver
|
(1,259,391)
|
321,972
|
656,132
|
|
Dilution loss
|
-
|
78,177
|
77,414
|
|
Loss on partial disposal of equity investment in Minco Silver
|
-
|
399,536
|
-
|
|
Impairment of equity investment in Minco Silver
|
-
|
4,205,816
|
-
|
|
Impairment on property, plant and equipment
|
-
|
8,784
|
-
|
|
Foreign exchange loss (gain)
|
(227,257)
|
17,603
|
21,496
|
|
Gain on sale of Minco Resource
|
(15,111,348)
|
-
|
-
|
|
Gain from legal settlement (note 10)
|
(51,745)
|
(148,739)
|
(1,343,638)
|
|
Gain on sale of exploration permits (note 8(b))
|
-
|
(376,937)
|
-
|
|
Share-based compensation (note 12 (b))
|
80,248
|
297,588
|
993,331
|
|
Unrealized loss on marketable securities
|
-
|
-
|
1,470
|
|
Changes in items of working capital:
|
|
|
|
|
Receivables
|
10,454
|
(82,144)
|
65,139
|
|
Due from related parties
|
501,491
|
41,368
|
1,034,808
|
|
Prepaid expenses and deposits
|
(140,315)
|
(73,151)
|
75,151
|
|
Accounts payable for Changkeng permit
|
-
|
-
|
(4,711,920)
|
|
Accounts payable and accrued liabilities
|
91,603
|
19,141
|
(36,317)
|
|
Net cash used in operating activities
|
(1,751,341)
|
(2,721,600)
|
(6,043,493)
|
|
Investing activities
|
|
|
|
|
Loan receivable
|
-
|
-
|
(1,641,900)
|
|
Net cash outflow from sale of Minco Resources and its subsidiaries
|
(1,354,041)
|
-
|
-
|
|
Proceeds from loan receivable (note 8(a))
|
-
|
-
|
1,641,900
|
|
Proceeds from legal settlement (note 10)
|
94,472
|
720,095
|
801,395
|
|
Proceeds from partial disposal of investment in Minco Silver (note 9)
|
-
|
1,500,000
|
-
|
|
Proceeds from sales of exploration permits (note 8(b))
|
-
|
376,937
|
-
|
|
Purchase of or proceeds from sale of property, plant and equipment
|
13,693
|
(13,772)
|
(29,301)
|
|
Redemption of short-term investments
|
6,068,564
|
-
|
5,205,562
|
|
Net cash generated from investing activities
|
4,822,688
|
2,583,260
|
5,977,656
|
|
Financing activities
|
|
|
|
|
Advance from non controlling interest shareholders
|
-
|
258,471
|
159,417
|
|
Proceeds from stock option exercises
|
17,290
|
73,333
|
-
|
|
Advance from Minco Silver Corporation
|
-
|
-
|
1,300,000
|
|
Net cash generated from financing activities
|
17,290
|
331,804
|
1,459,417
|
|
Effect of exchange rate changes on cash and cash equivalents
|
387,994
|
125,765
|
141,175
|
|
Increase in cash and cash equivalents
|
3,476,631
|
319,229
|
1,534,755
|
|
Cash and cash equivalents- Beginning of year
|
2,117,038
|
1,797,809
|
263,054
|
|
Cash and cash equivalents - End of year
|
5,593,669
|
2,117,038
|
1,797,809
|
|
Cash paid for income tax
|
-
|
-
|
-
|
The accompanying notes are an integral
part of these consolidated financial statements.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
1.
|
|
General information and significant transaction with
Minco Silver
|
Minco Gold Corporation (“Minco
Gold” or the “Company”) was incorporated in 1982 under the laws of British Columbia, Canada as Cap Rock Energy
Ltd. The Company changed its name to Minco Gold in 2007. The Company is an exploration stage enterprise engaged in exploration
and evaluation of gold-dominant mineral properties and projects. After the disposition of properties in China, the Company is currently
review mineral properties of merit. The registered office of the Company is 2772 – 1055 West Georgia Street, British Columbia,
Canada. The Company has listed its common shares on the Toronto Stock Exchange (“TSX”) under the symbol “MMM”,
and the NYSE MKT under the symbol “MGH”.
As at December 31, 2015, Minco
Gold owned a 18.45% (December 31, 2014 – 18.45%) equity interest in Minco Silver Corporation (“Minco Silver”),
which is accounted for as a significantly influenced investment in an associate. Minco Silver was incorporated in British Columbia,
Canada and its Common Shares are listed on the Toronto Stock Exchange (“TSX”) and trades under the symbol “MSV”.
On May 22, 2015, the Company
entered into the share purchase agreement (“SPA”) with Minco Silver and Minco Silver’s wholly-owned subsidiary,
Minco Investment Holding HK Ltd. (“Minco Investment”). Pursuant to the SPA, the Company sold all of the issued and
outstanding shares of its wholly-owned subsidiary, Minco Resources Limited (“Minco Resources”), which held interests
in Minco Mining (China) Corporation (“Minco China”) to Minco Investment. Minco China consolidated certain subsidiaries
including Yuanling Minco Mining Ltd. (“Yuanling Minco”), Tibet Minco Mining Co. Ltd. (“Tibet Minco”), Huaihua
Tiancheng Mining Ltd. (“Huanihua Tiancheng”), a legal ownership of Foshan Minco Mining Co. Ltd. (“Foshan Minco”)
and a 51% interest in Guangdong Mingzhong Mining Co. Ltd. (“Mingzhong”), which owned the Changkeng Gold Project. With
the disposal of Minco Resources (and indirectly, the Company’s ownership of Minco China), the trust agreement related to
the funding of the Fuwan Project was eliminated (note 15).
The selling price was $13,716,397,
net of other adjustment of $15,863. In accordance with the SPA, $3,700,000 of the sales price was applied to settle outstanding
amounts due from the Company to Minco Silver. This sale transaction was completed on July 31, 2015.
The Company has calculated a
gain of $18,467,407 on the sale, based on the consideration received of $13,716,397 and the negative carrying value of its investment
in the net assets of Minco Resources in the amount of $4,340,686. This resulted in a total gain of $18,057,083, which was reduced
by $69,000 to account for the transaction cost and further adjusted to include the reclassification of cumulative translation adjustments
of $479,324 relating to the disposed of entity. The negative carrying value of the net assets sold also includes a non-controlling
interest of $4,984,949, which relates to the 49% interest of Mingzhong that was not owned by the Company. Due to Minco Gold’s
18.45% ownership in Minco Silver, an unrealised gain in the amount of $3,407,237 was recorded as a reduction of Minco Gold’s
equity investment in Minco Silver and the remaining amount resulted in a realised gain of $15,060,170 recorded in net income.
Three assets have been retained
by the Company including the contingent receivable from a legal settlement with 208 Team and the Gold Bull Mountain and Longnan
exploration permits.
Minco Gold has entered into a
trust agreement with Minco Silver and Minco China where Minco China holds the above retained assets in trust for Minco Gold.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
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1.
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General information and significant transaction with Minco Silver
(continued)
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The majority of the consideration
was received in the form of a short-term investment (note 6) and net cash out flow of $1,354,041 as result of the transaction mainly
represented cash balances within the entities sold.
These consolidated financial
statements have been prepared in compliance with International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”).
These
financial statements were approved by the board of directors for issue on March 31, 2016.
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3.
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|
Summary of significant accounting policies
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Basis of measurement
The consolidated financial statements
have been prepared under the historical cost convention.
Consolidation
The consolidated financial statements
include the accounts of Minco Gold, and through to July 31, 2015, as described in Note 1, its wholly-owned Chinese subsidiaries
Minco Mining (China) Corporation (“Minco China”), Yuanling Minco Mining Ltd. (“Yuanling Minco”), Tibet
Minco Mining Co. Ltd. (“Tibet Minco”) and Huaihua Tiancheng Mining Ltd. (“Huaihua Tiancheng”); its wholly
owned Hong Kong subsidiary Minco Resources Limited (“Minco Resources”) and its 51% interest in Guangzhou Mingzhong
Mining Co., Ltd. (“Mingzhong”).
Information about the Company’s
holding in its former subsidiaries:
|
Name
|
Principal
activities (ownership interest)
|
Country of Incorporation
|
|
Minco China
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Exploring and evaluating mineral properties (100%)
|
China
|
|
|
Yuanling Minco
|
Exploring and evaluating mineral properties (100%)
|
China
|
|
|
Tibet Minco
|
Exploring and evaluating mineral properties (100%)
|
China
|
|
|
Huaihua Tiancheng
|
Exploring and evaluating mineral properties (100%)
|
China
|
|
|
Minco Resources
|
Holding company
(100%)
|
China
|
|
|
Mingzhong
|
Exploring and evaluating mineral properties (51%)
|
China
|
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Subsidiaries are all entities
(including structured entities) over which the group has
control. The group controls an entity when the group is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the group. They are deconsolidated from the
date that control ceases.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
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3.
|
|
Summary of significant accounting policies
(continued)
|
As of August 1, 2015 through
to the year-ended December 31, 2015, the Company had no subsidiaries.
Cash and cash equivalents
Cash and cash equivalents include cash
on hand and held at banks and short-term investments with an original maturity of 90 days or less, which are readily convertible
into a known amount of cash.
Short term investment
Short term investment consists
of term deposits with maturity dates between 90 days and 1 year.
Non-controlling interests
Non-controlling interests represent
equity interests in subsidiaries owned by outside parties. The share of net assets of subsidiaries attributable to non-controlling
interests is presented as a component of equity. Profit or loss and each component of other comprehensive income are attributed
to the non-controlling interests where applicable. Changes in the parent company’s ownership interest in subsidiaries that
do not result in a loss of control are accounted for as equity transactions.
Equity investment
Associates are entities over
which the Company has significant influence, but not control. Significant influence is generally presumed to exist where the Company
has between 20 percent and 50 percent of the voting rights, but can also arise where the Company holds less than 20 percent of
the voting rights, but it has power to be actively involved and influential in policy decisions affecting the entity. The Company
accounts for its investment in associates using the equity method. Under the equity method, the investment is initially recognized
at cost, and the carrying amount is increased or decreased to recognize the investor’s shares of profit or loss of the associate.
The Company’s share of income or loss of associates is recognized in the consolidated statement of income (loss).
Dilution gains and losses arising
from changes in interests in investments in associates where significant influence is retained are recognized in the consolidated
statements of income (loss).
At each reporting date, the Company
determines whether there is any objective evidence that the investment in the associate is impaired. If an impairment is determined
to exist, the amount of the impairment is recognized in the statement of income (loss). The amount of impairment is calculated
as the difference between the recoverable amount of the investment in the associate and its carrying value.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
3.
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|
Summary of significant accounting policies
(continued)
|
Foreign currency
translation
(i) Functional and
presentation currency
The financial statements of each
entity in the group are measured using the currency of the primary economic environment in which the entity operates (the “functional
currency”). The consolidated financial statements are presented in Canadian dollars.
The functional currency of Minco
Gold is the Canadian dollar.
The functional currency of the Company’s
Chinese subsidiaries, disposed of in the year, was Renminbi (“RMB”).
The financial statements of the
Company’s Chinese subsidiaries (“foreign operations”), prior to the disposal, were translated into the Canadian
dollar presentation currency as follows:
|
|
·
|
Assets and liabilities – at the closing rate at the date of the
statement of financial position
|
|
|
·
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Income and expenses – at the average rate of the period (as this
is considered a reasonable approximation of actual rates)
|
All resulting changes are recognized
in other comprehensive income as cumulative translation adjustments. When the settlement of a monetary item receivable from or
payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising
from the item are considered to form part of the net investment in a foreign operation and are recognized in other comprehensive
income.
When an entity disposes of its
entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the
foreign currency gains or losses accumulated in other comprehensive income related to the foreign operation are recognized in profit
or loss. If an entity disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount
of foreign currency gains or losses accumulated in other comprehensive income related to the subsidiary are reallocated between
controlling and non-controlling interests.
(ii) Transactions
and balances
Foreign currency transactions
are translated into the functional currency of an entity using the exchange rates prevailing at the dates of the transactions.
Generally, foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation
at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation’s functional
currency are recognized in the statements of income (loss).
Financial instruments
Financial assets and liabilities
are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized
when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially
all risks and rewards of ownership.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
Financial assets and liabilities
are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized
amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
At initial recognition, the Company
classifies its financial instruments in the following categories:
(i) Financial assets and liabilities
at fair value through profit or loss: A financial asset or liability is classified in this category if acquired principally for
the purpose of selling or repurchasing in the short-term. Financial instruments in this category are recognized initially and subsequently
at fair value. Transaction costs are expensed in the statement of income. Gains and losses arising from changes in fair value are
presented in the statement of income within other gains and losses in the period in which they arise. Financial assets and liabilities
at fair value through profit or loss are classified as current except for the portion expected to be realized or paid beyond twelve
months of the balance sheet date, which is classified as non-current.
(ii) Loans and receivables: Loans
and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
The Company’s loans and receivables are comprised of cash and cash equivalents, short-term investment, receivables, and due
from related parties. Loans and receivables are initially recognized at the amount expected to be received less, when material,
a discount to reduce the loans and receivables to fair value. Subsequently, loans and receivables are measured at amortized cost
using the effective interest method less a provision for impairment, if necessary.
(iii) Financial
liabilities at amortized cost: Financial liabilities at amortized cost include accounts payable, advance from non-controlling interest
and due to related parties.
Financial liabilities are classified
as current liabilities if payment is due within twelve months. Otherwise, they are presented as non-current liabilities.
Impairment of financial
assets
At each reporting date, the Company
assesses whether there is objective evidence that a financial asset (other than a financial asset classified as fair value through
profit or loss) is impaired.
The criteria used to determine
if objective evidence of an impairment exists include:
|
|
(i)
|
significant financial difficulty of the obligor;
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|
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(ii)
|
delinquencies in interest and principal payments; and
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|
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(iii)
|
it becomes probable that the borrower will enter bankruptcy or other
financial reorganization.
|
For equity securities, a significant
or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired.
Financial assets carried at amortized
cost: If evidence of impairment exists, the Company recognizes an impairment loss as the difference between the amortized cost
of the loan or receivable and the present value of the estimated future cash flows, discounted using the instrument’s original
effective interest rate. The carrying amount of the asset is reduced by this amount either directly or indirectly through the use
of an allowance account.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
Impairment losses on financial
assets carried at amortized cost and available-for-sale debt instruments are reversed in subsequent periods if the amount of the
loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.
Property, plant
and equipment
Property, plant and equipment
are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly
attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized
as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Company and the cost can be measured reliably. Repairs and maintenance costs are charged to the statement of income during
the period which they are incurred.
The major categories of property,
plant and equipment are depreciated on a straight-line basis as follows:
Leasehold Improvements remaining
lease term
Mining Equipment 5 years
Motor Vehicles 10 years
Office Equipment and Furniture 5
years
The Company allocates the amount
initially recognized in respect of an item of property, plant and equipment to its significant parts and depreciates separately
each such part. The carrying amount of a replaced asset is derecognized when replaced. Residual values, method of amortization
and useful lives of the assets are reviewed annually and adjusted if appropriate.
Gains and losses on disposals
of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the asset and are included
as part of other gains and losses in the statement of income.
Exploration and evaluation
costs
Exploration and evaluation
costs include costs to acquire exploration rights, geological studies, exploratory drilling and sampling and directly attributable
administrative costs.
Exploration and evaluation
costs relating to non-specific projects or properties or those incurred before the Company has obtained legal rights to explore
an area are expensed in the period incurred. In addition, exploration and evaluation costs, other than direct acquisition costs,
are expensed before a mineral resource is identified as having economic potential.
Exploration and evaluation
costs are capitalized as mineral interests when a mineral resource is identified as having economic potential on a property. A
mineral resource is considered to have economic potential when it is expected that documented resources can be legally and economically
developed considering long-term metal prices. Therefore, prior to capitalizing such costs, management determines that the following
conditions have been met:
i) There is a probable future
benefit that will contribute to future cash inflows;
ii) The Company can obtain
the benefit and control access to it; and
iii) The transaction or
event giving rise to the benefit has already occurred.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
Once the technical feasibility
and commercial viability of the extraction of resources from a particular mineral property has been determined, mineral interests
are reclassified to mine properties within property, plant and equipment and carried at cost until the properties to which they
relate are placed into commercial production, sold, abandoned or determined by management to be impaired in value.
Costs relating to any producing
mineral interests would be amortized on a unit of production basis over the estimated ore reserves. Costs incurred after the property
is placed into production that increase production volume or extend the life of a mine are capitalized.
Proceeds from the sale of
properties or cash proceeds received from option payments are recorded as a reduction of the related mineral interest, or if no
amounts are capitalized, then the proceeds are recorded in the statement of income (loss).
Impairment of non-financial
assets
The
recoverability of mineral interests is dependent upon the determination of economically recoverable ore reserves, confirmation
of the Company’s interest in the underlying mineral claims, the ability to farm-out its resource properties, the ability
to obtain the necessary financing to complete their development and future profitable production or proceeds from the disposition
thereof.
The Company performs impairment
tests on property, plant and equipment and mineral interests when events or circumstances occur which indicate the assets may not
be recoverable. Impairment assessments are carried out on a project by project basis with each project representing a single cash
generating unit.
When impairment indicators are
identified, an impairment loss is recognized for any amount by which the asset’s carrying value exceeds its recoverable amount.
The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use.
The Company evaluates impairment
losses for potential reversals when events or circumstances warrant such consideration.
Share-based payments
The Company grants stock options
to directors, officers, employees and service providers. Each tranche in an award is considered a separate award with its own vesting
period. The Company applies the fair-value method of accounting for share-based payments and the fair value is calculated using
the Black-Scholes option pricing model.
Share-based payments for employees
and others providing similar services are determined based on the grant date fair value. Share based payments for non-employees
are determined based on the fair value of the goods/services received or options granted measured at the date on which the Company
obtains such goods/services.
Compensation expense is recognized
over each tranche’s vesting period, in earnings or capitalized as appropriate, based on the number of awards expected to
vest. If stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
Income tax
Deferred tax is recognized in
respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is not recognized for the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor taxable profit or loss.
Deferred tax is measured at the
tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date.
A deferred tax asset is recognized
for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable
profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit will be realized.
Share capital
Common shares are classified
as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity.
Earnings per share
Basic earnings per share is computed
using the weighted average number of common shares outstanding during the year. Diluted earnings per share amounts are calculated
giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised
or converted to common shares using the treasury stock method. If the Company incurs net losses in a fiscal year, basic and diluted
loss per share are the same.
Accounting standards
and amendments issued but not yet applied
IFRS 9, Financial Instruments,
addresses classification and measurement of financial assets. It replaces the multiple category and measurement models in IAS 39
Financial Instruments: Recognition and Measurement
for debt instruments with a new mixed measurement model having only two
categories: amortized cost and fair value through profit or loss. Requirements for financial liabilities are largely carried forward
from the existing requirements in IAS 39 except that fair value changes due to credit risk for liabilities designated at fair value
through profit and loss are generally recorded in other comprehensive income. The effective date of this new standard will be for
periods beginning on or after January 1, 2018 with early adoption permitted. The Company has not yet assessed the impact of this
standard or determined whether it will adopt earlier.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
IFRS 16, Leases, replaces the
previous leases standard IAS 17,
Leases and Related Interpretations
, and sets out the principles for the recognition, measurement,
presentation and disclosure of leases for both parties to a contract, i.e. the customer (lessee) and the supplier (lessor). Effective
January 1, 2019, an entity can choose to apply IFRS 16, but only if it also applies IFRS 15, Revenue from Contracts with Customers.
The Company will evaluate the impact of the change to the consolidated financial statements based on the characteristics of leases
outstanding at the time of adoption.
|
4.
|
|
Critical accounting estimates and judgments
|
The preparation of financial
statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future.
Estimates and other judgments are continuously evaluated and are based on management’s experience and other factors, including
expectations about future events that are believed to be reasonable in the circumstances. The following discusses the most significant
accounting judgments and estimates that the Company has made in the preparation of the financial statements:
Significant Influence
of Minco Silver
Management has assessed the
level of influence that the Company has on Minco Silver and determined that it has significant influence even though its shareholding,
beginning on April 22, 2014 is below 20%. This is because of the representation on Minco Silver’s board, common CEO and other
shared management.
Impairment
At each reporting date, management
conducts a review to determine whether there is any objective evidence that the investment in associate is impaired. This determination
requires significant judgment. In making this judgment, management evaluates among other factors, the movements in the trading
share price of Minco Silver and other commercial activities impacting Minco Silver.
If objective evidence of impairment
exists, then the Company recognizes an impairment loss in the statement of income (loss) to the extent that the estimated recoverable
amount is less than the carrying value.
As at December 31, 2015, management evaluated its equity investment
in Minco Silver for indications that the impairment loss that had been recognized in the first quarter of fiscal 2015 either no
longer existed or had decreased. The company concluded that due to the positive developments in Minco Silver, which included the
acquisition of Minco Resources and the related activities associated with the Changkeng project, accompanied by a corresponding
increase in the market value of Minco Silver’s share price, that there were indicators that impairment
loss had reversed. As a result, management estimated the recoverable amount and reversed the previously recognized impairment.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
5.
|
|
Cash and cash equivalents
|
Cash and cash equivalents comprise
cash at banks and on hand and guaranteed investment certificates with initial maturities of less than three months. As at December
31, 2015, cash and cash equivalents consisted solely of cash at banks and on hand of $5,593,669 which includes $5,557,926 (USD
$4,007,446) denominated in USD (December 31, 2014 - $2,117,038 (USD $1,820,182)). The company did not hold any cash equivalents.
On July 31, 2015, the Company
received short-term investments in the amount of $10,116,905 from Minco Silver, as consideration for the sale of Minco Resources
and its subsidiaries. During the year, the Company redeemed $6,068,564 of the short-term investment received. As at December 31,
2015, short-term investments consist of $4,048,341 cashable guaranteed investment certificates, with maturity of one year on December
28, 2016 The yield on this investment is 1.4%.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
7.
|
|
Property, plant and equipment
|
|
|
Leasehold improvements
|
Mining equipment
|
Motor vehicles
|
Office equipment and furniture
|
Total
|
|
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014
|
|
|
|
|
|
At January 1, 2014
|
19,012
|
67,710
|
87,299
|
3,922
|
177,943
|
|
Additions
|
-
|
-
|
-
|
14,203
|
14,203
|
|
Depreciation
|
(12,446)
|
(20,128)
|
(25,815)
|
(8,791)
|
(67,180)
|
|
Impairment loss
|
-
|
(8,784)
|
-
|
-
|
(8,784)
|
|
Exchange differences
|
-
|
2,240
|
6,076
|
800
|
9,116
|
|
At December 31, 2014
|
6,566
|
41,038
|
67,560
|
10,134
|
125,298
|
|
|
|
|
|
|
|
|
At December 31, 2014
|
|
|
|
|
|
Cost
|
95,628
|
433,109
|
352,074
|
408,965
|
1,289,776
|
|
Accumulated depreciation
|
(89,062)
|
(392,071)
|
(284,514)
|
(398,831)
|
(1,164,478)
|
|
Net book value
|
6,566
|
41,038
|
67,560
|
10,134
|
125,298
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015
|
|
|
|
|
|
At January 1, 2015
|
6,566
|
41,038
|
67,560
|
10,134
|
125,298
|
|
Additions
|
-
|
-
|
-
|
1,300
|
1,300
|
|
Disposals
|
-
|
(34,223)
|
(62,631)
|
(17,330)
|
(114,184)
|
|
Depreciation
|
(6,566)
|
(8,839)
|
(12,240)
|
(7,136)
|
(34,781)
|
|
Exchange differences
|
-
|
2,024
|
7,311
|
23,460
|
32,795
|
|
At December 31, 2015
|
-
|
-
|
-
|
10,428
|
10,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
95,628
|
400,910
|
296,754
|
416,395
|
1,209,687
|
|
Accumulated depreciation
|
(95,628)
|
(400,910)
|
(296,754)
|
(405,967)
|
(1,199,259)
|
|
Net book value
|
-
|
-
|
-
|
10,428
|
10,428
|
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
a) Guangdong - Changkeng
Minco China and Tibet Minco,
wholly owned subsidiaries of Minco China, are the controlling shareholders in Mingzhong with a 51% interest collectively.
Mingzhong signed an exploration
permit transfer agreement with No. 757 Exploration Team of Guangdong Geological Bureau (“757 Exploration Team”) and
on January 5, 2008 Mingzhong received the Changkeng exploration permit (the “Changkeng Exploration Permit”). This exploration
permit expires September 10, 2017.
To acquire the Changkeng Exploration
Permit, Mingzhong was required to pay RMB 48 million ($8.15 million). As at December 31, 2008, the first payment for the Changkeng
Exploration Permit to 757 Exploration Team was made in an amount of RMB 19 million ($3.22 million). The remaining balance of RMB
29 million ($4.92 million) was settled in May 2013. According to a Supplementary Agreement signed between 757 Exploration Team
and Mingzhong, 757 Exploration Team agreed to refund RMB 3.8 million ($622,293) to Mingzhong for certain exploration costs incurred
during the early stages of the Changkeng project. The refunded amount was recorded as an exploration cost recovery during the year
ended December 31, 2013. On July 31, 2013, Mingzhong paid RMB 1.03 million ($169,669) to 757 Exploration Team for the completed
hydro-geological program on the Changkeng Gold Project.
On July 31, 2015, the Company’s
equity investment, Minco Silver, completed the purchase of the Company’s subsidiaries that control the 51% interest of Mingzhong
(note 1).
b) Gansu - Longnan
Following the transaction
in the year with Minco Silver, Minco China holds nine exploration permits in trust for the Company in the Longnan region of south
Gansu province in China. The Longnan region is within the southwest Qinling gold field.The Longnan region consists of three projects
according to their geographic distribution, type and potential of mineralization:
|
|
i)
|
Yangshan: including four exploration permits located in the northeast
extension of the Yangshan gold belt and its adjacent area;
|
|
|
ii)
|
Yejiaba: including four exploration permits adjacent to the Guojiagou
exploration permit; and
|
|
|
iii)
|
Xicheng East: including one exploration permit to the east extension
of the Xicheng Pb-Zn mineralization belt.
|
The Company has spent
a cumulative total of $12.4 million on exploration costs on the Longnan project as at December 31, 2015 (December 31, 2014 - $11.7
million).
On December 13, 2013,
Minco China entered into an agreement with Gansu Yuandong Investment Co., Ltd (“YDIC”) in which the Company agreed
to sell two exploration permits in the Xicheng East and Yejiaba area to YDIC for RMB 0.8 million ($170,973. The process of transferring
the titles to the two permits to YDIC was pending approval by Gansu province and the proceeds were not received as at December
31, 2015.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
8.
|
|
Mineral interests
(continued)
|
On December 26, 2014,
Minco China entered into an agreement with Beijing Runlong Investment Limited Company (“Beijing Runlong”) in which
the Company agreed to sell four exploration permits in the Yangshan area to Beijing Runlong for total cash proceeds of RMB 3,200,000
($604,618). The process of transferring the titles to the four permits to Beijing Runlong was pending approval by Gansu province
and the proceeds were not received as at December 31, 2015. The Company did not record any receivable due to the uncertainty of
collectability.
Beijing Runlong must make
the following payments to Minco China:
|
|
iv)
|
5% of the total cash proceeds within 20 working days from the date of
signing the agreement (not received)
|
|
|
v)
|
45% of the total cash proceeds upon receiving the approval of the transfer
from the Provincial land and resources administrative authority, before submitting to the Ministry of Land and Resources (not received);
and
|
|
|
vi)
|
50% of the total cash proceeds within 5 days upon receiving the approved
exploration rights license (not received).
|
|
|
c)
|
Hunan - Gold Bull Mountain
|
Minco China’s
wholly owned subsidiary Yuanling Minco owns the Gold Bull Mountain Exploration permit. Following the transaction in the year with
Minco Silver, Minco China through Yuanling Minco holds the Gold Bull Mountain exploration permit, which expires on June 28, 2017,
in trust for the Company.
The following is a summary of
exploration costs, net of recoveries, incurred by each project:
|
|
|
|
|
Cumulative to
|
|
|
December 31,
|
December 31,
|
December 31,
|
December 31,
|
|
|
2015
|
2014
|
2013
|
2015
|
|
|
$
|
$
|
$
|
$
|
|
Currently active properties:
|
|
|
|
|
|
Gansu
|
|
|
|
|
|
- Longnan
|
626,815
|
894,646
|
1,262,074
|
12,367,711
|
|
Guangdong
|
|
|
|
|
|
- Changkeng
|
122,652
|
244,784
|
(361,010)
|
8,285,703
|
|
Hunan
|
|
|
|
|
|
- Gold Bull Mountain
|
43,508
|
36,862
|
24,031
|
2,316,611
|
|
Guangdong
|
|
|
|
|
|
- Sihui
|
106
|
1,525
|
2,863
|
6,099
|
|
|
|
|
|
|
|
Total
|
793,081
|
1,177,817
|
927,958
|
22,976,125
|
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
9.
|
|
Equity investment in Minco Silver Corporation
|
On April 22, 2014, the Company
sold 2,000,000 common shares of Minco Silver for cash proceeds of $1,500,000 which decreased the Company’s equity interest
in Minco Silver from 21.81% to 18.45%. As a result of this transaction, the Company recognized a loss on partial disposition of
its investment in Minco Silver of $558,333, a resulting reduction in the carrying value of the investment in associate of $2,058,333
and reclassified the gain of $158,797 relating to the Company’s share of other comprehensive income (loss) amounts of its
equity investment in Minco Silver, resulting in an overall net loss on partial disposition of its investment in Minco Silver of
$399,536.
The Company determined that
it continued to hold significant influence over Minco Silver despite the Company owning less than 20% of the voting rights of Minco
Silver. The Company continues to have the ability to influence Minco Silver through its board representation, common CEO and shared
management positions between the Company and Minco Silver.
As at December 31, 2015, the
Company owned 11,000,000 common shares of Minco Silver (December 31, 2014 – 11,000,000 and 2012 - 13,000,000 common shares).
As at December 31, 2015, management evaluated its equity investment
in Minco Silver for indications that the impairment loss that had been recognized in the first quarter of fiscal 2015 either no
longer existed or had decreased. The company concluded that due to the positive developments in Minco Silver, which included the
acquisition of Minco Resources and the related activities associated with the Changkeng project, accompanied by a corresponding
increase in the market value of Minco Silver’s share price, that there were indicators that impairment
loss had reversed. As a result, management estimated the recoverable amount and reversed the previously recognized impairment.
|
|
2015
|
2014
|
2013
|
|
|
$
|
$
|
$
|
|
As at January 1, Equity investment in Minco Silver
|
6,820,000
|
13,368,836
|
13,375,407
|
|
Dilution loss
|
-
|
(78,177)
|
(77,414)
|
|
Share of associate’s income (loss)
|
1,259,391
|
(321,972)
|
(656,132)
|
|
Share of other comprehensive income of Minco Silver
|
1,958,940
|
115,462
|
726,975
|
|
Partial disposition
|
-
|
(2,058,333)
|
-
|
|
Unrealised gain on disposition of Minco Resources
|
(3,407,237)
|
-
|
-
|
|
Impairment
|
-
|
(4,205,816)
|
-
|
|
As at December 31, Equity investment in Minco Silver
|
6,631,094
|
6,820,000
|
13,368,836
|
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
9.
|
|
Equity investment in Minco Silver Corporation
(continued)
|
The following is a summary
of Minco Silver’s balance sheet and reconciliation to carrying amounts as at December 31, 2015 and 2014:
|
|
December 31,
|
December 31,
|
|
|
2015
|
2014
|
|
|
$
|
$
|
|
Cash and cash equivalents
|
26,202,564
|
11,938,544
|
|
Other current assets
|
33,039,404
|
48,582,255
|
|
Mineral interests
|
63,676,055
|
31,621,827
|
|
Property, plant and equipment
|
434,999
|
422,012
|
|
Current liabilities
|
638,549
|
419,592
|
|
Shareholders' equity
|
122,714,472
|
92,145,046
|
|
Reconciliation to carrying
amounts:
|
|
|
|
|
|
|
|
Minco Gold’s share in percentage
|
18.45%
|
18.45%
|
|
Minco Gold’s share of net assets of Minco Silver
|
22,640,820
|
17,000,761
|
|
Differences between Minco Gold’s share and carrying value
|
(16,009,726)
|
(10,180,761)
|
|
Carrying value of investment in Minco Silver
|
6,631,094
|
6,820,000
|
The following is a summary
of Minco Silver’s income statement for the years ended December 31, 2015, 2014, and 2013:
|
|
For the year ended December 31,
|
For the year ended December 31,
|
For the year ended December 31,
|
|
|
2015
|
2014
|
2013
|
|
|
$
|
$
|
$
|
|
Administrative recovery (expenses)
|
1,368,238
|
(2,336,876)
|
(3,458,998)
|
|
Interest income
|
911,213
|
980,945
|
806,038
|
|
Net income (loss) for the year
|
6,680,947
|
(1,665,516)
|
(2,987,033)
|
|
Other comprehensive income for the year
|
|
|
|
|
-
Shareholders of the Company
|
10,619,461
|
470,514
|
3,309,545
|
|
-
Non-controling interest
|
232,071
|
-
|
-
|
|
Comprehensive income (loss) for the year
|
17,532,479
|
(1,195,002)
|
322,512
|
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
10.
|
|
Gain on legal settlement
|
On December 16, 2010, Minco China
entered into an agreement with the 208 Team, a subsidiary of China National Nuclear Corporation, to acquire a 51% equity interest
in the Tugurige Gold Project located in Inner Mongolia, China (the “Agreement”). The 208 Team did not comply with certain
of its obligations under the Agreement, including its obligation to set up a new entity (the “JV Co”) and the transfer
of its 100% interest in the Tugurige Gold Project to the JV Co. As a result, Minco China commenced legal action in China seeking
compensation.
On March 25, 2013, Minco China
settled its claim against the 208 Team relating to the Agreement for an amount of RMB 14 million ($2.4 million). Minco China received
RMB 5 million ($801,395) during 2013 and recognized a receivable of RMB 4 million ($699,688) as at December 31, 2013. The Company
received RMB 4 million ($720,095) in January 2014.
On January 4, 2015, Minco China
engaged a Chinese law firm to recommence legal action against 208 Team to recover the remaining RMB 5 million ($1,014,734) unpaid
balance on a contingent fee basis whereby the Company will pay the Chinese law firm 50% of the net amount recovered.
On May 6, 2015, Minco China reached
an agreement to settle its claim against the 208 Team for an amount of RMB 5.5 million ($1,138,472). The payments were to be received
in following manner:
On the signing
date of the agreement- RMB 500,000 ($98,940) (received on May 7, 2015)
On or before
June 17, 2015- RMB 2,000,000 ($405,894) (outstanding)
On or before
August 7, 2015- RMB 3,000,000 ($608,840) (outstanding)
As at December 31, 2015, Minco
China had received RMB 500,000 ($98,941). Minco China recognized a net gain on the legal settlement of RMB 250,000 ($51,745) which
represents the net proceeds from the initial payment after remittance of 50% of the payment under the contingent fee arrangement
with the Chinese law firm. The remaining RMB 5 million ($1,014,734) balance due to be paid under the legal settlement has not been
settled and therefore, has not been recognized as an asset as at December 31, 2015 due to the uncertainty of collectability of
amount owing under the settlement agreement. Minco China, which is no longer a wholly-owned consolidated subsidiary of Minco Gold,
advises that they have recommenced legal action in China seeking compensation.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
11.
|
|
Non-controlling interest
|
Below is summarized financial
information for Mingzhong, the Company’s 51% formerly owned indirect subsidiary. The amounts disclosed are based on those
included in the consolidated financial statement before inter-company eliminations.
Summarized statement for financial
position
|
|
December 31,
|
December 31,
|
|
|
2015
|
2014
|
|
|
$
|
$
|
|
NCI percentage
|
49%
|
49%
|
|
Current assets
|
-
|
1,234,149
|
|
Current liabilities
|
-
|
(1,321,620)
|
|
|
-
|
(87,471)
|
|
Non-current asset
|
-
|
37,384
|
|
Net assets
|
-
|
50,087
|
|
Accumulated non-controlling interests
|
-
|
4,988,512
|
Summarized income statement
|
|
Period from Jaunary 1 to July 31,
|
For the year-ended
December 31,
|
|
|
2015
|
2014
|
|
|
$
|
$
|
|
Net loss
|
(101,050)
|
(290,477)
|
|
Other comprehensive income
|
75,966
|
16,226
|
|
Total comprehensive loss
|
(25,084)
|
(274,251)
|
|
Loss allocated to NCI
|
(40,786)
|
(143,632)
|
Summarized cash flows
|
|
Period from January 1 to July 31,
|
For the year-ended
December 31,
|
|
|
2015
|
2014
|
|
|
$
|
$
|
|
Cash flows from operating activities
|
(86,455)
|
(279,873)
|
|
Cash flows from financing activities
|
-
|
603,100
|
|
Effect of exchange rate changes on cash
|
37,233
|
82,790
|
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
Authorized:
100,000,000 common shares without par value
Minco Gold may grant options
to its directors, officers, employees and consultants under its stock option plan (the “Stock Option Plan”). The Company’s
board of directors grants such options for periods of up to five years, with vesting periods determined at its sole discretion
and at prices equal to or greater than the closing market price on the day preceding the date the options are granted. These options
are equity-settled.
For the year ended December 31,
2015, the Company granted stock options for 1,190,000 common shares to various employees, consultants and directors at a weighted
exercise price of $0.24 per common share that vest over an 18-month period from the issuance date.
The maximum number of common
shares reserved for issuance under the Stock Option Plan is 15% of the issued and outstanding common shares of the Company.
Minco
Gold recorded $80,248 in share-based compensation expense for the year ended December 31, 2015 (December 31, 2014 - $297,588, December
31, 2013 - $993,331).
A summary of the options
outstanding is as follows:
|
|
Number outstanding
|
|
Weighted average exercise price
|
|
|
|
|
$
|
|
January 1, 2014
|
6,853,167
|
|
0.86
|
|
|
|
|
|
|
Granted
|
1,270,000
|
|
0.26
|
|
Forfeited
|
(166,666)
|
|
0.44
|
|
Cancelled
|
(836,000)
|
|
0.94
|
|
Expired
|
(660,000)
|
|
0.48
|
|
|
|
|
|
|
Balance, December 31, 2014
|
6,460,501
|
|
0.79
|
|
|
|
|
|
|
Granted
|
1,190,000
|
|
0.24
|
|
Exercised
|
(66,500)
|
|
0.26
|
|
Forfeited
|
(927,500)
|
|
0.55
|
|
Expired
|
(66,667)
|
|
0.93
|
|
|
|
|
|
|
Balance, December 31, 2015
|
6,589,834
|
|
0.72
|
The weighted average share price
on the date of exercise was $0.30 in 2015 (2014 - $0.56, 2013 - $Nil). As at December 31, 2015, there was $83,716 (2014: $24,854)
of total unrecognized compensation cost relating to unvested stock options.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
12.
|
|
Share capital
(continued)
|
|
|
|
|
|
|
|
|
|
|
Options outstanding
|
|
Options exercisable
|
|
|
|
|
|
|
|
|
|
Range of
exercise
prices
|
Number
outstanding
|
Weighted
average
remaining
contractual
life (years)
|
Weighted
average
exercise
price
|
|
Number
exercisable
|
Weighted
average
exercise
price
|
|
$
|
|
|
$
|
|
|
$
|
|
0.18 – 0.44
|
2,072,334
|
3.88
|
0.25
|
|
1,032,334
|
0.26
|
|
0.45 – 0.54
|
2,125,000
|
1.99
|
0.46
|
|
2,125,000
|
0.46
|
|
0.55 – 0.93
|
1,270,000
|
1.24
|
0.67
|
|
1,270,000
|
0.67
|
|
0.94 – 2.59
|
1,122,500
|
0.04
|
2.17
|
|
1,122,500
|
2.17
|
|
|
6,589,834
|
2.11
|
0.72
|
|
5,549,834
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company uses the Black-Scholes
option pricing model to determine the fair value of the options with the following assumptions:
|
|
2015
|
2014
|
2013
|
|
|
|
|
|
|
Risk-free interest rate
|
0.78% - 1.68%
|
1.27% -1.68%
|
1.40% - 1.55%
|
|
Dividend yield
|
0%
|
0%
|
0%
|
|
Volatility
|
85% - 87%
|
87% - 89%
|
86% - 91%
|
|
Forfeiture rate
|
23%
|
23%
|
24%
|
|
Estimated expected lives
|
5 years
|
5 years
|
5 years
|
Option pricing models require
the use of subjective estimates and assumptions including the expected stock price volatility. The stock price volatility is calculated
based on the Company’s historical volatility. Changes in the underlying assumptions can materially affect the fair value
estimates.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
Income tax expense differs from
the amount that would result from applying the Canadian federal and provincial income tax rates to the loss before income taxes.
These differences result from the following items:
|
|
2015
|
2014
|
2013
|
|
|
$
|
$
|
$
|
|
|
|
|
|
|
Net income (loss)
|
14,320,556
|
(7,497,794)
|
(2,943,305)
|
|
|
|
|
|
|
|
26%
|
26%
|
25.75%
|
|
|
|
|
|
|
Income tax recovery at statutory rates
|
3,723,345
|
(1,949,427)
|
(757,901)
|
|
Non-taxable (deductible) expenses
|
19,159
|
(431,590)
|
(314,072)
|
|
Difference in tax rates
|
1,093,732
|
20,291
|
(92,885)
|
|
Difference in gain on disposition of Minco Resources
|
(6,662,076)
|
-
|
-
|
|
Reduction of tax attributes from sale of Minco Resources
|
6,668,881
|
-
|
-
|
|
Expiry of non-capital loss carry forward
|
300,755
|
279,602
|
87,867
|
|
Deferred income tax asset not recognized
|
(5,252,629)
|
1,664,315
|
1,054,613
|
|
Other
|
108,833
|
416,809
|
22,378
|
|
|
|
|
|
|
Provision for tax expenses
|
-
|
-
|
-
|
Deferred income taxes arise
from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The significant
components of unrecognized deferred income tax assets and liabilities at December 31, 2015 and 2014 are as follows:
|
|
2015
|
2014
|
|
|
$
|
$
|
|
|
|
|
|
Deferred income tax assets (liabilities) not recognized
|
|
|
|
Non-capital loss
|
3,536,062
|
6,397,642
|
|
Resource expenditures
|
701,784
|
4,285,187
|
|
Capital assets
|
50,671
|
69,672
|
|
Investment in Minco Silver
|
(375,488)
|
(400,045)
|
|
Capital loss
|
1,070,899
|
393,426
|
|
|
|
|
|
|
4,983,929
|
10,745,882
|
No deferred income tax asset
has been recognized as realization is not considered probable due to the uncertainty of future taxable income.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
13.
|
|
Income tax
(continued)
|
The Company has approximately
$13,600,240 of operating losses in Canada. The expiries for Canadian non-capital loss carry forwards are as follows:
|
|
$
|
|
|
|
|
2026
|
1,442,234
|
|
2028
|
1,582,716
|
|
2029
|
1,270,045
|
|
2030
|
1,285,615
|
|
2031
|
1,933,078
|
|
2032
|
2,131,656
|
|
2033
|
1,535,838
|
|
2034
|
1,329,782
|
|
2035
|
1,089,276
|
|
|
|
|
|
13,600,240
|
The Company has commitments in
respect of office leases requiring minimum payments (including a share of operating costs) of $485,065 as follows:
|
|
$
|
|
|
|
|
2016
|
207,885
|
|
2017
|
207,885
|
|
2018
|
69,295
|
|
|
|
|
|
485,065
|
The above lease commitment is
related to a Vancouver office that is shared by Minco Silver and Minco Base Metal Corporation (Note 15). The Company has a contract
to recover 70% of these lease payments from Minco Silver and Minco Base Metal Corporation.
|
15.
|
|
Related party transactions
|
Funding
of Foshan Minco
Up to July 31, 2015, Minco Silver
could not invest directly in Foshan Minco as Foshan Minco is legally owned by Minco China. All historical funding supplied by Minco
Silver for exploration of the Fuwan Project must first go through Minco China via the Company and Minco Resources to comply with
Chinese Law. In the normal course of business Minco Silver uses trust agreements when providing cash, denominated in US dollars,
to Minco China via the Company and Minco Resources for the purpose of increasing the registered capital of Foshan Minco. Upon completion
of the disposal of Minco Resources (note 1), the requirement for the trust structure was eliminated.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
15.
|
|
Related party transactions (Continued)
|
Shared
office expenses
|
|
a)
|
Minco Silver and Minco Gold share offices and certain administrative
expensesin Beijing up to July 31, 2015. Minco Silver,Minco Base Metals Corporation (“MBM”), a company with which the
Company’s CEO has significant influence over, and Minco Gold share offices and certain administrative expenses in Vancouver.
|
|
|
|
At December 31, 2015, the Company had $177,330 due to Minco Silver (December 31, 2014 – $3,603,848),
representing shared office expenses, and expenses in relation to the the Company’s remaining assets in China. In 2014, the
amount due to Minco Silver consisted of $3,700,000 debt to Minco Silver and $96,152 of shared expenses due from Minco Silver. The
$3,700,000 of debt was settled as part of the Company’s sale of the Changkeng Gold Project (note 1).
|
In the year ended December
31, 2015, the Company recovered $101,701 (December 31, 2014 – $124,833, December 31, 2013 - $157,296) in respect of rent
and $563,588 (December 31, 2014 – $663,667, December 31, 2013 - $617,044) in respect of shared head office expenses and administration
costs from Minco Silver.
|
|
b)
|
At December 31, 2015, the Company had $12,387 due from MBM (December 31, 2014 - $47,696), in relation
to shared office expenses.
|
The amounts due are unsecured,
non-interest bearing and payable on demand.
Key
management compensation
|
|
|
Key management includes the Company’s directors and senior management. This compensation
is included in exploration costs and administrative expenses.
|
For the years ended December
31, 2015, 2014 and 2013, the following compensation was paid to key management:
|
|
2015
|
2014
|
2013
|
|
|
$
|
$
|
$
|
|
Cash remuneration
|
333,729
|
270,693
|
341,537
|
|
Share-based compensation
|
67,405
|
215,202
|
736,294
|
|
Total
|
401,134
|
485,895
|
1,077,831
|
The above transactions were
conducted in the normal course of business.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
16.
|
|
Geographical information
|
The
Company’s business of exploration and development of mineral interests is considered as operating in one segment.
The geographical division of the Company’s non-current assets is as follows:
|
Assets by geography
|
December 31, 2015
|
|
|
|
|
|
Canada
|
China
|
Total
|
|
|
$
|
$
|
$
|
|
Non-current assets
|
6,692,799
|
-
|
6,692,799
|
|
|
December 31, 2014
|
|
|
|
|
|
Canada
|
China
|
Total
|
|
|
$
|
$
|
$
|
|
Non-current assets
|
6,888,410
|
108,165
|
6,996,575
|
|
|
|
|
|
|
|
17.
|
|
Financial instruments and fair value
|
As explained in Note 3, 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:
loans and receivables and other financial liabilities.
The following table summarizes
the carrying value of financial assets and liabilities at December 31, 2015 and 2014:
|
|
December 31,
|
December 31,
|
|
|
|
2015
|
2014
|
|
Loans and receivables
|
|
$
|
$
|
|
Cash
|
|
5,593,669
|
2,117,038
|
|
Short-term investment
|
|
4,048,341
|
-
|
|
Receivables
|
|
11,122
|
103,175
|
|
Due from related parties
|
|
12,387
|
47,696
|
|
|
|
|
|
|
Other Financial Liabilities
|
|
|
|
Accounts payables
|
405,550
|
311,552
|
|
Advance from non-controlling interest
|
-
|
453,463
|
|
Due to related party
|
177,330
|
3,603,848
|
|
|
|
|
|
|
|
The carrying value of the Company’s
loans and receivables and financial liabilities approximate their fair value.
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
17.
|
|
Financial instruments and fair value
(continued)
|
Fair value measurement
Financial assets and liabilities
that are recognized on the balance sheet at fair value can be classified in a hierarchy that is based on the 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); and
Level 3 - inputs for the asset
or liability that are not based on observable market data (that is, unobservable inputs).
Financial
instruments that are not measured at fair value on the balance sheet are represented by cash and cash equivalents, short-term investments,
receivable, due from related parties, account payable and accrued liabilities, due to related parties, and advance from non-controlling
interest. The fair values of these financial instruments approximate their carrying value due to their short-term nature.
Financial risk factors
The company’s
activities expose it to a variety of financial risks: market risk (including price risk, currency risk and interest rate risk),
credit risk and liquidity risk. Risk management activities are carried out by management, who identifies and evaluates the financial
risks.
Credit
risk
Counterparty
credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost if the counterparty
defaults on its obligations under the contract. This includes any cash amounts owed to the Company by these counterparties, less
any amounts owed to the counterparty by the Company where a legal right of set-off exists and also includes the fair value contracts
with individual counterparties which are recorded in the consolidated financial statements. The Company considers the following
financial assets to be exposed to credit risk:
|
|
o
|
Cash and cash equivalents– In order to manage credit and liquidity
risk the Company places its cash with major financial institutions in two major banks in Canada (subject to deposit insurance up
to $100,000). As at December 31, 2015, total cash of $5,593,669 was placed with two institutions.
|
|
|
o
|
Short-term investment – The Company places its short-term investment
with a major financial institution in a major bank in Canada. As at December 31, 2015, total short-term investment was $4,048,341
(December 31, 2014 - $Nil).
|
Minco Gold
Corporation
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For
the years ended December 31, 2015, 2014, and 2013
(in Canadian dollars)
|
17.
|
|
Financial instruments and fair value
(continued)
|
Foreign exchange risk
The Company’s functional
currency is the Canadian dollar in Canada. The foreign currency risk is related to US dollar funds held in the entity. Therefore
the Company’s net earnings are impacted by fluctuations in the valuation of the US dollar in relation to the Canadian dollar.
The Company does not hedge
its exposure to currency fluctuations. The Company has completed a sensitivity analysis to estimate the impact that a change in
foreign exchange rates would have on the net loss of the Company, based on the Company’s net US$5.6 million monetary assets
as at December 31, 2015. This sensitivity analysis shows that a changed of +/- 10% in US$ foreign exchange rate would have a -/+
US$0.6 million impact on net loss.
Interest rate risk
The effective interest rate
on financial liabilities (accounts payable) ranged up to 1%. The interest rate risk is the risk that the fair value of future cash
flows of a financial instrument fluctuates because of changes in market interest rates. Cash entered into by the Company bear interest
at a fixed rate thus exposing the Company to the risk of changes in fair value arising from interest rate fluctuations. A 1% increase
in the interest rate in Canada will have a net (before tax) income effect of $96,000 (2014 - $21,000), assuming the foreign exchange
rate remains constant.
The Company’s objectives
in the managing of the liquidity and capital are to safeguard the Company’s ability to continue as a going concern and provide
the financial capacity to meet its strategic objectives. The capital structure of the Company consists of equity attributable to
common shareholders, comprising of issued share capital, common share purchase warrants, contributed surplus, accumulated and other
comprehensive income and accumulated deficit.
The Company manages the
capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying
assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt and/or acquire
or dispose of assets to facilitate the management of its capital requirements. The Company prepares annual expenditure budgets
that are updated as necessary depending upon various factors, including successful capital deployment and general industry conditions.
As at December 31, 2015, the Company does not have any long-term debt.
Minco Silver Corporation
Consolidated
Financial Statements
For
the years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars,
unless otherwise stated)
Management's Responsibility for Financial
Reporting
The consolidated financial statements are the
responsibility of the Board of Directors and management. The consolidated financial statements have been prepared by management
in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and include
certain estimates that reflect management’s best judgments on information currently available. In the opinion of management,
the accounting practices utilized are appropriate in the circumstances and the consolidated financial statements fairly reflect
the financial position and results of operations of the Company within reasonable limits of materiality.
The Audit Committee of the Board of Directors
is composed of three Directors and meets with management and the independent auditors to review the scope and results of the annual
audit and to review the consolidated financial statements and related financial reporting matters prior to submitting the consolidated
financial statements to the Board of Directors for approval.
The consolidated financial statements have
been audited by PricewaterhouseCoopers LLP, Chartered Professional Accountants, who were appointed by the shareholders. The auditors’
report outlines the scope of their examination and their opinion on the consolidated financial statements.
Dr. Ken Cai Larry Tsang, CPA, CA
President and CEO Interim Chief Financial Officer
Vancouver, Canada
March 30, 2016
March 30, 2016
Independent
Auditor’s Report
To the Shareholders of Minco Silver Corporation
We have audited the accompanying consolidated
financial statements of Minco Silver Corporation, which comprise the consolidated statements of financial position as at December
31, 2015 and 2014 and the consolidated statements of operations and net income (loss), comprehensive income (l0ss), changes in
shareholder’s equity and cash flows for each of the years in the three-year period ended December 31, 2015, and the related
notes, which comprise a summary of significant accounting policies and other explanatory information.
Management’s responsibility for the
consolidated financial statements
Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted
auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
from material misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.
An audit involves performing procedures to
obtain audit evidence, on a test basis, about the amounts and disclosures in the consolidated financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. We were not engaged to perform an audit of the company’s internal control
over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting principles and policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have
obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of Minco Silver Corporation as at December 31, 2015
and December 31, 2014 and its financial performance and its cash flows for each of the years in the three-year period ended December
31, 2015 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
|
Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Financial Statements
|
|
|
5 - 10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Financial Position
|
|
|
|
5
|
|
|
Consolidated Statements of Operations and Net Income (Loss)
|
|
|
|
6
|
|
|
Consolidated Statements of Comprehensive Income (Loss)
|
|
|
|
7
|
|
|
Consolidated Statements of Changes in Shareholders’ Equity
|
|
|
|
8
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the Consolidated Financial Statements
|
|
11 - 34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
General information
|
|
|
|
11
|
|
2
|
Basis of preparation
|
|
|
|
11
|
|
3
|
Summary of significant accounting policies
|
|
|
|
11
|
|
4
|
Critical accounting estimates and judgments
|
|
|
|
18
|
|
5
|
Acquisition of Minco Resources
|
|
|
|
18
|
|
6
|
Cash and cash equivalents
|
|
|
|
19
|
|
7
|
Short-term investments
|
|
|
|
20
|
|
8
|
Mineral interests
|
|
|
|
20
|
|
9
|
Non-controlling interest
|
|
|
|
22
|
|
10
|
Investments
|
|
|
|
23
|
|
11
|
Property, plant and equipment
|
|
|
|
24
|
|
12
|
Share capital
|
|
|
|
25
|
|
13
|
Income taxes
|
|
|
|
28
|
|
14
|
Related party transactions
|
|
|
|
29
|
|
15
|
Geographical information
|
|
|
|
31
|
|
16
|
Commitments
|
|
|
|
31
|
|
17
|
Financial instruments and fair value
|
|
|
|
32
|
|
18
|
Capital management
|
|
|
|
34
|
Minco Silver Corporation
Consolidated
Statements of Financial Position
(Expressed in Canadian dollars, unless otherwise
stated)
|
|
December 31,
|
December 31,
|
|
|
2015
|
2014
|
|
Assets
|
$
|
$
|
|
|
|
|
|
Current assets
|
|
|
|
Cash and cash equivalents (note 6)
|
26,202,564
|
11,938,544
|
|
Short-term investments (note 7)
|
32,143,068
|
33,560,374
|
|
Receivables
|
517,359
|
370,903
|
|
Due from related parties (note 14)
|
177,330
|
3,603,847
|
|
Prepaid expenses and deposits
|
201,647
|
181,991
|
|
Investments (note 10)
|
-
|
10,865,140
|
|
|
59,241,968
|
60,520,799
|
|
|
|
|
|
Mineral interests
(note 8)
|
63,676,055
|
31,621,827
|
|
Property, plant and equipment
(note 11)
|
434,999
|
422,012
|
|
|
123,353,022
|
92,564,638
|
|
Liabilities
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
Accounts payable and accrued liabilities
|
638,550
|
419,592
|
|
|
638,550
|
419,592
|
|
Equity
|
|
|
|
Equity attributable to owners of the parent
|
|
|
|
Share capital (note 12(a))
|
106,630,256
|
106,630,256
|
|
Contributed surplus
|
22,977,633
|
22,615,759
|
|
Accumulated other comprehensive income
|
14,813,721
|
4,194,260
|
|
Deficit
|
(34,468,043)
|
(41,295,229)
|
|
|
109,953,567
|
92,145,046
|
|
Non-controlling interest
(note 9)
|
12,760,905
|
-
|
|
Total equity
|
122,714,472
|
92,145,046
|
|
Total liabilities and equity
|
123,353,022
|
92,564,638
|
|
|
|
|
|
|
|
|
|
|
Commitments (note 16)
Approved by the Board of
Directors:
(signed) Maria Tang Director
(signed) George Lian Director
The accompanying notes are an integral part
of these consolidated financial statements.
Minco Silver Corporation
Consolidated Statements of Operations and Net
Income (Loss)
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
|
|
2015
|
2014
|
2013
|
|
|
|
$
|
$
|
$
|
|
Administrative recovery (expenses)
|
|
|
|
|
|
Audit, legal and regulatory
|
|
284,789
|
246,236
|
328,194
|
|
Amortization
|
|
106,674
|
123,266
|
177,053
|
|
Consulting
|
|
161,074
|
226,390
|
68,633
|
|
Directors' fees
|
|
116,000
|
127,250
|
99,500
|
|
Field office expenses
|
|
860,980
|
686,418
|
563,576
|
|
Foreign exchange gain
|
|
(4,173,854)
|
(1,039,265)
|
(1,375,542)
|
|
Investor relations
|
|
16,297
|
15,350
|
175,225
|
|
Office administration expenses
|
|
237,310
|
205,984
|
185,053
|
|
Property investigation
|
|
31,331
|
169,852
|
72,665
|
|
Rent
|
|
376,544
|
356,736
|
290,930
|
|
Salaries and benefits
|
|
440,095
|
431,477
|
451,214
|
|
Share-based compensation (note 12(b))
|
|
146,742
|
750,226
|
2,393,720
|
|
Travel and transportation
|
|
27,780
|
36,956
|
28,777
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
1,368,238
|
(2,336,876)
|
(3,458,998)
|
|
|
|
|
|
|
|
Finance and other income (expenses)
|
|
|
|
|
|
Gain on disposal of investment (note 10)
|
|
4,792,888
|
-
|
-
|
|
Interest income
|
|
911,213
|
980,945
|
806,038
|
|
Other expenses (note 14(a))
|
|
(391,392)
|
(309,585)
|
(334,073)
|
|
|
|
5,312,709
|
671,360
|
471,965
|
|
Net income (loss) for the year
|
|
6,680,947
|
(1,665,516)
|
(2,987,033)
|
|
|
|
|
|
|
|
Net income (loss) attributable to:
|
|
|
|
|
|
Shareholders of the Company
|
|
6,827,186
|
(1,665,516)
|
(2,987,033)
|
|
Non-controlling interest
|
|
(146,239)
|
-
|
-
|
|
|
|
6,680,947
|
(1,665,516)
|
(2,987,033)
|
|
Income (loss) per share
– basic and diluted
|
|
0.11
|
(0.03)
|
(0.05)
|
|
Weighted average number of common shares outstanding
– basic and diluted
|
|
59,631,418
|
59,590,457
|
59,165,144
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
Minco Silver
Corporation
Consolidated
Statements of Comprehensive Income (Loss)
For the years ended December 31, 2015, 2014
and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
|
|
|
|
|
2015
|
2014
|
2013
|
|
|
|
$
|
$
|
$
|
|
Net income (loss) for the year
|
|
6,680,947
|
(1,665,516)
|
(2,987,033)
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
Items that may be reclassified subsequently
to profit or loss:
Unrealized gain (loss) on investment, net
of tax (note 10)
|
|
7,125,020
|
(3,024,176)
|
-
|
|
Realized gain reclassified to net income (loss) on disposal of investment, net of tax (note 10)
|
|
(4,100,844)
|
-
|
-
|
|
Exchange differences on translation from functional to presentation currency
|
|
7,827,356
|
3,494,690
|
3,309,545
|
|
Other comprehensive income for the year
|
|
10,851,532
|
470,514
|
3,309,545
|
|
|
|
|
|
|
|
Comprehensive income (loss) for the year
|
|
17,532,479
|
(1,195,002)
|
322,512
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to:
|
|
|
|
|
|
Shareholders of the Company
|
|
17,446,647
|
(1,195,002)
|
322,512
|
|
Non-controlling interest
|
|
85,832
|
-
|
-
|
|
|
|
17,532,479
|
(1,195,002)
|
322,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
Minco Silver
Corporation
Consolidated
Statements of Changes in Shareholders’ Equity
For the years ended December 31, 2015, 2014
and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
|
|
Changes in Shareholders’ Equity
|
|
|
|
|
|
|
|
Number of Shares
|
Share capital
|
Contributed surplus
|
Accumulated other comprehensive income
|
Deficit
|
Subtotal
|
Non-controlling interest
|
Total equity
|
|
|
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Balance - January 1, 2013
|
59,041,418
|
105,669,226
|
18,555,614
|
414,201
|
(36,642,680)
|
87,996,361
|
-
|
87,996,361
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
-
|
-
|
-
|
-
|
(2,987,033)
|
(2,987,033)
|
-
|
(2,987,033)
|
|
Other comprehensive income
|
-
|
-
|
-
|
3,309,545
|
-
|
3,309,545
|
-
|
3,309,545
|
|
Share-based compensation
|
-
|
-
|
3,859,945
|
-
|
-
|
3,859,945
|
-
|
3,859,945
|
|
Issuance of shares for restricted share units
|
280,000
|
459,200
|
(459,200)
|
-
|
-
|
-
|
-
|
-
|
|
Proceeds on issuance of shares from exercise of options
|
6,667
|
12,410
|
(5,410)
|
-
|
-
|
7,000
|
-
|
7,000
|
|
Balance – December 31, 2013
|
59,328,085
|
106,140,836
|
21,950,949
|
3,723,746
|
(39,629,713)
|
92,185,818
|
-
|
92,185,818
|
|
|
|
|
|
|
|
|
|
|
|
Balance - January 1, 2014
|
59,328,085
|
106,140,836
|
21,950,949
|
3,723,746
|
(39,629,713)
|
92,185,818
|
-
|
92,185,818
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
-
|
-
|
-
|
-
|
(1,665,516)
|
(1,665,516)
|
-
|
(1,665,516)
|
|
Other comprehensive income
|
-
|
-
|
-
|
470,514
|
-
|
470,514
|
-
|
470,514
|
|
Share-based compensation
|
-
|
-
|
1,135,564
|
-
|
-
|
1,135,564
|
-
|
1,135,564
|
|
Issuance of shares for restricted share units
|
280,000
|
459,200
|
(459,200)
|
-
|
-
|
-
|
-
|
-
|
|
Proceeds on issuance of shares from exercise of options
|
23,333
|
30,220
|
(11,554)
|
-
|
-
|
18,666
|
-
|
18,666
|
|
Balance – December 31, 2014
|
59,631,418
|
106,630,256
|
22,615,759
|
4,194,260
|
(41,295,229)
|
92,145,046
|
-
|
92,145,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minco Silver
Corporation
Consolidated
Statements of Changes in Shareholders’ Equity
For the years ended December 31, 2015, 2014
and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
|
Changes in Shareholders’ Equity
|
|
|
|
|
|
Number of Shares
|
Share capital
|
Contributed surplus
|
Accumulated other comprehensive income
|
Deficit
|
Subtotal
|
Non-controlling interest
|
Total equity
|
|
|
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Balance - January 1, 2015
|
59,631,418
|
106,630,256
|
22,615,759
|
4,194,260
|
(41,295,229)
|
92,145,046
|
-
|
92,145,046
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest in acquisition
|
-
|
-
|
-
|
-
|
-
|
-
|
12,675,073
|
12,675,073
|
|
Net income (loss) for the year
|
-
|
-
|
-
|
-
|
6,827,186
|
6,827,186
|
(146,239)
|
6,680,947
|
|
Other comprehensive income
|
-
|
-
|
-
|
10,619,461
|
-
|
10,619,461
|
232,071
|
10,851,532
|
|
Share-based compensation
|
-
|
-
|
361,874
|
-
|
-
|
361,874
|
-
|
361,874
|
|
Balance – December 31, 2015
|
59,631,418
|
106,630,256
|
22,977,633
|
14,813,721
|
(34,468,043)
|
109,953,567
|
12,760,905
|
122,714,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral
part of these consolidated financial statements.
Minco Silver
Corporation
Consolidated
Statements of Cash Flows
For the
years ended December 31, 2015, 2014 and 2013
(E
xpressed
in Canadian dollars, unless otherwise stated)
|
|
2015
|
2014
|
2013
|
|
|
|
$
|
$
|
$
|
|
|
Operating activities
|
|
|
|
|
|
Net income(loss) for the year
|
6,680,947
|
(1,665,516)
|
(2,987,033)
|
|
|
Adjustments for:
|
|
|
|
|
|
Amortization
|
106,674
|
123,266
|
177,053
|
|
|
Foreign exchange gain
|
(4,173,854)
|
(1,038,828)
|
(1,377,671)
|
|
|
Share-based compensation (note 12(b))
|
146,742
|
750,226
|
2,393,720
|
|
|
Gain on disposal of investment
|
(4,792,888)
|
-
|
-
|
|
|
|
|
|
|
|
|
Changes in items of working capital:
|
|
|
|
|
|
Receivables
|
(28,020)
|
(57,907)
|
(122,736)
|
|
|
Prepaid expenses and deposits
|
115,728
|
257,126
|
1,530
|
|
|
Accounts payable and accrued liabilities
|
4,695
|
(115,171)
|
(9,625)
|
|
|
Due from related parties (note 14)
|
(428,425)
|
(16,819)
|
(1,302,596)
|
|
|
Net cash used in operating activities
|
(2,368,401)
|
(1,763,623)
|
(3,227,358)
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
Proceeds from stock option exercises
|
-
|
18,666
|
7,000
|
|
|
Net cash generated from financing activities
|
-
|
18,666
|
7,000
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
Development costs
|
(1,811,422)
|
(1,550,105)
|
(2,378,304)
|
|
|
Advances from related parties
|
-
|
-
|
(1,300,000)
|
|
|
Cash inflows as result of acquisition of Changkeng Gold Project (note 5)
|
1,347,693
|
-
|
-
|
|
|
Proceeds from (purchase of) investments (note 10)
|
18,682,204
|
(13,889,316)
|
-
|
|
|
Property, plant and equipment
|
7,164
|
(29,828)
|
(34,487)
|
|
|
Purchase of short-term investments
|
(16,941,170)
|
(14,430,923)
|
(11,326,456)
|
|
|
Redemption of short-term investments
|
11,288,990
|
18,683,677
|
17,216,279
|
|
|
Net cash generated from (used in) investing activities
|
12,573,459
|
(11,216,495)
|
2,177,032
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash
|
4,058,962
|
1,319,482
|
2,037,542
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
14,264,020
|
(11,641,970)
|
994,216
|
|
|
Cash and cash equivalents
-
Beginning of year
|
11,938,544
|
23,580,514
|
22,586,298
|
|
|
Cash and cash equivalents -
End of year
|
26,202,564
|
11,938,544
|
23,580,514
|
|
|
The accompanying notes
are an integral part of these consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
Minco Silver Corporation (“Minco
Silver” or the “Company”) is engaged in exploring, evaluating and developing precious metals mineral properties
and projects. Minco Silver was incorporated on August 20, 2004 under the laws of British Columbia, Canada and its Common Shares
are listed on the Toronto Stock Exchange (“TSX”) and trades under the symbol “MSV”. The Company’s
registered office is 2772 – 1055 West Georgia Street, Vancouver, British Columbia, Canada.
As at December 31, 2015, Minco
Gold Corporation (“Minco Gold”) owned an 18.45% (December 31, 2014 – 18.45%) equity interest in Minco Silver.
These consolidated financial
statements have been prepared in compliance with International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”). These consolidated financial statements were approved by the
board of directors for issue on March 30, 2016.
|
3.
|
|
Summary of significant accounting policies
|
Consolidation
These consolidated financial
statements include the accounts of Minco Silver Corporation and its wholly owned subsidiaries, Minco Yinyuan Co. (“Minco
Yinyuan”), Minco Investment Holding HK Ltd (“Minco HK”), Foshan Minco Fuwan Mining Co. Ltd. (“Foshan Minco”),
Zhongjia Jinggu Limited (“Zhongjia”), Minco Resource Limited (“Minco Resources”), Minco Mining (China)
Corporation (“Minco China”), Yuanling Minco Mining Ltd. (“Yuanling Minco”), Tibet Miming Co. Ltd. (“Tibet
Minco”), Huaihua Tiancheng Mining Ltd. (“Huaihua”), Beijing Minco International Resources Investment Services
Ltd. (“Minco International Resources”) and its 51% interest in Mingzhong Mining Co. Ltd. (“Mingzhong”).
Foshan Minco is subject to a 10% net profit interest held by Guangdong Geological Bureau (“GGB”). The Company, indirectly
through Foshan Minco owns 90% of Zhongjia.
Information about subsidiaries:
|
Name
|
Principal activities (ownership interest)
|
Country of Incorporation
|
|
Minco Yinyuan
|
Treasury company (100%)
|
China
|
|
|
Minco HK
|
Holding company (100%)
|
China
|
|
|
Foshan Minco
|
Exploring, evaluating and developing mineral properties (90%)
|
China
|
|
|
Zhongjia
|
Service company (90%)
|
China
|
|
|
Minco China
|
Exploring and evaluating mineral properties (100%)
|
China
|
|
|
Yuanling Minco
|
Exploring and evaluating mineral properties (100%)
|
China
|
|
|
Tibet Minco
|
Exploring and evaluating mineral properties (100%)
|
China
|
|
|
Huaihua
|
Exploring and evaluating mineral properties (100%)
|
China
|
|
|
Minco Resources
|
Holding company (100%)
|
China
|
|
|
Mingzhong
|
Exploring and evaluating mineral properties (51%)
|
China
|
|
|
Minco International Resources
|
Investment and service company (100%)
|
China
|
|
|
|
|
|
|
|
|
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
Subsidiaries are all entities
(including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated
from the date that control ceases.
Foreign currency
translation
(i) Functional and
presentation currency
The financial statements of each
entity in the group are measured using the currency of the primary economic environment in which the entity operates (the “functional
currency”). The consolidated financial statements are presented in Canadian dollars.
The functional currency of Minco
Silver Corporation is Canadian dollars.
The functional currency of the
Company’s Chinese subsidiaries is Renminbi (“RMB”).
The financial statements of the
Company’s Chinese subsidiaries (“foreign operations”) are translated into the Canadian dollar presentation currency
as follows:
|
|
·
|
Assets and liabilities – at the closing rate at the date of the
statement of financial position
|
|
|
·
|
Income and expenses – at the average rate of the period (as this
is considered a reasonable approximation of actual rates)
|
All resulting changes are recognized
in other comprehensive income (loss) as translation adjustments.
When the settlement of a monetary
item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange
gains and losses arising from the item are considered to form part of the net investment in a foreign operation and are recognized
in other comprehensive income.
When an entity disposes of its
entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the
foreign currency gains or losses accumulated in other comprehensive income related to the foreign operation are recognized in profit
or loss. If an entity disposes a part of an interest in a foreign operation which remains a subsidiary, a proportionate amount
of foreign currency gains or losses accumulated in other comprehensive income related to the subsidiary are reallocated between
controlling and non-controlling interests.
(ii) Transactions and
balances
Foreign currency transactions
are translated into the functional currency of an entity using the exchange rates prevailing at the dates of the transactions.
Generally, foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation
at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation’s functional
currency are recognized in the statement of operations and net loss.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
Financial instruments
Financial assets and liabilities
are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized
when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially
all risks and rewards of ownership. Financial liabilities are derecognized when the obligation specified in the contract is discharged,
cancelled or expires.
Financial assets and liabilities
are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized
amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
At initial recognition, the Company
classifies its financial instruments in the following categories:
(i) Financial assets and liabilities
at fair value through profit or loss: A financial asset or liability is classified in this category if acquired principally for
the purpose of selling or repurchasing in the short-term.
Financial instruments in this
category are recognized initially and subsequently at fair value. Transaction costs are expensed in the consolidated statement
of operations. Gains and losses arising from changes in fair value are presented in the consolidated statement of operations within
other gains and losses in the period in which they arise. Financial assets and liabilities at fair value through profit or loss
are classified as current except for the portion expected to be realized or paid beyond twelve months of the balance sheet date,
which is classified as non-current.
(ii) Loans and receivables: Loans
and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
The Company’s loans and receivables are comprised of cash and cash equivalents, short-term investments, receivables, and
deposits and amounts due from related parties.
Loans and receivables are initially
recognized at the amount expected to be received less, when material, a discount to reduce the loans and receivables to fair value.
Subsequently, loans and receivables are measured at amortized cost using the effective interest method less a provision for impairment.
Cash and cash equivalents comprise
cash at banks and on hand and guaranteed investment certificates with initial maturities of less than three months. Short-term
investments comprise guaranteed investment certificates with initial maturity of greater than three months.
(iii) Available-for-sale financial
assets: Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or not classified
in any of the other categories.
Available-for-sale assets are
initially recorded at fair value plus transaction costs, and are subsequently carried at fair value. All unrealized gains and losses
arising from changes in the fair value of assets classified as available-for-sale are recognized directly in other comprehensive
income, except for unrealized foreign exchange gains or losses on monetary financial assets and impairment losses which are recognized
in the consolidated statement of operations. Any reversal of a previously recognized impairment loss on a non-monetary asset is
recognized directly in other comprehensive income. Realized gains and losses from the derecognition of available-for-sale assets
are recognized in the consolidated statement of operations in the period derecognized with any unrealized gains or losses being
recycled from other comprehensive income.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
(iv) Financial liabilities at
amortized cost: Financial liabilities at amortized cost include accounts payable and accrued liabilities and amounts due to related
parties.
Financial liabilities are classified
as current liabilities if payment is due within twelve months. Otherwise, they are presented as non-current liabilities.
Impairment of financial
assets
At each reporting date, the Company
assesses whether there is objective evidence that a financial asset (other than a financial asset classified as fair value through
profit or loss) is impaired.
The criteria used to determine
if objective evidence of impairment exists include:
|
|
(iv)
|
significant financial difficulty of the obligor;
|
|
|
(v)
|
delinquencies in interest and principal payments; and
|
|
|
(vi)
|
it becomes probable that the borrower will enter bankruptcy or other
financial reorganization.
|
For equity securities, a significant
or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired.
Financial assets carried at amortized
cost: If evidence of impairment exists, the Company recognizes an impairment loss as the difference between the amortized cost
of the loan or receivable and the present value of the estimated future cash flows, discounted using the instrument’s original
effective interest rate. The carrying amount of the asset is reduced by this amount either directly or indirectly through the use
of an allowance account.
Impairment losses on financial
assets carried at amortized cost and available-for-sale debt instruments are reversed in subsequent periods if the amount of the
loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.
Property, plant
and equipment
Property, plant and equipment
are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly
attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized
as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Company and the cost can be measured reliably.
The carrying amount of a replaced
asset is derecognized when replaced.
The major categories of property,
plant and equipment are depreciated on a straight-line basis as follows:
Computer, Office Equipment
and Furniture 5 years
Mining Equipment 5 years
Site Motor Vehicles 10
years
Leasehold Improvements
remaining lease term
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
Impairment losses are included
as part of other gains and losses on the consolidated statements of operations and net loss.
Exploration and
evaluation costs
Exploration and evaluation
costs include costs to acquire exploration rights, geological studies, exploratory drilling and sampling and directly attributable
administrative costs.
Exploration and evaluation
costs relating to non-specific projects or properties or those incurred before the Company has obtained legal rights to explore
an area are expensed in the period incurred. In addition, exploration and evaluation costs other than direct acquisition costs
are expensed before a mineral resource is identified as having economic potential.
Exploration and evaluation
costs are capitalized as mineral interests when a mineral resource is identified as having economic potential on a property. A
mineral resource is considered to have economic potential when it is expected that documented resources can be legally and economically
developed considering long-term metal prices. Therefore, prior to capitalizing such costs, management determines that the following
conditions have been met:
i) there is a probable future
benefit that will contribute to future cash inflows;
ii) the Company can obtain
the benefit and control access to it;
iii) the transaction or
event giving rise to the benefit has already occurred.
Once the technical feasibility
and commercial viability of the extraction of resources from a particular mineral property has been determined, mineral interests
are reclassified to mine properties within property, plant and equipment and carried at cost until the properties to which they
relate are placed into commercial production, sold, abandoned or determined by management to be impaired in value.
Costs relating to any producing
mineral interests would be amortized on a unit-of-production basis over the estimated ore reserves. Costs incurred after the property
is placed into production that increase production volume or extend the life of a mine are capitalized.
Proceeds from the sale of
properties or cash proceeds received from option payments are recorded as a reduction of the related mineral interest.
Impairment of non-financial
assets
The recoverability of mineral
interests is dependent upon the determination of economically recoverable ore reserves, confirmation of the Company’s interest
in the underlying mineral claims, the ability to option its resource properties, the ability to obtain the necessary financing
to complete their development and future profitable production or proceeds from the disposition thereof.
The Company performs impairment
tests on property, plant and equipment and mineral interests when events or circumstances occur which indicate the assets may not
be recoverable. Impairment assessments are carried out on a project by project basis with each project representing a single cash
generating unit.
When impairment indicators are
identified, an impairment loss is recognized for any amount by which the asset’s carrying value exceeds its recoverable amount.
The recoverable amount is the higher of the asset’s fair value less costs of disposal and its value in use.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
Fair value is determined as the
amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing
parties.
Value in use is determined
as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form
and from its ultimate disposal.
The Company evaluates impairment
losses for potential reversals when events or circumstances warrant such consideration.
Share-based payments
The Company grants stock options
to directors, officers, employees and service providers. Each tranche in an award is considered a separate award with its own vesting
period. The Company applies the fair value method of accounting for share-based payments and the fair value is calculated using
the Black-Scholes option pricing model.
Share-based payments for employees
and others providing similar services are determined based on the grant date fair value. Share-based payments for non-employees
are determined based on the fair value of the goods/services received or options granted measured at the date on which the Company
obtains such goods/services.
Compensation expense is recognized
over each tranche’s vesting period, in earnings or capitalized as appropriate, based on the number of awards expected to
vest. If stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.
|
|
(ii)
|
Restricted Share Units (“RSU”)
|
RSUs are equity-settled and are
fair valued based on the market value of the shares at the grant date. The Company’s compensation expense is recognized over
the vesting period based on the number of units estimated to vest. Management estimates the number of awards likely to vest on
grant and at each reporting date up to the vesting date. Annually, the estimated forfeiture rate is adjusted for actual forfeitures
in the period. On vesting of RSUs, the shares are issued from treasury.
|
|
(iii)
|
Performance Share Units (“PSU”)
|
PSUs are equity-settled and are
awarded to certain key employees. These units are subject to certain vesting requirements and expire at the end of three years.
Vesting requirements are based on performance criteria established by the Company. PSUs are fair valued as follows: the portion
of the PSUs related to market conditions is fair valued based on application of a Monte Carlo pricing model or other suitable option
pricing models at the date of grant and the portion related to non-market conditions is fair valued based on the market value of
the shares at the date of grant. The Company’s compensation expense is recognized over the vesting period based on the number
of units estimated to vest. Management estimates the number of awards likely to vest on grant and at each reporting date up to
the vesting date. Annually, the estimated forfeiture rate is adjusted for actual forfeitures in the period. On vesting of PSUs,
the shares are issued from treasury.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
Provision for restoration
and rehabilitation
A provision for restoration and
rehabilitation is recognized when there is a present legal or constructive obligation as a result of exploration and development
activities undertaken; it is more likely than not that an outflow of economic benefits will be required to settle the obligation
and the amount of the provision can be measured reliably. The estimated future obligation includes the cost of removing facilities,
abandoning sites and restoring the affected areas.
The provision for future restoration
costs is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting
date. The estimated cost is capitalized into the cost of the related asset and amortized on the same basis as the related assets.
If the estimated cost does not
relate to an asset, it is charged to earnings in the period in which the event giving raises to the liability occu4s.
As at December 31, 2015 and 2013,
the Company did not have any provision for restoration and rehabilitation.
Income tax
Deferred tax is recognized in
respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. Deferred tax is not recognized for the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor taxable profit nor loss.
Deferred tax is measured at the
tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date.
A
deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it
is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Earnings per share
Basic earnings per share are
computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share amounts are
calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were
exercised or converted to common shares using the treasury stock method. If the Company incurs net losses in a fiscal year, basic
and diluted losses per share are the same.
Share capital
Common shares are classified
as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity.
Accounting standards
and amendments issued but not yet applied
IFRS 9 is a c
omprehensive
standard to replace IAS 39, Financial Instruments:
Recognition and Measurement. It includes requirements for classification
and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. An early adoption of
this standard is permitted; however, the mandatory adoption date is for annual periods beginning on or after January 1, 2018. The
extent of the impact of adoption of the standard has not yet been determined.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
3.
|
|
Summary of significant accounting policies
(continued)
|
IFRS 16 replaces the previous
leases standard IAS 17,
Leases and Related Interpretations
, and sets out the principles for the recognition, measurement,
presentation and disclosure of leases for both parties to a contract, i.e. the customer (lessee) and the supplier (lessor). Effective
January 1, 2019, an entity can choose to apply IFRS 16, but only if it also applies IFRS 15, Revenue from Contracts with Customers.
The Company will evaluate the impact of the change to the consolidated financial statements based on the characteristics of leases
outstanding at the time of adoption.
|
4.
|
|
Critical accounting estimates and judgments
|
The preparation of financial
statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future.
Estimates and other judgments are continuously evaluated and are based on management’s experience and other factors, including
expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant
accounting judgment that the company has made in the preparation of the financial statements:
Impairment
In accordance with the Company’s
accounting policy, the Company’s mineral interest is evaluated every reporting period to determine whether there are any
indications of impairment. If any such indication exists, which is often judgmental, a formal estimate of recoverable amount is
performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. The recoverable
amount of an asset or cash generating group of assets is measured at the higher of fair value less costs to sell and value in use.
The evaluation of asset carrying
values for indications of impairment includes consideration of both external and internal sources of information, including such
factors as market and economic conditions, silver prices, future plans for the Company’s mineral properties and mineral resources
and/or reserve estimates.
Management has assessed for impairment
indicators for the Company’s mineral interests and has concluded that despite negative sentiments in the precious metals
sector which contributed to the Company’s carrying amount of net assets exceeding its market capitalization, the Company
plans to continue with its objective of developing the combined Fuwan / Changkeng project.
|
5.
|
|
Acquisition of Minco Resources
|
On May 22, 2015, the Company
entered into a share purchase agreement (the “SPA”) with Minco Gold and Minco HK. Pursuant to the SPA, the Company
agreed to purchase all of the issued and outstanding shares of Minco Gold’s wholly-owned subsidiary, Minco Resources, which
holds Minco China. Minco China owns certain subsidiaries including legal ownership of Foshan Minco Fuwan Mining Co. Ltd. (“Foshan
Minco”) and a 51% interest in Guangdong Mingzhong, which owns the Changkeng Gold Project. By acquiring control of Minco China,
the Company obtained legal ownership of Foshan Minco and consequently no longer requires trust agreements related to the funding
of the Fuwan Project. The acquisition closed on July 31, 2015.
This acquisition has been accounted
for as an asset purchase, as Minco Resources and its subsidiaries did not meet the definition of a business as defined in IFRS
3
Business Combinations.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
5.
|
|
Acquisition of Minco Resources
(continued)
|
The following summarizes the
consideration paid and estimates of fair value of assets acquired and liabilities assumed:
|
|
$
|
|
Consideration
|
|
|
Short-term investment
|
10,016,397
|
|
Settlement of loan payable from Minco Gold to Minco Silver
|
3,700,000
|
|
Transaction costs
|
69,627
|
|
Total consideration
|
13,786,024
|
|
|
|
|
Net assets acquired
|
$
|
|
Cash
|
1,249,209
|
|
Receivables
|
91,901
|
|
Prepaid expenses and deposits
|
126,035
|
|
Property, plan, and equipment
|
76,555
|
|
Mineral interest
|
25,312,695
|
|
Accounts payable and accrued liabilities
|
(195,595)
|
|
Due to related parties
|
(199,703)
|
|
Minority interest share of the assets acquired
|
(12,675,073)
|
|
|
13,786,024
|
Majority of the consideration
was paid in the form of a short-term investment and net cash inflow of $1,347,693 as result of the transaction mainly represented
cash balances within the entities acquired.
|
6.
|
|
Cash and cash equivalents
|
Cash and cash equivalents comprise
cash at banks and on hand and term deposits with initial maturities of less than three months.
|
|
|
As at December 31, 2015
|
|
As at December 31, 2014
|
|
|
|
$
|
|
$
|
|
Cash
|
|
22,886,760
|
|
10,127,337
|
|
Term deposits
|
|
3,315,804
|
|
1,811,207
|
|
|
|
26,202,564
|
|
11,938,544
|
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
6.
|
|
Cash and cash equivalents
(continued)
|
As at December 31, 2015, cash and
cash equivalents of $11,482,616 (RMB 53,728,309) (December 31, 2014 - $2,451,024 (RMB 12,972,292)) are in China. Under Chinese
law, cash advanced to the Company’s Chinese subsidiaries as registered share capital is maintained in the subsidiaries’
registered capital bank account. Remittance of these funds back to Canada requires approvals by the relevant government authorities
or designated banks in China or both.
|
7
.
|
|
Short-term investments
|
As at December 31, 2015, short-term
investments consist of cashable guaranteed investment certificates with one year to maturity. The yields on these investments were
between 1.22% and 3.08%. As at December 31, 2015, short-term investments of $22,079,638 (RMB 103,312,834 (December 31, 2014 - $13,822,164
(RMB 73,155,186)) are in China.
As at December 31, 2014, short-term
investments consist of cashable guaranteed investment certificates with one year to maturity. The yields on these investments were
between 1.68% and 3.30%.
|
|
$
|
|
Fuwan Silver Deposit (a)
|
37,565,101
|
|
Changkeng Project (c)
|
26,110,954
|
|
Total mineral interests
|
63,767,055
|
Minco Silver has a 90% interest
in Foshan Minco, the operating company and permit holder for the Fuwan project, subject to a 10% net profit interest held by GGB.
There will be no distributions to or participation by GGB, until such time as Minco Silver’s investment in the project is
recovered. GGB is not required to fund any expenditures related to the Fuwan project. The Exploration Permit for the Fuwan project
is the Luoke-Jilinggang exploration permit, which expires on July 20, 2017. The Mining Area Permit which defines the mining limits
of the Fuwan Silver Deposit and restricts the use of this land to mining activities expires on April 10, 2016.
Although the Company has taken
steps to verify the title to mineral properties in which it has an interest in accordance with industry standards for the current
stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject
to unregistered agreements or transfers.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
8.
|
|
Mineral interests
(continued)
|
The following is a summary of
project development costs capitalized to mineral interests from January 1, 2015 to December 31, 2015.
|
|
2015
|
2014
|
|
|
$
|
$
|
|
|
|
|
|
Opening Balance – January 1
|
31,621,827
|
27,369,966
|
|
Consulting fees
|
657,446
|
499,689
|
|
Salaries and benefits
|
147,761
|
340,509
|
|
Feasibility study
|
110,813
|
-
|
|
Share-based compensation
|
215,132
|
385,338
|
|
Mining design costs
|
18,826
|
16,288
|
|
Mining license application
|
181,992
|
401,287
|
|
Environment impact assessment
|
57,277
|
12,872
|
|
Travel
|
65,664
|
63,801
|
|
Other development costs
|
396,045
|
210,263
|
|
Foreign exchange
|
4,092,318
|
2,321,814
|
|
Ending Balance – December 31
|
37,565,101
|
31,621,827
|
In 2005, the Company acquired
three additional silver exploration permits on the Fuwan belt, referred to as the Guanhuatang Property, the Hecun Property and
the Guyegang-Sanyatang Property. The Company decided not to renew the Guanhuatang property permit, which expired April 7, 2014.
The Guyegang-Sanyatang permit expirs on March 17, 2017. The Company has submitted the renewal application for the Hecun permit
that was originally set to expire on April 7, 2014. The renewal applications are currently being processed by the Ministry of Land
and Resources.
During the year ended December
31, 2015, the Company did not conduct any regional exploration activities on the Fuwan Silver Belt, except for maintaining the
exploration permits.
During the year, the Company
announced that it had completed the acquisition of Minco Gold’s 51% interest in the Changkeng Gold Project, which is held
by Mingzhong (note 3). The Changkeng Project immediately adjoins the Fuwan Silver Deposit.
Mingzhong signed an exploration
permit transfer agreement with No. 757 Exploration Team of Guangdong Geological Bureau (“757 Exploration Team”) and
on January 5, 2008 Mingzhong received the Changkeng exploration permit (the “Changkeng Exploration Permit”). This exploration
permit expires on September 10, 2017. Prior to the acquisition of Minco Gold’s interest in Mingzhong, Minco Gold had assigned
its right to earn a 51% interest in the Changkeng Silver Mineralization to Minco Silver.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
8.
|
|
Mineral interests
(continued)
|
As at July 31, 2015, Mingzhong
completed the capital injection from the minority shareholders.
The following is a summary of
project development costs capitalized to mineral interest from August 1, 2015, the date of acquisition to December 31, 2015:
|
|
2015
|
|
|
$
|
|
|
|
|
Opening Balance – August 1
|
-
|
|
Acquisition costs
|
25,312,695
|
|
Salaries and benefits
|
90,693
|
|
Drilling
|
142,863
|
|
Feasibility study
|
112,201
|
|
Other development costs
|
446
|
|
Foreign exchange
|
452,056
|
|
Ending Balance – December 31
|
26,110,954
|
|
9.
|
|
Non-controlling interest
|
Below is summarized financial
information for Mingzhong, the Company’s 51% owned indirect subsidiary.
Summarized statement for financial
position
|
|
|
|
December 31, 2015
|
|
|
$
|
|
NCI percentage
|
49%
|
|
Current assets
|
977,783
|
|
Current liabilities
|
154,860
|
|
|
822,923
|
|
Non-current asset
|
26,110,954
|
|
Net assets
|
26,933,877
|
|
Accumulated non-controlling interests
|
12,760,908
|
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
9.
|
|
Non-controlling interest
(continued)
|
Summarized income statement
|
|
|
|
|
For the period ended from August 1 to December 31, 2015
|
|
|
$
|
|
Net loss
|
146,239
|
|
Loss allocated to NCI
|
146,239
|
|
|
|
|
Summarized cash flows
|
|
|
|
|
For the period ended from August 1 to December 31, 2015
|
|
|
$
|
|
Cash out flows from operating activities
|
45,695
|
|
Cash out flows from investing activities
|
169,639
|
|
|
|
Available for sale investments,
as of and for the year ended December 31, 2015:
|
|
Fair value
|
Fair value
adjustment
|
Net disposals
|
Fair value
|
|
|
December 31, 2014
|
December 31, 2014
|
May 21, 2015
|
December 31, 2015
|
|
|
$
|
$
|
$
|
$
|
|
Common shares in Gold Road Resources Limited
|
10,865,140
|
7,817,064
|
(18,682,204)
|
-
|
|
Total
|
10,865,140
|
7,817,064
|
(18,682,204)
|
-
|
During the year ended December
31, 2014, the Company acquired 47,719,423 common shares in Gold Road Resources Limited, a publicly listed resource company traded
on the ASX at a cost of $13,889,316.
During the year ended December
31, 2015, the Company disposed of all of its common shares of Gold Road Resources Limited for net proceeds of $18,682,204. As a
result, the Company recorded a gain on disposal of the investment of $4,792,888 during the year ended December 31, 2015.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
11.
|
|
Property, plant and equipment
|
|
|
Leasehold improvements
|
Mining equipment
|
Motor vehicles
|
Office equipment and furniture
|
Total
|
|
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014
|
|
|
|
|
|
At January 1, 2014
|
100,830
|
-
|
294,439
|
88,012
|
483,281
|
|
Additions
|
-
|
-
|
-
|
29,829
|
29,829
|
|
Depreciation
|
(44,322)
|
-
|
(46,984)
|
(31,960)
|
(123,266)
|
|
Exchange differences
|
3,000
|
-
|
22,975
|
6,193
|
32,168
|
|
At December 31, 2014
|
59,508
|
-
|
270,430
|
92,074
|
422,012
|
|
|
|
|
|
|
|
|
At December 31, 2014
|
|
|
|
|
|
Cost
|
408,294
|
-
|
500,258
|
359,124
|
1,267,676
|
|
Accumulated depreciation
|
(348,786)
|
-
|
(229,828)
|
(267,050)
|
(848,664)
|
|
Net book value
|
59,508
|
-
|
270,430
|
92,074
|
422,012
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015
|
|
|
|
|
|
At January 1, 2015
|
59,508
|
-
|
270,430
|
92,074
|
422,012
|
|
Additions
|
-
|
30,087
|
39,347
|
7,122
|
76,556
|
|
Disposals
|
-
|
-
|
(14,924)
|
(28,697)
|
(43,621)
|
|
Depreciation
|
(5,308)
|
(3,249)
|
(61,921)
|
(36,196)
|
(106,674)
|
|
Exchange differences
|
4,190
|
(169)
|
49,344
|
33,361
|
86,726
|
|
At December 31, 2015
|
58,390
|
26,669
|
282,276
|
67,664
|
434,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
412,484
|
29,918
|
574,025
|
370,910
|
1,387,337
|
|
Accumulated depreciation
|
(354,094)
|
(3,249)
|
(291,749)
|
(303,246)
|
(952,338)
|
|
Net book value
|
58,390
|
26,669
|
282,276
|
67,664
|
434,999
|
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
Authorized: Unlimited number
of common shares without par value.
|
|
(b)
|
Long-term Incentive Plan
|
The Company may grant up to 15%
of its issued and outstanding shares as options, restricted share units, performance share units and deferred share units, to its
directors, officers, employees and consultants under its long-term incentive plan.
Stock Options
The Company’s long-term
incentive plan allows the board of directors to grant options for periods of up to ten years, with vesting periods determined at
its sole discretion and at prices equal to or greater than the closing market price on a date preceding the date the options are
granted. These options are equity settled.
During the year ended December
31, 2015, the Company granted stock options for 1,690,000 common shares to its directors, officers and employees at a weighted
exercise price of $0.42 per share that vest over an 18-month period from the grant date.
The Company recorded $200,326
of the option component of share-based compensation for the year ended December 31, 2015. Share-based compensation expense of $135,634
(2014 - $722,109, 2013 - $2,301,139) was recorded in the statement of operations and net loss and share-based compensation expense
of $64,692 (2014 - $231,517, 2013 - $654,677) was capitalized to mineral interests.
A summary of the options outstanding
is as follows:
|
|
Number outstanding
|
|
Weighted average exercise price
|
|
|
|
|
$
|
|
|
|
|
|
|
Balance, January 1, 2014
|
6,705,836
|
|
2.92
|
|
|
|
|
|
|
Granted
|
1,425,000
|
|
0.80
|
|
Exercised
|
(23,333)
|
|
0.80
|
|
Expired
|
(375,000)
|
|
1.21
|
|
Forfeited
|
(1,254,668)
|
|
2.83
|
|
|
|
|
|
|
Balance, December 31, 2014
|
6,477,835
|
|
2.58
|
|
|
|
|
|
|
Granted
|
1,690,000
|
|
0.42
|
|
Expired
|
(350,836)
|
|
3.03
|
|
Forfeited
|
(1,331,332)
|
|
1.72
|
|
|
|
|
|
|
Balance, December 31, 2015
|
6,485,667
|
|
2.16
|
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
12.
|
|
Share capital
(continued)
|
The weighted average share price
on the day options were exercised was $Nil (2014 - $1.01, 2013 - $1.99). As at December 31, 2015, there was $186,241 (2014 - $75,211)
of total unrecognized compensation cost relating to unvested options.
|
Options outstanding
|
|
Options exercisable
|
|
Range of
exercise
prices
|
Number
outstanding
|
Weighted
average
remaining
contractual
life (years)
|
Weighted
average
exercise
price
|
|
Number
exercisable
|
Weighted
average
exercise
price
|
|
$
|
|
|
$
|
|
|
$
|
|
0.42 – 0.79
|
1,490,000
|
4.71
|
0.42
|
|
-
|
0.00
|
|
0.80 – 2.00
|
2,055,667
|
2.54
|
1.27
|
|
2,055,667
|
1.27
|
|
2.01 – 2.35
|
1,635,000
|
1.24
|
2.35
|
|
1,635,000
|
2.35
|
|
2.36 – 5.57
|
1,305,000
|
0.12
|
5.31
|
|
1,305,000
|
5.31
|
|
|
6,485,667
|
2.23
|
2.16
|
|
4,995,667
|
2.68
|
The Company used the Black-Scholes
option pricing model to determine the fair value of the options with the following assumptions:
|
|
2015
|
2014
|
2013
|
|
Risk-free interest rate
|
0.46%-1.69%
|
1.21% - 1.69%
|
1.17%-1.76%
|
|
Dividend yield
|
0%
|
0%
|
0%
|
|
Volatility
|
71% - 76%
|
71% - 76%
|
70% - 100%
|
|
Forfeiture rate
|
27%
|
26%
|
26%
|
|
Estimated expected lives
|
5 years
|
5 years
|
5 years
|
Option pricing models require
the use of subjective estimates and assumptions including the expected stock price volatility. The stock price volatility is calculated
based on the Company’s historical volatility. Changes in the underlying assumptions can materially affect the fair value
estimates.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
12.
|
|
Share capital
(continued)
|
Restricted Share Units, Performance
Share Units
A summary of the RSUs outstanding
is as follows:
|
|
Number outstanding
|
|
Weighted average fair value
|
|
|
|
|
$
|
|
|
|
|
|
|
Balance, January 1, 2014
|
280,000
|
|
1.64
|
|
|
|
|
|
|
Exercised
|
(280,000)
|
|
1.64
|
|
|
|
|
|
|
Balance, December 31, 2014 and 2015
|
-
|
|
-
|
|
|
|
|
|
During the year ended December
31, 2013, the Company granted 560,000 RSUs to the Company’s CEO. RSU’s are equity – settled and measured based
on the value of the Company’s share price at the date of grant and vest in tranches over a 12- month period from the date
of grant. The weighted average grant date fair value of the RSU’s was $918,400. 280,000 RSUs vested on August 1, 2013, and
the remaining 280,000 RSUs vested on February 1, 2014.
During the year ended December
31, 2015, the Company recorded $Nil (2014 - $39,000) of share-based compensation for RSUs. Share-based compensation of $Nil (2014
- $3,900) was recorded in the statement of operations and net loss and share-based compensation expense of $Nil (2014 - $35,100)
was capitalized to mineral properties.
A summary of the PSUs outstanding
is as follows:
|
|
Number outstanding
|
|
Weighted average fair value
|
|
|
|
|
$
|
|
|
|
|
|
|
Balance, January 1, 2014
|
940,000
|
|
0.80
|
|
|
|
|
|
|
Forfeited
|
(55,000)
|
|
0.80
|
|
|
|
|
|
|
Balance, December 31, 2014
|
885,000
|
|
0.80
|
|
|
|
|
|
|
Forfeited
|
(150,000)
|
|
0.80
|
|
|
|
|
|
|
Balance, December 31, 2015
|
735,000
|
|
0.80
|
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
12.
|
|
Share capital
(continued)
|
During the year ended December
31, 2013, the Company granted 940,000 performance share units to employees of the Company whereby 50% vests upon the Company receiving
the final approval from Guangdong Provincial Government for the EIA report for the Fuwan Silver Project and the remaining 50% vests
upon the completion of the Company’s obtaining the mining license issued by MOLAR in respect to the Fuwan Silver Project.
The weighted average grant date fair value of the PSU’s was $0.80 per unit. In valuing the PSUs, the Company used a forfeiture
rate of 26% and an expected life of 3 years.
During the year ended December
31, 2015, the Company recorded $161,548 (2014 - $142,938) of share-based compensation for PSUs. Share-based compensation of $11,108
(2014 - $24,217) was recorded in the statement of operations and net income (loss) and share-based compensation expense of $150,440
(2014 - $118,721) was capitalized to mineral properties.
The Company has subsidiaries
and one branch in China which are Minco Yinyuan, Foshan Minco, Minco China, Yuanling Minco, Tibet Minco, Huaihua, and Foshan Minco
Beijing Branch.
Income tax expense differs from
the amount that would result from applying the Canadian federal and provincial income tax rates to earnings before income taxes.
These differences result from the following items:
|
|
|
2015
|
|
2014
|
2013
|
|
|
|
$
|
|
$
|
$
|
|
Income (loss) before income taxes
|
|
6,680,947
|
|
(1,665,518)
|
(2,987,033)
|
|
|
|
|
|
|
|
|
Statutory income tax rate
|
|
26%
|
|
26%
|
25.75%
|
|
|
|
|
|
|
|
|
Expected tax recovery at statutory income tax rate
|
|
1,737,046
|
|
(433,035)
|
(769,161)
|
|
Non-deductible expenses and other items
|
|
63,663
|
|
(118,206)
|
835,061
|
|
Difference in tax rates
|
|
(607,441)
|
|
13,434
|
(264,146)
|
|
Temporary differences from acquisition transaction
|
|
(3,435,860)
|
|
-
|
-
|
|
Change in deferred income tax asset not recognized
|
|
2,858,979
|
|
625,349
|
448,909
|
|
Foreign exchange
|
|
(616,387)
|
|
(87,542)
|
(250,663)
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
-
|
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes arise
from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The significant
components of unrecognized deferred income tax assets and liabilities at December 31, 2015 and 2014 are as follows:
|
|
|
2015
|
|
2014
|
|
|
|
$
|
|
$
|
|
Deferred income tax assets not recognized
|
|
|
|
|
|
Non-capital losses
|
|
5,313,066
|
|
2,605,758
|
|
Mineral interests
|
|
1,549,489
|
|
1,211,504
|
|
Investments
|
|
-
|
|
393,143
|
|
Other
|
|
34,708
|
|
220,319
|
|
|
|
|
|
|
|
|
|
6,897,264
|
|
4,430,724
|
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
13.
|
|
Income taxes
(continued)
|
The Company has non-capital
losses carried forward for Canadian income tax purposes which expire as follows:
|
|
|
$
|
|
2030
|
|
1,149,910
|
|
2031
|
|
1,880,258
|
|
2032
|
|
2,229,724
|
|
2034
|
|
1,470,692
|
|
|
|
6,730,575
|
|
14.
|
|
Related party transactions
|
|
|
(a)
|
Funding of Foshan Minco
|
Up to July 31, 2015, the
Company was not able to invest directly in Foshan Minco as Foshan Minco was legally owned by Minco Gold. All historical funding
supplied by the Company for exploration of the Fuwan Project went through Minco China via Minco Gold and Minco Resources to comply
with Chinese law. In the normal course of business the Company used trust agreements when providing cash, denominated in US dollars,
to Minco China via Minco Gold and Minco Resources for the purpose of increasing the registered capital of Foshan Minco.
Upon completion of the acquisition
of the Changkeng Gold Project (note 5), the requirement for the trust structure was eliminated.
During the year ended December
31, 2013, the Company advanced US $20 million to Minco China via Minco Resources and Minco Gold in accordance with a trust agreement
signed on April 30, 2013 in which Minco Silver agreed to advance US $20 million to Minco China to increase Foshan Minco’s
registered capital. Minco China was to exchange these US funds into RMB.
Minco China is required to exchange
the US dollars into RMB, before the money can be used to increase the registered capital of Foshan Minco. The exchange of US dollars
into RMB requires approval from the State Administration of Foreign Exchange (“SAFE”). In order to obtain SAFE approval
to effect the foreign currency exchange, Minco China, on behalf of Minco Silver has previously engaged a third party consultant
to enter into purchase and sales transaction to exchange US dollars into RMB. During the year ended December 31, 2015, Minco China
paid and accrued consultancy fees totaling RMB 1,304,709 ($268,100) (2014 – RMB 139,692 ($25,063), 2013 – RMB 1,697,520
($281,888)) due to a third party, who assisted in the completion of currency exchange of the US funds into RMB.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
14.
|
|
Related party transactions
(continued)
|
(b)
Shared
expenses
Minco Silver and Minco Gold share
offices and certain administrative expenses in Beijing up to July 31, 2015 and in Vancouver.
Amounts due from Minco Gold as
at December 31, 2015 were $177,330 (December 31, 2014 – $3,603,847), representing the shared office expenses. As at December
31, 2014, the amount due from Minco Gold of $3,603,847, represented funds advanced from Minco Silver to Minco Gold to support its
operating activities in Canada, net of shared office expenses. This receivable was settled as part of the acquisition of the Chankeng
Gold Project (note 5).
The amounts due are unsecured,
non-interest bearing and payable on demand.
In the year ended December 31,
2015, the Company paid or accrued $101,701 (December 31, 2014 – $124,833, December 31, 2013 - $157,296) in respect of rent
and $563,588 (December 31, 2014 – $663,667, December 31, 2013 - $617,044) in respect of shared head office expenses and administration
costs to Minco Gold.
The above transactions are conducted
in the normal course of business.
(c)
Key management
compensation
In the years ended December 31,
2015, 2014 and 2013, the following compensation was paid to key management. Key management includes the Company’s directors
and senior management. This compensation is included in development costs and administrative expenses.
|
|
|
Years ended December 31,
|
|
|
|
2015
|
2014
|
2013
|
|
|
|
$
|
$
|
$
|
|
Cash remuneration
|
|
784,608
|
1,026,436
|
1,039,674
|
|
Share-based compensation
|
|
274,632
|
745,925
|
2,751,426
|
|
|
|
1,059,240
|
1,772,361
|
3,791,100
|
|
|
|
|
|
|
|
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
15.
|
|
Geographical information
|
The Company’s business
of exploration and development of mineral interest is considered as operating in one segment. The geographical division of the
Company’s non-current assets is as follows:
|
Non-current assets by geography
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Canada
|
China
|
Total
|
|
|
|
$
|
$
|
$
|
|
Current assets
|
|
32,679,357
|
26,562,611
|
59,241,968
|
|
Non-current assets
|
|
12,459
|
64,098,595
|
64,111,054
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
|
Canada
|
China
|
Total
|
|
|
|
$
|
$
|
$
|
|
Current assets
|
|
34,367,232
|
26,153,567
|
60,520,799
|
|
Non-current assets
|
|
20,022
|
32,023,817
|
32,043,839
|
|
|
|
|
|
|
|
|
|
(a)
|
The Company has commitments in respect of its portion of office leases
in China and Canada, requiring minimum payments of $1,363,416, as follows:
|
|
|
$
|
|
|
|
|
2016
|
758,273
|
|
2017
|
539,934
|
|
2018
|
41,700
|
|
2019
|
7,053
|
|
2020 – 2022
|
16,456
|
|
|
1,363,416
|
|
|
(b)
|
The Company has commitments in respect of the Environmental Impact Assessment
for the Fuwan Project and other various reports requiring payments of $300,000. The payments are anticipated to continue through
to 2016.
|
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
17.
|
|
Financial instruments and fair values
|
As explained in Note 3,
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 operations or comprehensive loss. Those
categories are: fair value through profit or loss, loans and receivables, available-for-sale and other financial liabilities. The
following table shows the carrying values of assets and liabilities for each of these categories at December 31, 2015 and 2014:
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
December 31, 2014
|
|
|
|
Loans and receivables
|
|
|
$
|
$
|
|
|
|
Cash and cash equivalents
|
|
|
26,202,564
|
11,938,544
|
|
|
|
Short-term investments
|
|
|
32,143,068
|
33,560,374
|
|
|
|
Receivables
|
|
|
517,359
|
370,903
|
|
|
|
Due from related parties
|
|
|
177,330
|
3,603,847
|
|
|
|
|
|
|
59,040,321
|
49,473,668
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
Investments
|
|
|
-
|
10,865,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
December 31, 2014
|
|
Other financial liabilities
|
|
|
|
$
|
$
|
|
Accounts payable and accrued liabilities
|
|
|
638,550
|
419,592
|
Fair value measurement
Financial assets and liabilities
that are recognized on the balance sheet at fair value can be classified in a hierarchy that is based on the 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); and
Level 3 - inputs for the asset
or liability that are not based on observable market data (that is, unobservable inputs).
Financial instruments that are
not measured at fair value on the balance sheet are represented by cash and cash equivalent, short-term investments, receivable,
accounts payable and accrued liabilities. The fair values of these financial instruments approximate their carrying value due to
their short-term nature.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
17.
|
|
Financial instruments and fair values
(continued)
|
Financial risk factors
The company’s activities
expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), and liquidity risk. Risk
management activities are carried out by management, who identifies and evaluates the financial risks.
Foreign exchange risk
The functional currency of Minco
Silver is the Canadian dollar and the functional currency of its Chinese subsidiaries is RMB. Most of the foreign currency risk
is related to US dollar funds held by Minco Silver and its Chinese subsidiaries. Therefore, the Company’s net loss is impacted
by fluctuations in the valuation of the US dollar in relation to the Canadian dollar and RMB.
The Company does not hedge its
exposure to currency fluctuations. The Company has completed a sensitivity analysis to estimate the impact that a change in foreign
exchange rates would have on the net loss of the Company, based on the Company’s net US$22.3 million monetary assets at year-end.
This sensitivity analysis shows that a change of +/- 10% in US$ foreign exchange rate would have a -/+ US$2.2 million impact on
net loss.
Interest rate risk
Financial instruments that expose
the Company to interest rate risk are cash and cash equivalents and short-term investments.
The Company has completed a sensitivity
analysis to estimate the impact that a change in interest rates would have on the net loss of the Company. This sensitivity analysis
shows that a change of +/- 100 basis points in interest rate would have a -/+ $0.6 million impact on net loss. This impact
is primarily as a result of the Company holding short-term investments such as guaranteed investment certificates and as a result
of the Company having cash invested in interest bearing accounts.
Minco
Silver Corporation
Notes to the
Consolidated Financial Statements
For the
years ended December 31, 2015, 2014 and 2013
(Expressed in Canadian dollars, unless otherwise
stated)
|
17.
|
|
Financial instruments and fair values
(continued)
|
Liquidity risk
Liquidity risk includes the risk
that the Company cannot meet its financial obligations as they fall due. The Company has in place a planning and budgeting process
to help determine the funds required to support the Company’s normal operating requirements and its exploration and development
plans. The annual budget is approved by the Company’s board of directors. The Company ensures that there are sufficient cash
balances to meet its short-term business requirements. As at December 31, 2015, the Company has a positive working capital of approximately
$58.7 million and therefore has sufficient funds to meet its current operating and exploration and development obligations. However,
the Company will require significant additional funds to complete its plans for the construction of the Fuwan project.
The Company’s objectives
in the managing of the liquidity and capital are to safeguard the Company’s ability to continue as a going concern and provide
the financial capacity to meet its strategic objectives. The capital structure of the Company consists of equity attributable to
common shareholders, comprising of issued share capital, common share purchase warrants, contributed surplus, accumulated other
comprehensive income and accumulated deficit.
The Company manages the capital
structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying
assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt and/ or acquire
or dispose of assets to facilitate the management of its capital requirements. The Company prepares annual expenditure budgets
that are updated as necessary depending upon various factors, including successful capital deployment and general industry conditions.
The annual and updated budgets are approved by the Company’s board of directors.
As at December 31, 2015, the
Company does not have any long-term debt and has sufficient funds to meet its current operating and exploration and development
obligations.
Item 19. Exhibits
|
Exhibit
Number
|
Description
|
|
1.1*
|
Articles of Incorporation of Minco Gold Corporation
|
|
1.2*
|
Notice of Articles of Minco Gold Corporation
|
|
4.1*
|
Joint Venture agreement dated April 16, 2004 between Guangdong Geological Exploration and Development, the Company, Zhuhai Zhenjie Development Ltd and Foshan Baojiang Nonferrous Metals Corporation and Fushan Baojiang Nonferrous Metals Corporation
|
|
4.2*
|
Joint Venture agreement dated September 28, 2004 between Guangdong Geological Exploration and Zhenjie Development Ltd., Foshan Baojiang Nonferrous Metals Corp. and Guangdong Gold Corporation
|
|
4.3*
|
Confirmation agreement dated August 24, 2006 among the Company, Minco Silver and Minco China
|
|
4.4*
|
Assignment Agreement dated March 10, 2010 among the Company, Minco Silver and Minco China.
|
|
4.5*
|
Cost Sharing Agreement dated March 10, 2010 between the Company and Minco Silver.
|
|
4.6*
|
Co-operation Framework Agreement dated December 16, 2010 between Minco China, Inner Mongolia Urat Middle Banner Tugurige Gold Mine and The 208 Team of China National Nuclear Corporation
|
|
4.7*
|
Supplementary Agreement to the Co-operation Framework Agreement dated December 24, 2010 between Minco China, Inner Mongolia Urat Middle Banner Tugurige Gold Mine and The 208 Team of China National Nuclear Corporation.
|
|
4.8*
|
Trust Agreement dated June 9, 2011 between the Company, Minco Silver Corporation and Minco China.
|
|
4.9*
|
Share Exchange Agreement dated December 17, 2012 between the Company and Minco Resources Limited.
|
|
4.10*
|
Trust Agreement dated April 30, 2013 between the Company, Minco Silver Corporation and Minco China.
|
|
4.11*
|
Sale Agreement dated December 26, 2014 between the Company and Beijing Runlong Investment Limited Company.
|
|
4.13
|
Share Purchase Agreement dated May 22, 2015 between the Company, Minco Silver Corporation and Minco Investment Holdings HK Ltd.
|
|
4.14
|
Amended and Restated Declaration of Trust and Agency Agreement dated July 31, 2015 between the Company, Minco Silver Corporation, Yuangling Minco Mining Co. Ltd. and Huaihua Tiancheng Mining Ltd.
|
|
4.12*
|
Minco Gold Corporation Stock Option Plan
|
|
12.1
|
Certification of the President Pursuant to Rule 13(a)-14(a) or ISD -14(a) under the Exchange Act
|
|
12.2
|
Certification of the Chief Financial Officer Pursuant to Rule 13(a)-14(a) or ISD -14(a) under the Exchange Act
|
|
13.1
|
Certification of the President Pursuant to 18
USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
13.2
|
Certification of the Chief Financial Officer Pursuant to 18
USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
99.1
|
Glossary of Geological Terms
|
* Incorporated by reference from our Form 20-Fs
filed in prior years.
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