UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 20-F
[ ] REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) or 12(g) OF THE
SECURITIES EXCHANGE ACT
OF 1934
OR
[ x ] ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 2012 OR
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
OR
[ ] SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
OF 1934
Commission file number 0-15490
QUARTZ MOUNTAIN RESOURCES
LTD.
(Exact name of Registrant as specified in its
charter)
BRITISH COLUMBIA, CANADA
(Jurisdiction of
incorporation or organization)
15
th
Floor, 1040 West Georgia Street
Vancouver, British Columbia, Canada, V6E 4H1
(Address of principal
executive offices)
Xenia Kritsos, Corporate Secretary
Facsimile No.:
604-681-2741
15
th
Floor, 1040 West Georgia Street
Vancouver, British Columbia, Canada, V6E 4H1
(Name, Telephone,
E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section
12(b) of the Act.
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Title of Each Class:
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Name of each exchange on which registered
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Not applicable
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Not applicable
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Securities registered or to be registered pursuant to Section
12(g) of the Act
Common shares, no par value
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 the close of the period
covered by the annual report:
22,032,793 common shares as of July 31, 2012
Indicate by check mark if the Registrant is a well known
seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
[ ] No [ x ]
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 [ x ]
Indicate by check mark whether 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 Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ x
] No [ ]
1
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 (§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 [ ]
Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer or non-accelerated filer. See definition
of "accelerated filer" and "large accelerated filer" in Rule 126-2 of the
Exchange Act.
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Large Accelerated Filer [ ]
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Accelerated Filer [ ]
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Non Accelerated Filer [ x
]
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Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:
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U.S. GAAP [ ]
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International Financial
Reporting Standards as issued
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Other [ ]
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by the International Accounting
Standards Board [ x ]
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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 [ x ]
2
T A B L E O F C O N T E N T S
3
GENERAL
In this Annual Report on Form 20-F, all references to "we", the
"Company" or "Quartz Mountain" refer to Quartz Mountain Resources Ltd. and its
consolidated subsidiary.
The Company uses the Canadian dollar as its reporting currency.
All references in this document to "dollars" or "$" are expressed in Canadian
dollars, unless otherwise indicated. See also
Item 3 – "Key
Information"
for more detailed currency and conversion information.
Except as noted, the information set forth in this Annual
Report is as of November 22, 2012, and all information included in this document
should only be considered correct as of such date.
Certain terms used herein are defined as follows:
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ICP
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Inductively coupled plasma (ICP) mass spectrometry is a
type of mass spectrometry which is capable of detecting metals and several
non-metals at concentrations as low as one part in 1012 (part per
trillion).
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ICP-AES
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Inductively coupled plasma atomic emission spectroscopy
is an analytical technique used for the detection of trace metals. It is a
type of emission spectroscopy that uses the inductively coupled plasma to
produce excited atoms and ions that emit electromagnetic radiation at
wavelengths characteristic of a particular element. The intensity of this
emission is indicative of the concentration of the element within the
sample.
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Induced Polarization (IP) Survey
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A geophysical survey used to identify a feature that
appears to be different from the typical or background survey results when
tested for levels of electro-conductivity; IP detects both chargeable,
pyrite-bearing rock and non-conductive rock that has a high content of
quartz.
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Epithermal Deposit
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Gold, gold-silver or silver, some with important base
metal minerals, occurring in veins, fractures and breccias or as
disseminations; range from narrow vein to large low grade disseminated
deposits.
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4
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Mineral Reserve
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Securities and Exchange Commission Industry Guide 7
Description of
Property by Issuers Engaged or to be Engaged in
Significant Mining
Operations
(under the United States
Securities Exchange Act of 1934, as amended) defines a 'reserve' as that
part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve determination. Reserves
consist of:
(1)
Proven (Measured) Reserves.
Reserves for
which: (a) quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes; grade and/or quality are computed from
the results of detailed sampling; and (b) the sites for inspection,
sampling and measurement are spaced so closely and the geologic character
is so well defined that size, shape, depth and mineral content of reserves
are well-established.
(2)
Probable (Indicated) Reserves.
Reserves for
which quantity and grade and/or quality are computed from information
similar to that used for proven (measured) reserves, but the sites for
inspection, sampling and measurement are farther apart or are otherwise
less adequately spaced. The degree of assurance, although lower than that
for proven (measured) reserves, is high enough to assume continuity
between points of observation.
As a reporting issuer under the
Securities Acts
of
British Columbia and Alberta, the Company is subject to National
Instrument 43-101
Standards
of Disclosure for Mineral Projects
of the Canadian Securities Administrators. Securities and Exchange
Commission Industry Guide 7, as interpreted by Securities and Exchange
Commission Staff, applies standards that are different from those
prescribed by National Instrument 43-101 in order to classify
mineralization as a reserve. Under the standards of the Securities and
Exchange Commission, mineralization may not be classified as a "reserve"
unless the determination has been made that the mineralization could be
economically and legally produced or extracted at the time the reserve
determination is made. Among other things, all necessary permits would be
required to be in hand or issued imminently in order to classify
mineralized material as reserves under Securities and Exchange Commission
Industry Guide 7. Accordingly, mineral reserve estimates established in
accordance with National Instrument 43-101 may not qualify as "reserves"
under SEC standards. The Company does not currently have any mineral
deposits that have been classified as reserves.
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5
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Mineral Resource
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National Instrument 43-101
Standards of Disclosure for
Mineral Projects
of the Canadian Securities Administrators defines a
"Mineral Resource" as a concentration or occurrence of natural, solid,
inorganic or fossilized organic material in or on the Earth's crust in
such form and quantity and of such a grade or quality that it has
reasonable prospects for economic extraction. The location, quantity,
grade, geological characteristics and continuity of a mineral resource are
known, estimated or interpreted from specific geological evidence and
knowledge.
Mineral Resources are sub-divided, in order of increasing
geological confidence, into Inferred, Indicated and Measured categories.
An Inferred Mineral Resource has a lower level of confidence than that
applied to an Indicated Mineral Resource. An Indicated Mineral Resource
has a higher level of confidence than an Inferred Mineral Resource but has
a lower level of confidence than a Measured Mineral Resource. It cannot be
assumed that all or any part of Measured Mineral Resources, Indicated
Mineral Resources, or Inferred Mineral Resources will ever be upgraded to
a higher category. It also cannot be assumed that any part of any reported
Measured Mineral Resources, Indicated Mineral resources, or Inferred
Mineral Resources is economically or legally mineable. Further, in
accordance with Canadian rules, estimates of Inferred Mineral Resources
cannot form the basis of feasibility or other economic studies.
(1)
Inferred Mineral Resource.
An 'Inferred
Mineral Resource' is that part of a Mineral Resource for which quantity
and grade or quality can be estimated on the basis of geological evidence
and limited sampling and reasonably assumed, but not verified, geological
and grade continuity. The estimate is based on limited information and
sampling gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes.
(2)
Indicated Mineral Resource.
An 'Indicated
Mineral Resource' is that part of a Mineral Resource for which quantity,
grade or quality, densities, shape and physical characteristics can be
estimated with a level of confidence sufficient to allow the appropriate
application of technical and economic parameters, to support mine planning
and evaluation of the economic viability of the deposit. The estimate is
based on detailed and reliable exploration and testing information
gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes that are spaced closely enough
for geological and grade continuity to be reasonably assumed.
(3)
Measured Mineral Resource.
A 'Measured Mineral
Resource' is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape, physical characteristics are so well
established that they can be estimated with confidence sufficient to allow
the appropriate application of technical and economic parameters, to
support production planning and evaluation of the economic viability of
the deposit. The estimate is based on detailed and reliable exploration,
sampling and testing information gathered through appropriate techniques
from locations such as outcrops, trenches, pits, workings and drill holes
that are spaced closely enough to confirm both geological and grade
continuity.
Industry Guide 7 – "
Description of Property by Issuers
Engaged or to be
Engaged in Significant Mining Operations"
of
the Securities and Exchange Commission does not define or recognize
resources. In addition, disclosure of resources using "contained ounces"
is permitted under Canadian regulations; however, the Securities and
Exchange Commission only permits issuers to report mineralization that
does not qualify as a reserve as in place tonnage and grade without
reference to unit measures. As used in this Form 20-F, "resources" are as
defined in National Instrument 43-101.
For the above reasons, information in the Company's
publicly-available documents containing descriptions of the Company's
mineral deposits may not be comparable to similar information made public
by U.S. companies subject to the reporting and disclosure requirements
under the United States federal securities laws and the rules and
regulations thereunder.
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6
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Mineral Symbols
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As – arsenic; Au – gold; Ag – silver; Cu – copper; Fe –
iron; Hg – mercury; Mo – molybdenum; Na – sodium; Ni – nickel; O – oxygen;
Pd - palladium; Pt – platinum; Pb – lead; S – sulphur; Sb – antimony; Zn –
zinc.
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Net Smelter Return (NSR)
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Monies received for concentrate delivered to a smelter
net of metallurgical recovery losses, transportation costs, smelter
treatment-refining charges and penalty charges.
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Porphyry Deposit
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Mineral deposit characterized by widespread disseminated
or veinlet- hosted sulphide mineralization, characterized by large tonnage
and moderate to low grade.
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Sulphide
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A compound of sulphur with another element, typically a
metallic element or compound.
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Vein
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A tabular or sheet-like mineral deposit with identifiable
walls, often filling a fracture or fissure.
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Currency and Measurement
All currency amounts in this Annual Report are stated in
Canadian dollars unless otherwise indicated.
Conversion of metric units into imperial equivalents is as
follows:
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Metric Units
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Multiply by
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Imperial Units
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hectares
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2.471
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= acres
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meters
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3.281
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= feet
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kilometers
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0.621
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= miles (5,280 feet)
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grams
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0.032
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= ounces (troy)
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tonnes
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1.102
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= tons (short) (2,000 lbs)
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grams/tonne
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0.029
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= ounces (troy)/ton
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NOTE ON FORWARD LOOKING STATEMENTS
This Annual Report on Form 20-F contains statements that
constitute "forward-looking statements". Any statements that are not statements
of historical facts may be deemed to be forward-looking statements. These
statements appear in a number of different places in this Annual Report and, in
some cases, can be identified by words such as "anticipates", "estimates",
"projects", "expects", "intends", "believes", "plans", or their negatives or
other comparable words. The forward-looking statements, including the statements
contained in
Item 3D "Risk Factors"
,
Item 4B "Business Overview"
,
Item 5 "Operating and
Financial Review and Prospects"
and
Item 11
"Quantitative and Qualitative Disclosures About Market
Risk"
, involve
known and unknown risks, uncertainties and other factors which may cause the
Company's actual results, performance or achievements to be materially different
from any future results, performance or achievements that may be expressed or
implied by such statements. Forward-looking statements include statements
regarding the outlook for the Company's future operations, plans and timing for
the Company's exploration programs, statements about future market conditions,
supply and demand conditions, forecasts of future costs and expenditures, the
outcome of legal proceedings, and other expectations, intentions and plans that
are not historical facts.
You are cautioned that forward-looking statements are not
guarantees. The risks and uncertainties that could cause the Company's actual
results to differ materially from those expressed or implied by the
forward-looking statements include:
-
changes in general economic and business conditions, including commodity
prices, costs associated with mineral exploration and development, changes in
interest rates and the availability of financing on reasonable terms;
-
natural phenomena, including geological and meteorological phenomena;
-
actions by government authorities, including changes in government
regulation and permitting requirements;
-
uncertainties associated with legal proceedings;
-
future decisions by management in response to changing conditions;
-
the Company's ability to execute prospective business plans; and
-
misjudgments in the course of preparing forward-looking statements.
7
The Company advises you that these cautionary remarks expressly
qualify, in their entirety, all forward-looking statements attributable to
Quartz Mountain or persons acting on the Company's behalf. The Company assumes
no obligation to update the Company's forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting
such statements. You should carefully review the cautionary statements and risk
factors contained in this and other documents that the Company files from time
to time with the Securities and Exchange Commission.
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ITEM 1
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IDENTITY OF DIRECTORS,
SENIOR MANAGEMENT AND ADVISERS
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A.
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DIRECTORS AND SENIOR
MANAGEMENT
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Not applicable.
Not applicable.
Not applicable.
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ITEM 2
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OFFER STATISTICS AND
EXPECTED TIMETABLE
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Not applicable.
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A.
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Selected Financial Data
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The following tables summarize selected financial data for the
Company (stated in Canadian dollars) prepared, in respect of the years ended
July 31, 2012 and July 31, 2011, in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”) (“IFRS-IASB”). The Company’s consolidated financial statements
have been prepared in accordance with IFRS-IASB for the first time for the
fiscal year ended July 31, 2012, together with comparative consolidated
financial statements for the prior fiscal year also in accordance with
IFRS-IASB. Pursuant to SEC Release 33-8567 this information is presented solely
for these two years, and information based on US GAAP is not provided. The
information in the table was extracted from the more detailed consolidated
financial statements and related notes included herein and should be read in
conjunction with these consolidated financial statements and with the
information appearing under the heading “Item 5 – Operating And Financial Review
And Prospects”. Results for the period ended July 31, 2012 are not necessarily
indicative of results for future periods.
The selected financial data of the Company for the fiscal years
2012 and 2011 was derived from the consolidated financial statements of the
Company that have been audited by Davidson & Company LLP, independent
Chartered Accountants, as indicated in their audit report which is included
elsewhere in this Annual Report.
The auditors conducted their audits in accordance with United
States and Canadian generally accepted auditing standards, and the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that the auditor plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation.
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For the year ended July 31, 2012
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For the year ended July 31, 2011
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Sales Revenue
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$ –
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$ –
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Loss from Operations
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$ 3,587,805
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$ 174,867
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Loss and Comprehensive Loss
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$ 3,587,805
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$ 183,483
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8
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Basic and Diluted Loss per Common Share
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$ 0.20
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$ 0.01
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Dividends Per Share
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–
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–
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Working Capital
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$ 911,035
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$ 57,066
|
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Total Assets
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$ 2,821,289
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$ 99,230
|
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Shareholder’s Equity
|
$ 989,036
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$ 57,067
|
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Shares Outstanding
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22,032,793
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13,399,422
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Currency and Exchange Rates
On November 22, 2012 the rate of exchange of the Canadian
dollar, based on the daily noon rate in Canada as published by the Bank of
Canada, was US$1 = Canadian $0.9974. Exchange rates published by the Bank of
Canada are, available on its website
www.bankofcanada.ca
, nominal
quotations — not buying or selling rates — and are intended for statistical or
analytical purposes.
The following tables set out the exchange rates, based on the
daily noon rates in Canada as published by the Bank of Canada for the conversion
of Canadian dollars into U.S. dollars.
|
For year ended July 31
(Canadian Dollar per U.S. Dollar)
|
|
|
2012
|
2011
|
2010
|
2009
|
2008
|
|
End of Period
|
$0.9986
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$0.9538
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$1.0290
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$1.0790
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$1.0257
|
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Average for the Period
(1)
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$0.9935
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$0.9941
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$1.0486
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$1.1758
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$1.0070
|
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High for the Period
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$1.0583
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$1.0642
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$1.1079
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$1.3000
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$1.0755
|
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Low for the Period
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$0.9430
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$0.9449
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$0.9961
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$1.0253
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$0.9170
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(1) The average rate for each period is the average of the
daily noon rates on the last day of each month during the period.
|
Monthly High and Low Exchange Rate
(Canadian Dollar per U.S. Dollar)
|
|
Month
|
High
|
Low
|
|
July 2012
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$0.9986
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$0.9790
|
|
June 2012
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$0.9825
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$0.9599
|
|
May 2012
|
$1.0164
|
$0.9663
|
|
April 2012
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$1.0197
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$0.9961
|
|
March 2012
|
$1.0153
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$0.9985
|
|
B.
|
Capitalization and
Indebtedness
|
Not applicable.
|
C.
|
Reasons for the Offer and Use of
Proceeds
|
Not applicable.
Due to the nature of the Company's business and the present
stage of exploration and development of its projects in British Columbia, an
investment in the securities of Quartz Mountain is highly speculative and
subject to a number of risks. Briefly, these include the highly speculative
nature of the resources industry, characterized by the requirement for large
capital investments from an early stage and a very small probability of finding
economic mineral deposits. In addition to the general risks of mining, there are
country-specific risks, including currency, political, social, permitting and
legal risk. An investor should carefully consider the risks described below and
the other information that Quartz Mountain furnishes to, or files with, the
Securities and Exchange Commission and with Canadian securities regulators
before investing in Quartz Mountain's common shares, and should not consider an
investment in Quartz Mountain unless the investor is capable of sustaining an
economic loss of the entire investment. The Company's actual exploration and
operating results may be very different from those expected as at the date of
this Annual Report.
9
Exploration, Development and Mining Risks
Resource exploration, development, and operations are highly
speculative, characterized by a number of significant risks, which even a
combination of careful evaluation, experience and knowledge may not reduce,
including among other things, unsuccessful efforts resulting not only from the
failure to discover mineral deposits but from finding mineral deposits which,
though present, are insufficient in quantity and quality to return a profit from
production. Few properties that are explored are ultimately developed into
producing mines. Unusual or unexpected formations, formation pressures, fires,
power outages, labour disruptions, flooding, explosions, cave-ins, landslides
and the inability to obtain suitable or adequate machinery, equipment or labour
are other risks involved in the operation of mines and the conduct of
exploration programs. The Company will rely upon consultants and others for
exploration, development, construction and operating expertise. Substantial
expenditures are required to establish mineral resources and mineral reserves
through drilling, to develop metallurgical processes to extract the metal from
mineral resources, and in the case of new properties, to develop the mining and
processing facilities and infrastructure at any site chosen for mining.
No assurance can be given that minerals will be discovered in
sufficient quantities to justify commercial operations or that funds required
for development can be obtained on a timely basis. Whether a mineral deposit
will be commercially viable depends on a number of factors, some of which are:
the particular attributes of the deposit, such as size, grade and proximity to
infrastructure; metal prices, which are highly cyclical; and government
regulations, including regulations relating to prices, taxes, royalties, land
tenure, land use, importing and exporting of minerals, and environmental
protection. The exact effect of these factors cannot accurately be predicted,
but the combination of these factors may result in the Company not receiving an
adequate return on invested capital.
The Company will carefully evaluate the political and economic
environment in considering any properties for acquisition.
Future Profits/Losses and Production
Revenues/Expenses
The Company has no history of operations or earnings, and
expects that its losses and negative cash flow will continue for the foreseeable
future. The Company currently a limited number of mineral properties and there
can be no assurance that the Company will, if needed, be able to acquire
additional properties of sufficient technical merit to represent a compelling
investment opportunity. If the Company is unable to acquire additional
properties, its entire prospects will rest solely with its current projects and
accordingly, the risk of being unable to identify a mineral deposit will be
higher than if the Company had additional properties to explore. There can be no
assurance that the Company will ever be profitable in the future. The Company's
operating expenses and capital expenditures may increase in subsequent years as
needed consultants, personnel and equipment associated with advancing
exploration, development and commercial production of its current properties and
any other properties that the Company may acquire are added. The amounts and
timing of expenditures will depend on the progress of on-going exploration and
development, the results of consultants' analyses and recommendations, the rate
at which operating losses are incurred, the execution of any joint venture
agreements with strategic partners, and the Company's acquisition of additional
properties and other factors, many of which are beyond the Company's control.
The Company does not expect to receive revenues from operations in the
foreseeable future, and expects to incur losses unless and until such time as
its current properties, or any other properties the Company may acquire commence
commercial production and generate sufficient revenues to fund its continuing
operations. The development of the Company’s current properties and any other
properties the Company may acquire will require the commitment of substantial
resources to conduct the time-consuming exploration and development of
properties. The Company anticipates that it will retain any cash resources and
potential future earnings for the future operation and development of the
Company's business. The Company has not paid dividends since incorporation and
the Company does not anticipate paying dividends in the foreseeable future.
There can be no assurance that the Company will generate any revenues or achieve
profitability. There can be no assurance that the underlying assumed levels of
expenses will prove to be accurate. To the extent that such expenses do not
result in the creation of appropriate revenues, the Company's business may be
materially adversely affected. It is not possible to forecast how the business
of the Company will develop.
Permits and Licenses
The operations of the Company will require licenses and permits
from various governmental authorities. There can be no assurance that the
Company will be able to obtain all necessary licenses and permits which may be
required to carry out exploration and development of the Buck, Galaxie, Karma
and ZNT Projects.
Additional Funding Requirements
Further development of the Company's properties will require
additional capital. The Company currently does not have sufficient funds to
fully develop the properties it holds. In addition, a positive production
decision at these properties or any other development projects acquired in the
future would require significant capital for project engineering and
construction. Accordingly, the continuing development of the Company's
properties will depend upon the Company's ability to obtain funding through debt
or equity financings, the joint venturing of projects, or other means. It is
possible that the financing required by the Company will not be available, or, if available, will
not be available on acceptable terms. If the Company issues treasury shares to
finance its operations or expansion plans, control of the Company may change and
shareholders may suffer dilution of their investment. If adequate funds are not
available, or are not available on acceptable terms, the Company may not be able
to take advantage of opportunities, or otherwise respond to competitive
pressures and remain in business. In addition, a positive production decision at
any of the Company’s current projects or any other development projects acquired
in the future would require significant resources/funding for project
engineering and construction. Accordingly, the continuing development of the
Company’s properties will depend upon the Company’s ability to obtain financing
through debt financing, equity financing, the joint venturing of projects, or
other means. There is no assurance that the Company will be successful in
obtaining the required financing for these or other purposes, including for
general working capital.
10
Going concern assumption
The Company's consolidated financial statements have been
prepared assuming the Company will continue on a going concern basis. However,
unless additional funding is obtained, this assumption will have to change. The
Company has incurred losses since inception. Failure to continue as a going
concern would require that Quartz Mountain's assets and liabilities be restated
on a liquidation basis, which could differ significantly from the going concern
basis.
Infrastructure Risk
The operations of the Company are carried out in geographical
areas which may lack adequate infrastructure and are subject to various other
risk factors. Mining, processing, development and exploration activities depend,
to one degree or another, on adequate infrastructure. Reliable roads, bridges,
power sources and water supply are important determinants which affect capital
and operating costs. Lack of such infrastructure or unusual or infrequent
weather phenomena, government or other interference in the maintenance or
provision of such infrastructure could adversely affect the Company's
operations, financial condition and results of operations.
Changes in Local Legislation or Regulation
The Company's mining and processing operations and exploration
activities are subject to extensive laws and regulations governing the
protection of the environment, exploration, development, production, exports,
taxes, labour standards, occupational health, waste disposal, toxic substances,
mine and worker safety, protection of endangered and other special status
species and other matters. The Company's ability to obtain permits and approvals
and to successfully operate in particular communities may be adversely impacted
by real or perceived detrimental events associated with the Company's activities
or those of other mining companies affecting the environment, human health and
safety of the surrounding communities. Delays in obtaining or failure to obtain
government permits and approvals may adversely affect the Company's operations,
including its ability to explore or develop properties, commence production or
continue operations. Failure to comply with applicable environmental and health
and safety laws and regulations may result in injunctions, fines, suspension or
revocation of permits and other penalties. The costs and delays associated with
compliance with these laws, regulations and permits could prevent the Company
from proceeding with the development of a project or the operation or further
development of a mine or increase the costs of development or production and may
materially adversely affect the Company's business, results of operations or
financial condition. The Company may also be held responsible for the costs of
addressing contamination at the site of current or former activities or at third
party sites. The Company could also be held liable for exposure to hazardous
substances.
Environmental Matters
All of the Company's operations are and will be subject to
environmental laws and regulations, which can make operations expensive or
prohibit them altogether. The Company may be subject to potential risks and
liabilities associated with pollution of the environment and the disposal of
waste products that could occur as a result of its mineral exploration,
development and production. In addition, environmental hazards may exist on a
property in which the Company directly or indirectly holds an interest, which
are unknown to the Company at present and have been caused by previous or
existing owners or operators of the Company’s projects. Environmental
legislation provides for restrictions and prohibitions on spills, releases or
emissions of various substances produced in association with certain mining
industry operations which would result in environmental pollution. A breach of
such legislation may result in the imposition of fines and penalties, or the
requirement to remedy environmental pollution, which would reduce funds
otherwise available to the Company and could have a material adverse effect on
the Company. If the Company is unable to fully remedy an environmental problem,
it could be required to suspend operations or undertake interim compliance
measures pending completion of the required remedy, which could have a material
adverse effect on the Company.
There is no assurance that future changes in environmental
regulation, if any, will not adversely affect the Company’s operations. There is
also a risk that the environmental laws and regulations may become more onerous,
making the Company's operations more expensive. Many of the environmental laws
and regulations applicable to the Company’s operations will require the Company
to obtain permits for its activities. The Company will be required to update and
review its permits from time to time, and may be subject to environmental impact analyses and public review
processes prior to approval of the additional activities. It is possible that
future changes in applicable laws, regulations and permits or changes in their
enforcement or regulatory interpretation could have a significant impact on some
portion of the Company's business, causing those activities to be economically
re-evaluated at that time.
11
Groups Opposed to Mining May Interfere with the Company's
Efforts to Explore and Develop its Properties
Organizations opposed to mining may be active in the regions in
which the Company conducts its exploration activities. Although the Company
intends to comply with all environmental laws and maintain good relations with
local communities, there is still the possibility that those opposed to mining
will attempt to interfere with the development of the Company's properties. Such
interference could have an impact on the Company's ability to explore and
develop its properties in a manner that is most efficient or appropriate, or at
all, and any such impact could have a material adverse effect on the Company's
financial condition and the results of its operations.
Market for Securities and Volatility of Share Price
There can be no assurance that active trading market in the
Company's securities will be established or sustained. The market price for the
Company's securities is subject to wide fluctuations. Factors such as
announcements of exploration results, as well as market conditions in the
industry or the economy as a whole, may have a significant adverse impact on the
market price of the securities of the Company.
The stock market has from time to time experienced extreme
price and volume fluctuations that have often been unrelated to the operating
performance of particular companies.
Conflicts of Interest
The Company's directors and officers may serve as directors or
officers of other companies, joint venture partners, or companies providing
services to the Company or they may have significant shareholdings in other
companies. Situations may arise where the directors and/or officers of the
Company may be in competition with the Company. Any conflicts of interest will
be subject to and governed by the law applicable to directors' and officers'
conflicts of interest. In the event that such a conflict of interest arises at a
meeting of the Company's directors, a director who has such a conflict will
abstain from voting for or against the approval of such participation or such
terms. In accordance with applicable laws, the directors of the Company are
required to act honestly, in good faith and in the best interests of the
Company.
Lack of Revenue and a History of Operating Losses
The Company does not have any operational history or earnings
and the Company has incurred net losses and negative cash flow from its
operations since its incorporation. Although the management of the Company hopes
to eventually generate revenues, significant operating losses are to be
anticipated for at least the next several years and possibly longer. To the
extent that such expenses do not result in the creation of appropriate revenues,
the Company's business may be materially adversely affected. It is not possible
to forecast how the business of the Company will develop.
General Economic Conditions
Global financial markets have experienced a sharp increase in
volatility during the last few years. Market conditions and unexpected
volatility or illiquidity in financial markets may adversely affect the
prospects of the Company and the value of the Company's shares.
Reliance on Key Personnel
The Company is dependent on the continued services of its
senior management team, and its ability to retain other key personnel. The loss
of such key personnel could have a material adverse effect on the Company. There
can be no assurance that any of the Company's employees will remain with the
Company or that, in the future, the employees will not organize competitive
businesses or accept employment with companies competitive with the Company.
Furthermore, as part of the Company's growth strategy, it must continue to hire
highly qualified individuals. There can be no assurance that the Company will be
able to attract, train or retain qualified personnel in the future, which would
adversely affect its business.
Risks Related to Flow-Through Shares
Financing of the Company may involve the issuance of
flow-through common shares under the
Income Tax Act
(Canada). There is no
guarantee that there will not be any differences of opinion between the Canadian
federal and British Columbia provincial tax authorities with respect to the tax
treatment of flow-through common shares issued under a financing, if any, and
the activities contemplated by the Company's exploration and development
programs.
If the Company does not expend an amount equal to the gross
proceeds from the sale of flow-through common shares so as to incur sufficient
qualifying expenditures within the relevant timeframe, subscribers in the
flow-through financing may be reassessed. The Company shall be obligated to
indemnify any subscribers of flow-through common shares for tax payable pursuant
to any such reassessment pursuant to the terms and conditions set out in the
subscription agreements that the Company will enter into with each subscriber in a flow-through
financing. There can be no assurances that the Company will have sufficient
funds to satisfy such obligations.
12
Competition
The resources industry is highly competitive in all its phases,
and the Company will compete with other mining companies, many of which have
greater financial, technical and other resources. Competition in the mining
industry is primarily for: attractive mineral rich properties capable of being
developed and producing economically; the technical expertise to find, develop
and operate such properties; the labour to operate the properties; and the
capital for the purpose of funding such properties. Many competitors not only
explore for and mine certain minerals, but also conduct production and marketing
operations on a worldwide basis. Such competition may result in the Company
being unable to acquire desired properties, to recruit or retain qualified
employees or to acquire the capital necessary to fund its operations and develop
its properties. The Company's inability to compete with other mining companies
for these resources could have a materially adverse effect on the Company's
results of operation and its business.
Uninsurable Risks
In the course of exploration, development and production of
mineral properties, certain risks, and in particular, unexpected or unusual
geological operating conditions including rock bursts, cave ins, fires, flooding
and earthquakes may occur. It is not always possible to fully insure against
such risks and the Company may decide not to take out insurance against such
risks as a result of high premiums or other reasons.
Land Claims
In Canada, aboriginal interests, rights (including treaty
rights), claims and title may exist notwithstanding that they may be
unregistered or overlap with other tenures and interests granted to third
parties. Generally speaking, the scope and content of such rights are not well
defined and may be the subject of litigation or negotiation with the government.
The government has a legal obligation to consult First Nations on proposed
activities that may have an impact on asserted or proven aboriginal interests,
claims, rights or title. All of the mineral claims in the Company’s projects are
identified by the Province of British Columbia as overlapping with areas in
which certain aboriginal groups have asserted aboriginal interests, rights,
claims or, title or undefined rights under historic treaties. Nevertheless,
potential overlaps between the Company’s properties and existing or asserted
aboriginal interests, rights, claims or, title, or undefined rights under
historic treaties, may exist notwithstanding whether the Province of British
Columbia has identified such interests, rights, claims or, title or undefined
rights under historic treaties.
Property Title
The acquisition of title to resource properties is a very
detailed and time-consuming process. Title to, and the area of, resource claims
may be disputed. Although the Company believes it has taken reasonable measures
to ensure that title to the mineral claims comprising part of its projects are
held as described, there is no guarantee that title to any of those claims will
not be challenged or impaired. There may be valid challenges to the title of any
of the mineral claims comprising the Company’s projects that, if successful,
could impair development or operations or both.
The mineral property underlying the Company's net smelter
return royalty interest contains no known ore.
The Company holds a 1% net smelter return ("NSR") royalty
interest on the Quartz Mountain Property (recently renamed "Angel's Camp"), an
exploration stage prospect in Oregon. The Company's interest in the property
will be limited to any future NSR that would be forthcoming only if or when any
mining commences on the property. There is currently no known body of ore on the
property. Extensive additional exploration work will be required to ascertain if
any mineralization may be economic.
Likely PFIC status has consequences for United States
investors
Potential investors who are U.S. taxpayers should be aware that
the Company expects to be classified for U.S. tax purposes as a passive foreign
investment company ("PFIC") for the current fiscal year, and may also have been
a PFIC in prior years and may also be a PFIC in future years. If the Company is
a PFIC for any year during a U.S. taxpayer's holding period, then such U.S.
taxpayer generally will be required to treat any so-called "excess distribution"
on its common shares, or any gain realized upon a disposition of common shares,
as ordinary income which would be taxed at the shareholder's highest marginal
rates and to pay an interest charge on a portion of such distribution or gain,
unless the taxpayer has made a timely qualified electing fund ("QEF") election
or a mark-to-market election with respect to the shares of the Company. In
certain circumstances, the sum of the tax and the interest charge may exceed the
amount of the excess distribution received, or the amount of proceeds of
disposition realized, by the taxpayer. A U.S. taxpayer who makes a QEF election
generally must report on a current basis its share of the Company's net capital
gain and ordinary earnings for any year in which the Company is a PFIC, whether
or not the Company distributes any amounts to its shareholders.
A U.S. taxpayer who makes the mark-to-market election generally must include as
ordinary income each year the excess of the fair market value of the common
shares over the taxpayer's tax basis therein. See also
Item 10E – "Passive
Foreign
Investment Company
".
13
Potential investors should also note that recently enacted
legislation may require U.S. shareholders to report their interest in a PFIC on
an annual basis. US shareholders of the Company should consult their tax
advisors as to these reporting requirements as well as the consequences of
investing in the Company.
Penny stock classification could affect the marketability of
the Company's common stock and shareholders could find it difficult to sell
their stock
The penny stock rules in the United States require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation.
Further, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from such rules; the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These additional broker-dealer practice and
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for the Company's common shares in the U.S.,
and shareholders may find it more difficult to sell their shares.
|
ITEM 4
|
INFORMATION ON THE
COMPANY
|
|
A.
|
History and Development of the
Company
|
Incorporation
The legal name of the Company is "Quartz Mountain Resources
Ltd."
Quartz Mountain Resources Ltd. was incorporated on August 3,
1982, in British Columbia, Canada, and it continues to subsist under the laws of
the Province of British Columbia.
The Company was originally incorporated as Wavecrest Resources
Ltd., but changed its name to Quartz Mountain Gold Corp. on June 18, 1986. On
November 5, 1997, the name of the Company was changed from Quartz Mountain Gold
Corp. to Quartz Mountain Resources Ltd., and the common shares were consolidated
on a ten-old-for-one-new share basis.
Market for the Company's Securities
The Company's common shares were quoted on NASDAQ SmallCap
Market in the United States until May 12, 1994, when the Company ceased to meet
the SmallCap Market's minimum listing requirements. The Company's common shares
were also listed on The Toronto Stock Exchange until November 10, 1994, when it
ceased to meet the Exchange's minimum listing requirements. Prior to November
15, 1989, the shares were also listed on the Vancouver Stock Exchange (a
predecessor to the TSX Venture Exchange). The Company voluntarily surrendered
its listing on the Vancouver Stock Exchange at that time.
After delisting from the NASDAQ SmallCap Market and the
Vancouver Stock Exchange, the Company's common shares continued to trade in
Canada on the Canadian Dealer Network Inc. (the "CDN", colloquially known as the
Canadian "unlisted" market). In October 2000, as a result of an agreement
between The Toronto Stock Exchange and the CDN, the Canadian unlisted market
ceased to operate, and qualifying issuers that were formerly quoted on the CDN
were invited to list on a newly created Tier 3 of the Canadian Venture Exchange
(now renamed the TSX Venture Exchange).
On December 23, 2003, the Company was reclassified as a Tier 2
company on the TSX Venture Exchange. On February 17, 2005, the Company
transferred its listing to NEX, a separate board of the TSX Venture Exchange
established in 2003 to provide a new trading forum for listed companies that
have fallen below the TSX Venture Exchange's continued listing standards, due to
low levels of business activity.
The Company was relisted on the TSX Venture Exchange on
December 30, 2011.
Currently, the Company's common shares trade on the TSX Venture
Exchange under the symbol QZM, and certain broker-dealers in the United States
make market in the Company's common shares on the OTC Grey Market under the
symbol QZMRF.
14
Offices
The Company's business office is located at 15
th
Floor, 1040 West Georgia Street, Vancouver, British Columbia V6E 4H1;
telephone (604) 684-6365. The Company's registered office is Suite 1500 – 1055
West Georgia Street, Vancouver, British Columbia V6E 4N7; telephone (604)
689-9111.
The Company's Business Strategy and Principal
Activities
Quartz Mountain is in the business of exploring and developing
mineral properties. The Company’s activities are primarily focused in British
Columbia, Canada, where it has assembled a portfolio of projects through option
or purchase agreements and ground staking. Exploration activities on the
properties are primarily focused on ascertaining whether the properties host
commercially viable mineral deposits.
In the first three years of its existence, the Company was
active in the exploration of small gold and silver prospects in Canada, but none
of these prospects warranted further exploration or development. In 1986, the
Company acquired the Quartz Mountain gold property, located in south central
Oregon, and until January 2002 most of the Company's efforts were expended on
the exploration and maintenance of these claims. The Company's interests in the
Quartz Mountain gold property, and in its other properties, were acquired by
direct purchase, lease and option, or through joint ventures.
The Company sold the Quartz Mountain gold property during the
fiscal year ended July 31, 2002, to Seabridge Resources Ltd. and Seabridge
Resources Inc. (collectively "Seabridge"). Seabridge subsequently changed its
name to Seabridge Gold Inc. At closing, Quartz Mountain received 300,000
Seabridge common shares, 200,000 Seabridge common share purchase warrants,
US$100,000 and a 1% NSR from any future production on the Quartz Mountain gold
property. The Seabridge warrants were exercised and all Seabridge common shares
held by the Company have been sold. The Company's interest in the Quartz
Mountain gold property is limited to the 1% NSR royalty. The Company does not
expect to generate any royalty revenue from the Quartz Mountain gold property
for several years, and it is not known at this time when any mining will
commence, if at all, on that property.
Following the sale of the Quartz Mountain gold property, the
Company continued in its efforts to find a suitable mineral property for
potential acquisition and exploration during the period of 2002 to 2011.
In December 2011, the Company acquired an option to earn a 100%
interest in the Buck gold-silver property near the town of Houston in central
British Columbia (the “Buck Project”). Concurrently with the Buck Project
acquisition, the Company completed a $4.2 million private placement financing
and began trading on the TSX Venture Exchange.
In August 2012, the Company acquired 100% of the Galaxie
copper-gold property in northwestern British Columbia (the “Galaxie
Project”).
The Company also staked the Karma Project and the ZNT Project
by utilizing British Columbia’s on-line mineral tenure system in 2012. The
100%-owned Karma and ZNT properties are both located in central British
Columbia. The Karma Project is 41 kilometres south of Houston, British Columbia.
The ZNT Project is located 15 kilometres southeast of the town of Smithers,
British Columbia.
In November 2012, Quartz Mountain entered into an option and
joint venture agreement with Amarc Resources Ltd. (“Amarc”) pursuant to which
Amarc can earn a 40% ownership interest, with an option to acquire an additional
10% ownership interest, in the Galaxie and ZNT Projects.
The Company does not have any operating revenue and anticipates
that it will rely on sales of its equity securities in order to finance its
acquisition and exploration activities.
British Columbia Mineral Tenure
On January 12, 2005, the Province of British Columbia adopted
an on-line mineral tenure system that includes mineral tenure acquisition and
tenure maintenance procedures, as well as a method of converting previous format
claims (legacy claims) to new format claims (cell claims). All of the Company's
mineral tenures have been converted to cell claims resulting in new tenure
numbers and marginally larger claim boundaries. The mineral claims are
maintained through the completion of exploration activities referred to as
"Assessment Work". The financial requirements related to these exploration works
defined by the Provincial Government. Currently the cost to stake a mineral
claim is $1.75 per hectare and the cost of maintaining a claim is $5.00 per
hectare per year during the first two years following location of the mineral
claim, $10.00 per hectare per year in the third and fourth years, $15.00 per
hectare in the fifth and sixth years, and $20.00 per hectare in the seventh and
all succeeding years. If the assessment work is not completed the mineral claims
may be maintained by a cash payment, but if this payment is not made before the
forfeiture date, the tenure is relinquished.
15
Another type of mineral tenure exists, called crown-granted
mineral claims, on which the perimeter has been physically surveyed.
Crown-granted mineral claims are maintained by paying taxes on an annual basis.
Unlike mineral claims, the taxes can be paid late with penalties and interest.
If the taxes remain unpaid after a specified period of time, the claims will
revert to the Crown and will be subsequently made available for acquisition by
normal procedures.
Environmental Matters
Environmental matters related to mineral exploration companies
in British Columbia are administered by the Ministry of Energy, Mines and
Petroleum Resources. The Company files notice of its work programs with the
Ministry, and a reclamation security is determined that will set aside
sufficient monies to reclaim the exploration sites to their pre-exploration land
use. Typically, no reclamation security is required for non-mechanized
exploration activities such as surface geological, geochemical and geophysical
surveys. However, a reclamation security is generally required for mechanized
activities such as machine work and drilling. The required level of reclamation
usually involves leaving the sites in a geotechnically stable condition, and
grooming the sites to both prevent forest fire hazards and to ensure that
natural regeneration of indigenous plant species can progress within a
reasonable period of time.
Mineral Properties and Exploration Activities and
Plans
The location of Quartz Mountain’s Galaxie, Buck, ZNT and Karma
projects is shown on the map below.
16
Galaxie Project, Northwestern British
Columbia
Agreements
Sale Agreement with Finsbury Exploration Ltd.
In August 2012, Quartz Mountain completed the acquisition of a
100% interest in the Galaxie Project from Finsbury Exploration Ltd (“Finsbury”),
a Non-Arm’s Length Party, through a sale agreement (the “Sale Agreement”) dated
July 27, 2012. The Galaxie Project-area, acquired from Finsbury, included an
area of 1,488 square kilometres, comprised of three mineral claims totalling
1,294.3 hectares (the “Gnat Pass Property”) and the surrounding mineral claims
staked by Finsbury to that time. Some of the originally purchased claims were
allowed to expire and new adjacent claims were staked by Quartz Mountain, with
the result that the Galaxie Property currently covers an area of 1,324 square
kilometres. Pursuant to the terms of the Sale Agreement, Quartz Mountain issued
2,038,111 shares to Finsbury and assumed the rights and obligations of Finsbury
under a mineral property purchase agreement (the “Bearclaw Agreement”) on the
Gnat Pass Property between Finsbury and Bearclaw Capital Corp. (“Bearclaw”).
Quartz Mountain also assumed the rights and obligations under an NSR Royalty
Agreement between Finsbury and Bearclaw.
The remaining payment obligations to Bearclaw for the Gnat Pass
Property under the Bearclaw Agreement to be assumed by Quartz Mountain consisted
of:
|
|
1.
|
a payment, on or before August 20, 2012, to Bearclaw of
$50,000 in cash (paid);
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|
|
|
|
|
|
2.
|
the issuance, on or before August 20, 2012, to Bearclaw
of a convertible debenture note in the amount of $650,000 at a rate of 8%
per annum and with a maturity date of October 31, 2013 (issued);
and
|
|
|
|
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|
|
3.
|
the issuance, following the closing date of the
transactions contemplated in the Sale Agreement, to Bearclaw of 1,000,000
shares in the capital of Quartz Mountain (issued).
|
Acquisition of Hotai Claims
Quartz Mountain acquired a 100% interest in nine mineral claims
(the Hot and Hot Doughnut mineral claims, collectively called the “Hotai
Claims”, formerly referred to as the Hotailuh Slope Mineral Claims) totalling
3,846 hectares, that are adjacent to, and now form a part of, the Galaxie
Project from Crucible Resources Ltd. and Michael Rowley (together, the “Hotai
Vendors”) through a mineral property sale and purchase agreement (the “Hotai
Agreement”) dated as of July 27, 2012.
Pursuant to the terms of the Hotai Agreement, the consideration
payable by Quartz Mountain to the Hotai Vendors in aggregate consists of:
|
|
1.
|
on the closing date, $5,000 payable in cash and $5,000
payable by the issuance of shares in the capital of Quartz Mountain (paid)
and the issuance of a 2% NSR royalty which is capped at $5,000,000
(issued);
|
|
|
|
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|
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2.
|
on August 23, 2013, $10,000 payable in cash and $10,000
payable by the issuance of shares in the capital of Quartz Mountain;
and
|
|
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|
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|
|
3.
|
on August 23, 2014 and August 23, 2015 $20,000 payable in
cash and $20,000 payable by the issuance of shares in the capital of
Quartz Mountain.
|
Quartz Mountain is required to incur expenditures on the Hotai
Claims of at least $1,000,000 during the period ending on August 23, 2015.
Quartz Mountain and Amarc Joint Venture on Galaxie and
ZNT
Quartz Mountain and Amarc Resources Ltd. (“Amarc”) entered into
a binding letter agreement (“Letter Agreement”) dated November 1, 2012, pursuant
to which Quartz Mountain will grant to Amarc an initial 40% ownership interest
in the Galaxie and ZNT Projects, upon Amarc making a cash payment of $1 million
to Quartz and funding $1 million in exploration expenditures to be incurred by
Quartz Mountain relating to the Galaxie Project on or before December 31, 2012.
Quartz Mountain will also grant to Amarc an option to acquire an additional 10%
ownership interest in the Galaxie and ZNT Projects, by funding an additional $1
million in exploration expenditures in relation to the Projects, on or before
September 30, 2013.
The transactions contemplated by the Letter Agreement are
subject to regulatory approval and it is contemplated that the parties will
enter into definitive agreements governing in greater detail the transactions
contemplated by the Letter Agreement. Quartz Mountain and Amarc have certain
directors in common and are accordingly considered by the TSX Venture Exchange
to be Non-Arm’s Length Parties.
Location, Access and Local Resources
The Galaxie Project is located 24 km south of the community of
Dease Lake in northwestern British Columbia. It is accessed by the paved,
two-lane Stewart-Cassiar Highway (#37) which crosses the central part of the
property. A four-wheel drive road leads easterly from the highway for a distance
of about 1.5 km to a network of drill roads at the Gnat deposit, a porphyry
copper occurrence that is located on the property. The rest of the property is
most easily accessed by helicopter.
17
Dease Lake (population 600) offers an array of services,
including motel accommodations, food, fuel, a variety of small equipment
operators, post office, health clinic, bank agent and government services.
Mining and exploration make up the most substantial industry, and a small
experienced workforce is available for contract hire. The Dease Lake airport has
regularly scheduled flights to Terrace or Smithers in the summer, with
connecting flights to Vancouver. Pacific Western Helicopters has a year-round
base at the Dease Lake. Dease Lake is powered by an off-grid source of
distributed power generation, with diesel backup. A transmission line from the
grid is planned for development along Highway 37.
Elevations on the property
vary from about 1,200 m above sea level (“ASL”) in the valley bottom to about
1,300 and 1,600 m ASL to the west and east, respectively. The Gnat deposit
itself occupies a low hill, the top of which is at an elevation of about 1,340 m
ASL. In the area of the surrounding claims, the topography is more varied and
the elevation range much greater.
The climate is typified by relatively short, moderately warm
summers and longer, cold winters. Work programs are best completed between the
five months from June to October.
Property Description
The Galaxie Project is comprised of claims acquired through the
sale agreement described above and also some additional claims staked by Quartz
Mountain. Some of the originally purchased claims were allowed to expire and new
adjacent claims were staked by Quartz Mountain. Names and expiry dates for the
claims that currently comprise the 1,324 square kilometre project-area are
summarized below:
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Property
|
Claim Name
|
Expiry date
|
Gnat Pass
|
Tenure # 512878 (no name)
|
July 26, 2016
|
|
Gnat North
|
July 28, 2015
|
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Gnat 3
|
Galaxie Claims
|
Stu 1-060, 062-064, 066-097, 136-162, 168,
171-175, 178-182, 186-190
|
Stu 223-260, 262-288 289 (tenure 880610),
Stu 289 (tenure 880909), Stu 290-317
|
Stu 319 (tenure 940641), Stu 319 (tenure
940649), Stu 320-322, Stu 324-341, Stu 370
|
|
Stu 342-369, Stu 371
|
Jan 10, 2013
|
Stu 373, Stu 37(942614), Stu 374 (983876),
Stu 375-376
|
May 31, 2013
|
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Stu 377
|
Jul 23, 2013
|
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Stu 378-380
|
Jul 27, 2013
|
|
Stu 381
|
Jul 29, 2013
|
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Stu 382
|
Jul 30, 2013
|
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Stu 383-385
|
Jul 31, 2013
|
|
Stu 386
|
Aug 5, 2013
|
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Stu 387
|
Aug 6, 2013
|
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Stu 388
|
Aug 13, 2013
|
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Stu 389-390
|
Oct 25, 2013
|
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Stu 391
|
Oct 26, 2013
|
|
Hot 1-4, Hot 5 – Doughnut, Hot 6-9
|
Jul 28, 2015
|
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Hot 10-34 (1014099), Hot 34 (1014104)
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Oct 29, 2013
|
For the first two years after a claim’s registration, the work
cost to maintain the claim is $5.00 per hectare. After the second year, the work
cost doubles to $10.00 per hectare for the third and fourth years, $15 for the
fifth and sixth years, and $20 for subsequent years. The present work and filing
costs to advance (by one year) the expiry dates of all 341 Galaxie Project
claims, including the three Gnat Pass Property claims, from their current expiry
date listed in the table above is approximately $1,143,561.
Geology and Mineralization
The Galaxie Project is underlain mainly by volcanic, intrusive
and lesser sedimentary rocks of the Middle Triassic to Lower Jurassic Stikine
Terrane, which elsewhere in northern British Columbia is known to host the large
Red Chris, Schaft Creek, Galore and Kerr-Sulphurets-Mitchell-Snowfield porphyry
deposits.
Upper Triassic Stuhini Group volcanic rocks and a quartz
feldspar porphyry (QFP) dike complex host the Gnat Pass copper deposit. Two
distinctive types of mineralization are present. One is characterized by
chalcopyrite (copper iron sulphide)-magnetite-hematite (iron oxides) with minor
bornite (copper sulphide) as veinlets, fracture-fillings and lesser
disseminations in volcanic rocks. Local (but rare) replacement of volcanic rocks
has produced small, higher grade lenses in which copper grades commonly exceed
1%, and rare flecks of molybdenite (molybdenum sulphide) and locally abundant
specular hematite are associated. A second type of mineralization is
characterized by chalcopyrite-tourmaline-carbonate breccia zones which occur
proximal to or within irregular, eastward-dipping feldspar porphyry and QFP
intrusions. Chalcopyrite mainly occurs as fine disseminations in the matrix of
the breccia. Anomalous gold values (>100 parts per billion, (“ppb”)) is commonly
associated with silicification, tourmaline veining and chalcopyrite. About 65%
of gold values greater than 100 ppb are accompanied by concentrations of greater
than 1% Cu.
18
The Gnat deposit is located nearby the northern contact of the
Late Triassic to Middle Jurassic, multiphase Hotailuh Batholith-Three Sisters
Pluton intrusive complex, which occupies most of the remainder of the Galaxie
project-area and hosts a number of base and/or precious metals prospects and
showings some of which are on internal claims held by competitors.
Exploration and Development
Historical work is summarized in the table below.
|
Year
|
Type of Work
|
|
1964
|
rock sampling; mapping; 69.3 line-km ground magnetometer,
15.2 line-km of electromagnetic surveys; 12 trenches
|
|
1965-67
|
topographical, geological, geochemical and geophysical
surveys. 4 trenches; 10 holes (1,402.1 m) of AQ diamond drilling. 1966-67
work at Moss prospect 3,296 soil samples; 99.2 line-km of ground magnetic
surveying.
|
|
1966
|
14 holes (2,712.8 m) of AQ diamond drilling; geological,
geochemical and magnetometer surveys.
|
|
1967
|
41 holes (6,716.7 m) of AQ diamond drilling; induced
polarization and magnetic surveys.
|
|
1968
|
37 holes (6,622.6 m) of AQ diamond drilling. Aggregate
drilling 1965-68, mostly at Gnat deposit - 17,454.2 m, 102 holes.
|
|
1969-71
|
Moss prospect area, reportedly a few thousand feet of
trenching and 47 percussion holes
|
|
1960s- 70s
|
unpublished reports state work done in late 1960s, in the
1970’s re-sampled selected sections of core.
|
|
1971
|
145 line-km of airborne magnetics, extending from the
Gnat deposit northwesterly to beyond the Moss prospect area.
|
|
1989
|
11 rock samples and completed 11 line-km of VLF-ground
magnetic surveys.
|
|
1989
|
8 holes (935.7 m) diamond drilling; 7 holes in the Gnat
deposit; 1 in the Creek Zone. Two trenches were also excavated.
|
|
1990
|
adjacent claims east of the Gnat deposit, 1 rock, 4 silt
(2 regular and 2 bulk) and 82 soil samples.
|
|
1993
|
56 soil and 42 rock samples in the Gnat deposit, and
between Gnat deposit and Creek Zone.
|
|
1996
|
Expanded 1993 soil survey by 577 samples; re-logged 19
drill holes; systematic re-sampling of core in 46 holes (1,251 samples) to
assess the gold content in the 1965-68 drill holes.
|
|
2005
|
34 line-km of induced polarization and ground
magnetometer surveys in/between the Gnat deposit and Creek Zone.
|
|
2011
|
first-pass reconnaissance prospecting and geochemical
silt, soil and rock sampling program within 20 areas across the Project,
outside of the Gnat Pass Property
|
Historical drilling in the Gnat deposit-area resulted in a
historical estimate of the mineral resources in 1972. It also showed that the
copper mineralization remains open to the east and at depth in the eastern and
central parts of the drill area (see cross section below). Deeper drill testing
of the deposit may show that zones of mineralization within the deposit coalesce
at depth, increasing the potential to expand the deposit and establish
significant resources.
19
Gnat Deposit Generalized Cross Section, Looking North
Work by Quartz Mountain
In 2012, Quartz Mountain’s technical team carried out a
geological assessment of the Gnat deposit, involving compiling and interpreting
historical data that confirmed that copper mineralization in the deposit remains
open to expansion, including to depth. This exercise was followed by a field
program of re-logging core, soil sampling (115 samples) and an Induced
Polarization (“IP”) survey which have refined targets for drilling.
In addition to the Gnat deposit and other copper and/or
molybdenum occurrences discovered historically at Galaxie, at least five target
areas were identified by prospecting surveys carried out across the property in
2011.
In 2012, Quartz Mountain followed up on these targets as well
as carrying out initial surveys on the Hot Claims. This work included geological
mapping, silt and rock sampling, and soil sampling on reconnaissance and
detailed grids (totaling over 6000 samples) and 330 line-kilometre of IP
geophysical surveys. Results are pending.
Sample Preparation, Analyses and Security
Silt samples are comprised of fines material taken from the
active part of streams. Sample protocols for soil samples were similar to those
for silt samples. For soil samples, “B” horizon material was collected at most
sites,; in disturbed areas, the top of the “C” horizon was the preferred sample
medium with surface material or buried organic materials avoided as well as
larger rock fragments, with an average sample size of about 500 grams. For both
soils and silts, sample material was placed into a standard kraft sample bag and
the location was marked by a survey ribbon. Rock samples were collected as a
composite or select grabs of variably mineralized, altered and/or iron-stained
rock chip material. About 2-3 kilograms of sample material was placed into a
plastic bag, identified by an assay ticket and secured with a nylon cable
tie.
Field notes were recorded for each sample including sampler
name; property name; target area and grid number; date and time; sample site
coordinates (UTM, NAD 83 - Zone 9); sample number and sample description. For
rock samples, the size of the occurrence, its orientation (strike and dip if
measurable), host rock, sulphides present and their amounts in percent, and any
other data that would aid in later interpretation after receipt of analytical
results were also recorded. All field notes were later compiled into a digital
file.
Silt and soil samples were hung to dry, then packed in a secure
container and shipped to the Acme Analytical Laboratories Ltd. (“Acme”)
preparation facility in Smithers, B.C where they were dried at 60° Celsius and
sieved to -80 mesh (0.18 mm or 180µm), then shipped to Acme’s laboratory in
Vancouver where they were analyzed for gold and multi-elements by ICP
methods.
Rock samples were packed in a secure container and also shipped
to Acme’s preparation lab in Smithers, B.C. Entire rock samples were crushed to
80% passing 10 mesh, from which a 250 gram split was pulverized to 85% passing
200 mesh, and the “assay pulps” were shipped to Acme’s laboratory in Vancouver
where 15 gram splits were analyzed for gold and multi-elements by acid digestion
ICP methods. A few of the rock samples for the Buck Project (see below) were
analysed by 30 gram fire assay fusion for gold with ICP-AES.
20
For the early stage programs carried out in 2012, quality
control/quality assurance (“QA/QC”) samples were done at the laboratory. QAQC
samples were inserted as flows: 1 blank for every 30 regular samples, 1 standard
for every 30 regular samples and 1 duplicate for every 20 regular samples.
Acme is ISO 9001:2005 certified for the provision of assays and
geochemical analysis and is also ISO/IEC 17025:2005 certified for gold by Fire
Assay.
Planned Program
Quartz Mountain plans to initiate follow up programs, which
began with focused drilling at the Gnat deposit in late 2012.
Buck Project, Central British Columbia
Agreements
In December 2011, the Company purchased an option (the
"Option") to acquire a 100% interest in the Buck Project.
|
(i)
|
Pursuant to the Option, the Company must make certain
scheduled payments to the underlying owners of the Buck Project (the
"Optionors") as follows:
|
Payable on or before
|
Cash payment
|
Number of common
shares issuable
|
Status as of the date of
this Annual Report
|
|
December 30, 2011
|
$20,000
|
100,000
|
paid and issued
|
|
June 28, 2012
|
$25,000
|
150,000
|
paid and issued
|
|
June 28, 2013
|
$30,000
|
200,000
|
|
|
June 28, 2014
|
$30,000
|
200,000
|
|
|
(ii)
|
Prior to the acquisition of the Option by the Company, a
private party (the "Vendor") held the Option. In December 2011, the
Company paid $100,000 in cash and issued 1,200,000 common shares to the
Vendor to acquire the Option from the Vendor. The common shares issued
were valued at the fair value on the date of issue ($0.50 per common
share) and were expensed along with the cash consideration paid. The
Company agreed to issue up to 6,000,000 additional common shares to the
Vendor upon the achievement of certain
milestones.
|
Payable upon
|
Cash
payment
|
Number of
common shares
issuable
|
Status as of the date
of this Annual
Report
|
|
December 30, 2011
|
$100,000
|
1,200,000
|
paid and issued
|
Completion of a National Instrument 43-101
compliant
resource estimate on the Buck Project
|
–
|
1,200,000
|
|
Completion of a "preliminary assessment" or a
"pre-feasibility study" (as those terms are used in
National
Instrument 43-101) on the Buck Project
|
–
|
2,400,000
|
|
Completion of a "feasibility study" (as that term
is
used in National Instrument 43-101) on the
Buck Project
|
–
|
2,400,000
|
|
Under the terms of the Option, the Optionors retain a 3% net
smelter returns royalty. The royalty percentage will decrease by 1% when
aggregate royalty payments equal or exceed $10 million. The Company has the
right at any time to reduce the royalty by 1% by paying $500,000 to the
Optionors.
Location, Access and Local Resources
The Buck Project is located in central British Columbia near
the town of Houston. Access to the western central and eastern parts of the
property is via local resource roads. Other parts of the Buck Project are
accessible by helicopter, which can be chartered from local bases in Houston and
the town of Smithers, located some 50 kilometres to the northwest.
The topography of the Buck Project is generally subdued,
ranging from about 900 metres above sea level along the Buck Creek and Morice
River valleys to over 1,500 metres above sea level in the eastern part of the
property.
The area is serviced by Highway 16, the main arterial highway
from Prince George, and by Canadian National rail. The nearest airport is
located at Smithers, where daily scheduled air services provide direct access to
Vancouver. The region is host to several present and past producing mines and
skilled labour is readily available in the region, both for mining and mineral
exploration. A natural gas pipeline and high voltage electricity transmission
lines occur immediately to the north of the Buck Project.
Property Description
The Buck Project consists of 200 contiguous mineral claims,
totalling approximately 83,600 hectares. The list of claims detailing expiry
dates are shown in Table 1.
21
|
Claim Name
|
Expiry date
|
|
New Buck, Bob Creek 2, Gotcha, Gotcha 2
|
Aug 01, 2013
|
|
Bob Creek 5,6,7,8, 10, 12-47
|
Aug 01, 2013
|
Buck 1-88, TUTH 01-17, ITUTH 01-17, ITUTN 18 (985625),
ITUTH 18
(986006), ITUTH 19-22
|
Aug 01, 2013
|
Buck 89 (tenure 935598), Buck 89 (tenure 935699), Buck 90
(tenure 935629)
Buck 90 (tenure 935701), Buck 91 (tenure 935698), Buck
92 (tenure 935695),
Buck 94 (tenure 935691), Buck 95 (tenure 935597),
Buck 96 (tenure 935694),
Buck 97 (tenure 935690), Buck 98 (tenure
935609)
|
June 22, 2013
|
|
IRK
|
Mar 06, 2013
|
Buck 91 (tenure 985622), Buck 92 (tenure 985623), Buck 93
(tenure 985624),
Buck 94 (tenure 985625), Buck 95 (tenure 985626),
Buck 96 (tenure 985627),
Buck 97 (tenure 985642), Buck 98 (tenure
985643), Buck 99-102
|
May 10, 2013
|
|
Buck 103
|
May 12, 2013
|
For the first two years after a claim’s registration, the work
cost to maintain the claim is $5.00 per hectare. After the second year, the work
cost doubles to $10.00 per hectare for the third and fourth years, $15 for the
fifth and sixth years, and $20 for subsequent years. The present work and filing
costs to advance (by one year) the expiry dates of all 200 Buck claims totals
approximately $418,052.
Geological Setting
Lying within the Stikine Terrane of central British Columbia,
the regional geology is characterized by volcanic assemblages of the Upper
Triassic Takla Group and the Lower to Middle Jurassic Hazelton Group and
overlain by sedimentary assemblages of the Bowser Lake, Skeena and Sustut
groups. Late Jurassic, Cretaceous and Tertiary age belts of rocks formed as a
result of both arc volcanism (e.g. Ootsa Lake and Kasalka groups) and later
crustal extension (e.g. Endako, Kamloops, Buck Creek and Chilcotin groups),
overlie older Mesozoic rocks. In other areas of the Stikine Terrane, the
intrusive rocks associated with Cretaceous and Tertiary volcanic assemblages are
known to host significant copper and molybdenum deposits (e.g. Granisle, Endako
and Huckleberry porphyry deposits) and epithermal precious metal deposits, such
as Blackwater-Davidson, Chu and Sam Goosly (Equity Silver), are probably also
associated with Late Cretaceous and Tertiary intrusive events.
The Buck Project is underlain by andesitic and dacitic
volcaniclastic units of the Lower Jurassic Telkwa Formation of the Hazelton
Group, dominantly dacitic units, of the Upper Cretaceous Tip Top Hill Formation
and Eocene basaltic andesite and andesite of the Buck Creek Formation. Intruding
this assemblage are mafic to felsic stocks that possibly are part of the Upper
Cretaceous Bulkley intrusive suite and intermediate to felsic dykes that are
considered to belong to the Duck Lake intrusive suite.
Deformation is present in
all of the rock assemblages of the Stikine Terrane. In the region of the Buck
Project, faults are dominantly northwest-striking and in many cases have
resulted in the formation of down-faulted blocks in which younger rocks such as
the Tip Top Hill and Goosly Lake formations are preserved.
Mineralization
Drilling, trenching and geological mapping by previous
operators in the Bob Creek area, now called the Canyon Zone, has shown that
mineralization is of epithermal character, similar in age and to the reported
signature of other BC mid Cretaceous mineral occurrences. Three zones of
mineralization are contained within an alteration zone of that extends at least
700 metres in an east-west direction and at least 600 metres in a north-south
direction.
Mineralization is most commonly hosted by narrow quartz veins
and veinlets and includes iron-rich sphalerite (zinc sulphide), galena (lead
sulphide) and iron sulphides (pyrite, marcasite and arsenopyrite). No
metallurgical studies have been undertaken and, thus, the habit of occurrence of
gold and silver are not known. Although it is likely that some silver is
contained within galena, there is a stronger relationship between silver and
zinc than between silver and lead.
Exploration and Development
Historical Work
The Buck Project area first became of interest to prospectors
in 1905 when alluvial gold was discovered in Bob Creek near its confluence with
Buck Creek. The following information is a summary of historical work on the
property:
-
The first mineral claims covering bedrock were staked in 1914. In 1936
about 85 tons of mineralized rock was extracted from a 10 metres long adit in
the Bob Creek gorge. Twelve tons of gravity concentrate from the mined
material assayed 0.1 oz/ton gold, 1.0 oz/ton silver and 1.1% zinc.
-
Between 1945 and 1968, 18 holes were drilled in the Bob Creek gorge area.
Most of these holes intersected anomalous gold and silver mineralization along
with elevated zinc concentrations within quartz feldspar porphyry rocks.
22
-
An electromagnetic (“EM”) survey of the Bob Creek area was carried out in
1978. Drilling to test the resultant EM anomalies indicated the presence of
anomalous gold and silver to the west of earlier drilling in the Bob Creek
gorge area.
-
A pole-dipole induced polarization (“IP”) survey was carried out c1982 that
defined a geophysically anomalous zone (a pronounced chargeability response
over an area of about 400 metres x 600 metres in size). A soil geochemical
program in the vicinity of Bob Creek and also to the west, across Buck Creek.
Significant precious metal anomalies in soils were defined to the south of Bob
Creek.
-
In the period from 1983 to 1985, 40 diamond drill holes were completed
south of Bob Creek and, with the aid of trenching, outlined three zones of
anomalous silver-gold-zinc mineralization within an alteration zone in felsic
dykes and the volcanic rocks adjacent to the dykes.
-
16 diamond drill holes were completed during the period from 1988 to 1989,
although holes 13, 14 and 15 are not recorded. This drilling demonstrated the
altered and mineralized rock extends to the east under the post mineralization
Buck Creek Formation that covers the eastern part of the property.
|
Significant Intersections from
HistoricalDrilling
|
|
Hole No
|
From (m)
|
To (m)
|
Length (m)
|
Au g/t
|
Ag g/t
|
Zn%
|
|
83-9
|
42.00
|
54.00
|
12.00
|
0.15
|
8.30
|
1.05
|
|
84-11
|
124.00
|
133.00
|
9.00
|
1.67
|
5.50
|
0.17
|
|
84-13
|
22.00
|
40.75
|
18.75
|
3.38
|
32.50
|
>0.82
|
|
84-17
|
92.00
|
105.00
|
13.00
|
<0.1
|
9.40
|
>0.46
|
|
84-18
|
11.00
|
17.00
|
6.00
|
0.56
|
12.40
|
0.23
|
|
85-19
|
9.85
|
60.15
|
50.30
|
0.80
|
11.68
|
Not analysed
|
|
85-20
|
18.00
|
30.00
|
12.00
|
1.05
|
20.41
|
Not analysed
|
|
85-23
|
24.00
|
30.00
|
6.00
|
1.70
|
40.50
|
Not analysed
|
|
85-24
|
33.00
|
45.00
|
12.00
|
0.22
|
17.20
|
Not analysed
|
|
85-25
|
6.10
|
78.00
|
71.90
|
0.40
|
8.90
|
Not analysed
|
|
85-26
|
48.00
|
60.00
|
12.00
|
0.30
|
8.35
|
Not analysed
|
|
85-28
|
3.50
|
24.00
|
20.50
|
0.81
|
11.61
|
Not analysed
|
|
85-29
|
9.10
|
45.00
|
35.90
|
0.20
|
9.30
|
Not analysed
|
|
88-1
|
24.00
|
47.00
|
23.00
|
0.58
|
12.65
|
0.79
|
|
89-6
|
94.00
|
104.50
|
10.50
|
0.61
|
10.40
|
0.17
|
|
89-7
|
115.00
|
124.00
|
9.00
|
<0.1
|
6.00
|
0.28
|
|
89-11
|
144.50
|
177.50
|
33.00
|
0.40
|
4.20
|
0.23
|
-
Five holes, totalling 1,206 metres, were drilled in 1990 to the north of
Bob Creek and intersected moderately to highly altered volcanic and intrusive
rocks which, in places contained anomalous precious metals over narrow
intervals, for example, 52 g/t Ag and 2.94 g/t Au over 3 metres. While records
are incomplete, this work does indicate that the alteration and mineralization
extend to the north of where most previous drilling was concentrated.
-
IP geophysical surveys were carried to the west of Buck Creek in 2003 and,
in 2004, carried out a soil sampling program over the areas underlain by
induced polarization anomalies.
-
Five holes, one adjacent to Bob Creek and four to the south to test an IP
anomaly extension of the 1982 survey were completed in 2004. The northern hole
confirmed previous drill results, but work in the south was not sufficiently
encouraging to suggest that further work.
23
The mineralized system at the Canyon Zone is currently
defined by geophysics, geochemistry and limited drilling (see figure below), and
is open to expansion. Other parts of the property have not been
adequately
explored.
Work by Quartz Mountain
The Company has completed ground geophysical surveys in late
2011 and followed up with a program of geological mapping, and collection of
soil (723), silt (10) and rock chip (41) samples in 2012 to refine targets for
drilling. Results are pending.
Sample Preparation, Analyses and Security
Sample preparation, analyses and security are described under
the Galaxie Project above.
Planned Program
Once results from the 2012 program have been received and
assessed, plans for follow up work will be determined.
Other Projects
Karma Project
The Karma property consists of 109 mineral claims, owned 100%
by Quartz Mountain. The property is located 41 kilometres south of Houston, BC
and directly south of and contiguous to the Company’s Buck Project.
Claim expiry dates are as follows:
|
Claim Name
|
Expiry
|
BON 038-059, CNKS 060-077, DALE 016-
037, DALE 078,
KARMA 001-015
|
Mar 02, 2013
|
|
OOT 001-015
|
Feb
08, 2013
|
|
NIRN 001-007, ARGO
001-009
|
May
10, 2013
|
The present work cost to advance (by one year) the expiry dates
of all 109 Karma claims totals $196,500.
24
Regional geology is similar to the adjacent Buck Project. The
468-square kilometre Karma property was staked in 2012 to cover 70-73 million
year old Kasalka volcanic units which at are the same age as the rocks that host
gold and silver deposits in BC’s Blackwater-Newton gold district.
An airborne magnetic geophysical survey was carried and
followed up by ground reconnaissance work, including geological mapping and
collection of 766 soil and 41 rock samples (sample preparation, analyses and
security are as described under the Galaxie Project above) to establish drill
targets. Results are pending.
ZNT Project
The ZNT property consists of 80 mineral claims owned 100% by
Quartz Mountain. The property is located in central British Columbia, some 15
kilometres southeast of the town of Smithers, BC.
Claim expiry dates are as follows:
|
Claim Name
|
Expiry
|
|
ZNT 01-16
|
Jun 20, 2013
|
|
ZNT 17-19
|
Jun 21, 2013
|
|
ZNT 20
|
Oct 05, 2013
|
|
ZNT 21
|
Oct 24, 2013
|
|
ZNT 22-28
|
Nov 11, 2013
|
|
ZNT 29-34
|
Nov 13, 2013
|
ZNT 35-71, ZNT 72 (1014656),
ZNT 72 (1014686), ZNT
74-80
|
Nov 20, 2013
|
The present work cost to advance (by one year) the expiry dates
of all 34 ZNT claims totals $75,800.
The 372-square km property was staked by Quartz Mountain in
2012 on the basis of significant zinc and gold values in regional till samples,
as well as copper and silver mineral occurrences as reported by Geoscience BC
and the provincial government surveys, respectively.
Reconnaissance surveys, including geological mapping,
collection of 2,500 soil samples (sample preparation, analyses and security are
as described under the Galaxie Project above) and completion of 20
line-kilometres of IP, have been done by Quartz Mountain in 2012 and additional
ground work is planned.
|
C.
|
Organizational Structure
|
The Company operates in a single reportable operating segment –
the acquisition, exploration and development of mineral property interests. The
Company is currently focused on the acquisition and exploration of mineral
property interests in Canada, and conducts most of its business affairs through
its Canadian parent entity.
The Company has one inactive wholly-owned subsidiary, Wavecrest
Resources Inc., a Delaware corporation.
|
D.
|
Property, Plant and
Equipment
|
The Company has no material tangible fixed assets, such as
mining equipment or plant facilities.
All currency amounts in this Annual Report are stated in
Canadian dollars unless otherwise indicated (see
Item 3
for exchange rate
information).
|
ITEM 4A
|
UNRESOLVED STAFF
COMMENTS
|
Not applicable.
|
ITEM 5
|
OPERATING AND FINANCIAL
REVIEW AND PROSPECTS
|
OVERVIEW
The Company currently has four active exploration projects.
Accordingly, during the fiscal year ended July 31, 2012, the Company's
activities primarily involved the acquisition, planning and execution of initial
exploration activities of the Buck Project as well administrative activities
associated with property investigations of mineral property interests.
Subsequent to year end in August 2012, the Company acquired the Galaxie Project
and also initiated an exploration program on the Galaxie Project. As Quartz
Mountain is an exploration stage company, it does not have any revenues from its
operations to offset its expenditures. Accordingly, the Company's ability to continue
its exploration activities will be contingent upon receiving additional
financing.
25
The Company's financial statements are prepared on the basis
that it will continue as a going concern. The Company has incurred losses since
inception, and the ability of the Company to continue as a going concern depends
upon its ability to continue to raise adequate financing and to develop
profitable operations. Quartz Mountain's financial statements do not reflect
adjustments, which could be material, to the carrying values of assets and
liabilities, which may be required should the Company be unable to continue as a
going concern.
The following discussion should be read in conjunction with the
audited annual consolidated financial statements for the years ended July 31,
2012 and 2011 and the related notes accompanying this Annual Report. The Company
prepares its financial statements in accordance with International Financial
Reporting Standards ("IFRS"). These financial statements are the Company's first
financial statements prepared in accordance with IFRS. The Company includes
selected financial data prepared in compliance with IFRS without reconciliation
to U.S. GAAP.
TRANSITION TO IFRS
For all periods up to and including July 31, 2011, the Company
prepared its consolidated financial statements in accordance with Canadian GAAP.
The financial statements for the year ended July 31, 2012 are the first annual
consolidated financial statements the Company has prepared in accordance with
IFRS as in effect as at July 31, 2012, as detailed in the accounting policies
described in Note 3. In preparing these financial statements, the Company's
opening statement of financial position was prepared as at August 1, 2010, the
Company's date of transition to IFRS. The consolidated financial statements have
been prepared in accordance with IFRS as issued by the International Accounting
Standards Board (“IASB”) and interpretations of the International Financial
Reporting Interpretations Committee (“IFRIC”).
IFRS 1 “First-time Adoption of International Financial
Reporting Standards” sets forth guidance for the initial adoption of IFRS. Under
IFRS 1 the standards are applied retrospectively at the transitional balance
sheet date, with all adjustments to assets and liabilities taken to deficit
unless certain exemptions are applied.
Subject to certain transition elections disclosed in note 15 to
the consolidated financial statements, the Company has consistently applied the
same accounting policies in its opening IFRS statement of financial position at
August 1, 2010, and throughout all periods presented, as if these policies had
always been in effect. The policies applied in these consolidated financial
statements are based on IFRS issued and outstanding as of November 22, 2012, the
date the Board of Directors approved the financial statements.
Comprehensive loss for the year ended July 31, 2012 vs.
2011
The Company recorded a loss from operations of $3,588,000 in
the current year compared to a loss from operations of $175,000 in the prior
fiscal year due mainly to higher exploration and evaluation expenses incurred
(discussed below).
The increase was due to the commencement of exploration
activities.
In the current fiscal year, the Company made payments of cash
and shares pursuant to an option agreement to acquire the Buck Property and
Hotai Claims, claim staking costs for the Galaxie and Karma properties, and
geological and site activities for the Buck, Galaxie (including the Hotai
Claims) and Karma Properties. Prior to December 2011, the Company was largely
inactive and did not have any significant exploration activities in the previous
fiscal year.
During the fiscal year ended July 31, 2011 the operations of
the Company were mainly focused on activities of a property evaluation
nature.
26
The following table provides the breakdown of exploration costs
incurred:
Exploration and
evaluation costs
|
Buck
|
Galaxie
|
Hotai
|
Karma
|
Other
|
Total
|
|
|
2012
|
2012
|
2012
|
2012
|
2012
|
2012
|
|
Assays and analysis
|
$ 45,963
|
$ 2,696
|
$ –
|
$ 1,998
|
$ 2,088
|
$ 52,745
|
|
Engineering
|
8,400
|
–
|
–
|
–
|
–
|
8,400
|
|
Environmental
|
1,375
|
–
|
–
|
–
|
–
|
1,375
|
|
Equipment rental
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Geological
|
329,108
|
288,152
|
13,280
|
225,603
|
14,374
|
870,517
|
|
Graphics
|
9,741
|
702
|
312
|
624
|
1,627
|
13,006
|
|
Helicopter
|
–
|
100,914
|
–
|
–
|
–
|
100,914
|
|
Property fees and assessments
|
889,044
|
1,518
|
–
|
16,944
|
3,313
|
910,819
|
|
Site activities
|
31,595
|
89,928
|
6,200
|
14,201
|
1,620
|
143,544
|
|
Socio economics
|
77,969
|
2,410
|
1,365
|
7,842
|
60
|
89,646
|
|
Travel and accommodation
|
13,978
|
31,210
|
–
|
9,943
|
553
|
55,684
|
|
Total
|
$ 1,407,173
|
$ 517,530
|
$ 21,157
|
$ 277,155
|
$ 23,635
|
$ 2,246,650
|
The increase in administration expenses was mainly due to the
legal and administrative costs related to the reactivation of the Company, and
moving from the NEX Exchange to the TSX-V, and legal costs related to acquiring
the options on the Buck Property and the Galaxie Property (including the Hotai
Claims).
The following table provides a breakdown of the administration
costs incurred:
|
Administration costs
|
2012
|
2011
|
|
Legal, accounting and audit
|
$ 301,641
|
$ 55,125
|
|
Office and administration
|
70,140
|
19,784
|
|
Salaries and benefits
|
686,358
|
72,798
|
|
Shareholder communication
|
28,097
|
1,986
|
|
Travel
|
31,357
|
–
|
|
Trust and filing
|
48,659
|
36,090
|
|
Total
|
$ 1,166,252
|
$ 185,783
|
In the current fiscal year, the Company expensed stock options
to employees and directors amounting to $381,000 compared to nil in the same
comparative fiscal year.
|
B.
|
Liquidity and Capital
Resources
|
The Company's source of funding has been the issuance of equity
securities for cash, primarily through private placements to sophisticated
investors and institutions.
At July 31, 2012, the Company had cash and cash equivalents of
$2.5 million as compared to $0.1 million at July 31, 2011, and working capital
of $0.9 million. The source of these funds was the December 2011 Flow-Through
financing.
Until December 2011, the Company’s cash flows were
predominantly related to cash used in operating activities for general and
administration expenses as the Company was largely inactive until this point.
Subsequent to the purchase of the Buck Option and related private placement, the
Company generated $4.0 million from financing activities.
In recent months, general market conditions for junior resource
companies have deteriorated and have resulted in depressed equity prices for
resource companies, despite higher commodity prices. Although the Company was
able to successfully complete a private placement in December 2011, the
deterioration in market conditions could potentially increase the cost of
obtaining capital and/or limit the availability of funds in the future.
Accordingly, management is actively monitoring the effects of the current
economic and financing conditions on our business and reviewing our
discretionary spending, capital projects and operating expenditures, and
implementing appropriate cash and cash management strategies.
Management
believes that its current liquid assets are sufficient to meet its known
obligations and to maintain its mineral rights in good standing for the next 12
month period. Additional debt or equity financing will be required to fund
additional exploration or development programs. The Company has a reasonable
expectation that additional funds will be available when necessary to meet
ongoing exploration and development costs. However, there can be no assurance
that the Company will continue to obtain additional financial resources and/or
achieve profitability or positive cash flows. If the Company is unable to obtain
adequate additional financing, the Company will be required to re-evaluate its
planned expenditures until additional funds can be raised through financing
activities.
27
Debenture
In August 2012, pursuant to the Galaxie Project Sale Agreement,
the Company issued a convertible debenture (the “Debenture”) in the amount of
$0.65 million maturing on October 31, 2013, and bearing interest at a rate of 8%
per annum (payable quarterly in arrears) to Bearclaw. The Debenture is
convertible into the Company’s common shares at a conversion price of $0.40 per
shares any time before its expiry. Any interest accrued, but unpaid, shall be
converted at an exercise price of the higher of $0.40 per share and the market
price at the time of conversion.
Financing
Concurrent with the completion of the option agreement in
December 2011 related to the Buck Project, the Company completed a non-brokered
private placement of 7,183,371 common shares, of which 6,043,171 were
flow-through common shares issued at a price of $0.60 per share and 1,140,200
were non-flow-through common shares issued at a price of $0.50 per share, for
gross cash proceeds of $4.2 million. The Company paid issuance costs totaling
$0.2 million, for net cash proceeds of $4.0 million.
In accordance with the terms of the flow-through share
agreements, the Company is obligated to spend the proceeds, $3,625,902, on
eligible Canadian Exploration Expenses ("CEE"), as defined in the Income Tax Act
(Canada), by December 31, 2012. At July 31, 2012, approximately $2.5 million
remained to be spent. As of the date of this Annual Report approximately $0.1
million remained to be spent.
Joint Venture Agreement
Pursuant to a letter agreement between the Company and Amarc,
Amarc will make a cash payment of $1,000,000 to the Company and fund $1,000,000
in exploration expenses related to the Galaxie Project. In November 2012, the
Company received $1,950,000 from Amarc in relation to this letter agreement.
Should the Company fail to meet any of the conditions precedent in the letter
agreement, any exploration expenditures funded by Amarc will constitute a demand
loan bearing interest at the CIBC prime rate plus 5% from the date of advance.
Upon earning an initial 40% interest, Amarc will have an option to earn an
additional 10% (for a total of 50%) interest in these properties by funding
$1,000,000 of exploration expenses to be incurred by Quartz Mountain on the
Galaxie and ZNT Projects, prior to September 30, 2013.
Other Matters Relating to Financing
The Company had no material commitments for capital
expenditures as at July 31, 2012.
The Company has no lines of credit or other sources of
financing which have been arranged but are as of yet, unused.
Financial Instruments
The Company keeps its financial instruments primarily
denominated in Canadian dollars with a very small amount held in US dollars. The
Company does not engage in any hedging operations with respect to currency or
in-situ minerals.
Quartz Mountain does not have any material, legally
enforceable, obligations requiring it to make capital expenditures and
accordingly, can remain relatively flexible in gearing its activities to the
availability of funds.
Financial assets and liabilities are recognized when the
Company becomes party to the contracts that give rise to them. The Company
determines the classification of its financial assets and liabilities at initial
recognition and, where allowed and appropriate, re-evaluates such classification
at each financial year end. The Company does not have any derivative financial
instruments.
Non-derivative financial assets:
The Company classifies its non-derivative financial assets into
the following categories:
Cash and cash equivalents
Cash and cash equivalents are comprised of cash and short term
deposits held at major financial institutions with an original maturity of three
months or less, which are readily convertible into a known amount of cash. The
Company's cash and cash equivalents are invested in business and savings
accounts which are available on demand by the Company for its programs. They are
measured at fair value.
Loans and receivables
Loans and receivables are
financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are initially recognized at fair value plus any
directly attributable transaction costs. Subsequent to initial recognition loans
and receivables are measured at amortized cost using the effective interest
method, less any impairment losses.
Loans and receivables comprise amounts receivable and
restricted cash.
28
Non-derivative financial liabilities:
The Company's non-derivative financial liabilities comprise
financial liabilities measured at amortized cost. Such financial liabilities are
recognized initially at fair value net of any directly attributable transaction
costs. Subsequent to initial recognition these financial liabilities are
measured at amortized cost using the effective interest method. Financial
liabilities measured at amortized cost comprise amounts payable and balances
payable to related parties.
Requirement of Financing
The Company is in the process of acquiring and exploring
mineral property interests. The Company's continuing operations are entirely
dependent upon the existence of economically recoverable mineral reserves, the
ability of the Company to obtain the necessary financing to complete the
exploration and development of these projects, obtaining the necessary permits
to mine, on future profitable production of any mine and the proceeds from the
disposition of the mineral property interests.
Management believes that its current liquid assets, as of the
date of this Annual Report, are sufficient to meet all known obligations and to
maintain its mineral rights in good standing for the next 12 month period.
Additional debt or equity financing will be required to fund additional
exploration or development programs. The Company has a reasonable expectation
that additional funds will be available when necessary to meet ongoing
exploration and development costs. However, there can be no assurance that the
Company will continue to obtain additional financial resources and/or achieve
profitability or positive cash flows. If the Company is unable to obtain
adequate additional financing, the Company will be required to re-evaluate its
planned expenditures until additional funds can be raised through financing
activities.
The Company has no long-term debt, capital lease obligations,
operating leases or any other long-term obligations.
The Company has no "Purchase Obligations" defined as any
agreement to purchase goods or services that is enforceable and legally binding
on the Company that specifies all significant terms, including: fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions; and the
approximate timing of the transaction.
Quartz Mountain does not carry out any research or development
activities. Please refer to
Item 5A
and
Item 5B
above for a
discussion of the expenditures that the Company has incurred in connection with
its business activities.
As a natural resource exploration company, Quartz Mountain's
activities reflect the traditional cyclical nature of metal prices.
Consequently, Quartz Mountain's business is primarily an "event-driven" business
based on exploration results.
Although there has been periodic volatility in the gold market,
the average annual price has been on an upward trend for the past five years. In
response to the global economic uncertainty that began in mid-2008, gold prices
were strong in 2009 and 2010, and continued their overall upward trend for most
of 2011, reaching more than US$1,800 per ounce. Prices have varied between
US$1,540 and US$1,784 per ounce since that time.
Silver prices were impacted by economic volatility in
2008-2009. Prices increased significantly in 2010. The upward trend in the
silver price continued through most of 2011, reaching as high as US$43 per
ounce. Prices have ranged between US$20 and US$37 per ounce since October
2011.
Copper prices increased significantly between late 2003 and mid
2008 before declining in late 2008 and through early 2009. Prices steadily
increased through 2009, 2010 and most of 2011. After dropping to $3.07 per pound
in October 2011, they have been increasing, overall, since that time.
Average annual prices as well as the average prices so far in
2012 for gold, silver and copper are shown in the table below, all dollar
figures are presented in USD:
|
|
Average Metal Price
|
|
Calendar Year
|
Au
|
Ag
|
Cu
|
|
2008
|
$871/oz
|
$14.95/oz
|
$3.16/lb
|
|
2009
|
$974/oz
|
$14.70/oz
|
$2.34/lb
|
|
2010
|
$1,228/oz
|
$20.24/oz
|
$3.42/lb
|
|
2011
|
$1,532/oz
|
$36.56/oz
|
$4.00/lb
|
|
2012 to date of this 20F
|
$1,667/oz
|
$31.04/oz
|
$3.59/lb
|
29
|
E.
|
Off – Balance Sheet
Arrangements
|
Quartz Mountain has no off-balance sheet arrangements.
As used in this
Item 5E
, the term "off-balance sheet
arrangement" means any transaction, agreement or other contractual arrangement
to which an entity, unconsolidated with the Company, is a party, under which the
Company has:
(a) any obligation under a guarantee contract that has any of
the characteristics identified in paragraph 3 of FASB Interpretation No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others (November 2002) ("FIN 45"), as may
be modified or supplemented, excluding the types of guarantee contracts
described in paragraphs 6 and 7 of FIN 45;
(b) a retained or contingent interest in assets transferred to
an unconsolidated entity or similar arrangement that serves as credit, liquidity
or market risk support to such entity for such assets;
(c) any obligation under a derivative instrument that is both
indexed to the Company's own stock and classified in stockholders' equity, or
not reflected, in the Company's statement of financial position; or
(d) any obligation, including a contingent obligation, arising
out of a variable interest (as referenced in FASB Interpretation No. 46,
Consolidation of Variable Interest Entities (January 2003), as may be modified
or supplemented) in an unconsolidated entity that is held by, and material to,
the Company, where such entity provides financing, liquidity, market risk or
credit risk support to, or engages in leasing, hedging or research and
development services with, the Company.
|
F.
|
Tabular Disclosure of Contractual
Obligations
|
As at July 31, 2012, the Company had no material contractual
obligations:
|
|
Payments due by period
|
Contractual Obligations
|
Total
|
Less than 1
year
|
1-3 years
|
3-5 years
|
More than 5
years
|
|
Long-Term Debt Obligations
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Capital Finance/Lease
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Operating Lease
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Purchase Obligations
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Other long-term liabilities reflected on the Company's
balance sheet under IFRS
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Total
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
The safe harbor provided in Section 27A of the Securities Act
and Section 21E of the Exchange Act applies to forward-looking information
provided pursuant to
Item 5E
and
Item 5F
above.
|
ITEM 6
|
DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEES
|
|
A.
|
Directors and Senior
Management
|
Ronald W. Thiessen (age 58), President, Chief Executive
Officer and Director
Ronald Thiessen is a Chartered Accountant with professional
experience in finance, taxation, mergers, acquisitions and re-organizations.
Since 1986, Mr. Thiessen has been involved in the acquisition and financing of
mining and mineral exploration companies. Mr. Thiessen is a director of Hunter
Dickinson Inc. (“HDI”) and its wholly owned subsidiary, Hunter Dickinson
Services Inc. (“HDSI”), a company providing management and administrative
services to several publicly-traded companies and focuses on directing corporate
development and financing activities.
30
Mr. Thiessen is, or was within the past five years, an officer
and/or director of the following public companies:
|
Company
|
Positions Held
|
From
|
To
|
Amarc Resources Ltd.
|
Director
|
September 1995
|
Present
|
President and Chief Executive
Officer
|
September 2000
|
Present
|
|
Atlatsa Resources Corporation
|
Director
|
April 1996
|
June 2011
|
Continental Minerals Corporation
|
Director
|
November 1995
|
April 2011
|
|
Co-Chairman
|
January 2006
|
April 2011
|
Detour Gold Corporation
|
Director
|
July 2006
|
Present
|
|
Chairman
|
July 2006
|
March 2009
|
Farallon Mining Ltd.
|
Director
|
August 1994
|
January 2011
|
|
Chairman
|
December 2005
|
January 2011
|
Great Basin Gold Ltd.
|
Director
|
October 1993
|
Present
|
|
Chairman
|
November 2006
|
Present
|
Northern Dynasty Minerals Ltd.
|
Director
|
November 1995
|
Present
|
President and Chief Executive
Officer
|
November 2001
|
Present
|
|
Quartz Mountain Resources Ltd.
|
Director
|
December 2011
|
Present
|
Taseko Mines Limited
|
Director
|
October 1993
|
Present
|
|
Chairman
|
May 2006
|
Present
|
Scott D. Cousens (age 47), Chairman and
Director
Mr. Cousens provides management and financial services to a
number of publicly traded companies associated with Hunter Dickinson Inc. His
focus for the past 20 years has been the development of relationships within the
international investment community. Substantial financings and subsequent
corporate success has established strong ties with North American, European and
Middle Eastern investors. Mr. Cousens is also the Director of Capital Finance
for Hunter Dickinson Inc.
Mr. Cousens is, or was within the past five years, an officer
and/or director of the following public companies:
|
Company
|
Positions Held
|
From
|
To
|
|
Amarc Resources Ltd.
|
Director
|
September 1995
|
Present
|
|
Anooraq Resources Corporation
|
Director
|
September 1996
|
June 2009
|
|
Continental Minerals Corporation
|
Director
|
June 1994
|
April 2011
|
|
Heatherdale Resources Ltd.
|
Chairman and Director
|
November 2009
|
Present
|
|
Northcliff Resources Ltd.
|
Director
|
June 2011
|
Present
|
|
Northern Dynasty Minerals Ltd.
|
Director
|
June 1996
|
Present
|
|
Quartz Mountain Resources Ltd.
|
Chairman and Director
|
November 2012
|
Present
|
|
Rockwell Diamonds Ltd.
|
Director
|
November 2000
|
November 2008
|
|
Taseko Mines Limited
|
Director
|
October 1992
|
Present
|
Robert A. Dickinson (age 64), Director
Mr. Dickinson is an economic geologist who has been actively
involved in mineral exploration and mine development for over 40 years. He is
Chairman of HDI and HDSI, as well as a director and member of the management
team of a number of the public companies associated with HDI. He is also
President and Director of United Mineral Services Ltd., a private resource
company. He also serves as a Director of the BC Mining Museum and a Trustee of
the BC Mineral Resources Education Program.
31
Mr. Dickinson is, or was within the past five years, an officer
and/or director of the following public companies:
|
Company
|
Positions Held
|
From
|
To
|
Amarc Resources Ltd.
|
Director
|
April 1993
|
Present
|
|
Chairman
|
April 2004
|
Present
|
|
Atlatsa Resources Corporation
|
Director and Co-Chairman
|
October 2004
|
June 2009
|
|
Continental Minerals Corporation
|
Director
|
June 2004
|
April 2011
|
Curis Resources Ltd.
|
Director
|
November 2010
|
November 2012
|
|
Chairman
|
November 2010
|
December 2010
|
|
Detour Gold Corporation
|
Director
|
August 2006
|
February 2009
|
|
Heatherdale Resources Ltd.
|
Director
|
November 2009
|
Present
|
|
Northcliff Resources Ltd.
|
Director and Chairman
|
June 2011
|
Present
|
Northern Dynasty Minerals Ltd.
|
Director
|
June 1994
|
Present
|
|
Chairman
|
April 2004
|
Present
|
Quartz Mountain Resources Ltd.
|
Director
|
December 2011
|
Present
|
|
Chairman
|
December 2011
|
November 2012
|
|
Rathdowney Resources Ltd.
|
Director & Chairman
|
March 2011
|
December 2011
|
|
Taseko Mines Limited
|
Director
|
January 1991
|
Present
|
James Kerr (age 66), Director
Mr. Kerr holds a B.A. degree and graduated from the University
of British Columbia in 1968. Mr. Kerr is a Chartered Accountant and was a
partner at KPMG, a national accounting firm, until his retirement in 2007. Mr.
Kerr has extensive experience in public practice, and actively involved with
audit committees of mining and energy companies, providing advice on accounting
and compliance issues based on a risk management approach.
Mr. Kerr is, or was within the past five years, a director of
the following public companies:
|
Company
|
Positions Held
|
From
|
To
|
|
Curis Resources Ltd.
|
Director
|
November 2010
|
Present
|
|
Quartz Mountain Resources Ltd.
|
Director
|
December 2011
|
Present
|
David Mordant (age 67), Director
Retired founder and CEO of an agricultural commodities trading
business that was sold to a listed company. Focused on commodity and stock
market trading in local and international markets since 2002 and has been a
guest commentator on CNBC on commodities and stocks.
Mr. Mordant has not, within the past five years, been an
officer and/or director of any public companies.
Gordon Fretwell (age 57), Director
Mr. Fretwell holds a B.Comm, degree and graduated from the
University of British Columbia in 1979 with his Bachelor of Law degree. Formerly
a partner in a large Vancouver law firm, Mr. Fretwell has, since 1991, been a
self-employed solicitor (Gordon J. Fretwell Law Corporation) in Vancouver
practicing primarily in the areas of corporate and securities law.
32
Mr. Fretwell is, or was within the past five years, an officer
and/or director of the following public companies:
|
Company
|
Positions Held
|
From
|
To
|
Bell Copper Corporation
|
Secretary
|
March 2001
|
May 2011
|
|
Director
|
June 2001
|
April 2011
|
Benton Resources Corp.
|
Director
|
July 2003
|
Present
|
|
Secretary
|
December 2003
|
Present
|
|
Continental Minerals Corporation
|
Director
|
February 2001
|
April 2011
|
|
Copper Ridge Explorations Inc.
|
Director/Secretary
|
September 1999
|
August 2009
|
|
Coro Mining Corporation
|
Director
|
June 2009
|
Present
|
|
Coro Resources Corp.
|
Director
|
January 2009
|
Present
|
|
Curis Resources Ltd.
|
Director
|
January 2011
|
Present
|
|
CVC Cayman Venture Corp.
|
Director
|
July 2010
|
November 2010
|
|
Frontera Copper Corporation
|
Director
|
February 2009
|
June 2009
|
|
Golden Dory Resources Corp.
|
Secretary
|
August 2008
|
Present
|
|
Grandcru Resources Corp.
|
Director
|
December 2002
|
May 2008
|
ICN Resources Ltd.
|
VP of Legal Services
|
December 2000
|
March 2009
|
|
Secretary
|
March 2009
|
August 2010
|
|
Director
|
July 2004
|
March 2009
|
International Royalty Corporation
|
Director
|
June 2003
|
February 2010
|
|
Secretary
|
June 2003
|
February 2010
|
|
Keegan Resources Inc.
|
Director
|
February 2004
|
Present
|
|
Lignol Energy Corporation
|
Director
|
January 2007
|
Present
|
|
Meritus Minerals Ltd.
|
Director
|
June 2007
|
Present
|
|
Northern Dynasty Minerals Ltd.
|
Director
|
June 2004
|
Present
|
Quartz Mountain Resources Ltd.
|
Director
|
January 2003
|
Present
|
|
Secretary
|
January 2003
|
December 2011
|
|
Rare Earth Metals Inc.
|
Secretary
|
December 2009
|
Present
|
Simon Beller (age 35), Chief Financial
Officer
Simon Beller is a Chartered Accountant and Chartered Business
Valuator who specializes in mergers, acquisitions, valuations, divestitures and
financings. He is also Vice President, Corporate Finance at HDSI. Prior to
joining HDSI, Mr. Beller acted as chief financial officer for the MultiSport
Centre of Excellence and spent seven years with KPMG practicing corporate
finance.
Mr. Beller has not, within the past five years, been an officer
and/or director of any public companies.
Xenia Kritsos (age 41), Corporate Secretary
Ms. Kritsos is an internationally qualified business lawyer
experienced in providing advice in the mining infrastructure, technology and
other sectors. Areas of expertise include mergers and acquisitions, corporate
finance, securities law, competition law and foreign investment. Ms. Kritsos is
also Legal Counsel for HDSI.
33
Ms. Kritsos is, or was within the past five years, an officer
of the following public companies:
|
Company
|
Positions Held
|
From
|
To
|
|
Curis Resources Ltd.
|
Secretary
|
November 2010
|
Present
|
|
Heatherdale Resources Ltd.
|
Secretary
|
October 2010
|
Present
|
|
Quartz Mountain Resources Ltd.
|
Secretary
|
December 2011
|
Present
|
During the Company's financial year ended July 31, 2012, the
aggregate cash compensation paid or payable by the Company to its directors and
senior officers was $173,158.
Ronald W. Thiessen, President, and Simon Beller, Chief
Financial Officer, are each "Named Executive Officers" of the Company for the
purposes of the following disclosure.
The compensation paid to the Named Executive Officers during
the Company's most recently completed financial year is as set out below:
Name and principal
position
|
Salary
($)
|
Share-
based
awards
($)
|
Option-
based
awards
($)
|
Pension
value
($)
|
All other
compensation
($)
|
Total
compensation
($)
|
Ronald W. Thiessen
(1)
President and Chief
Executive Officer
|
28,875
|
Nil
|
22,188
|
Nil
|
Nil
|
51,063
|
Simon Beller
(2)
Chief Financial Officer
|
43,750
|
Nil
|
22,188
|
Nil
|
Nil
|
65,938
|
Notes:
(1) Mr. Thiessen was appointed as President and Chief
Executive Officer on December 30, 2011
(2) Mr. Beller was appointed as Chief
Financial Officer on December 7, 2011
During the fiscal year ended July 31, 2012, the above named
NEOs did not serve the Company solely on a full-time basis, and their
compensation from the Company is allocated based on the estimated amount of time
spent providing services to the Company.
Director Compensation
The compensation provided to the directors, excluding a
director who is already set out in disclosure for a NEO for the Company's most
recently completed financial year ended July 31, 2012 is as set out below:
Name
|
Fees
earned
($)
|
Share-based
awards
($)
|
Option-based
awards
(3)
($)
|
Non-equity
incentive plan
compensation
($)
|
Pension
value
($)
|
All other
compensation
($)
|
Total
($)
|
Robert A.
Dickinson
(2)(4)
|
28,875
|
Nil
|
22,188
|
Nil
|
Nil
|
Nil
|
51,063
|
|
James Kerr
(1)(4)(5)
|
15,604
|
Nil
|
22,188
|
Nil
|
Nil
|
Nil
|
37,792
|
David
Mordant
(1)(4)(6)
|
12,688
|
Nil
|
22,188
|
Nil
|
Nil
|
Nil
|
34,876
|
|
Gordon Fretwell
(1)(7)
|
15,604
|
Nil
|
22,188
|
Nil
|
Nil
|
Nil
|
37,792
|
Notes:
(1) Independent directors receive an annual fee of $15,750 for
their services plus an additional $5,000 annually for holding the position of
Committee Chair, and $3,000 annually for being a Committee Member.
(2) Pursuant to the Corporate Services Agreement with HDSI,
compensation for Mr. Dickinson is allocated to the Company on the basis of time
spent in respect of the Company's business.
(3) Options were granted during the year ended July 31, 2012
with an exercise price of $0.45 per option and expiry date of January 18, 2017.
For compensation purposes, the Black-Scholes option valuation model has been
used to determine the fair value on the date of grant. The Black-Scholes option
valuation is determined using the expected life of the share option, expected
volatility of the Company's common share price, expected dividend yield, and
risk-free interest rate.
(4) Messrs. Dickinson, Kerr, and Mordant, were appointed
Directors of the Company effective December 30, 2011. The former Directors (Rene
G. Carrier, Brian Causey and Barry Coughlan) ceased to be Directors on December
30, 2011 and received no compensation in their roles as Directors in the year
ended July 31, 2012.
(5) Mr. Kerr is the Chairman of the Audit and Risk Committee as
well as a member of the Compensation Committee and Nominating and Governance
Committee.
(6) Mr. Mordant is a member of the Audit and Risk Committee and
Nominating and Governance Committee.
34
(7) Mr. Fretwell is the Chairman of the Nominating and
Governance Committee as well as a member of the Audit and Risk Committee and
Compensation Committee.
Pension and Retirement Benefits
Neither the Company nor its subsidiary provides any pension,
retirement or similar benefits.
All directors were re-elected at the annual general meeting of
the Company's shareholders held on March 15, 2012. Mr. Cousens was appointed as
Chairman of the Board on November 22, 2012. All directors have a term of office
expiring at the next annual general meeting of the Company's shareholders, which
is expected to be held in early 2013. All officers have a term of office lasting
until their removal or replacement by the Board of Directors.
Directors Service Contracts
There is no written employment contract between the Company and
any director.
There is no service contract between any director of the
Company and either the Company or its subsidiary, which provides for any
benefits upon termination of employment.
Audit and Risk Committee
Composition of Audit and Risk Committee
The members of the Audit and Risk Committee are James Kerr,
David Mordant and Gordon J. Fretwell. All Audit and Risk Committee members are
financially literate and no Audit and Risk Committee members are officers,
employees or Control Persons of the Company. Mr. Kerr is a Chartered Accountant,
and hence a financial expert.
Relevant Education and Experience
As a result of their education and experience, each member of
the Audit and Risk Committee has familiarity with, an understanding of, or
experience in:
-
the accounting principles used by the Company to prepare its financial
statements, and the ability to assess the general application of those
principles in connection with estimates, accruals and reserves;
-
reviewing or evaluating financial statements that present a breadth and
level of complexity of accounting issues that are generally comparable to the
breadth and complexity of issues that can reasonably be expected to be raised
by the Company's financial statements; and
-
an understanding of internal controls and procedures for financial
reporting.
Mr. Kerr is a Chartered Accountant and was a partner at KPMG, a
national accounting firm, until his retirement in 2007. He has extensive
experience in public practice, and actively involved with audit committees of
mining and energy companies, providing advice on accounting and compliance
issues based on a risk management approach. Mr. Fretwell is an experienced
securities lawyer and Mr. Mordant is an experienced businessman with corporate
finance experience. See disclosure under “A. Directors and Senior Management”
above.
Audit and Risk Committee’s Charter
The function of the Audit and Risk Committee is to oversee the
employment and compensation of the Company’s independent auditor, and other
matters under the authority of the Committee. The Committee also assists the
Board of Directors in carrying out its oversight responsibilities relating to
the Company’s financial, accounting and reporting processes, the Company’s
system of internal accounting and financial controls, the Company’s compliance
with related legal and regulatory requirements, and the fairness of transactions
between the Company and related parties.
The Audit and Risk Committee has a charter that sets out its
mandate and responsibilities, which is contained in Appendix 6 of the Corporate
Governance Policies and Procedures Manual (available for download from the
Company’s website under Corporate Governance at
www.quartzmountainresources.com
). The Audit and Risk Committee has the
following responsibilities and authority:
|
(a)
|
Relationship with Independent Auditor
|
|
|
(i)
|
Subject to the law of British Columbia as to the role of
the Shareholders in the appointment of independent auditors, the Committee
shall have the sole authority to appoint or replace the independent
auditor.
|
|
|
(ii)
|
The Committee shall be directly responsible for the
compensation and oversight of the work of the independent auditor
(including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work.
|
|
|
(iii)
|
The independent auditor shall report directly to the
Committee.
|
35
|
|
(iv)
|
The Committee shall approve in advance all audit and
permitted non-audit services with the independent auditor, including the
terms of the engagements and the fees payable; provided that the Committee
Chairman may approve services to be performed by the independent auditor
between Committee meetings if the amount of the fee does not exceed
$50,000, provided that any such approval shall be reported to the
Committee at the next meeting thereof. The Committee may delegate to a
subcommittee the authority to grant pre-approvals of audit and permitted
non-audit services, provided that the decision of any such subcommittee
shall be presented to the full Committee at its next scheduled
meeting.
|
|
|
(v)
|
At least annually, the Committee shall review and
evaluate the experience and qualifications of the lead partner and senior
members of the independent auditor team.
|
|
|
(vi)
|
At least annually, the Committee shall obtain and review
a report from the independent auditor regarding:
|
|
|
|
(1)
|
the independent auditor’s internal quality-control
procedures;
|
|
|
|
(2)
|
any material issues raised by the most recent internal
quality-control review, or peer review, of the auditor, or by any inquiry
or investigation by governmental or professional authorities within the
preceding five years respecting one or more independent audits carried out
by the firm;
|
|
|
|
(3)
|
any steps taken to deal with any such issues;
and
|
|
|
|
(4)
|
all relationships between the independent auditor and the
Company.
|
|
|
(vii)
|
At least annually, the Committee shall evaluate the
qualifications, performance and independence of the independent auditor,
including considering whether the auditor’s quality controls are adequate
and the provision of permitted non-audit services is compatible with
maintaining the auditor’s independence.
|
|
|
(viii)
|
The Committee shall ensure the rotation of the lead (or
coordinating) audit partner having primary responsibility for the audit,
the concurring partner responsible for reviewing the audit, and other
audit partners as required by law.
|
|
|
(ix)
|
The Committee shall consider whether, in order to assure
continuing auditor independence, it is appropriate to adopt a policy of
rotating the independent auditing firm on a regular basis.
|
|
|
(x)
|
The Committee shall recommend to the Board policies for
the Company’s hiring of employees or former employees of the independent
auditor who were engaged on the Company’s account or participated in any
capacity in the audit of the Company.
|
|
|
(xi)
|
The Committee shall oversee the implementation by
management of appropriate information technology systems for the Company,
including as required for proper financial reporting and
compliance.
|
|
(b)
|
Financial Statement and Disclosure Review
|
|
|
(i)
|
The Committee shall review and discuss with management
and the independent auditor the annual audited financial statements,
including disclosures made in management’s discussion and analysis, and
recommend to the Board whether the audited financial statements should be
filed with applicable securities regulatory authorities and included in
the Company’s annual reports.
|
|
|
(ii)
|
The Committee shall review and discuss with management
(and, to the extent the Committee deems it necessary or appropriate, the
independent auditor) the Company’s quarterly financial statements,
including disclosures made in management’s discussion and analysis, and
recommend to the Board whether such financial statements should be filed
with applicable securities regulatory authorities.
|
|
|
(iii)
|
The Committee shall review and discuss with management
and the independent auditor significant financial reporting issues and
judgments made in connection with the preparation of the Company’s
financial statements, including the independent auditor’s assessment of
the quality of the Company’s accounting principles, any significant
changes in the Company’s selection or application of accounting
principles, any major issues as to the adequacy of the Company’s internal
controls over financial reporting, and any special steps adopted in light
of material control deficiencies.
|
|
|
(iv)
|
At least annually and prior to the publication of annual
audited financial statements, the Committee shall review and discuss with
management and the independent auditor a report from the independent
auditor on:
|
|
|
|
(1)
|
all critical accounting policies and practices used by
the Company;
|
|
|
|
(2)
|
all alternative accounting treatments of financial
information that have been discussed with management since the prior
report, ramifications of the use of such alternative disclosures and
treatments, the treatment preferred by the independent auditor, and an
explanation of why the independent auditor’s preferred method was not
adopted; and.
|
|
|
|
(3)
|
other material written communications between the
independent auditor and management since the prior report, such as any
management letter or schedule of unadjusted differences, the development,
selection and disclosure of critical accounting estimates, and analyses of
the effect of alternative assumptions, estimates or GAAP methods on the
Company’s financial statements.
|
36
|
|
(v)
|
Prior to their filing or issuance, the Committee shall
review the Company’s Annual Information Form, quarterly and annual
earnings press releases, and other financial press releases, including the
use of “pro forma” or “adjusted” non-GAAP information.
|
|
|
(vi)
|
The Committee shall review and discuss with management
the financial information and earnings guidance provided to analysts and
rating agencies. Such discussion may be specific or it may be in general
regarding the types of information to be disclosed and the types of
presentations to be made.
|
|
(c)
|
Conduct of the Annual Audit
|
|
|
|
|
|
The Committee shall oversee the annual audit, and in the
course of such oversight the Committee shall have the following
responsibilities and authority:
|
|
|
(i)
|
The Committee shall meet with the independent auditor
prior to the audit to discuss the planning and conduct of the annual
audit, and shall meet with the independent auditor as may be necessary or
appropriate in connection with the audit.
|
|
|
(ii)
|
The Committee shall ascertain that the independent
auditor is registered and in good standing with the Canadian Public
Accounting Board and that the independent auditor satisfies all applicable
independence standards. The Committee shall obtain from the auditor a
written statement delineating all relationships between the auditor and
the Company as per applicable independence standards, and review
relationships that may impact the objectivity and independence of the
auditor.
|
|
|
(iii)
|
The Committee shall discuss with the independent auditor
the matters required to be discussed by Statement on Auditing Standards
No. 61 relating to the conduct of the audit, including
|
|
|
|
(1)
|
the adoption of, or changes to, the Company’s significant
auditing and accounting principles and practices as suggested by the
independent auditor, internal auditors or management;
|
|
|
|
(2)
|
the management letter provided by the independent auditor
and the Company’s response to that letter; and
|
|
|
|
(3)
|
any difficulties encountered in the course of the audit
work, including any restrictions on the scope of activities or access to
requested information, and any significant disagreements with
management.
|
|
|
(iv)
|
The Committee shall make such inquiries to the management
and the independent auditor as the Committee members deem necessary or
appropriate to satisfy themselves regarding the efficacy of the Company’s
financial and internal controls and procedures and the auditing
process.
|
|
(d)
|
Compliance and Oversight
|
|
|
(i)
|
The Committee shall meet periodically with management and
the independent auditor in separate executive sessions. The Committee may
also, to the extent it deems necessary or appropriate, meet with the
Company’s investment bankers and financial analysts who follow the
Company.
|
|
|
(ii)
|
The Committee shall discuss with management and the
independent auditor the effect of regulatory and accounting initiatives as
well as off-balance sheet structures on the Company’s financial
statements.
|
|
|
(iii)
|
The Committee shall discuss with management the Company’s
major financial risk exposures and the steps management has taken to
monitor and control such exposures, including the Company’s risk
assessment and risk management policies, and regularly review the top
risks identified by management and the policies and practices adopted by
the Company to mitigate those risks.
|
|
|
(iv)
|
If required, the Committee shall annually review with
management and the independent auditor the disclosure controls and
procedures and confirm that the Company (with CEO and CFO participation)
has evaluated the effectiveness of the design and operation of the
controls within 90 days prior to the date of filing of the AIF. The
Committee also shall review with management and the independent auditor
any deficiencies in the design and operation of internal controls and
significant deficiencies or material weaknesses therein and any fraud
involving management or other employees who have a significant role in the
Company’s internal controls. As a part of that review, the Committee shall
review the process followed in preparing and verifying the accuracy of the
required CEO and CFO annual certifications.
|
|
|
(v)
|
If required, the Committee shall annually, prior to the
filing of the AIF, review management’s internal control report and the
independent auditor’s assessment of the internal controls and
procedures.
|
|
|
(vi)
|
The Committee shall establish procedures for the receipt,
retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters, and the
confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
|
|
|
(vii)
|
The Committee shall discuss with management and the
independent auditor any correspondence with regulators or governmental
agencies and any employee complaints or reports which raise material issues regarding the
Company’s financial statements or accounting policies.
|
37
|
|
(viii)
|
At least annually, the Committee shall meet with the
Company’s legal counsel and discuss any legal matters that may have a
material impact on the financial statements or the Company’s compliance
policies.
|
|
|
(ix)
|
The Committee shall oversee the preparation of reports
relating to the Audit and Risk Committee as required under applicable
laws, regulations and stock exchange requirements.
|
|
|
(x)
|
The Committee shall exercise oversight with respect to
anti-fraud programs and controls.
|
|
(e)
|
Related Party Transactions
|
|
|
(i)
|
The Committee shall review for fairness to the Company
proposed transactions, contracts and other arrangements between the
Company and its subsidiaries and any related party or affiliate, and make
recommendations to the Board whether any such transactions, contracts and
other arrangements should be approved or continued. The foregoing shall
not include any compensation payable pursuant to any plan, program,
contract or arrangement subject to the authority of the Company’s and
Compensation Committee.
|
|
|
(ii)
|
As used herein the term “related party” means any officer
or director of the Company or any subsidiary, or any shareholder holding a
greater than 10% direct or indirect financial or voting interest in the
Company, and the term “affiliate” means any person, whether acting alone
or in concert with others, that has the power to exercise a controlling
influence over the Company and its subsidiaries. "Related party" includes
Hunter Dickinson Services Inc.
|
Compensation Committee
The Board’s Compensation Committee currently consists of Scott
Cousens (Chairman), Gordon Fretwell and James Kerr.
The function of the Compensation Committee is to assist the
Board in carrying out its responsibilities relating to executive and director
compensation. The Compensation Committee has a charter that sets out its mandate
and responsibilities, which is contained in Appendix 7 of the Corporate
Governance Policies and Procedures Manual (available for download from the
Company’s website under Corporate Governance at
www.quartzmountainresources.com
). In furtherance of its purpose, the
Compensation Committee has the following responsibilities and authority:
|
(a)
|
The Compensation Committee shall recommend to the Board
the form and amount of compensation to be paid by the Company to directors
for service on the Board and on Board committees. The Compensation
Committee shall review director compensation at least annually.
|
|
|
|
|
(b)
|
The Compensation Committee shall annually review the
Company's base compensation structure and the Company's incentive
compensation, stock option and other equity based compensation programs
and recommend changes in or additions in such structure and plans to Board
as needed.
|
|
|
|
|
(c)
|
The Compensation Committee shall recommend to the Board
the annual base compensation of the Company's executive officers and
senior managers (collectively the "Officers").
|
|
|
|
|
(d)
|
The Compensation Committee shall recommend to the Board
the range of increase or decrease in the annual base compensation for
non-Officer personnel providing services to the Company.
|
|
|
|
|
(e)
|
The Compensation Committee shall recommend to the Board
annual corporate goals and objectives under any incentive compensation
plan adopted by the Company for Officers and non-Officer personnel
providing services to the Company, and recommend incentive compensation
participation levels for Officers and non-Officer personnel providing
services to the Company under any such incentive compensation plan. In
determining the incentive component of compensation, the Committee will
consider the Company's performance and relative shareholder return, the
values of similar incentives at comparable companies and the awards given
in past years.
|
|
|
|
|
(f)
|
The Compensation Committee shall evaluate the performance
of Officers generally and in light of annual corporate goals and
objectives under any incentive compensation plan.
|
|
|
|
|
(g)
|
The Compensation Committee shall periodically review with
the Chairman and CEO their assessments of corporate officers and senior
managers and succession plans, and make recommendations to the Board
regarding appointment of officers and senior managers.
|
|
|
|
|
(h)
|
The Compensation Committee shall provide oversight of the
performance evaluation and incentive compensation of non-Officer personnel
providing services to the Company.
|
|
|
|
|
(i)
|
The Compensation Committee shall administer the Company's
stock option and other equity based compensation plans and determines the
annual grants of stock options and other equity based
compensation.
|
|
|
|
|
(j)
|
The Compensation Committee shall recommend to the
Nominating and Governance Committee the qualifications and criteria for
membership on the Compensation Committee.
|
38
Other Board Committees
The Company has a Nominating and Corporate Governance Committee
which is responsible for identifying new candidates for the Board of Directors
as necessary, after considering what competencies and skills the directors as a
group should possess and assessing the competencies and skills the directors as
a group should possess and assessing the competencies and skills of the existing
and any proposed directors, and considering the appropriate size of the Board.
The committee is also responsible for developing and recommending to the Board a
set of corporate governance principles applicable to the Chief Financial
Officer, and overseeing the evaluation of the Board and Senior Management. The
current members of the Nominating and Corporate Governance Committee are Gordon
Fretwell, James Kerr, and David Mordant.
The Company has a Special Committee composed of independent
directors of the Company in order to consider the best interests of the Company
related to all matters in respect of any proposed transactions with members of
the Hunter Dickinson group of companies, including proposed transactions between
non-arm’s length parties, and to make recommendations to the Board in respect of
such matters. The current members of the Special Committee are Gordon Fretwell,
James Kerr, and David Mordant.
At November 22, 2012 and for each of the past three fiscal
years, the Company has had no employees and has contracted staff on an as-needed
basis in British Columbia, Canada. The directors of the Company primarily
administer the Company's functions through the employees of HDSI, a private
company with certain directors in common with the Company (see
Item 7 –
"Major Shareholders and Related Party
Transactions
").
Security Holdings of Directors and Senior Management
As at November 22, 2012, the directors and officers of Quartz
Mountain and their respective affiliates, directly and indirectly, own or
control as a group an aggregate of 3,803,765 common shares or 15.1% .
As at November 22, 2012, the Company's directors and officers
beneficially own the following number of the Company's common shares, options
and warrants:
|
Name of Insider
|
Securities Beneficially Owned
(1)(3)
|
As a % of outstanding common shares
|
Ronald W. Thiessen
|
1,732,686 Common shares
60,000 options
|
6.9%
|
Scott Cousens
|
147,177 Common shares
60,000 options
|
0.6%
|
Robert A. Dickinson
|
1,823,902 Common shares
(2)
60,000 options
|
7.3%
|
|
Simon Beller
|
60,000 options
|
–
|
|
James Kerr
|
60,000 options
|
–
|
|
Gordon J. Fretwell
|
60,000 options
|
–
|
David Mordant
|
100,000 Common shares
60,000 options
|
0.4%
|
|
Xenia Kritsos
|
48,000 options
|
–
|
Notes:
(1) This information has been provided by the
individual directors as provided by them on
www.sedi.ca
(2) Certain
of these shares are beneficially owned through a private company controlled by
Mr. Dickinson.
(3) Options to purchase Common Shares at $0.45 per share
expiring on January 18, 2017.
Share Option Plan
As at November 22, 2012, an aggregate of 1,754,600 were
outstanding pursuant to the Company's share option plan (the "Plan"), described
below, and an aggregate of 753,919 common shares remained available for issuance
pursuant to the Plan, described below.
The Company adopted the Plan in order to advance the interests
of the Company by providing a means to encourage directors, officers, employees,
and others who provide services to the Company and its subsidiaries to acquire
shares of the Company, thereby increasing their proprietary interest in the
Company, encouraging them to remain associated with the Company and furnishing
them with additional incentive to advance the interests of the Company in the
conduct of their affairs.
39
The Plan is a "rolling" plan, whereby the maximum number of
shares that may be reserved for issuance pursuant to all option awards granted
under the Plan is 10% of the Company's outstanding common shares, as calculated
at the time that an award is granted. Under the policies of the TSX Venture
Exchange (the "TSX-V"), the continuation of the Plan required shareholder
approval by ordinary resolution at each annual general meeting of the Company's
shareholders. The Company's shareholders confirmed the Plan in accordance with
the policies of the TSX-V at the Company's last annual general meeting, held on
March 15, 2012.
Pursuant to the Plan, if outstanding options are exercised, or
expire, or the number of issued and outstanding common shares of the Company
increases, the number of options available to grant under the Plan increases
proportionately. The exercise price of each option is set by the Board of
Directors at the time of grant but cannot be less than the Discounted Market
Price (as defined in, and determined in accordance with, the policies of the
TSX-V). Options can have a maximum term of five years (or 10 years if the
Company becomes a Tier 1 issuer on the TSX-V) and typically terminate 90 days
following the termination of the optionee's employment or engagement, except in
the case of retirement or death. Vesting of options is at the discretion of the
Board of Directors at the time the options are granted.
Eligible Optionees
Under the policies of the TSX-V, to be eligible for the
issuance of a stock option under the Plan, an optionee must either be a
director, officer or employee of the Company, or a consultant or an employee of
a company providing management or other services to the Company, or its
subsidiaries, at the time the option is granted.
Options may be granted only to an individual or to a company
that is wholly-owned by individuals eligible for an option grant. If the option
is granted to a non-individual, the company must provide the TSX-V with an
undertaking that it will not permit any transfer of its securities, nor issue
further securities, to any other individual or entity as long as the incentive
stock option remains in effect without the consent of TSX-V.
Limitations on Awards
No optionee can be granted an option or options to purchase
more than 5% of the outstanding listed shares of the Company in any one year
period.
|
ITEM 7
|
MAJOR SHAREHOLDERS AND
RELATED PARTY TRANSACTIONS
|
Major Shareholders
Quartz Mountain is a publicly-held corporation, with its shares
held by residents of Canada, the United States of America and other countries.
To the best of Quartz Mountain's knowledge, other than as noted below, no
person, corporation or other entity beneficially owns, directly or indirectly,
or controls more than 5% of the common shares of Quartz Mountain, the only class
of securities with voting rights. For these purposes, "beneficial ownership"
means the sole or shared power to vote or direct the voting or to dispose or
direct the disposition of any security.
As of November 22, 2012, Quartz Mountain had authorized
unlimited common shares without par value, of which 25,085,190 were issued and
outstanding. The following table sets forth certain information with respect to
beneficial ownership of the Company's common stock as of November 22, 2012 by
each shareholder known to be the beneficial owner of more than 5% of the common
stock.
|
Identity of Person or Group
|
Shares
|
Percentage Beneficially Owned of Class
|
|
Finsbury Exploration Ltd.
|
2,038,111
|
8.1%
|
|
Robert A. Dickinson
|
1,823,902
|
7.3%
|
|
Ronald Thiessen
|
1,732,686
|
6.9%
|
|
David Copeland
|
1,307,685
|
5.2%
|
All of the common shares have the same voting rights and no
major shareholders of the Company have different voting rights.
Geographic Breakdown of Shareholders
As of November 22, 2012, Quartz Mountain's register of
shareholders indicates that Quartz Mountain's common shares are held as follows:
40
Location
|
Number of registered
shareholders of record
|
Number of shares
|
Percentage of total
shares
|
|
Canada
|
44
|
23,588,878
|
94.04%
|
|
United States
|
451
|
1,461,102
|
5.82%
|
|
Other
|
4
|
35,210
|
0.14%
|
|
Total
|
499
|
25,085,190
|
100.0%
|
Shares registered in the names of intermediaries, were assumed
to be held by residents of the same country in which the intermediary was
located.
Transfer Agent
The Company's common shares are recorded on the books of its
transfer agent, Computershare Investor Services Inc., located at 4th Floor, 510
Burrard Street, Vancouver, B.C. V6C 3B9; telephone (604) 661-9400 in registered
form. However, the majority of the Company's common shares are registered in the
name of intermediaries such as brokerage houses and clearing houses (on behalf
of their respective brokerage clients). Quartz Mountain does not have knowledge
or access to the identities of the beneficial owners of such shares registered
through intermediaries.
Control
To the best of its knowledge, the Company is not owned or
controlled, directly or indirectly, by any other corporation, by any foreign
government or by any other natural or legal person, severally or jointly, other
than as noted above under Major Shareholders. There are no arrangements known to
Quartz Mountain which, at a subsequent date, may result in a change in control
of the Company.
Insider Reports under the Securities Acts of British
Columbia, Alberta and Ontario
Since the Company is a reporting issuer under the Securities
Acts of British Columbia, Alberta and Ontario, certain "insiders" of the Company
(including its directors, certain executive officers, and persons who directly
or indirectly beneficially own, control or direct more than 10% of its common
shares) are generally required to file insider reports of changes in their
ownership of Quartz Mountain's common shares within five days following the
trade under National Instrument 55-104 – Insider Reporting Requirements and
Exemptions, as adopted by the CSA, and the Securities Act (Ontario). Copies of
such reports are available for public inspection at the offices of the British
Columbia Securities Commission, 9th Floor, 701 West Georgia Street, Vancouver,
British Columbia V7Y 1L2, (604) 899-6500 or at the British Columbia Securities
Commission web site,
www.bcsc.bc.ca
. In British Columbia, all insider
reports must be filed electronically five days following the date of the trade
at
www.sedi.ca
. The public is able to access these reports at
www.sedi.ca
.
|
B.
|
Related Party Transactions
|
Except as disclosed below, Quartz Mountain has not, since the
beginning of its last fiscal year ended July 31, 2012:
(1) entered into any transactions which are material to Quartz
Mountain, or a related party or any transactions unusual in their nature or
conditions involving goods, services or tangible or intangible assets to which
Quartz Mountain or any of its former subsidiaries was a party;
(2) entered into any transactions or loans between the Company
and:
(a) enterprises that directly or
indirectly through one or more intermediaries, control or are controlled by, or
are under common control with, Quartz Mountain;
(b) associates of Quartz Mountain
(unconsolidated enterprises in which Quartz Mountain has significant influence
or which has significant influence over Quartz Mountain) including shareholders
beneficially owning 10% or more of the outstanding shares of Quartz Mountain;
(c) individuals owning, directly or
indirectly, an interest in the common shares of Quartz Mountain that gives them
significant influence over Quartz Mountain, and close members of any such
individual’s family;
(d) key management personnel (persons
having authority in responsibility for planning, directing and controlling the
activities of Quartz Mountain including directors and senior management and
close members of such individuals’ families); or
(e) enterprises in which a substantial
voting interest is owned, directly or indirectly, by any person described in (c)
or (d) or over which such a person is able to exercise significant
influence.
Hunter Dickinson Services Inc. ("HDSI")
As an umbrella organization, HDSI provides, both cost and
expertise advantages to the companies through access to a shared
multidisciplinary team of mining and financial professionals. This includes: management capability, geological, engineering and
environmental expertise, financial acumen, and administrative and support
services. In addition, HDSI organizes and shares leased premises and office and
technical equipment for staff to perform their duties.
41
Quartz Mountain's business relationship with HDSI consists of
utilizing the services described above. HDSI provides these services to Quartz
Mountain which includes the services of Quartz Mountain's President, pursuant to
a standard (within the group) Geological Management and Administration Services
Agreement with HDSI, dated June 1, 2008 (the "Geological Management and
Administration Services Agreement") and amended July 2, 2010. Because of cross
membership of many of the boards of directors within the group, certain members
of management and the Board of Directors of Quartz Mountain are also members of
the board of directors or employees of HDSI.
HDSI's arrangements are also flexible enough that it is able to
defer collection of monthly service invoices and on occasion, where surplus
funds are available to HDSI, make short term advances to members of the group.
The Geological Management and Administration Services Agreement can be
terminated by either party on 30 days' notice.
During the fiscal year ended July 31, 2012, the Company had
transactions totaling $1,255,789 (2011 -$nil); (2010 – $nil) to HDSI for
services and reimbursements of third party disbursements pursuant to this
agreement.
Finsbury Exploration Ltd.
Finsbury Exploration Ltd. ("Finsbury") is a private company
which has certain directors in common with the Company. During the fiscal year
ended July 31, 2012, the Company had transactions totaling $25,278 (2011 -
$nil); (2010 – $nil) to Finsbury relating to the Galaxie Project.
|
C.
|
Interests of Experts and
Counsel
|
Not applicable.
|
ITEM 8
|
FINANCIAL
INFORMATION
|
|
A.
|
Consolidated Statements and Other Financial
Information
|
Item 17
of this Form 20-F contains Quartz Mountain's
audited consolidated annual financial statements as at July 31, 2012 and
2011.
Legal Proceedings
The Company is not, and has not been in the recent past,
involved in any legal or arbitration proceedings, including governmental
proceedings and those relating to bankruptcy, receivership, or similar
proceedings.
Dividend Policy
The Company has not paid any dividends on its outstanding
common shares since its incorporation and does not anticipate that it will do so
in the foreseeable future. All funds of the Company are being retained for
administration expenses and mineral property investigations.
There have been no significant changes to the accompanying
financial statements since July 31, 2012, except as disclosed in this Annual
Report on Form 20-F.
|
ITEM 9
|
THE OFFER AND
LISTING
|
|
A.
|
Offer and Listing Details
|
Trading Markets
The following tables set forth for the periods indicated the
price history of the Company's common shares on the TSX Venture Exchange (NEX
board from 2008 to 2011) and on the OTC Grey Market:
42
|
|
TSX Venture Exchange
|
OTC
|
Fiscal year ended
July 31,
|
High
(Cdn$)
|
Low
(Cdn$)
|
High
(US$)
|
Low
(US$)
|
|
2012
|
0.50
|
0.20
|
0.50
|
0.20
|
|
2011
|
0.49
|
0.18
|
0.42
|
0.16
|
|
2010
|
0.30
|
0.15
|
0.30
|
0.13
|
|
2009
|
0.50
|
0.12
|
0.43
|
0.08
|
|
2008
|
0.75
|
0.42
|
0.72
|
0.39
|
|
|
TSX Venture Exchange
|
OTC
|
Quarter
|
High
(Cdn$)
|
Low
(Cdn$)
|
High
(US$)
|
Low
(US$)
|
|
Q4, 2012
|
0.45
|
0.31
|
0.38
|
0.30
|
|
Q3, 2012
|
0.50
|
0.37
|
0.50
|
0.37
|
|
Q2, 2012
|
0.50
|
0.20
|
0.50
|
0.20
|
|
Q1, 2012
|
0.30
|
0.20
|
0.32
|
0.20
|
|
Q4, 2011
|
0.38
|
0.32
|
0.42
|
0.32
|
|
Q3, 2011
|
0.49
|
0.30
|
0.42
|
0.31
|
|
Q2, 2011
|
0.42
|
0.18
|
0.31
|
0.17
|
|
Q1, 2011
|
0.20
|
0.18
|
0.17
|
0.16
|
|
|
TSX Venture Exchange
|
OTC
|
Month
|
High
(Cdn$)
|
Low
(Cdn$)
|
High
(US$)
|
Low
(US$)
|
|
October 2012
|
0.29
|
0.23
|
0.30
|
0.28
|
|
September 2012
|
0.30
|
0.27
|
0.30
|
0.30
|
|
August 2012
|
0.35
|
0.30
|
0.37
|
0.30
|
|
July 2012
|
0.35
|
0.31
|
0.34
|
0.30
|
|
June 2012
|
0.45
|
0.35
|
0.34
|
0.34
|
|
May 2012
|
0.45
|
0.37
|
0.38
|
0.34
|
Not applicable.
On December 30, 2011, the Company acquired a qualifying
property and was relisted on the main board of the TSX Venture Exchange, trading
under the symbol QZM. The Company continues to trade on the OTC Grey Market
under the symbol QZMRF.
On February 17, 2005, the Company transferred its listing to
NEX, a separate board of TSX Venture Exchange and the Company's common shares
traded on NEX under the symbol QZM.H.
Prior to February 17, 2005, the Company's common shares were
listed and traded in Canada on Tier 2 on the TSX Venture Exchange, under the
symbol QZM.V. The transition to Tier 2 became effective December 23, 2003. Prior
to this, the Company traded on Tier 3 on the TSX Venture Exchange.
Not applicable.
Not applicable.
Not applicable.
43
|
ITEM 10
|
ADDITIONAL
INFORMATION
|
Not applicable.
|
B.
|
Memorandum and Articles of
Association
|
Articles of Association
Quartz Mountain's original corporate constituting documents
comprised of the Memorandum and Articles of Association were registered with the
British Columbia Registrar of Companies under Corporation No. BC0253743. The
Company’s Memorandum and Articles have subsequently been replaced by a Notice of
Articles and Articles under the
Business Corporations Act
(British
Columbia) (“BCA”), and the Articles were last amended by shareholder resolution
at the Company’s Annual General Meeting, held on March 15, 2012. The Company's
articles of incorporation do not contain a description or place any restrictions
on the Company's objects and purposes. For more information, see the Articles of
Amalgamation filed as Exhibit 10.1 to this Form 20-F.
Certain Powers of Directors
The Company’s articles require that a director or senior
officer who holds any office or possesses any property, right or interest that
could result, directly or indirectly, in the creation of a duty or interest that
materially conflicts with that individual’s duty or interest as a director or
senior officer, must disclose the nature and extent of the conflict as required
by the BCA.
The BCA requires that every director or senior officer who is a
party to, or who is a director or officer of, or has a material interest in, any
person who is a party to, a material contract or transaction or a proposed
material contract or transaction with the Company, must disclose in writing to
the Company or request to have entered in the minutes of a meeting or a consent
resolution of directors, the nature and extent of his or her interest, and must
refrain from voting in respect of the contract or transaction, unless the
contract or transaction is: (a) one relating primarily to his or her
remuneration as a director of the corporation or an affiliate; (b) one for
indemnity of or insurance for directors as contemplated under the BCA; or (c)
one with an affiliate of the Company. However, a director who is prohibited by
the BCA from voting on a material contract or proposed material contract may be
counted in determining whether a quorum is present for the purpose of the
resolution, if the director disclosed his or her interest in accordance with the
BCA and the contract or transaction was reasonable and fair to the corporation
at the time it was approved.
The Company's Articles provide that the Board will from time to
time determine the remuneration to be paid to the directors. The Company must
reimburse each director for the reasonable expenses that he or she may incur in
and about the business of the Company. The Board may also, by resolution, award
special remuneration to any director for undertaking any professional or other
services on the Company's behalf, outside than the ordinary duties of a director
of the Company.
The Company's Articles provide that the directors may: (a)
borrow money in the manner and amount, on the security, from the sources and on
the terms and conditions that they consider appropriate; (b) issue bonds,
debentures and other debt obligations either outright or as security for any
liability or obligation of the Company or any other person and at such discounts
or premiums and on such other terms as the directors consider appropriate; (c)
guarantee the repayment of money by any other person or the performance of any
obligation of any other person; and (d) mortgage, charge, whether by way of
specific or floating charge, grant a security interest in, or give other
security on, the whole or any part of the present and future assets and
undertaking of the Company.
The directors may, by resolution, amend or repeal any articles
that regulate the business or affairs of the Company. The BCA requires the
directors to submit any such amendment or repeal to the Company's shareholders
at the next meeting of shareholders, and the shareholders may confirm, reject or
amend the amendment or repeal.
The Board does not have a mandatory retirement policy for
directors based solely on age. The Company has a practice of conducting annual
Board, Committee and individual director evaluations, pursuant to which each
director's performance is evaluated annually. There is no minimum share
ownership requirement for director’s qualification.
Authorized Share Capital
The Company's authorized share capital consists of an unlimited
number of common shares without par value, and an unlimited number of preferred
shares without par value.
All outstanding common shares of the Company are fully paid and
non-assessable. The holders of the common shares are entitled to one vote per
share at meetings of shareholders and to receive dividends if, as and when
declared by the directors of the Company. In the event of voluntary or
involuntary liquidation, dissolution or winding-up of the Company, after payment
of all outstanding debts, the remaining assets of the Company available for
distribution would be distributed rateably to the holders of the common shares. Holders of the common shares of the Company
have no pre-emptive, redemption, exchange or conversion rights.
44
The preferred shares may be issued in series on such terms as
determined by the Company's directors in accordance with the class rights and
restrictions. The special rights and restrictions attaching to the preferred
shares are set forth in Part 26 of the Articles, and provide the directors with
wide latitude to create a series of preferred shares which may be convertible
into common shares, and have attached to them rights that rank ahead of common
shares in respect of entitlement to dividends. The directors may, by resolution,
create, define and attach special rights and restrictions to the shares of each
series, subject to the special rights and restrictions attached to the preferred
shares.
Except as described above, the Company may not create any class
or series of shares or make any modification to the provisions attaching to the
Company's shares without the affirmative vote of a majority of the votes cast by
the holders of the common shares.
Majority Voting Policy
Under the Company’s Corporate Governance Manual, in an
uncontested director election, if the votes “for” the election of a director
nominee at a meeting of shareholders are fewer than the number voted “withhold”,
the nominee is expected to submit his or her resignation promptly after the
meeting for the consideration of the Nominating and Governance Committee. T he
Nominating and Governance Committee will make a recommendation to the Board of
Directors after reviewing the matter, and the Board of Directors will then
decide whether to accept or reject the resignation. The Board’s decision to
accept or reject the resignation will be disclosed to shareholders. The nominee
will not participate in any Nominating and Governance Committee deliberations
whether to accept or reject the resignation.
Meetings of Shareholders
The BCA requires the Company to call an annual shareholders'
meeting not later than 15 months after holding the last preceding annual meeting
and permits the Company to call a special shareholders' meeting at any time. In
addition, in accordance with the BCA, the holders of not less than 5% of the
Company's shares carrying the right to vote at a meeting sought to be held may
requisition the directors to call a special shareholders' meeting for the
purposes stated in the requisition. The Company is required to mail a notice of
meeting and management information circular to registered shareholders not less
than 21 days and not more than 2 months prior to the date of any annual or
special shareholders' meeting. These materials are also filed with Canadian
securities regulatory authorities and furnished to the SEC. The Company's
articles provide that a quorum of two shareholders in person or represented by
proxy holding or representing by proxy at least 10% of the Company's issued
shares carrying the right to vote at the meeting is required to transact
business at a shareholders' meeting. In addition to shareholders and their duly
appointed proxies and corporate representatives, the Company's directors,
president, secretary, lawyers, auditors, and invitees of the directors or
chairperson, are entitled to be admitted to the Company's annual and special
shareholders' meetings; provided that any such person is not to be counted in
the quorum and is not entitled to vote at the meeting unless that person is a
shareholder or proxy holder entitled to vote at the meeting.
Disclosure of Share Ownership
The
Securities Act
(British Columbia) currently provides
that the directors and certain officers of an issuer and its subsidiaries and
any person or company that beneficially owns, directly or indirectly, voting
securities of an issuer or that exercises control or direction over voting
securities of an issuer or a combination of both, carrying more than 10% of the
voting rights attached to all the issuer's outstanding voting securities (a
"significant shareholder"), as well as the directors and officers of any
significant shareholder, (each an "insider") must, within 10 days of becoming an
insider, file a report in the required form effective the date on which the
person became an insider, disclosing any direct or indirect beneficial ownership
of, or control or direction over, securities of the reporting issuer. The
Securities Act
(British Columbia) also provides for the filing of a
report by an insider of a reporting issuer who acquires or transfers securities
of the issuer or who enters into, materially amends or terminates an arrangement
the effect of which is to alter the insider's economic interest in a security of
the issuer or the insider's economic exposure to the issuer. These reports must
be filed within five days after the reportable event. The
Securities Act
(British Columbia) also requires these reports to be filed by reporting
insiders within five days after the applicable event, though are only required
by the Chief Executive Officer, Chief Financial Officer, Chief Operating
Officer, directors, any person or company responsible for a principal business
unit and significant shareholders of the Company.
The
Securities Act
(British Columbia) also provides that
a person or company that acquires (whether or not by way of a take-over bid,
offer to acquire or subscription from treasury) beneficial ownership of voting
or equity securities or securities convertible into voting or equity securities
of a reporting issuer that, together with previously held securities brings the
total holdings of such holder to 10% or more of the outstanding securities of
that class, must (a) issue and file forthwith a news release containing certain
prescribed information and (b) file a report within two business days containing
the same information set out in the news release. The acquiring person or
company must also issue a news release and file a report each time it acquires,
in the aggregate, an additional 2% or more of the outstanding securities of the
same class and every time there is a change to any material fact in
the news release and report previously issued and filed.
45
The rules in the United States governing the ownership
threshold above which shareholder ownership must be disclosed are more stringent
than those discussed above. Section 13(d) of the
Securities Exchange Act
of 1934, as amended (the "Exchange Act"), imposes reporting requirements on
persons who acquire beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act) of more than 5% of a class of an equity security
registered under Section 12 of the Exchange Act. In general, such persons must
file, within ten days after such acquisition, a report of beneficial ownership
with the SEC containing the information prescribed by the regulations under
Section 13(d) of the Exchange Act and promptly file an amendment to such report
to disclose any material change to the information reported, including any
acquisition or disposition of 1% or more of the outstanding securities of the
registered class. Certain institutional investors that acquire shares in the
ordinary course of business and not with the purpose or with the effect of
changing or influencing the control of the issuer, are subject to lesser
disclosure obligations.
Quartz Mountain's material contracts as of November 22, 2012
are:
-
Corporate Services Agreement with HDSI, dated for reference July 2, 2010.
See Item 7B;
-
Option Agreement with Richard Billingsley, R.G. Lifeboat Holdings Ltd. and
Dwayne Kress dated June 28, 2011, as amended on October 19, 2011 and June 15,
201. See Item 4B;
-
Sale Agreement with Finsbury Exploration Ltd., dated for reference July 27,
2012. See Item 4B;
-
Convertible Debenture Agreement with Bearclaw Capital Corp., dated for
reference August 20, 2012. See Item 4B;
-
Mineral Property Sale and Purchase Agreement with Crucible Resources Ltd.
and Michael Rowley dated as of July 27, 2012. See Item 4B; and
-
Letter Agreement with Amarc Resources Ltd., dated November 1, 2012. See
Item 4B.
Quartz Mountain is incorporated pursuant to the laws of the
Province of British Columbia, Canada. There is no law or governmental decree or
regulation in Canada that restricts the export or import of capital, or affects
the remittance of dividends, interest or other payments to a non-resident holder
of common shares, other than withholding tax requirements. Any such remittances
to United States residents are generally subject to withholding tax, however no
such remittances are likely in the foreseeable future. See
"Taxation"
,
below.
There is no limitation imposed by Canadian law or by the
charter or other constituent documents of the Company on the right of a
non-resident to hold or vote Common Shares of the Company, except that except
that the
Investment Canada Act
may require review and approval by the
Minister of Industry (Canada) of certain acquisitions of "control" of the
Company by a "non-Canadian". The threshold for acquisitions of "control" is
generally defined as being one-third or more of the voting shares of the
Company. "Non-Canadian" generally means an individual who is not a Canadian
citizen or a permanent resident of Canada, or a corporation, partnership, trust
or joint venture that is ultimately controlled by non-Canadians.
Certain Canadian Federal Income Tax Information for
United States Residents
The following summarizes the principal Canadian federal income
tax considerations generally applicable to the holding and disposition of common
shares of the Company by a holder (a) who, for the purposes of the Income Tax
Act (Canada) the (“Tax Act”), is not resident in Canada or deemed to be resident
in Canada, deals at arm’s length and is not affiliated with the Company, holds
the common shares as capital property and does not use or hold the common shares
in the course of carrying on, or otherwise in connection with, a business in
Canada, and (b) who, for the purposes of the Canada-United States Income Tax
Convention (the “Treaty”), is a resident of the United States, has never been a
resident of Canada, has not held or used (and does not hold or use) common
shares in connection with a permanent establishment or fixed base in Canada, and
who qualifies for the full benefits of the Treaty. The Canada Revenue Agency has
recently introduced special forms to be used in order to substantiate
eligibility for Treaty benefits, and affected holders should consult with their
own advisors with respect to these forms and all relevant compliance matters.
Holders who meet all such criteria in clauses (a) and (b) above
are referred to herein as a “U.S. Holder” or “U.S. Holders”, and this summary
only addresses such U.S. Holders. The summary does not deal with special
situations, such as particular circumstances of traders or dealers, limited
liability companies, tax-exempt entities, insurers, financial institutions (including
those to which the mark-to-market provisions of the Tax Act apply), or entities
considered fiscally transparent under applicable law, or otherwise.
46
This summary is based on the current provisions of the Tax Act
and the regulations thereunder, all proposed amendments to the Tax Act and
regulations publicly announced by the Minister of Finance (Canada) to the date
hereof, the current provisions of the Treaty and our understanding of the
current administrative practices of the Canada Revenue Agency. It has been
assumed that all currently proposed amendments to the Tax Act and regulations
will be enacted as proposed and that there will be no other relevant change in
any governing law, the Treaty or administrative policy, although no assurance
can be given in these respects. This summary does not take into account
provincial, U.S. or other foreign income tax considerations, which may differ
significantly from those discussed herein.
This summary is not exhaustive of all possible Canadian income
tax consequences. It is not intended as legal or tax advice to any particular
U.S. Holder and should not be so construed. The tax consequences to a U.S.
Holder will depend on that U.S. Holder’s particular circumstances.
Accordingly, all U.S. Holders or prospective U.S. Holders should consult
their own tax advisors with respect to the tax consequences applicable to them
having regard to their own particular circumstances. The discussion below is
qualified accordingly.
Dividend
Dividends paid or deemed to be paid or credited by the Company
to a U.S. Holder are subject to Canadian withholding tax. Under the Treaty, the
rate of withholding tax on dividends paid to a U.S. Holder is generally limited
to 15% of the gross dividend (or 5% in the case of a U.S. holder that is a
corporate shareholder owning at least 10% of the Company’s voting shares),
provided the U.S. Holder can establish entitlement to the benefits of the
Treaty.
Disposition
A U.S. Holder is generally not subject to tax under the Tax Act
in respect of a capital gain realized on the disposition of a common share in
the open market, unless the share is “taxable Canadian property” to the holder
thereof and the U.S. Holder is not entitled to relief under the Treaty.
Provided that the Company’s common shares are listed on a
“designated stock exchange” for purposes of the Tax Act (which currently
includes the TSX Venture) at the time of disposition, a common share will
generally not constitute taxable Canadian property to a U.S. Holder unless, at
any time during the 60 month period ending at the time of disposition, (i) the
U.S. Holder or persons with whom the U.S. Holder did not deal at arm’s length
(or the U.S. Holder together with such persons) owned 25% or more of the issued
shares of any class or series of the Company AND (ii) more than 50% of the fair
market value of the share was derived directly or indirectly from certain types
of assets, including real or immoveable property situated in Canada, Canadian
resource properties or timber resource properties, and options, interests or
rights in respect of any of the foregoing. Common shares may also be deemed to
be taxable Canadian property under the Tax Act in certain specific
circumstances. A U.S. Holder holding Common shares as taxable Canadian property
should consult with the U.S. Holder’s own tax advisors in advance of any
disposition of Common shares or deemed disposition under the Tax Act in order to
determine whether any relief from tax under the Tax Act may be available by
virtue of the Treaty, and any related compliance procedures.
United States Federal Income Tax Consequences
The Company believes it is likely a "passive foreign investment
company" which may have adverse U.S. federal income tax consequences for U.S.
shareholders
U.S. shareholders should be aware that the Company believes it
was classified as a passive foreign investment company (“PFIC”) during the tax
year ended July 31, 2012, and may be a PFIC in future tax years. If the Company
is a PFIC for any year during a U.S. shareholder’s holding period, then such
U.S. shareholder generally will be required to treat any gain realized upon a
disposition of common shares, or any so-called “excess distribution” received on
its common shares, as ordinary income, and to pay an interest charge on a
portion of such gain or distributions, unless the shareholder makes a timely and
effective "qualified electing fund" election (“QEF Election”) or a
"mark-to-market" election with respect to the common shares. A U.S. shareholder
who makes a QEF Election generally must report on a current basis its share of
the Company's net capital gain and ordinary earnings for any year in which the
Company is a PFIC, whether or not the Company distributes any amounts to its
shareholders. However, U.S. shareholders should be aware that there can be no
assurance that the Company will satisfy record keeping requirements that apply
to a qualified electing fund, or that the Company will supply U.S. shareholders
with information that such U.S. shareholders require to report under the QEF
Election rules, in the event that the Company is a PFIC and a U.S. shareholder
wishes to make a QEF Election. Thus, U.S. shareholders may not be able to make a
QEF Election with respect to their common shares. A U.S. shareholder who makes
the mark-to-market election generally must include as ordinary income each year
the excess of the fair market value of the common shares over the taxpayer’s
basis therein. This paragraph is qualified in its entirety by the discussion
below under the heading “Certain United States Federal Income Tax Considerations.” Each U.S. shareholder
should consult its own tax advisor regarding the PFIC rules and the U.S. federal
income tax consequences of the acquisition, ownership, and disposition of common
shares.
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Certain United States Federal Income Tax
Considerations
The following is a general summary of certain material U.S.
federal income tax considerations applicable to a U.S. Holder (as defined below)
arising from and relating to the acquisition, ownership, and disposition of
common shares.
This summary is for general information purposes only and does
not purport to be a complete analysis or listing of all potential U.S. federal
income tax considerations that may apply to a U.S. Holder arising from and
relating to the acquisition, ownership, and disposition of common shares. In
addition, this summary does not take into account the individual facts and
circumstances of any particular U.S. Holder that may affect the U.S. federal
income tax consequences to such U.S. Holder, including specific tax consequences
to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is
not intended to be, and should not be construed as, legal or U.S. federal income
tax advice with respect to any U.S. Holder. This summary does not address the
U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and
local, and foreign tax consequences to U.S. Holders of the acquisition,
ownership, and disposition of common shares. Each prospective U.S. Holder should
consult its own tax advisor regarding the U.S. federal, U.S. federal alternative
minimum, U.S. federal estate and gift, U.S. state and local, and foreign tax
consequences relating to the acquisition, ownership and disposition of common
shares.
No legal opinion from U.S. legal counsel or ruling from the
Internal Revenue Service (the “IRS”) has been requested, or will be obtained,
regarding the U.S. federal income tax consequences of the acquisition,
ownership, and disposition of common shares. This summary is not binding on the
IRS, and the IRS is not precluded from taking a position that is different from,
and contrary to, the positions taken in this summary. In addition, because the
authorities on which this summary is based are subject to various
interpretations, the IRS and the U.S. courts could disagree with one or more of
the conclusions described in this summary.
Scope of this Summary
Authorities
This summary is based on the Internal Revenue Code of 1986, as
amended (the “Code”), Treasury Regulations (whether final, temporary, or
proposed), published rulings of the IRS, published administrative positions of
the IRS, the Convention Between Canada and the United States of America with
Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended
(the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable
and, in each case, as in effect and available, as of the date of this document.
Any of the authorities on which this summary is based could be changed in a
material and adverse manner at any time, and any such change could be applied on
a retroactive or prospective basis which could affect the U.S. federal income
tax considerations described in this summary. This summary does not discuss the
potential effects, whether adverse or beneficial, of any proposed legislation
that, if enacted, could be applied on a retroactive or prospective basis.
U.S. Holders
For purposes of this summary, the term "U.S. Holder" means a
beneficial owner of common shares that is for U.S. federal income tax
purposes:
- an individual who is a citizen or resident of the
U.S.;
- a corporation (or other entity taxable as a corporation
for U.S. federal income tax purposes) organized under the laws of the U.S., any
state thereof or the District of Columbia;
- an estate whose income is subject to U.S. federal
income taxation regardless of its source; or
- a trust that (1) is subject to the primary supervision
of a court within the U.S. and the control of one or more U.S. persons for all
substantial decisions or (2) has a valid election in effect under applicable
Treasury Regulations to be treated as a U.S. person.
Non-U.S. Holders
For purposes of this summary, a “non-U.S. Holder” is a
beneficial owner of common shares that is not a U.S. Holder. This summary does
not address the U.S. federal income tax consequences to non-U.S. Holders arising
from and relating to the acquisition, ownership, and disposition of common
shares. Accordingly, a non-U.S. Holder should consult its own tax advisor
regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal
estate and gift, U.S. state and local, and foreign tax consequences (including the potential application of and
operation of any income tax treaties) relating to the acquisition, ownership,
and disposition of common shares.
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U.S. Holders Subject to Special U.S. Federal Income Tax
Rules Not Addressed
This summary does not address the U.S. federal income tax
considerations applicable to U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, the following: (a) U.S. Holders
that are tax-exempt organizations, qualified retirement plans, individual
retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are
financial institutions, underwriters, insurance companies, real estate
investment trusts, or regulated investment companies; (c) U.S. Holders that are
broker-dealers, dealers, or traders in securities or currencies that elect to
apply a mark-to-market accounting method; (d) U.S. Holders that have a
“functional currency” other than the U.S. dollar; (e) U.S. Holders that own
common shares as part of a straddle, hedging transaction, conversion
transaction, constructive sale, or other arrangement involving more than one
position; (f) U.S. Holders that acquired common shares in connection with the
exercise of employee stock options or otherwise as compensation for services;
(g) U.S. Holders that hold common shares other than as a capital asset within
the meaning of Section 1221 of the Code (generally, property held for investment
purposes); or (h) U.S. Holders that own or have owned (directly, indirectly, or
by attribution) 10% or more of the total combined voting power of the
outstanding shares of the Company. This summary also does not address the U.S.
federal income tax considerations applicable to U.S. Holders who are: (a) U.S.
expatriates or former long-term residents of the U.S.; (b) persons that have
been, are, or will be a resident or deemed to be a resident in Canada for
purposes of the Income Tax Act (Canada) (the “Tax Act”); (c) persons that use or
hold, will use or hold, or that are or will be deemed to use or hold common
shares in connection with carrying on a business in Canada; (d) persons whose
common shares constitute “taxable Canadian property” under the Tax Act; or (e)
persons that have a permanent establishment in Canada for the purposes of the
Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, U.S. Holders described
immediately above, should consult their own tax advisor regarding the U.S.
federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S.
state and local, and foreign tax consequences relating to the acquisition,
ownership and disposition of common shares.
If an entity or arrangement that is classified as a partnership
(or other “pass-through” entity) for U.S. federal income tax purposes holds
common shares, the U.S. federal income tax consequences to such entity and the
partners (or other owners) of such entity generally will depend on the
activities of the entity and the status of such partners (or owners). This
summary does not address the tax consequences to any such owner. Partners (or
other owners) of entities or arrangements that are classified as partnerships or
as “pass-through” entities for U.S. federal income tax purposes should consult
their own tax advisors regarding the U.S. federal income tax consequences
arising from and relating to the acquisition, ownership, and disposition of
common shares.
Passive Foreign Investment Company Rules
If the Company were to constitute a “passive foreign investment
company” under the meaning of Section 1297 of the Code (a “PFIC”, as defined
below) for any year during a U.S. Holder’s holding period, then certain
potentially adverse rules will affect the U.S. federal income tax consequences
to a U.S. Holder resulting from the acquisition, ownership and disposition of
common shares. The Company believes that it was classified as a PFIC during the
tax year ended July 31, 2012, and may be a PFIC in future tax years. The
determination of whether any corporation was, or will be, a PFIC for a tax year
depends, in part, on the application of complex U.S. federal income tax rules,
which are subject to differing interpretations. In addition, whether any
corporation will be a PFIC for any tax year depends on the assets and income of
such corporation over the course of each such tax year and, as a result, cannot
be predicted with certainty as of the date of this document. Accordingly, there
can be no assurance that the IRS will not challenge any determination made by
the Company (or any subsidiary of the Company) concerning its PFIC status. Each
U.S. Holder should consult its own tax advisor regarding the PFIC status of the
Company and any subsidiary of the Company.
In addition, in any year in which the Company is classified as
a PFIC, such holder would be required to file an annual report with the IRS
containing such information as Treasury Regulations and/or other IRS guidance
may require. U.S. Holders should consult their own tax advisors regarding the
requirements of filing such information returns under these rules, including the
requirement to file a IRS Form 8621.
PFIC Status of the Company
The Company generally will be a PFIC if, for a tax year, (a)
75% or more of the gross income of the Company is passive income (the “income
test”) or (b) 50% or more of the value of the Company’s assets either produce
passive income or are held for the production of passive income, based on the
quarterly average of the fair market value of such assets (the “asset test”).
“Gross income” generally includes all sales revenues less the cost of goods
sold, plus income from investments and from incidental or outside operations or
sources, and “passive income” generally includes, for example, dividends,
interest, certain rents and royalties, certain gains from the sale of stock and
securities, and certain gains from commodities transactions.
49
Active business gains arising from the sale of commodities
generally are excluded from passive income if substantially all (85% or more) of
a foreign corporation’s commodities are stock in trade or inventory, depreciable
property used in a trade or business, or supplies regularly used or consumed in
a trade or business and certain other requirements are satisfied.
For purposes of the PFIC income test and asset test described
above, if the Company owns, directly or indirectly, 25% or more of the total
value of the outstanding shares of another corporation, the Company will be
treated as if it (a) held a proportionate share of the assets of such other
corporation and (b) received directly a proportionate share of the income of
such other corporation. In addition, for purposes of the PFIC income test and
asset test described above, and assuming certain other requirements are met,
“passive income” does not include certain interest, dividends, rents, or
royalties that are received or accrued by the Company from certain “related
persons” (as defined in Section 954(d)(3) of the Code), to the extent such items
are properly allocable to the income of such related person that is not passive
income.
Under certain attribution rules, if the Company is a PFIC, U.S.
Holders will generally be deemed to own their proportionate share of the
Company’s direct or indirect equity interest in any company that is also a PFIC
(a ‘‘Subsidiary PFIC’’), and will be subject to U.S. federal income tax on their
proportionate share of (a) any “excess distributions,” as described below, on
the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of
the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both
as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In
addition, U.S. Holders may be subject to U.S. federal income tax on any indirect
gain realized on the stock of a Subsidiary PFIC on the sale or disposition of
common shares. Accordingly, U.S. Holders should be aware that they could be
subject to tax even if no distributions are received and no redemptions or other
dispositions of common shares are made.
Default PFIC Rules Under Section 1291 of the Code
If the Company is a PFIC for any tax year during which a U.S.
Holder owns common shares, the U.S. federal income tax consequences to such U.S.
Holder of the acquisition, ownership, and disposition of common shares will
depend on whether and when such U.S. Holder makes an election to treat the
Company and each Subsidiary PFIC, if any, as a “qualified electing fund” or
“QEF” under Section 1295 of the Code (a “QEF Election”) or makes a
mark-to-market election under Section 1296 of the Code (a “Mark-to-Market
Election”). A U.S. Holder that does not make either a QEF Election or a
Mark-to-Market Election will be referred to in this summary as a “Non-Electing
U.S. Holder.”
A Non-Electing U.S. Holder will be subject to the rules of
Section 1291 of the Code (described below) with respect to (a) any gain
recognized on the sale or other taxable disposition of common shares and (b) any
excess distribution received on the common shares. A distribution generally will
be an “excess distribution” to the extent that such distribution (together with
all other distributions received in the current tax year) exceeds 125% of the
average distributions received during the three preceding tax years (or during a
U.S. Holder’s holding period for the common shares, if shorter).
Under Section 1291 of the Code, any gain recognized on the sale
or other taxable disposition of common shares (including an indirect disposition
of the stock of any Subsidiary PFIC), and any “excess distribution” received on
common shares or with respect to the stock of a Subsidiary PFIC, must be ratably
allocated to each day in a Non-Electing U.S. Holder’s holding period for the
respective common shares. The amount of any such gain or excess distribution
allocated to the tax year of disposition or distribution of the excess
distribution and to years before the entity became a PFIC, if any, would be
taxed as ordinary income. The amounts allocated to any other tax year would be
subject to U.S. federal income tax at the highest tax rate applicable to
ordinary income in each such year, and an interest charge would be imposed on
the tax liability for each such year, calculated as if such tax liability had
been due in each such year. A Non-Electing U.S. Holder that is not a corporation
must treat any such interest paid as “personal interest,” which is not
deductible.
If the Company is a PFIC for any tax year during which a
Non-Electing U.S. Holder holds common shares, the Company will continue to be
treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of
whether the Company ceases to be a PFIC in one or more subsequent tax years. A
Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to
recognize gain (which will be taxed under the rules of Section 1291 of the Code
discussed above), but not loss, as if such common shares were sold on the last
day of the last tax year for which the Company was a PFIC.
50
QEF Election
A U.S. Holder that makes a timely and effective QEF Election
for the first tax year in which its holding period of its common shares begins
generally will not be subject to the rules of Section 1291 of the Code discussed
above with respect to its common shares. A U.S. Holder that makes a timely and
effective QEF Election will be subject to U.S. federal income tax on such U.S.
Holder’s pro rata share of (a) the net capital gain of the Company, which will
be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary
earnings of the Company, which will be taxed as ordinary income to such U.S.
Holder. Generally, “net capital gain” is the excess of (a) net long-term capital
gain over (b) net short-term capital loss, and “ordinary earnings” are the
excess of (a) “earnings and profits” over (b) net capital gain. A U.S. Holder
that makes a QEF Election will be subject to U.S. federal income tax on such
amounts for each tax year in which the Company is a PFIC, regardless of whether
such amounts are actually distributed to such U.S. Holder by the Company.
However, for any tax year in which the Company is a PFIC and has no net income
or gain, U.S. Holders that have made a QEF Election would not have any income
inclusions as a result of the QEF Election. If a U.S. Holder that made a QEF
Election has an income inclusion, such a U.S. Holder may, subject to certain
limitations, elect to defer payment of current U.S. federal income tax on such
amounts, subject to an interest charge. If such U.S. Holder is not a
corporation, any such interest paid will be treated as “personal interest,”
which is not deductible.
A U.S. Holder that makes a timely and effective QEF Election
with respect to the Company generally (a) may receive a tax-free distribution
from the Company to the extent that such distribution represents “earnings and
profits” of the Company that were previously included in income by the U.S.
Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax
basis in the common shares to reflect the amount included in income or allowed
as a tax-free distribution because of such QEF Election. In addition, a U.S.
Holder that makes a QEF Election generally will recognize capital gain or loss
on the sale or other taxable disposition of common shares.
The procedure for making a QEF Election, and the U.S. federal
income tax consequences of making a QEF Election, will depend on whether such
QEF Election is timely. A QEF Election will be treated as “timely” if such QEF
Election is made for the first year in the U.S. Holder’s holding period for the
common shares in which the Company was a PFIC. A U.S. Holder may make a timely
QEF Election by filing the appropriate QEF Election documents at the time such
U.S. Holder files a U.S. federal income tax return for such year. If a U.S.
Holder does not make a timely and effective QEF Election for the first year in
the U.S. Holder’s holding period for the common shares, the U.S. Holder may
still be able to make a timely and effective QEF Election in a subsequent year
if such U.S. Holder meets certain requirements and makes a “purging” election to
recognize gain (which will be taxed under the rules of Section 1291 of the Code
discussed above) as if such common shares were sold for their fair market value
on the day the QEF Election is effective. If a U.S. Holder owns PFIC stock
indirectly through another PFIC, separate QEF Elections must be made for the
PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC
for the QEF rules to apply to both PFICs.
A QEF Election will apply to the tax year for which such QEF
Election is timely made and to all subsequent tax years, unless such QEF
Election is invalidated or terminated or the IRS consents to revocation of such
QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax
year, the Company ceases to be a PFIC, the QEF Election will remain in effect
(although it will not be applicable) during those tax years in which the Company
is not a PFIC. Accordingly, if the Company becomes a PFIC in another subsequent
tax year, the QEF Election will be effective and the U.S. Holder will be subject
to the QEF rules described above during any subsequent tax year in which the
Company qualifies as a PFIC.
U.S. Holders should be aware that there can be no assurances
that the Company will satisfy the record keeping requirements that apply to a
QEF, or that the Company will supply U.S. Holders with information that such
U.S. Holders are required to report under the QEF rules, in the event that the
Company is a PFIC. Thus, U.S. Holders may not be able to make a QEF Election
with respect to their common shares. Each U.S. Holder should consult its own tax
advisor regarding the availability of, and procedure for making, a QEF
Election.
A U.S. Holder makes a QEF Election by attaching a completed IRS
Form 8621, including a PFIC Annual Information Statement, to a timely filed
United States federal income tax return. However, if the Company cannot provide
the required information with regard to the Company or any of its Subsidiary
PFICs, U.S. Holders will not be able to make a QEF Election for such entity and
will continue to be subject to the rules discussed above that apply to
Non-Electing U.S. Holders with respect to the taxation of gains and excess
distributions.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market Election only if the
common shares are marketable stock. The common shares generally will be
“marketable stock” if the common shares are regularly traded on (a) a national securities exchange that is registered with the
Securities and Exchange Commission, (b) the national market system established
pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a
foreign securities exchange that is regulated or supervised by a governmental
authority of the country in which the market is located, provided that (i) such
foreign exchange has trading volume, listing, financial disclosure, and
surveillance requirements, and meets other requirements and the laws of the
country in which such foreign exchange is located, together with the rules of
such foreign exchange, ensure that such requirements are actually enforced and
(ii) the rules of such foreign exchange effectively promote active trading of
listed stocks. If such stock is traded on such a qualified exchange or other
market, such stock generally will be “regularly traded” for any calendar year
during which such stock is traded, other than in de minimis quantities, on at
least 15 days during each calendar quarter
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A U.S. Holder that makes a Mark-to-Market Election with respect
to its common shares generally will not be subject to the rules of Section 1291
of the Code discussed above with respect to such common shares. However, if a
U.S. Holder does not make a Mark-to-Market Election beginning in the first tax
year of such U.S. Holder’s holding period for the common shares or such U.S.
Holder has not made a timely QEF Election, the rules of Section 1291 of the Code
discussed above will apply to certain dispositions of, and distributions on, the
common shares.
A U.S. Holder that makes a Mark-to-Market Election will include
in ordinary income, for each tax year in which the Company is a PFIC, an amount
equal to the excess, if any, of (a) the fair market value of the common shares,
as of the close of such tax year over (b) such U.S. Holder’s tax basis in such
common shares. A U.S. Holder that makes a Mark-to-Market Election will be
allowed a deduction in an amount equal to the excess, if any, of (a) such U.S.
Holder’s adjusted tax basis in the common shares, over (b) the fair market value
of such common shares (but only to the extent of the net amount of previously
included income as a result of the Mark-to-Market Election for prior tax
years).
A U.S. Holder that makes a Mark-to-Market Election generally
also will adjust such U.S. Holder’s tax basis in the common shares to reflect
the amount included in gross income or allowed as a deduction because of such
Mark-to-Market Election. In addition, upon a sale or other taxable disposition
of common shares, a U.S. Holder that makes a Mark-to-Market Election will
recognize ordinary income or ordinary loss (not to exceed the excess, if any, of
(a) the amount included in ordinary income because of such Mark-to-Market
Election for prior tax years over (b) the amount allowed as a deduction because
of such Mark-to-Market Election for prior tax years). Losses that exceed this
limitation are subject to the rules generally applicable to losses provided in
the Code and Treasury Regulations.
A Mark-to-Market Election applies to the tax year in which such
Mark-to-Market Election is made and to each subsequent tax year, unless the
common shares cease to be “marketable stock” or the IRS consents to revocation
of such election. Each U.S. Holder should consult its own tax advisor regarding
the availability of, and procedure for making, a Mark-to-Market Election.
Although a U.S. Holder may be eligible to make a Mark-to-Market
Election with respect to the common shares, no such election may be made with
respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as
owning, because such stock is not marketable. Hence, the Mark-to-Market Election
will not be effective to eliminate the application of the default rules of
Section 1291 of the Code described above with respect to deemed dispositions of
Subsidiary PFIC stock or excess distributions from a Subsidiary PFIC.
Other PFIC Rules
Under Section 1291(f) of the Code, the IRS has issued proposed
Treasury Regulations that, subject to certain exceptions, would cause a U.S.
Holder that had not made a timely QEF Election to recognize gain (but not loss)
upon certain transfers of common shares that would otherwise be tax-deferred
(e.g., gifts and exchanges pursuant to corporate reorganizations). However, the
specific U.S. federal income tax consequences to a U.S. Holder may vary based on
the manner in which common shares are transferred.
Certain additional adverse rules may apply with respect to a
U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder
makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S.
Holder that uses common shares as security for a loan will, except as may be
provided in Treasury Regulations, be treated as having made a taxable
disposition of such common shares.
Special rules also apply to the amount of foreign tax credit
that a U.S. Holder may claim on a distribution from a PFIC. Subject to such
special rules, foreign taxes paid with respect to any distribution in respect of
stock in a PFIC are generally eligible for the foreign tax credit. The rules
relating to distributions by a PFIC and their eligibility for the foreign tax
credit are complicated, and a U.S. Holder should consult with its own tax
advisor regarding the availability of the foreign tax credit with respect to
distributions by a PFIC.
52
The PFIC rules are complex, and each U.S. Holder should consult
its own tax advisor regarding the PFIC rules and how the PFIC rules may affect
the U.S. federal income tax consequences of the acquisition, ownership, and
disposition of common shares.
Ownership and Disposition of Common Shares
The following discussion is subject to the rules described
above under the heading “Passive Foreign Investment Company Rules.”
Distributions on Common Shares
A U.S. Holder that receives a distribution, including a
constructive distribution, with respect to a common share will be required to
include the amount of such distribution in gross income as a dividend (without
reduction for any Canadian income tax withheld from such distribution) to the
extent of the current or accumulated “earnings and profits” of the Company, as
computed for U.S. federal income tax purposes. A dividend generally will be
taxed to a U.S. Holder at ordinary income tax rates if the Company is a PFIC. To
the extent that a distribution exceeds the current and accumulated “earnings and
profits” of the Company, such distribution will be treated first as a tax-free
return of capital to the extent of a U.S. Holder's tax basis in the common
shares and thereafter as gain from the sale or exchange of such common shares.
(See “ Sale or Other Taxable Disposition of common shares” below). However, the
Company may not maintain the calculations of earnings and profits in accordance
with U.S. federal income tax principles, and each U.S. Holder should therefore
assume that any distribution by the Company with respect to the common shares
will constitute ordinary dividend income. Dividends received on common shares
generally will not be eligible for the “dividends received deduction”. In
addition, the Company does not anticipate that its distributions will constitute
qualified dividend income eligible for the preferential tax rates applicable to
long-term capital gains. The dividend rules are complex, and each U.S. Holder
should consult its own tax advisor regarding the application of such rules.
Sale or Other Taxable Disposition of Common Shares
Upon the sale or other taxable disposition of common shares, a
U.S. Holder generally will recognize capital gain or loss in an amount equal to
the difference between the U.S. dollar value of cash received plus the fair
market value of any property received and such U.S. Holder's tax basis in such
common shares sold or otherwise disposed of. A U.S. Holder’s tax basis in common
shares generally will be such holder’s U.S. dollar cost for such common shares.
Gain or loss recognized on such sale or other disposition generally will be
long-term capital gain or loss if, at the time of the sale or other disposition,
the common shares have been held for more than one year.
Preferential tax rates currently apply to long-term capital
gain of a U.S. Holder that is an individual, estate, or trust. There are
currently no preferential tax rates for long-term capital gain of a U.S. Holder
that is a corporation. Deductions for capital losses are subject to significant
limitations under the Code.
Additional Considerations
Additional Tax on Passive Income
For tax years beginning after December 31, 2012, certain
individuals, estates and trusts whose income exceeds certain thresholds will be
required to pay a 3.8% Medicare surtax on “net investment income” including,
among other things, dividends and net gain from dispositions of property (other
than property held in a trade or business). U.S. Holders should consult with
their own tax advisors regarding the effect, if any, of this tax on their
ownership and disposition of common shares.
Receipt of Foreign Currency
The amount of any distribution paid to a U.S. Holder in foreign
currency, or on the sale, exchange or other taxable disposition of common
shares, generally will be equal to the U.S. dollar value of such foreign
currency based on the exchange rate applicable on the date of receipt
(regardless of whether such foreign currency is converted into U.S. dollars at
that time). A U.S. Holder will have a basis in the foreign currency equal to its
U.S. dollar value on the date of receipt. Any U.S. Holder who converts or
otherwise disposes of the foreign currency after the date of receipt may have a
foreign currency exchange gain or loss that would be treated as ordinary income
or loss, and generally will be U.S. source income or loss for foreign tax credit
purposes. Each U.S. Holder should consult its own U.S. tax advisor regarding the
U.S. federal income tax consequences of receiving, owning, and disposing of
foreign currency.
Foreign Tax Credit
Subject to the PFIC rules discussed above, a U.S. Holder that
pays (whether directly or through withholding) Canadian income tax with respect
to dividends paid on the common shares generally will be entitled, at the
election of such U.S. Holder, to receive either a deduction or a credit for such
Canadian income tax. Generally, a credit will reduce a U.S. Holder’s
U.S. federal income tax liability on a dollar-for-dollar basis, whereas a
deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax.
This election is made on a year-by-year basis and applies to all foreign taxes
paid (whether directly or through withholding) by a U.S. Holder during a
year.
53
Complex limitations apply to the foreign tax credit, including
the general limitation that the credit cannot exceed the proportionate share of
a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s
“foreign source” taxable income bears to such U.S. Holder’s worldwide taxable
income. In applying this limitation, a U.S. Holder’s various items of income and
deduction must be classified, under complex rules, as either “foreign source” or
“U.S. source.” Generally, dividends paid by a foreign corporation should be
treated as foreign source for this purpose, and gains recognized on the sale of
stock of a foreign corporation by a U.S. Holder should be treated as U.S. source
for this purpose, except as otherwise provided in an applicable income tax
treaty, and if an election is properly made under the Code. However, the amount
of a distribution with respect to the common shares that is treated as a
“dividend” may be lower for U.S. federal income tax purposes than it is for
Canadian federal income tax purposes, resulting in a reduced foreign tax credit
allowance to a U.S. Holder. In addition, this limitation is calculated
separately with respect to specific categories of income. The foreign tax credit
rules are complex, and each U.S. Holder should consult its own U.S. tax advisor
regarding the foreign tax credit rules.
Backup Withholding and Information Reporting
Under U.S. federal income tax law and Treasury Regulations,
certain categories of U.S. Holders must file information returns with respect to
their investment in, or involvement in, a foreign corporation. For example,
recently enacted legislation generally imposes new U.S. return disclosure
obligations (and related penalties) on individuals who are U.S. Holders that
hold certain specified foreign financial assets in excess of $50,000. The
definition of specified foreign financial assets includes not only financial
accounts maintained in foreign financial institutions, but also, unless held in
accounts maintained by a financial institution, any stock or security issued by
a non-U.S. person, any financial instrument or contract held for investment that
has an issuer or counterparty other than a U.S. person and any interest in a
foreign entity. U.S. Holders may be subject to these reporting requirements
unless their common shares are held in an account at a domestic financial
institution. Penalties for failure to file certain of these information returns
are substantial. U.S. Holders should consult with their own tax advisors
regarding the requirements of filing information returns, including the
requirement to file an IRS Form 8938.
Payments made within the U.S. or by a U.S. payor or U.S.
middleman, of dividends on, and proceeds arising from the sale or other taxable
disposition of, common shares will generally be subject to information reporting
and backup withholding tax, at the rate of 28% (and increasing to 31% for
payments made after December 31, 2012), if a U.S. Holder (a) fails to furnish
such U.S. Holder’s correct U.S. taxpayer identification number (generally on
Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c)
is notified by the IRS that such U.S. Holder has previously failed to properly
report items subject to backup withholding tax, or (d) fails to certify, under
penalty of perjury, that such U.S. Holder has furnished its correct U.S.
taxpayer identification number and that the IRS has not notified such U.S.
Holder that it is subject to backup withholding tax. However, certain exempt
persons generally are excluded from these information reporting and backup
withholding rules. Backup withholding is not an additional tax. Any amounts
withheld under the U.S. backup withholding tax rules will be allowed as a credit
against a U.S. Holder’s U.S. federal income tax liability, if any, or will be
refunded, if such U.S. Holder furnishes required information to the IRS in a
timely manner. Each U.S. Holder should consult its own tax advisor regarding the
information reporting and backup withholding rules
.
|
F.
|
Dividends and Paying
Agents
|
Not applicable.
Not applicable.
Exhibits attached to this Form 20-F are also available for
viewing on EDGAR at
http://www.sec.gov/
, or at the offices of the
Company, 15
th
Floor - 1040 West Georgia Street, Vancouver, British
Columbia V6E 4H1 or on request of the Company at 604-684-6365, attention:
Investor Relations Department. Copies of the Company's IFRS financial statements
and other continuous disclosure documents required under the British Columbia
Securities Act are available for viewing on the internet at
www.sedar.com
.
|
I.
|
Subsidiary Information
|
Not applicable.
54
|
ITEM 11
|
QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
A.
|
Transaction Risk and Currency Risk
Management
|
The Company is exposed in varying degrees to a variety of
financial instrument related risks. The Board approves and monitors the risk
management processes, inclusive of documented treasury policies, counterparty
limits, and controlling and reporting structures.
|
B.
|
Exchange Rate Sensitivity
|
The Company incurs substantially all of its expenditures in
Canada and substantially all of its cash and cash equivalents held are
denominated in Canadian dollars. Consequently the Company is not subject to
material foreign exchange risk.
|
C.
|
Interest Rate Risk and Equity Price
Risk
|
The Company is subject to interest rate risk with respect to
its investments in cash and cash equivalents. The Company's policy is to invest
cash at fixed rates of interest and cash reserves are to be maintained in cash
and cash equivalents in order to maintain liquidity, while achieving a
satisfactory return for shareholders. Fluctuations in interest rates when the
cash and cash equivalents mature impact interest income earned.
As at July 31, 2012 the Company held cash and cash equivalents
in financial institutions in the amount of $2,450,451 (2011 - $78,652).
While the value of the Company's resource properties, if any,
can always be said to relate to the price of precious metals and the outlook for
same, the Company does not have any resource properties or operating mines and
hence does not have any hedging or other commodity based operational risks
respecting to its business activities.
|
ITEM 12
|
DESCRIPTION OF
SECURITIES OTHER THAN EQUITY SECURITIES
|
Not applicable.
|
ITEM 13
|
DEFAULTS, DIVIDEND
ARREARAGES AND DELINQUENCIES
|
Not applicable.
|
ITEM 14
|
MATERIAL MODIFICATIONS
TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS
|
Not applicable.
|
ITEM 15
|
CONTROLS AND
PROCEDURES
|
Disclosure Controls and Procedures
At the end of the period covered by this annual report on Form
20-F, an evaluation was carried out with the participation of the Company's
management, including the President and Chief Executive Officer ("CEO") and the
Chief Financial Officer ("CFO"), of the effectiveness of the Company's
disclosure controls and procedures (as defined in Rules 13a – 15(e) and 15d
–15(e) under the
Securities Exchange Act of 1934
, as amended (the
"Exchange Act")). Based on that evaluation, the President and CEO and the CFO
have concluded that as of the end of the period covered by this annual report on
Form 20-F, the Company's disclosure controls and procedures were effective in
providing reasonable assurance that: (i) information required to be disclosed by
the Company in reports that it files or submits to the SEC under the Exchange
Act was recorded, processed, summarized and reported within the time periods
specified in applicable rules and forms, and (ii) material information required
to be disclosed in the Company's reports filed under the Exchange Act was
accumulated and communicated to the Company's management, including the
President and CEO and the CFO, as appropriate, to allow for accurate and timely
decisions regarding required disclosure.
55
Management's Annual Report on Internal Control over
Financial Reporting
The Company's management, including the President and CEO and
CFO, is responsible for establishing and maintaining adequate internal control
over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. The Company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation and fair presentation of financial
statements for external purposes in accordance with IFRS. The Company's internal
control over financial reporting includes those policies and procedures that:
-
pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets
of the Company;
-
provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with IFRS, and
that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and
-
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets that
could have a material effect on the financial statements.
With the participation of the President and CEO and CFO,
management conducted an evaluation of the design and operation of the Company's
internal control over financial reporting as of July 31, 2012, based on the
criteria set forth in
Internal Control – Integrated Framework
issued by
the Committee of Sponsoring Organizations of the Treadway Commission. This
evaluation included review of the documentation of controls, evaluation of the
design effectiveness of controls, testing of the operating effectiveness of
controls and a conclusion on this evaluation. Based on this evaluation,
management concluded in its report that the Company's internal control over
financial reporting was effective as of July 31, 2012.
This annual report does not include an attestation report of
the Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to rules that permit the
Company to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
During the period covered by this annual report on Form 20-F,
no changes occurred in the Company's internal control over financial reporting
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.
Limitations of Controls and Procedures
The Company's management, including its President and CEO and
CFO, does not expect that its disclosure controls and procedures or internal
controls and procedures will prevent all errors and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls is also based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
|
ITEM 16A
|
AUDIT COMMITTEE
FINANCIAL EXPERT
|
The members of the Audit and Risk Committee are James Kerr,
David Mordant and Gordon J. Fretwell. The Board of Directors has determined that
Mr. Kerr qualifies as a "financial expert" under the rules of the Securities and
Exchange Commission, based on his education and experience. Messrs. Kerr,
Mordant and Fretwell are "independent", as that term is defined in section 803
of the NYSE Amex Company Guide. Mr. Kerr is an accredited Chartered Accountant
in Canada.
Each Audit and Risk Committee member is able to read and
understand fundamental financial statements.
56
The Company's board of directors has adopted a written Code of
Ethics governing directors, officers and employees. The Code of Ethics sets
forth written standards that are designed to deter wrongdoing and to meet the
Company's core vision: to become a successful and innovative mining and mineral
exploration corporation.
In order to achieve the Company's vision the following values
are to be included in all activities:
|
|
a)
|
Responsibly explore for and develop mineral
resources;
|
|
|
b)
|
Be respectful of the environment;
|
|
|
c)
|
Be an industry leader and participate in industry
organizations devoted to improving the industry;
|
|
|
d)
|
Be a strong and honest competitor;
|
|
|
e)
|
Be a responsible corporate citizen and contribute to the
community;
|
|
|
f)
|
Deal fairly with our customers, suppliers and joint
venture participants;
|
|
|
g)
|
Provide a safe and rewarding work environment;
and
|
|
|
h)
|
Deliver value to shareholders.
|
The board of directors monitors compliance with the Code of
Ethics by ensuring that all Company personnel have read and understood the Code
of Ethics, and by charging management with bringing to the attention of the
board of directors any issues that arise with respect to the Code of Ethics.
A copy of the Code of Ethics was filed with the Securities and
Exchange Commission as an exhibit to the Company's Annual Report filed on Form
20-F for the fiscal year ended July 31, 2005 and is available at
www.sec.gov
. The Company will also provide a copy of the Code of Ethics
to any person without charge, upon request. Requests can be sent by mail to:
15th Floor, 1040 West Georgia Street, Vancouver, British Columbia, Canada, V6E
4H8; or submitted by telephone at 604-684-6365, attention: Investor Relations
Department.
During the most recently completed fiscal year, the Company has
neither: (a) amended its Code of Ethics; nor (b) granted any waiver (including
any implicit waiver) form any provision of its Code of Ethics.
|
ITEM 16C
|
PRINCIPAL ACCOUNTANT
FEES AND SERVICES
|
The following table discloses the aggregate fees billed for
each of the last two fiscal years for professional services rendered by the
Company's audit firm, Davidson & Company LLP for various services.
|
Services:
|
Year ended
|
|
|
July 31, 2012
|
July 31, 2011
|
|
Audit Fees
(1)
|
$ 32,750
|
$ 24,000
|
|
Audit Related Fees
(2)
|
–
|
–
|
|
Tax Fees
(3)
|
$ 10,000
|
$ 3,000
|
|
All Other Fees
(4)
|
–
|
–
|
|
|
$ 42,750
|
$ 27,000
|
Notes:
(1) "Audit Fees" include fees necessary to perform the annual
audit and quarterly reviews of the Company's consolidated financial statements.
Audit Fees include fees for review of tax provisions and for accounting
consultations on matters reflected in the financial statements. Audit Fees also
include audit or other attest services required by legislation or regulation,
such as comfort letters, consents, reviews of securities filings and statutory
audits.
(2) "Audit-Related Fees" include services that are
traditionally performed by the auditor. These audit-related services include
employee benefit audits, due diligence assistance, accounting consultations on
proposed transactions, internal control reviews and audit or attest services not
required by legislation or regulation.
(3) "Tax Fees" include fees billed for professional services
rendered by the principal accountant for tax compliance, tax advice, and tax
planning.
(4) "All Other Fees" include fees billed for products and
services provided by the principal accountant, other than the services reported
in (1), (2) or (3) above.
From time to time, management of the Company recommends to and
requests approval from the Audit and Risk Committee for non-audit services to be
provided by the Company's auditors. The Audit and Risk Committee routinely
considers such requests at committee meetings, and if acceptable to a majority
of the Audit and Risk Committee members, pre-approves such non-audit services by
a resolution authorizing management to engage the Company's auditors for such
non-audit services, with set maximum dollar amounts for each itemized service.
During such deliberations, the Audit and Risk Committee assesses, among other
factors, whether the services requested would be considered "prohibited
services" as contemplated by the SEC, and whether the services requested and the
fees related to such services could impair the independence of the auditors. No
material non-audit services were provided by the Company's auditors during the
year ended July 31, 2012.
57
|
ITEM 16D
|
EXEMPTIONS FROM LISTING
STANDARDS FOR AUDIT COMMITTEES
|
Not applicable.
|
ITEM 16E
|
PURCHASES OF EQUITY
SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
|
During the year ended July 31, 2012, the Company did not
purchase any of its issued and outstanding common shares pursuant to any
repurchase program or otherwise.
|
|
|
|
ITEM 16F
|
CHANGE IN REGISTRANT'S
CERTIFYING ACCOUNTANT
|
None.
|
ITEM 16G
|
CORPORATE GOVERNANCE
|
Not applicable.
|
ITEM 17
|
FINANCIAL STATEMENTS
|
The following attached financial statements are incorporated
herein:
-
Independent Auditor’s Report, dated November 22, 2012;
-
Statements of financial position as at July 31, 2012, July 31, 2011 and
August 1, 2011;
-
Statements of comprehensive loss for the years ended July 31, 2012 and
July 31, 2011;
-
Statements of cash flows for the years ended July 31, 2012 and July 31,
2011;
-
Statements of changes in equity for the years ended July 31, 2012 and July
31, 2011;
-
Notes to annual financial statements
58
QUARTZ MOUNTAIN RESOURCES LTD.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JULY 31, 2012 AND 2011
(Expressed in Canadian Dollars, unless otherwise stated)
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Quartz Mountain Resources Ltd.
We have audited the accompanying consolidated financial
statements of Quartz Mountain Resources Ltd., which comprise the consolidated
balance sheets as at July 31, 2012, July 31, 2011 and August 1, 2010 and the
consolidated statements of loss and comprehensive loss, changes in equity and
cash flows for the years ended July 31, 2012 and July 31, 2011, and 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.
Auditors’ 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 comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including
the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk
assessments, the auditors consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness
of accounting 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, these consolidated financial statements present
fairly, in all material respects, the financial position of Quartz Mountain
Resources Ltd. as at July 31, 2012, July 31, 2011 and August 1, 2010 and its
financial performance and its cash flows for the years ended July 31, 2012 and
July 31, 2011 in accordance with International Financial Reporting Standards, as
issued by the International Accounting Standards Board.
|
|
“DAVIDSON
&
COMPANY LLP”
|
|
|
|
|
Vancouver, Canada
|
Chartered Accountants
|
|
|
|
|
November 22, 2012
|
|
|
QUARTZ MOUNTAIN RESOURCES LTD.
|
|
Consolidated Balance Sheets
|
|
(Expressed in Canadian Dollars (note 2))
|
|
|
|
July 31
|
|
|
July 31
|
|
|
August 1
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
Restated
|
|
|
Restated
|
|
|
|
|
|
|
|
(notes 2 and 15
|
)
|
|
(notes 2 and 15
|
)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (note 4
(a))
|
$
|
2,450,451
|
|
$
|
78,652
|
|
$
|
258,526
|
|
|
Amounts
receivable and other assets (note 5)
|
|
292,837
|
|
|
20,577
|
|
|
13,291
|
|
|
Total current assets
|
|
2,743,288
|
|
|
99,229
|
|
|
271,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral property interests (note 6)
|
|
1
|
|
|
1
|
|
|
1
|
|
|
Restricted
cash (note 4 (b))
|
|
78,000
|
|
|
–
|
|
|
–
|
|
|
Total non-current assets
|
|
78,001
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
2,821,289
|
|
$
|
99,230
|
|
$
|
271,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts payable and other liabilities
(note 8)
|
$
|
607,389
|
|
$
|
42,163
|
|
$
|
31,268
|
|
|
Flow-through share premium (note 9)
|
|
411,009
|
|
|
–
|
|
|
–
|
|
|
Due to related parties (note 10)
|
|
813,855
|
|
|
–
|
|
|
–
|
|
|
Total current
liabilities
|
|
1,832,253
|
|
|
42,163
|
|
|
31,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital (note 7)
|
$
|
24,514,381
|
|
$
|
29,407,744
|
|
$
|
29,407,744
|
|
|
Reserves (notes 2 and 7)
|
|
381,139
|
|
|
(331,903
|
)
|
|
(323,287
|
)
|
|
Accumulated
deficit
|
|
(23,906,484
|
)
|
|
(29,018,774
|
)
|
|
(28,843,907
|
)
|
|
Total shareholders' equity
|
|
989,036
|
|
|
57,067
|
|
|
240,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
$
|
2,821,289
|
|
$
|
99,230
|
|
$
|
271,818
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
|
James Kerr
|
Ronald W. Thiessen
|
|
Director
|
Director
|
|
QUARTZ MOUNTAIN RESOURCES LTD.
|
|
Consolidated Statements of Loss and
Comprehensive Loss
|
|
(Expressed in Canadian Dollars (note 2))
|
|
|
|
For the year ended July 31
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
Restated
|
|
|
|
|
|
|
|
(notes 2 and 15
|
)
|
|
Expenses (note 11):
|
|
|
|
|
|
|
|
Exploration and evaluation
|
$
|
2,246,650
|
|
$
|
–
|
|
|
Assays and
analysis
|
|
52,745
|
|
|
–
|
|
|
Engineering
|
|
8,400
|
|
|
–
|
|
|
Environmental
|
|
1,375
|
|
|
–
|
|
|
Geological
|
|
870,517
|
|
|
–
|
|
|
Graphics
|
|
13,006
|
|
|
–
|
|
|
Property payments
|
|
910,819
|
|
|
–
|
|
|
Site activities
|
|
143,544
|
|
|
–
|
|
|
Socio-economic
|
|
89,646
|
|
|
–
|
|
|
Transportation
|
|
100,914
|
|
|
–
|
|
|
Travel and accommodation
|
|
55,684
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
1,166,252
|
|
|
185,783
|
|
|
Conferences and
travel
|
|
31,357
|
|
|
–
|
|
|
Legal, accounting and audit
|
|
301,641
|
|
|
55,125
|
|
|
Office and
administration
|
|
70,140
|
|
|
19,784
|
|
|
Regulatory, trust and filing
|
|
48,659
|
|
|
36,090
|
|
|
Salaries and
benefits
|
|
686,358
|
|
|
72,798
|
|
|
Shareholder communications
|
|
28,097
|
|
|
1,986
|
|
|
|
|
|
|
|
|
|
|
Equity-settled
share-based payments (note 7 (d))
|
|
381,139
|
|
|
–
|
|
|
|
|
(3,794,041
|
)
|
|
(185,783
|
)
|
|
Flow-through share premium (note 9)
|
|
193,308
|
|
|
–
|
|
|
Interest income
|
|
13,067
|
|
|
1,598
|
|
|
Foreign exchange (loss) gain
|
|
(139
|
)
|
|
9,318
|
|
|
Loss before income tax
|
|
(3,587,805
|
)
|
|
(174,867
|
)
|
|
Income tax (note 13)
|
|
–
|
|
|
–
|
|
|
Loss for the year
|
|
(3,587,805
|
)
|
|
(174,867
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
Currency translation difference (note 2)
|
|
–
|
|
|
(8,616
|
)
|
|
Other comprehensive loss for the year
|
|
–
|
|
|
(8,616
|
)
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the year
|
$
|
(3,587,805
|
)
|
$
|
(183,483
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share (note 7(c))
|
$
|
(0.20
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding (note
7(c))
|
|
18,396,348
|
|
|
13,399,422
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
|
QUARTZ MOUNTAIN RESOURCES LTD.
|
|
Consolidated Statement of Changes in
Equity
|
|
(Expressed in Canadian Dollars (note 2))
|
|
|
|
Share Capital
|
|
|
Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
|
|
|
Equity-settled
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
reserve
|
|
|
share-based
|
|
|
Accumulated
|
|
|
shareholders'
|
|
|
|
|
Number
|
|
|
Amount
|
|
|
(note
2
|
)
|
|
payments
|
|
|
deficit
|
|
|
equity
|
|
|
Balance at August 1, 2010
|
|
13,399,422
|
|
$
|
29,407,744
|
|
$
|
(323,287
|
)
|
$
|
–
|
|
$
|
(28,843,907
|
)
|
$
|
240,550
|
|
|
Loss for the year
|
|
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
(174,867
|
)
|
|
(174,867
|
)
|
|
Currency translation difference (note 2)
|
|
|
|
|
–
|
|
|
(8,616
|
)
|
|
–
|
|
|
–
|
|
|
(8,616
|
)
|
|
Balance at July
31, 2011 (notes 2 and 15)
|
|
13,399,422
|
|
$
|
29,407,744
|
|
$
|
(331,903
|
)
|
$
|
–
|
|
$
|
(29,018,774
|
)
|
$
|
57,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2011
|
|
13,399,422
|
|
$
|
29,407,744
|
|
$
|
(331,903
|
)
|
$
|
–
|
|
$
|
(29,018,774
|
)
|
$
|
57,067
|
|
|
Functional
currency translation adjustment (note 2)
|
|
|
|
|
(9,031,998
|
)
|
|
331,903
|
|
|
–
|
|
|
8,700,095
|
|
|
–
|
|
|
Balance at August 1, 2011
|
|
13,399,422
|
|
|
20,375,746
|
|
|
–
|
|
|
–
|
|
|
(20,318,679
|
)
|
|
57,067
|
|
|
Loss for the year
|
|
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
(3,587,805
|
)
|
|
(3,587,805
|
)
|
|
Equity-settled share-based payments (note 7
(d))
|
|
|
|
|
–
|
|
|
–
|
|
|
381,139
|
|
|
–
|
|
|
381,139
|
|
|
Shares issued for cash, net of issuance costs (note 7 (b))
|
|
7,183,371
|
|
|
3,434,635
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
3,434,635
|
|
|
Shares issued for property option payment (note 6)
|
|
1,450,000
|
|
|
704,000
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
704,000
|
|
|
Balance at July
31, 2012
|
|
22,032,793
|
|
$
|
24,514,381
|
|
$
|
–
|
|
$
|
381,139
|
|
$
|
(23,906,484
|
)
|
$
|
989,036
|
|
The
accompanying
notes are an
integral
part of these
consolidated
financial
statements.
|
QUARTZ MOUNTAIN RESOURCES LTD.
|
|
Consolidated Statements of Cash
Flows
|
|
(Expressed in Canadian Dollars (note 2))
|
|
|
|
For the year ended July 31
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
Restated
|
|
|
|
|
|
|
|
(notes 2 and 15
|
)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Loss for the year
|
$
|
(3,587,805
|
)
|
$
|
(174,867
|
)
|
|
Adjusted for:
|
|
|
|
|
|
|
|
Foreign exchange
|
|
139
|
|
|
(9,318
|
)
|
|
Equity-settled share-based
payments (note 7 (d))
|
|
381,139
|
|
|
–
|
|
|
Flow-through share premium (note 9)
|
|
(193,308
|
)
|
|
–
|
|
|
Property option payments paid
through issuance of shares (note 6)
|
|
704,000
|
|
|
–
|
|
|
Restricted cash (note 4 (b))
|
|
(78,000
|
)
|
|
–
|
|
|
Changes in non-cash working capital items:
|
|
|
|
|
|
|
|
Amounts receivable and other assets
|
|
(272,260
|
)
|
|
(14,290
|
)
|
|
Amounts payable and other
liabilities
|
|
565,226
|
|
|
17,899
|
|
|
Due
to related parties
|
|
813,855
|
|
|
–
|
|
|
Net cash used in operating activities
|
|
(1,667,014
|
)
|
|
(180,576
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds from issuance of share capital, net of issue costs (note 7
(b))
|
|
4,038,952
|
|
|
–
|
|
|
Net cash provided by financing activities
|
|
4,038,952
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents
|
|
2,371,938
|
|
|
(180,576
|
)
|
|
Effect of exchange rate fluctuations on cash held
|
|
(139
|
)
|
|
702
|
|
|
|
|
2,371,799
|
|
|
(179,874
|
)
|
|
Cash and cash
equivalents, beginning of year
|
|
78,652
|
|
|
258,526
|
|
|
Cash and cash equivalents, end of year (note 4(a))
|
$
|
2,450,451
|
|
$
|
78,652
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
Non cash financing activities:
|
|
|
|
|
|
|
|
Property option payments paid through issuance of
shares (note 6)
|
|
704,000
|
|
|
–
|
|
|
|
$
|
704,000
|
|
$
|
–
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
1.
|
N
ATURE AND
C
ONTINUANCE OF
O
PERATIONS
|
|
|
|
|
|
Quartz Mountain Resources Ltd. ("Quartz Mountain" or the
"Company") is a Canadian public company incorporated in British Columbia
on August 3, 1982. The Company's corporate office is located at 1040 West
Georgia Street, 15th Floor, Vancouver, British Columbia, Canada. The
Company is primarily engaged in the acquisition and exploration of mineral
properties.
|
|
|
|
|
|
These consolidated financial statements (the "Financial
Statements") of the Company as at and for the year ended July 31, 2012
include Quartz Mountain Resources Ltd. and its subsidiary (together
referred to as the "Group" and individually as "Group entities"). Quartz
Mountain Resources Ltd. is the ultimate parent entity of the
Group.
|
|
|
|
|
|
The Company is in the process of acquiring and exploring
mineral property interests. The Company's continuing operations are
entirely dependent upon the existence of economically recoverable mineral
reserves, the ability of the Company to obtain the necessary financing to
complete the exploration and development of these projects, obtaining the
necessary permits to mine, on future profitable production of any mine and
the proceeds from the disposition of the mineral property
interests.
|
|
|
|
|
|
After the reporting period, on November 1, 2012, the
Company announced that it had entered into an agreement with a
publicly-listed company, Amarc Resources Ltd. ("Amarc") , whereby Amarc
would acquire a 40% beneficial joint venture interest in the Galaxie (note
16(a)) and ZNT properties for consideration of $2.0 million (note 16(c)).
The 40% interest will be earned by Amarc paying to Quartz Mountain $1.0
million in cash and also funding $1.0 million of exploration expenses
prior to December 31, 2012.
|
|
|
|
|
|
Management believes that its current liquid assets are
sufficient to meet all known obligations (note 14) and to maintain its
mineral rights in good standing for the next 12 month period. Additional
debt or equity financing will be required to fund additional exploration
or development programs. The Company has a reasonable expectation that
additional funds will be available when necessary to meet ongoing
exploration and development costs. However, there can be no assurance that
the Company will continue to obtain additional financial resources and/or
achieve profitability or positive cash flows. If the Company is unable to
obtain adequate additional financing, the Company will be required to
re-evaluate its planned expenditures until additional funds can be raised
through financing activities.
|
|
|
|
|
|
These Financial Statements do not include any adjustments
to the amounts and classification of assets and liabilities that may be
necessary should the Company be unable to continue as a going
concern.
|
|
|
|
|
2.
|
C
HANGE OF
P
RESENTATION AND
F
UNCTIONAL
C
URRENCY
|
|
|
|
|
|
Following the decision to acquire and explore mineral
property interests in Canada (note 6), the Company's cash flows were
anticipated to be principally denominated in Canadian dollars.
Accordingly, effective August 1, 2011, the Group changed both the
functional currency of the Company and the currency in which it presents
its consolidated financial statements, from United States dollars ("USD")
to Canadian dollars ("CAD").
|
|
|
|
|
|
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
A change in presentation currency is
accounted for as a change in accounting policy and is applied retrospectively,
as if the new presentation currency had always been the presentation currency.
Consequently, the comparative figures for the year ended July 31, 2011, and an
opening balance sheet at August 1, 2010 have been restated to be presented in
Canadian dollars using average exchange rates for income and expenses and the
closing rate at the balance sheet date for assets, liabilities and items related
to equity. Share capital and accumulated deficit have been translated using
historic rates. Resulting exchange differences have been recognized within
equity. In accordance with International Accounting Standards ("IAS") 1,
Presentation of Financial Statements, an additional balance sheet for the Group
and the Company has been presented as at August 1, 2010, together with the
related notes.
The exchange rates applied for
translation purposes were as follows:
|
|
Date or Period
|
|
Exchange Rate
|
|
|
|
As at July 31, 2011
|
|
1 CAD = 1.0466
USD
|
|
|
|
For the year ended July 31, 2011
|
|
1 CAD = 1.0057 USD
|
|
|
|
As
at August 1, 2010
|
|
1 CAD = 1.0239 USD
|
|
|
3.
|
S
IGNIFICANT
A
CCOUNTING
P
OLICIES
|
|
|
|
|
(a)
|
Statement of compliance
|
|
|
|
|
|
In 2010, Canadian accounting standards were revised to
incorporate International Financial Reporting Standards ("IFRS") as issued
by the International Accounting Standards Board ("IASB") and
interpretations of the International Financial Reporting Interpretations
Committee ("IFRIC"), and require publicly accountable enterprises to apply
IFRS effective for financial years beginning on or after January 1, 2011.
|
|
|
|
|
|
These Financial Statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") as
issued by the International Accounting Standards Board ("IASB") effective
for the Company's year ended July 31, 2012.
|
|
|
|
|
|
Issuance of these Financial Statements was authorized on
November 22, 2012 by the Board of Directors.
|
|
|
|
|
(b)
|
Basis of presentation
|
|
|
|
|
|
These Financial Statements have been prepared on a
historical cost basis. They have been prepared using the accrual basis of
accounting, except for cash flow information. The preparation of these
Financial Statements resulted in changes to the accounting policies as
presented in the most recent annual financial statements prepared under
Canadian Generally Accepted Accounting Principles ("CGAAP"). The
accounting policies set out below have been applied consistently to all
periods presented in these Financial Statements. They also have been
applied in preparing an opening IFRS balance sheet at August 1, 2010 for
the purposes of the transition to IFRS, as required by IFRS 1, First Time
Adoption of International Financial Reporting Standards ("IFRS 1"). The impact of the
transition from CGAAP to IFRS is described in note 15.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
(c)
|
Significant accounting estimates and
judgments
|
|
|
|
|
|
|
The preparation of Financial Statements in conformity
with IFRS requires management to make judgments, estimates and assumptions
that affect the application of policies and reported amounts of assets and
liabilities, income and expenses. Actual results may differ from these
estimates. The impacts of such estimates are pervasive throughout the
Financial Statements, and may require accounting adjustments based on
future occurrences. Revisions to accounting estimates are recognized in
the period in which the estimate is revised and future periods if the
revision affects both current and future periods. These estimates are
based on historical experience, current and future economic conditions and
other factors, including expectations of future events that are believed
to be reasonable under the circumstances. Specific areas where significant
estimates or judgments exist are:
|
|
|
|
|
|
|
Sources of estimation uncertainty:
|
|
|
|
|
|
|
|
Management determines costs for share-based payments
using market-based valuation techniques. The fair value of the
market-based and performance-based share awards are determined at the date
of grant using generally accepted valuation techniques. Assumptions are
made and judgment used in applying valuation techniques. These assumptions
and judgments include estimating the future volatility of the stock price,
expected dividend yield, future employee turnover rates and future
employee stock option exercise behaviors and corporate performance. Such
judgments and assumptions are inherently uncertain. Changes in these
assumptions affect the fair value estimates;
|
|
|
|
|
|
|
|
Provisions for income taxes are made using the best
estimate of the amount expected to be paid based on a qualitative
assessment of all relevant factors. The Company reviews the adequacy of
these provisions at the end of the reporting period. However, it is
possible that at some future date an additional liability could result
from audits by taxing authorities. Where the final outcome of these
tax-related matters is different from the amounts that were originally
recorded, such differences will affect the tax provisions in the period in
which such determination is made;
|
|
|
|
|
|
|
|
Valuation of shares issued in non-cash transactions are
measured at the fair value of the equity instruments granted based on
quoted market prices on the date of grant or per the terms of the
contract.
|
|
|
|
|
|
|
Critical accounting judgments:
|
|
|
|
|
|
|
|
The determination of categories of financial assets and
financial liabilities has been identified as an accounting policy which
involves judgments or assessments made by
management;
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
The classification of the option agreements in respect of
the Buck Property and Galaxie Property (including the Hotai Claims) as
earn-in agreements, as opposed to the acquisition of mineral property
interests, has been identified as an accounting policy which involves
judgments or assessments made by management. Currently a feasibility study
has not been completed on any of these properties to determine if the
properties are capable of supporting commercial production; consequently
the costs associated with these properties are expensed as
incurred;
|
|
|
|
|
|
|
|
Management is required to assess the functional currency
of each entity of the Company. In concluding that the Canadian dollar is
the functional currency of the parent and of its subsidiary, management
considered the currency that mainly influences the cost of providing goods
and services in each jurisdiction in which the Company
operates.
|
|
(d)
|
Basis of consolidation
|
|
|
|
|
|
These Financial Statements include the accounts of the
Company and its subsidiary. Subsidiaries are all entities over which the
Company has the power to govern the financial and operating policies
generally accompanying a shareholding of more than one half of the voting
rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether
the Group controls another entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. Inter-company
balances and transactions, including any unrealized income and expenses
arising from inter-company transactions, are eliminated on consolidation.
Unrealized losses are eliminated in the same way as unrealized gains, but
only to the extent that there is no impairment.
|
|
|
|
|
|
At July 31, 2012 and July 31, 2011 the Company held an
ownership interest in the following
subsidiary:
|
|
Name of Subsidiary
|
Place
of Incorporation
|
Ownership Interest
|
Principal Activity
|
|
Wavecrest Resources Inc.
|
Delaware
|
100%
|
Holding company
|
|
(e)
|
Foreign currency
|
|
|
|
|
|
The functional and presentation currency of the Company
and its subsidiary, as at July 31, 2012, is the Canadian dollar (note 2).
Prior to August 1, 2011, the functional and presentation currency of the
Company was the US dollar. Comparative amounts have been restated to be
presented in Canadian dollars.
|
|
|
|
|
|
Transactions in currencies other than the functional
currency are recorded at the rates of exchange prevailing on the dates of
transactions. At the end of each reporting period, monetary assets and
liabilities that are denominated in foreign currencies are translated at
the rates prevailing at the period end date. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not
re-translated. Gains and losses arising on translation are included in
profit or loss for the period.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
(f)
|
Financial instruments
|
|
|
|
|
|
Financial assets and liabilities are recognized when the
Group becomes party to the contracts that give rise to them. The Group
determines the classification of its financial assets and liabilities at
initial recognition and, where allowed and appropriate, re-evaluates such
classification at each financial year end. The Group does not have any
derivative financial instruments.
|
|
|
|
|
|
Non-derivative financial assets:
|
|
|
|
|
|
The Group classifies its non-derivative financial assets
into the following categories:
Cash and cash equivalents
|
Cash and cash equivalents are
comprised of cash and short term deposits held at major financial institutions
with an original maturity of three months or less, which are readily convertible
into a known amount of cash. The Group's cash and cash equivalents are invested
in business and savings accounts which are available on demand by the Group for
its programs. They are measured at fair value.
Loans and receivables
Loans and receivables are financial
assets with fixed or determinable payments that are not quoted in an active
market. Such assets are initially recognized at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition loans and
receivables are measured at amortized cost using the effective interest method,
less any impairment losses.
Loans and receivables comprise amounts
receivable and restricted cash.
Non-derivative financial
liabilities:
The Group's non-derivative financial
liabilities comprise financial liabilities measured at amortized cost. Such
financial liabilities are recognized initially at fair value net of any directly
attributable transaction costs. Subsequent to initial recognition these
financial liabilities are measured at amortized cost using the effective
interest method. Financial liabilities measured at amortized cost comprise
amounts payable and balances payable to related parties.
Impairment of financial assets:
Financial assets are assessed for
indicators of impairment at the end of each reporting period. Financial assets
are impaired when there is objective evidence that, as a result of one or more
events that occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been impacted.
Objective evidence of impairment could
include:
-
significant financial difficulty of the issuer or
counterparty; or
-
default or delinquency in interest or principal
payments; or
-
it becoming probable that the borrower will enter
bankruptcy or financial re- organization.
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
For certain categories of financial
assets, such as amounts receivable, assets that are assessed not to be impaired
individually are subsequently assessed for impairment on a collective basis. The
carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of amounts receivable,
where the carrying amount is reduced through the use of an allowance account.
When an amount receivable is considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously written off
are credited against the allowance account. Changes in the carrying amount of
the allowance account are recognized in profit or loss.
If, in a subsequent period, the amount
of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed through profit or loss to the extent that
the carrying amount of the investment at the date the impairment is reversed
does not exceed what the amortized cost would have been had the impairment not
been recognized.
|
(g)
|
Exploration and evaluation
expenditures
|
Exploration and evaluation
expenditures
Exploration and evaluation expenditures
are expenditures incurred by the Group in connection with the exploration for
and evaluation of mineral resources before the technical feasibility and
commercial viability of extracting a mineral resource are demonstrable.
Exploration and evaluation expenditures
are expensed as incurred, except for initial expenditures associated with the
acquisition of exploration and evaluation assets through a business combination
or an asset acquisition.
Exploration and evaluation expenditures
include the cash consideration and the estimated fair market value of common
shares on the date of issue or as otherwise provided under the relevant
agreements.
Costs for properties for which the
Group does not possess unrestricted ownership and exploration rights, such as
option agreements, are expensed in the period incurred or until a feasibility
study has determined that the property is capable of commercial production.
Administrative expenditures related to exploration activities are expensed in
the period incurred.
Mineral property interests
Expenditures incurred by the Group in
connection with the exploration for and evaluation of mineral resources after
the technical feasibility and commercial viability of extracting a mineral
resource are demonstrable are capitalized. Such amounts are then amortized over
the estimated life of the property following the commencement of commercial
production, or are written off if the property is sold, allowed to lapse or
abandoned, or when an impairment has been determined to have occurred.
Mineral property interests, if any, are
assessed for impairment if (i) sufficient data exists to determine technical
feasibility and commercial viability, and (ii) facts and circumstances suggest
that the carrying amount exceeds the recoverable amount.
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
Once the technical feasibility and commercial viability
of the extraction of mineral resources in an area of interest are
demonstrable, mineral property interests attributable to that area of
interest are first tested for impairment and then reclassified to mineral
property and development assets within property, plant and
equipment.
|
|
|
|
|
|
Recoverability of the carrying amount of mineral property
interests is dependent on successful development and commercial
exploitation, or alternatively, a sale of the respective areas of
interest.
|
|
|
|
|
(h)
|
Impairment of non-financial assets
|
|
|
|
|
|
At the end of each reporting period the carrying amounts
of the Group's assets are reviewed to determine whether there is any
indication that those assets are impaired. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment, if any. The recoverable amount is the higher of:
fair value less costs to sell and value in use. 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. In
assessing value in use, the estimated future cash flows are discounted to
their present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the
asset. If the recoverable amount of an asset is estimated to be less than
its carrying amount, the carrying amount of the asset is reduced to its
recoverable amount and the impairment loss is recognized in the profit or
loss for the period. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the
cash generating unit to which the asset belongs.
|
|
|
|
|
|
Where an impairment loss subsequently reverses, the
carrying amount of the asset (or cash- generating unit) is increased to
the revised estimate of its recoverable amount, but to an amount that does
not exceed the carrying amount that would have been determined had no
impairment loss been recognized for the asset (or cash-generating unit) in
prior years. A reversal of an impairment loss is recognized immediately in
profit or loss.
|
|
|
|
|
(i)
|
Share capital
|
|
|
|
|
|
Common shares are classified as equity. Transaction costs
directly attributable to the issuance of common shares and share purchase
options are recognized as a deduction from equity, net of any tax
effects.
|
|
|
|
|
|
Flow–through shares
|
|
|
|
|
|
Canadian tax legislation permits mining entities to issue
flow–through shares to investors. Flow–through shares are securities
issued to investors whereby the deductions for tax purposes related to
eligible Canadian exploration expenses ("CEE"), as defined in the Income
Tax Act (Canada), may be claimed by investors instead of the entity,
pursuant to a defined renunciation process. Renunciation may
occur:
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
-
retrospectively (namely, the flow–through shares
are issued, CEE are then incurred, and renunciation occurs subsequently).
|
|
Flow–through shares are recorded in share capital at the
fair value of common shares on date of issuance. When flow–through shares
are issued, the difference between the fair value of non-flow-through
common shares and the amount the investors pay for flow–through shares is
recorded as a deferred liability called "flow-through share premium". This
deferred liability is credited to profit or loss when the eligible
expenses are incurred and renounced to investors.
Upon eligible expenses
being incurred, the Company derecognizes the liability and recognizes a
deferred tax liability, if any, for the amount of tax reduction renounced
to shareholders. The premium is recognized as other income and the related
deferred tax is recognized as a tax provision.
|
|
|
|
|
(j)
|
Loss per share
|
|
|
|
|
|
The Group presents basic and diluted loss per share data
for its common shares, calculated by dividing the loss attributable to
common shareholders of the Group by the weighted average number of common
shares outstanding during the period. Diluted loss per share does not
adjust the loss attributable to common shareholders or the weighted
average number of common shares outstanding when the effect is
anti-dilutive.
|
|
|
|
|
(k)
|
Share-based payments
|
|
|
|
|
|
The cost of equity-settled transactions with employees is
measured by reference to the fair value of the instruments issued at the
date at which they are granted and is recognized as an expense over the
vesting period, which ends on the date on which the relevant employees
become fully entitled to the award. Fair value is determined using an
appropriate pricing model. In valuing equity-settled transactions, no
account is taken of any vesting conditions.
|
|
|
|
|
|
The cost of equity-settled transactions with
non-employees is measured by reference to the fair value of the
instruments issued, on the basis that the fair value of the services
received cannot be estimated reliably. Fair value is originally measured
at the date at which they are granted and subsequently re-measured at each
balance sheet date for any unvested portion, and is recognized as an
expense over the vesting period, which ends on the date on which the
relevant non-employees become fully entitled to the award. Fair value is
determined using an appropriate pricing model.
|
|
|
|
|
|
In valuing equity-settled transactions, no account is
taken of any vesting conditions. Vesting conditions are taken into account
by adjusting the number of equity instruments included in the measurement
of the transaction amount, based on an estimate of the number of equity
instruments expected to vest so that, ultimately, the amount recognized
for goods or services received as consideration for the equity instruments
granted will be based on the number of equity instruments that eventually
vest. On the vesting date, the Company revises the estimate to equal the
number of equity instruments that ultimately vested.
|
|
|
|
|
|
At each balance sheet date prior to vesting, the
cumulative expense is calculated, representing the extent to which the
vesting period has expired and management's estimates of
the achievement or otherwise of non-market conditions and of
the number of equity instruments that will ultimately vest. The movement
in cumulative expense from amounts previously recorded is recognized in
profit or loss, with a corresponding entry in equity.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
Where the terms of an equity-settled award are modified
or a new award is designated as replacing a cancelled or settled award,
the cost based on the original award terms continues to be recognized over
the original vesting period. In addition, any expense is recognized over
the remainder of the new vesting period for the incremental fair value of
any modification, based on the difference between the fair value of the
original award and the fair value of the modified award, both as measured
on the date of the modification. No reduction is recognized if this
difference is negative.
|
|
|
|
|
|
Where an equity-settled award is cancelled, any cost not
yet recognized in profit or loss for the award shall not be recognized and
any previous amounts recognized for awards that have not vested are
reversed.
|
|
|
|
|
(l)
|
Rehabilitation provision
|
|
|
|
|
|
Statutory, contractual and constructive obligations to
incur restoration, rehabilitation and environmental costs arise when
environmental disturbance is caused by the exploration or development of
an exploration and evaluation asset. Such costs are discounted to their
estimated net present value and capitalized to the carrying amount of the
asset, along with a corresponding liability, as soon as the obligation to
incur such costs arises. The timing of the actual rehabilitation
expenditure is dependent on a number of factors such as the life and
nature of the asset, the operating license conditions and, when
applicable, the environment in which the mine operates.
|
|
|
|
|
|
Discount rates reflecting the time value of money are
used to calculate the net present value, where applicable. These costs are
charged against profit or loss over the economic life of the related
asset, through amortization using either the unit-of-production or the
straight line method. The corresponding liability is progressively
increased as the effect of discounting unwinds, creating an expense
recognized in profit or loss.
|
|
|
|
|
|
Decommissioning costs are also adjusted for changes in
estimates. Those adjustments are accounted for as a change in the
corresponding capitalized cost, except where a reduction in costs is
greater than the unamortized capitalized cost of the related assets, in
which case the capitalized cost is reduced to nil and the remaining
adjustment is recognized in profit or loss.
The operations of the Group
have been, and may in the future be, affected from time to time in varying
degree by changes in environmental regulations, including those for site
restoration costs. Both the likelihood of new regulations and their
overall effect upon the Group are not predictable.
|
|
|
|
|
(m)
|
Income taxes
|
|
|
|
|
|
Income tax on the profit or loss for the periods
presented comprises current and deferred tax. Income tax is recognized in
profit or loss except to the extent that it relates to items recognized
directly in equity, in which case it is recognized in equity.
|
|
|
|
|
|
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
Current tax expense is the expected tax
payable on the taxable income for the year, using tax rates enacted or
substantively enacted at year end, adjusted for amendments to tax payable with
regards to previous years.
Deferred tax is provided using the
balance sheet liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes.
The following temporary differences are
not provided for:
-
goodwill not deductible for tax purposes;
-
the initial recognition of assets or liabilities
that affect neither accounting nor taxable profit; and
-
differences relating to investments in
subsidiaries, associates, and joint ventures to the extent that they will
probably not reverse in the foreseeable future.
The amount of deferred tax provided is
based on the expected manner of realization or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively enacted at
the end of the reporting period applicable to the period of expected realization
or settlement.
A deferred tax asset is recognized only
to the extent that it is probable that future taxable profits will be available
against which the asset can be utilized. Deferred tax assets and liabilities are
offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by
the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
|
(n)
|
Government assistance
|
|
|
|
|
|
When the Company is entitled to receive mineral
exploration tax credits and other government grants, these government
assistances are recognized as a cost recovery within exploration and
evaluation expenditures when there is reasonable assurance of their
recovery.
|
|
|
|
|
(o)
|
Accounting standards, interpretations and amendments
to existing standards
|
|
|
|
|
|
Effective August 1, 2011, the Group adopted new and
revised IFRS that were issued by the IASB. The application of these new
and revised IFRS has not had any material impact on the amounts reported
for the current and prior years but may affect the accounting for future
transactions or arrangements.
|
|
|
|
|
|
Accounting standards issued but not yet
effective
|
|
|
(i)
|
Effective for annual periods beginning on or after
January 1, 2012
|
|
|
|
|
|
|
|
|
|
Amendments to IAS 12, Income Taxes
|
|
|
|
|
|
|
|
(ii)
|
Effective for annual periods beginning on or after July
1, 2012
|
|
|
|
|
|
|
|
|
|
Amendments to IAS 1, Presentation of Items of Other
Comprehensive Income
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
|
(iii)
|
Effective for annual periods beginning on or after
January 1, 2013
|
|
|
|
|
|
|
|
|
|
IFRS 1, Provisions of IFRIC 20 for First-Time Adopters of
IFRS; Accounting for Government loans
|
|
|
|
|
|
|
|
|
|
IFRS 7, Financial Instruments – Disclosures
|
|
|
|
|
|
|
|
|
|
IFRS 10, Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
IFRS 11, Joint Arrangements
|
|
|
|
|
|
|
|
|
|
IFRS 12, Disclosure of Interests in Other
Entities
|
|
|
|
|
|
|
|
|
|
IFRS 13, Fair Value Measurement
|
|
|
|
|
|
|
|
|
|
IAS 1, Presentation of Financial Statements
(amendments)
|
|
|
|
|
|
|
|
|
|
IAS 16, Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
IAS 19, Employee Benefits
|
|
|
|
|
|
|
|
|
|
IAS 27, Separate Financial Statements
|
|
|
|
|
|
|
|
|
|
IAS 28, Investments in Associates and Joint
Ventures
|
|
|
|
|
|
|
|
|
|
IAS 32, Financial Instruments – Presentation
|
|
|
|
|
|
|
|
|
|
IAS 34, Interim Financial Reporting
|
|
|
|
|
|
|
|
|
|
IFRIC 20, Stripping Costs in the Production Phase of a
Surface Mine
|
|
|
|
|
|
|
|
(iii)
|
Effective for annual periods beginning on or after
January 1, 2014
|
|
|
|
|
|
|
|
|
|
IAS 32, Financial Instruments – Presentation
|
|
|
|
|
|
|
|
(iv)
|
Effective for annual periods beginning on or after
January 1, 2015
|
|
|
|
|
|
|
|
|
|
IFRS 7, Financial Instruments – Disclosure
|
|
|
|
|
|
|
|
|
|
IFRS 9, Financial Instruments – Recognition and
measurement
|
The Group has not early-adopted these
revised standards. Amendments to IAS 1 and IAS 12 effective for the Group's
financial period commencing August 1, 2012 will not have a material impact on
the Group's financial statements, except for disclosures and presentation. The
Group is currently assessing the impact that all other new and amended standards
will have on the Group's financial statements.
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
4.
|
C
ASH AND
C
ASH
E
QUIVALENTS AND
R
ESTRICTED
C
ASH
|
|
|
|
|
(a)
|
Cash and cash equivalents
|
|
|
|
|
July 31, 2012
|
|
|
July 31, 2011
|
|
|
|
|
|
|
|
|
(restated, note 2
|
)
|
|
|
Business and savings accounts
|
$
|
2,450,451
|
|
$
|
78,652
|
|
|
(b)
|
Restricted cash
|
|
|
|
|
|
Restricted cash in the amount of $78,000 (July 31, 2011 -
$nil) consists of guaranteed investment certificates held in support of
explorations permits.
|
|
|
|
|
5.
|
A
MOUNTS
R
ECEIVABLE AND
O
THER
A
SSETS
|
|
|
|
|
July 31, 2012
|
|
|
July 31, 2011
|
|
|
|
|
|
|
|
|
(restated, note 2
|
)
|
|
|
Harmonized sales tax receivable
|
$
|
280,777
|
|
$
|
17,744
|
|
|
|
Prepaid expenses – Other
|
|
7,060
|
|
|
–
|
|
|
|
Other receivables
|
|
5,000
|
|
|
2,833
|
|
|
|
Total
|
$
|
292,837
|
|
$
|
20,577
|
|
|
6.
|
M
INERAL
P
ROPERTY
I
NTERESTS
|
|
|
|
|
(a)
|
Buck Gold-Silver Project
|
|
|
|
|
|
In December 2011, the Company purchased an option (the
"Option") to acquire a 100% interest in the Buck gold-silver property (the
"Buck Project") located in central British Columbia.
In December 2011, the
Company paid $100,000 in cash and issued 1,200,000 common shares to
acquire the Option from a private party (the "Vendor"). The common shares
issued were valued at the fair value on the date of issue ($0.50 per
common share) and were expensed along with the cash consideration paid.
The Company agreed to issue up to 6,000,000 additional common shares to
the Vendor upon the achievement of certain milestones, as follows:
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Cash
|
|
|
common
|
|
|
Status at
|
|
|
|
Payable upon
|
|
payment
|
|
|
shares issuable
|
|
|
July
31, 2012
|
|
|
|
December 30, 2011
|
$
|
100,000
|
|
|
1,200,000
|
|
|
Completed
|
|
|
|
Completion of a compliant resource estimate on the Buck
Project
|
|
nil
|
|
|
1,200,000
|
|
|
|
|
|
|
Completion of a "preliminary assessment" or
a "pre-feasibility study" on the Buck Project
|
|
nil
|
|
|
2,400,000
|
|
|
|
|
|
|
Completion of a
"feasibility study" on the Buck Project
|
|
nil
|
|
|
2,400,000
|
|
|
|
|
The Company is also required to make
certain scheduled payments to the underlying owners of the Buck Project (the
"Underlying Owners") as follows:
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Cash
|
|
|
common shares
|
|
|
Status at
|
|
|
|
Payable on or
before
|
|
payment
|
|
|
issuable
|
|
|
July
31, 2012
|
|
|
|
December 30, 2011
|
$
|
20,000
|
|
|
100,000
|
|
|
Completed
|
|
|
|
June 28, 2012
|
$
|
25,000
|
|
|
150,000
|
|
|
Completed
|
|
|
|
June 28, 2013
|
$
|
30,000
|
|
|
200,000
|
|
|
|
|
|
|
June 28, 2014
|
$
|
30,000
|
|
|
200,000
|
|
|
|
|
|
|
The common shares issued on December 30, 2011 were valued
at the estimated fair value on that date ($0.50 per share) and were
expensed. The common shares issued on June 28, 2012 were valued at the
estimated fair value on that date ($0.36) and were expensed.
|
|
|
|
|
|
Under the terms of the Option, the Underlying Owners
retain a 3% net smelter returns royalty. The royalty percentage will
decrease by 1% once aggregate royalty payments exceed $10 million. The
Company has the right at any time to reduce the royalty by 1% by paying
$500,000 to the Underlying Owners.
|
|
|
|
|
(b)
|
Galaxie Project
|
|
|
|
|
|
The Galaxie Project covers an area of 1,540 square
kilometres, comprised of three mineral claims totalling approximately
1,294 hectares (the "Gnat Pass Property") and the surrounding Galaxie
Project which consists of 382 mineral claims totalling 151,796 hectares.
The property straddles the Stewart-Cassiar Highway, and is located 24
kilometres south of the community of Dease Lake, British
Columbia.
|
|
|
|
|
|
In July 2012, the Company entered into an earn-in
agreement (the "Galaxie Earn-in Agreement") with Finsbury Exploration
Ltd., a non-arm's length party (note 10(b)) whereby it obtained an option
to earn up to a 50% interest in the Galaxie Project by spending up to
$1,500,000 in exploration expenditures.
|
|
|
|
|
|
After the reporting period, in August 2012, the Galaxie
Earn-in Agreement was terminated and the Company acquired outright a 100%
interest in the Galaxie Project, subject to a 1% net smelter returns royalty, capped at aggregate payments of
$7.5 million, retained by an arm's length party (note 16(a)).
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
(c)
|
Karma Project
|
|
|
|
|
|
During the year ended July 31, 2012, the Company staked
93 mineral claims located approximately 41 kilometres south of Houston, BC
(the "Karma Project"), near the Company's Buck Project. The Company paid
claim staking costs totalling $13,933.
|
|
|
|
|
(d)
|
ZNT Project
|
|
|
|
|
|
In June 2012, the Company staked 19 mineral claims,
located approximately 15 kilometres southeast of the town of Smithers, BC,
in central British Columbia. These 19 claims, together with an additional
61 claims that were staked in October and November 2012, comprise the
Company’s ZNT Project. The Company paid claim staking costs relating to
the initial 19 mineral claims totalling $3,313.
|
|
|
|
|
(e)
|
Angel's Camp Property
|
|
|
|
|
|
The Company retains a 1% net smelter return royalty
payable to the Company on any production from the Angel's Camp property
located in Lake County, Oregon. The Angel's Camp property is currently
held by Golden Predator Corporation and Orsa Ventures Corp., each of which
holds a 50% beneficial joint venture interest in the property.
|
|
|
|
|
|
During the year ended July 31, 2002, the Company sold
100% of its title, rights and interest in the Angel's Camp property
located in Lake County, Oregon to Seabridge Resources Inc. ("Seabridge"),
which later changed its name to Seabridge Gold Inc., for 300,000 common
shares of Seabridge (sold in prior years), 200,000 common share purchase
warrants of Seabridge (exercised and sold in prior years), cash of
$100,000, and a 1% net smelter return royalty payable to the Company on
any production from the Angel's Camp property.
|
|
|
|
|
|
In 2003, Seabridge optioned a 50% interest in the
property to Quincy Gold Inc., which later changed its name to Golden
Predator Mines Inc., then to Golden Predator Royalty & Development
Corporation, and is now named Golden Predator Corporation.
|
|
|
|
|
|
In April 2012, Orsa Ventures Corp. (TSX-V: ORN) exercised
its option to acquire all of Seabridge's remaining undivided 50%
beneficial joint venture interest in the Angel's Camp property.
|
|
|
|
|
|
The royalty has been recorded at a nominal amount of
$1.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
7.
|
C
APITAL AND
R
ESERVES
|
|
|
|
|
(a)
|
Authorized share capital
|
|
|
|
|
|
At July 31, 2012, the authorized share capital of the
Company comprised an unlimited number of common shares without par value
and an unlimited number of preferred shares without par value.
|
|
|
|
|
|
No preferred shares have been issued to date.
All issued common shares are fully paid.
|
|
|
|
|
(b)
|
Private Placement and Flow-Through
Financing
|
|
|
|
|
|
In December 2011, the Company completed a non-brokered
private placement (the "Private Placement") of 7,183,371 common shares for
aggregate gross proceeds of $4,196,002. The Private Placement was
comprised of:
|
-
1,140,200 non-flow-through common shares issued at
a price of $0.50 per share for gross proceeds of $570,100; and
-
6,043,171 flow-through common shares issued at
$0.60 per share, including a premium of $0.10 per share over the offering
price for the non-flow through common shares, for gross proceeds of $3,625,902
(the "Flow-through Funds").
|
|
After issuance costs of $157,050, net cash proceeds from
the Private Placement were $4,038,952, of which $604,317 was recorded as a
flow-through share premium liability (note 9) and the balance of
$3,434,635 was allocated to the common shares issued.
|
|
|
|
|
|
Pursuant to the flow-through share agreements, the
Company renounced eligible Canadian Exploration Expenses ("CEE"), as
defined in the Income Tax Act (Canada).
|
|
|
|
|
(c)
|
Basic and diluted loss per share
|
|
|
|
|
|
The calculation of basic and diluted loss per share for
the period was based on the following:
|
|
|
|
|
Year ended July 31
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
Loss attributable to common shareholders
|
$
|
3,679,805
|
|
$
|
174,867
|
|
|
|
Weighted average
number of common shares outstanding
|
|
18,396,348
|
|
|
13,399,422
|
|
|
(d)
|
Equity-Settled Share-Based Payments
|
|
|
|
|
|
The Company has a share purchase option plan approved by
the Company's shareholders that allows the Board of Directors to grant
share purchase options, subject to regulatory terms and approval, to its
officers, directors, employees, and service providers. The share purchase
option plan (the "2012 Option Plan") is based on the maximum number of
eligible shares equaling 10% of the Company's outstanding common shares,
calculated from time to time.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
The exercise price of each share
purchase option is set by the Board of Directors at the time of grant but cannot
be less than the five day volume weighted average trading price of the Company's
shares calculated on the day prior to the grant. Share purchase options may have
a maximum term of ten years (although share purchase options have generally been
granted with a term of up to five years) and typically terminate 90 days
following the termination of the optionee's employment or engagement, except in
the case of retirement or death. The vesting period for share purchase options
is at the discretion of the Board of Directors at the time the options are
granted.
The following summarizes the changes in
the Company's share purchase options for the years ended July 31, 2012 and 2011:
|
|
Continuity of share options
|
|
Number of options
|
|
|
Weighted average
|
|
|
|
|
|
outstanding
|
|
|
exercise price
|
|
|
|
Share purchase options outstanding at July
31, 2011
|
|
–
|
|
|
–
|
|
|
|
Granted during the year
|
|
1,776,600
|
|
$
|
0.45
|
|
|
|
Forfeited during the year
|
|
(9,000
|
)
|
$
|
0.45
|
|
|
|
Share purchase
options outstanding at July 31, 2012
|
|
1,767,600
|
|
$
|
0.45
|
|
|
|
Share purchase options exercisable at July 31, 2012
|
|
589,200
|
|
$
|
0.45
|
|
The weighted average contractual
remaining life of the share purchase options outstanding at July 31, 2012 was
4.0 years.
Options were priced based on the
Black-Scholes option pricing model using the following weighted average
assumptions to estimate the fair value of options granted: grant date share
price of $0.45; risk-free interest rate of 1.2%; expected volatility of 119%;
expected life of 4.0 years; and expected dividend yield of nil).
The estimated weighted average fair
value of options granted during the year ended July 31, 2012 was $0.34 per
option (2011 – not applicable). The Company recognized share-based payment
expense of $381,139 in the year ended July 31, 2012 (2011 – nil).
Option pricing models require the input
of highly subjective assumptions, including the expected price volatility.
Changes in the subjective input assumptions can materially affect the fair value
estimate, and therefore the existing models do not necessarily provide a
reliable measure of the fair value of the Company's share purchase options.
|
8.
|
A
MOUNTS
P
AYABLE AND
O
THER
L
IABILITIES
|
|
|
|
|
Year ended July 31
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
(restated, note
2
|
)
|
|
|
Amounts payable
|
$
|
544,156
|
|
$
|
–
|
|
|
|
Accrued
liabilities
|
|
63,233
|
|
|
42,163
|
|
|
|
Total
|
$
|
607,389
|
|
$
|
42,163
|
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
9.
|
F
LOW
-T
HROUGH
S
HARE
P
REMIUM
L
IABILITY
|
|
|
|
|
Year ended July 31
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
(restated, note
2
|
)
|
|
|
Balance at beginning of year
|
$
|
–
|
|
$
|
–
|
|
|
|
Recognized as liability upon issuance of flow-through
shares
|
|
604,317
|
|
|
–
|
|
|
|
Derecognized upon eligible expenditures incurred
|
|
(193,308
|
)
|
|
–
|
|
|
|
Balance at end of
year
|
$
|
411,009
|
|
$
|
–
|
|
Pursuant to the Private Placement of
the flow-through shares (note 7(b)) and in accordance with the Income Tax Act
(Canada), the Company is obligated to spend the Flow-through Funds on eligible
Canadian Exploration Expenses ("CEE") and to renounce them to the investors The
renunciation of CEE to the investors was completed during the current year. At
July 31, 2012, the balance of the flow-through share premium represents the
prorated portion of the premium attributable to the Flow-through Funds that
remained unspent on CEE at the end the reporting period.
To July 31, 2012, out of total
Flow-through Funds of $3,625,902, the Company had incurred approximately
$1,160,000 in CEE.
|
10.
|
R
ELATED
P
ARTY
B
ALANCES AND
T
RANSACTIONS
|
|
|
|
|
(a)
|
Transactions with Key Management Personnel
|
|
|
|
|
|
Key management personnel are those persons that have the
authority and responsibility for planning, directing and controlling the
activities of the Company, directly and indirectly, and by definition
include the directors of the Company.
During the years ended July 31, 2012
and 2011, the Group compensated key management personnel as follows:
|
|
|
|
|
Year ended July 31
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
(restated, note 2
|
)
|
|
|
Short-term employee benefits, including
salaries and directors fees
|
$
|
237,563
|
|
$
|
–
|
|
|
|
Equity-settled
share-based payments
|
|
150,914
|
|
|
–
|
|
|
|
Total
|
$
|
388,477
|
|
$
|
–
|
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
(b)
|
Entities with Significant Influence over the
Company
|
|
|
|
|
|
The Company's management believes that certain entities
have the power to participate in the financial or operating policies of
the Company. Several directors and other key management personnel of those
entities, who are close business associates, are also key management
personnel of the Company. Pursuant to management agreements between the
Company and these entities which have significant influence over the
Company, the Company receives geological, engineering, corporate
development, administrative, management and shareholder communication
services from such entities.
|
|
|
|
|
|
Hunter Dickinson Services Inc.
|
|
|
|
|
|
Hunter Dickinson Services Inc. ("HDSI") is a private
company which has certain directors and officers in common with the
Company. HDSI provides geological, corporate development, administrative
and management services to, and incurs third party costs on behalf of the
Group pursuant to an agreement dated July 2, 2010, and is based on
annually set rates.
|
|
|
|
|
|
Finsbury Exploration Ltd.
|
|
|
|
|
|
Finsbury Exploration Ltd. ("Finsbury") is a private
company which has certain directors in common with the Company. The
transactions and balances with Finsbury presented herein relate to the
Galaxie Earn-in Agreement (note 6(b)).
|
|
|
|
|
|
Transactions with these related parties were as
follows:
|
|
|
|
|
Year ended July 31
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
(restated,
|
|
|
|
|
|
|
|
|
note
2
|
)
|
|
|
HDSI: Services received based on management
services agreement
|
$
|
1,135,345
|
|
$
|
–
|
|
|
|
HDSI: Reimbursement of third party expenses paid
|
|
120,444
|
|
|
|
|
|
|
Finsbury: Reimbursement of third party expenses paid
|
|
25,278
|
|
|
–
|
|
Outstanding balances were as follows:
|
|
|
|
July 31, 2012
|
|
|
July 31, 2011
|
|
|
|
|
|
|
|
|
(restated,
|
|
|
|
|
|
|
|
|
note
15
|
)
|
|
|
Balance payable to HDSI
|
$
|
786,425
|
|
$
|
–
|
|
|
|
Balance payable to
Finsbury
|
|
27,430
|
|
|
–
|
|
|
|
Total
|
$
|
813,855
|
|
$
|
–
|
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
11.
|
E
MPLOYEES
B
ENEFIT
E
XPENSES
|
|
|
|
|
|
The amount of employees' salaries and benefits (including
equity-settled share-based payments) included in various expenses are as
follows:
|
|
|
|
|
Year ended July 31
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
(restated,
|
|
|
|
|
|
|
|
|
note
2
|
)
|
|
|
Exploration and evaluation expenses
|
$
|
544,802
|
|
$
|
–
|
|
|
|
General and administration expenses
|
|
697,025
|
|
|
72,798
|
|
|
|
Equity-settled share-based payment
|
|
381,139
|
|
|
–
|
|
|
|
Total
|
$
|
1,622,966
|
|
$
|
72,798
|
|
|
12.
|
O
PERATING
S
EGMENTS
|
|
|
|
|
|
The Group operates in a single reportable operating
segment – the acquisition, exploration and evaluation of mineral property
interests. The Company is currently focused on the acquisition and
exploration of mineral property interests in Canada.
|
|
|
|
|
13.
|
T
AXATION
|
|
|
|
|
(a)
|
Provision for current tax
|
|
|
|
|
|
No provision has been made for current income
taxes, as the Company has no taxable income.
|
|
|
|
|
(b)
|
Provision for deferred tax
|
|
|
|
|
|
As future taxable profits of the Company are uncertain,
no deferred tax asset has been recognized. As at July 31, 2012, the
Company had unused non-capital loss carry forwards of approximately
$2,901,000 (2011 – $1,542,000) in Canada and $37,000 (2011 – $50,000) in
the United States.
|
|
|
|
|
|
The Company had approximately $4,550,000 (2011 –
$3,639,000) of resource tax pools available, which may be used to shelter
certain resource income.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
Reconciliation of effective tax rate:
|
|
|
|
Year ended July 31
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
(restated,
|
|
|
|
|
|
|
|
|
note
2
|
)
|
|
|
Loss for the period
|
$
|
(3,587,805
|
)
|
$
|
(174,680
|
)
|
|
|
Income tax expense
|
|
–
|
|
|
–
|
|
|
|
Loss excluding income tax
|
$
|
(3,587,805
|
)
|
$
|
(174,680
|
)
|
|
|
Effective tax rate
|
|
–
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax recovery using the Company's domestic tax rate
|
$
|
(919,000
|
)
|
$
|
(48,000
|
)
|
|
|
Effect of tax rates in foreign
jurisdictions
|
|
–
|
|
|
–
|
|
|
|
Non-deductible expenses and other
|
|
310,000
|
|
|
–
|
|
|
|
Differences in statutory tax rates
|
|
16,000
|
|
|
14,000
|
|
|
|
Differences due to foreign exchange
|
|
(1,000
|
)
|
|
(105,000
|
)
|
|
|
Changes in unrecognized temporary differences
|
|
594,000
|
|
|
139,000
|
|
|
|
|
$
|
–
|
|
$
|
–
|
|
The Company's domestic tax rate during
the year ended July 31, 2012 was 25.6% (2011 – 27.3%) and the effective tax rate
was nil (2011 – nil).
As at July 31, 2012, the Company had
the following balances in respect of which no deferred tax asset had been
recognized:
|
|
|
|
|
|
|
Resource
|
|
|
Equipment
|
|
|
|
Expiry:
|
|
Tax
losses
|
|
|
pools
|
|
|
and
other
|
|
|
|
Within one year
|
$
|
16,000
|
|
$
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
–
|
|
|
|
|
|
|
One to five years
|
|
252,000
|
|
|
–
|
|
|
126,000
|
|
|
|
After five years
|
|
2,670,000
|
|
|
–
|
|
|
–
|
|
|
|
No
expiry date
|
|
–
|
|
|
4,550,000
|
|
|
114,000
|
|
|
|
|
$
|
2,938,000
|
|
$
|
4,550,000
|
|
$
|
240,000
|
|
|
14.
|
F
INANCIAL
R
ISK
M
ANAGEMENT
|
|
|
|
|
|
The Group is exposed in varying degrees to a variety of
financial instrument related risks. The Board approves and monitors the
risk management processes, inclusive of documented investment policies,
counterparty limits, and controlling and reporting structures. The type of
risk exposure and the way in which such exposure is managed is provided as
follows:
|
|
|
|
|
(a)
|
Credit Risk
|
|
|
|
|
|
Credit risk is the risk of potential loss to the Group if
the counterparty to a financial instrument fails to meet its contractual
obligations. The Group's credit risk is primarily attributable to its liquid financial assets including cash
and cash equivalents and amounts receivable. The Group limits its exposure to
credit risk on liquid financial assets by only investing its cash and cash
equivalents with high-credit quality financial institutions in business and
savings accounts.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
The carrying value of the Group's cash
and cash equivalents and trade and amounts receivable represent the maximum
exposure to credit risk.
|
|
|
|
Carrying Amount
|
|
|
|
Financial Assets
|
|
July
31, 2012
|
|
|
July
31, 2011
|
|
|
|
Cash and cash equivalents (note 4(a))
|
$
|
2,450,451
|
|
$
|
78,652
|
|
|
|
Amounts receivable (note 5)
|
|
280,777
|
|
|
17,744
|
|
|
|
Restricted cash (note 4(b))
|
|
78,000
|
|
|
–
|
|
|
|
Total
|
$
|
2,809,228
|
|
$
|
96,396
|
|
|
(b)
|
Liquidity Risk
|
|
|
|
|
|
Liquidity risk is the risk that the Group will not be
able to meet its financial obligations when they become due. The Group
ensures that there is sufficient capital in order to meet short term
business requirements, after taking into account cash flows from
operations and the Group's holdings of cash and cash
equivalents.
|
|
|
|
|
|
The following obligations existed at July 31,
2012:
|
|
|
|
|
|
|
|
Payments due by period
|
|
|
|
|
|
|
|
|
Less than 1
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
year
|
|
|
1-5
years
|
|
|
After
5 years
|
|
|
|
Amounts payable and other liabilities (note
8)
|
$
|
607,389
|
|
$
|
607,389
|
|
$
|
–
|
|
$
|
–
|
|
|
|
Due to related
parties (note 10)
|
|
813,855
|
|
|
813,855
|
|
|
–
|
|
|
–
|
|
|
|
Total
|
$
|
1,421,244
|
|
$
|
1,421,244
|
|
$
|
–
|
|
$
|
–
|
|
The following obligations existed at
July 31, 2011:
|
|
|
|
|
|
|
Payments due by period
|
|
|
|
|
|
|
|
|
Less than 1
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
year
|
|
|
1-5
years
|
|
|
After
5 years
|
|
|
|
Amounts payable and other liabilities (note 8)
|
$
|
42,163
|
|
$
|
42,163
|
|
$
|
–
|
|
$
|
–
|
|
|
|
Total
|
$
|
42,163
|
|
$
|
42,163
|
|
$
|
–
|
|
$
|
–
|
|
|
(c)
|
Market Risk
|
|
|
|
|
|
Market risk is the risk that changes in market prices,
such as foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of
financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters,
while optimizing the return.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
Interest rate risk
|
|
|
|
|
|
The Group is subject to interest rate risk with respect
to its investments in cash and cash equivalents. The Group's policy is to
invest cash at fixed rates of interest and cash reserves are to be
maintained in cash and cash equivalents in order to maintain liquidity,
while achieving a satisfactory return for shareholders. Fluctuations in
interest rates when cash and cash equivalents mature impact interest
income earned.
|
|
|
|
|
|
Assuming that all variables remain constant, a 10 basis
points change representing a 0.1% increase or decrease in interest rates
would have resulted in a decrease or increase in the loss for the year
ended July 31, 2012 of approximately $1,300 (2011 – $160).
|
|
|
|
|
|
Foreign exchange risk
|
|
|
|
|
|
The Company incurs substantially all of its expenditures
in Canada and substantially all of its cash and cash equivalents held are
denominated in Canadian dollars. Consequently the Company is not subject
to material foreign exchange risk.
|
|
|
|
|
|
Price risk
|
|
|
|
|
|
The Company is not subject to any price risk.
|
|
|
|
|
(d)
|
Capital management objectives
|
|
|
|
|
|
The Company's primary objectives when managing capital
are to safeguard the Company's ability to continue as a going concern, so
that it can continue to provide returns for shareholders, and to have
sufficient liquidity available to fund ongoing expenditures and suitable
business opportunities as they arise.
|
|
|
|
|
|
The Company considers the components of shareholders'
equity, as well as its cash and cash equivalents as capital. The Company
manages its capital structure and makes adjustments to it in light of
changes in economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital structure,
the Company may issue equity, sell assets, or return capital to
shareholders as well as issue or repay debt.
|
|
|
|
|
|
The Company's investment policy is to invest its cash in
highly liquid short–term interest– bearing investments having maturity
dates of three months or less from the date of acquisition and that are
readily convertible to known amounts of cash.
|
|
|
|
|
|
There were no changes to the Company's approach to
capital management during the year ended July 31, 2012.
|
|
|
|
|
|
The Company is not subject to any externally imposed
equity requirements.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
(e)
|
Fair Value
|
|
|
|
|
|
The fair value of the Group's financial assets and
liabilities approximate the carrying value. Due to their short-term
nature, cash and cash equivalents are carried at a level 1 fair value.
Financial instruments measured at fair value are classified into one of
three levels in the fair value hierarchy according to the relative
reliability of the inputs used to estimate the fair values. The three
levels of the fair value hierarchy are:
|
Level 1 – Unadjusted quoted prices in
active markets for identical assets or liabilities;
Level 2 – Inputs other
than quoted prices that are observable for the asset or liability either
directly or indirectly; and
Level 3 – Inputs that are not based on
observable market data.
There were no transfers between levels
of the fair value hierarchy used in measuring the fair value of financial
instruments during the year ended July 31, 2012.
|
15.
|
F
IRST
T
IME
A
DOPTION
OF
I
NTERNATIONAL
F
INANCIAL
R
EPORTING
S
TANDARDS
|
|
|
|
|
|
|
The Canadian Accounting Standards Board has mandated the
adoption of IFRS effective for interim and annual financial statements
relating to fiscal years beginning on or after January 1, 2011 for
Canadian publicly accountable profit-orientated enterprises. The date of
transition is August 1, 2010 and as a result the fiscal 2011 comparative
information has been adjusted to conform to IFRS.
|
|
|
|
|
|
|
Under IFRS 1, IFRS are applied retrospectively at the
transition balance sheet with all adjustments to assets and liabilities as
stated under Canadian GAAP ("CGAAP") recorded to retained earnings unless
certain exemptions are applied. The Company has elected to take the
following IFRS 1 optional exemptions:
|
|
|
|
|
|
|
|
to apply the requirements of IFRS 3, Business
Combinations, prospectively from the Transition Date;
|
|
|
|
|
|
|
|
to apply the requirements of IFRS 2, Share–based Payment,
only to equity instruments granted after November 7, 2002 which had not
vested as of the Transition Date; and
|
|
|
|
|
|
|
|
to apply the requirement of IAS 39, Financial
Instruments: Recognition and Measurement, prospectively to transactions
entered into on or after the date of transition. Accordingly, flow-through
share premium has been separated from share capital only when there was an
outstanding obligation to incur eligible expenditures and to renounce them
to investors on the Transition Date.
|
|
|
|
|
|
|
In preparing its opening IFRS balance sheet and financial
statements for the year ended July 31, 2011, the Company has adjusted
amounts reported previously in financial statements prepared in accordance
with CGAAP.
|
|
|
|
|
|
|
Additionally, as the Company opted to change its
presentation currency effective August 1, 2011 (note 2) a retroactive
restatement was required for all previous periods. Prior to August 1, 2011
the Company was reporting under CGAAP guidelines and as such the
comparative information was translated based on those guidelines, prior to
transition to IFRS.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
The translation was performed using
average exchange rates for income and expenses and the closing rate at the
balance sheet date for assets, liabilities and items related to equity. Share
capital and accumulated deficit have been translated using historic rates.
Resulting exchange differences were recognized within equity.
Reconciliation of previously
reported financial statements
Previously, under CGAAP, certain
entities were determined to be related parties; however under IFRS these
entities no longer meet the definition of a related party.
An explanation of how the transition
from CGAAP to IFRS has affected the Company's financial position, financial
performance and cash flows is set out in the following tables.
|
(a)
|
Reconciliation of Balance
Sheet
|
|
|
As at August 1, 2010
|
|
|
|
|
|
|
|
Effect of
|
|
|
|
|
|
|
(date of transition to
IFRS)
|
|
|
|
|
|
|
|
Transition
|
|
|
|
|
|
|
|
|
CGAAP
|
|
|
|
|
|
to IFRS
|
|
|
|
|
|
|
|
|
(US$)
|
|
|
CGAAP
($)
|
|
|
($)
|
|
|
IFRS
($)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
US$ 251,240
|
|
$
|
258,526
|
|
$
|
–
|
|
$
|
258,526
|
|
|
|
Amounts receivable and prepaid expenses
|
|
12,873
|
|
|
13,291
|
|
|
–
|
|
|
13,291
|
|
|
|
Total current assets
|
|
264,113
|
|
|
271,817
|
|
|
–
|
|
|
271,817
|
|
|
|
Mineral property interests
|
|
1
|
|
|
1
|
|
|
–
|
|
|
1
|
|
|
|
Total assets
|
|
US$
264,114
|
|
$
|
271,818
|
|
$
|
–
|
|
$
|
271,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities
|
|
US$ 20,000
|
|
$
|
21,118
|
|
$
|
10,150
|
|
$
|
31,268
|
|
|
|
Due to a related
party
|
|
9,864
|
|
|
10,150
|
|
|
(10,150
|
)
|
|
–
|
|
|
|
Total current liabilities
|
|
29,864
|
|
|
31,268
|
|
|
–
|
|
|
31,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
21,269,046
|
|
|
29,407,744
|
|
|
–
|
|
|
29,407,744
|
|
|
|
Reserves
|
|
–
|
|
|
(323,287
|
)
|
|
–
|
|
|
(323,287
|
)
|
|
|
Accumulated
deficit
|
|
(21,034,796
|
)
|
|
(28,843,907
|
)
|
|
–
|
|
|
(28,843,907
|
)
|
|
|
Total equity
|
|
234,250
|
|
|
240,550
|
|
|
–
|
|
|
240,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
US$ 264,114
|
|
$
|
271,818
|
|
$
|
–
|
|
$
|
271,818
|
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
As at July 31, 2011
|
|
|
|
|
|
|
|
Effect of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transition
|
|
|
|
|
|
|
|
|
CGAAP
|
|
|
|
|
|
to IFRS
|
|
|
|
|
|
|
|
|
(US$)
|
|
|
CGAAP
($)
|
|
|
($)
|
|
|
IFRS
($)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
US$ 82,315
|
|
$
|
78,652
|
|
$
|
–
|
|
$
|
78,652
|
|
|
|
Amounts receivable and prepaid expenses
|
|
21,380
|
|
|
20,577
|
|
|
–
|
|
|
20,577
|
|
|
|
Total current assets
|
|
103,695
|
|
|
99,229
|
|
|
–
|
|
|
99,229
|
|
|
|
Mineral property interests
|
|
1
|
|
|
1
|
|
|
–
|
|
|
1
|
|
|
|
Total assets
|
|
US$
103,696
|
|
$
|
99,230
|
|
$
|
–
|
|
$
|
99,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities
|
|
US$ 40,833
|
|
$
|
39,017
|
|
$
|
3,146
|
|
$
|
42,163
|
|
|
|
Due to a related
party
|
|
3,293
|
|
|
3,146
|
|
|
(3,146
|
)
|
|
–
|
|
|
|
Total current liabilities
|
|
44,126
|
|
|
42,163
|
|
|
–
|
|
|
42,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
21,269,046
|
|
|
29,407,744
|
|
|
–
|
|
|
29,407,744
|
|
|
|
Reserves
|
|
–
|
|
|
(331,903
|
)
|
|
–
|
|
|
(331,903
|
)
|
|
|
Accumulated
deficit
|
|
(21,209,476
|
)
|
|
(29,018,774
|
)
|
|
–
|
|
|
(29,018,774
|
)
|
|
|
Total equity
|
|
59,570
|
|
|
57,067
|
|
|
–
|
|
|
57,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
US$ 103,696
|
|
$
|
99,230
|
|
$
|
–
|
|
$
|
99,230
|
|
|
(b)
|
Reconciliation of Statement of Comprehensive
Loss
|
|
|
Year Ended July 31, 2011
|
|
|
|
|
|
|
|
Effect of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to IFRS
|
|
|
|
|
|
|
|
|
CGAAP
(US$)
|
|
|
CGAAP
($)
|
|
|
($)
|
|
|
IFRS
($)
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal, accounting and audit
|
|
US$ 55,172
|
|
$
|
55,125
|
|
$
|
–
|
|
$
|
55,125
|
|
|
|
Office and administration
|
|
92,136
|
|
|
92,582
|
|
|
–
|
|
|
92,582
|
|
|
|
Regulatory, trust and filing
|
|
36,390
|
|
|
36,090
|
|
|
–
|
|
|
36,090
|
|
|
|
Shareholder communication
|
|
1,990
|
|
|
1,986
|
|
|
–
|
|
|
1,986
|
|
|
|
Net loss before the following
|
|
(185,688
|
)
|
|
(185,783
|
)
|
|
–
|
|
|
(185,783
|
)
|
|
|
Interest income
|
|
1,597
|
|
|
1,598
|
|
|
–
|
|
|
1,598
|
|
|
|
Foreign exchange
gain
|
|
9,411
|
|
|
9,318
|
|
|
–
|
|
|
9,318
|
|
|
|
Loss for the period
|
|
(174,680
|
)
|
|
(174,867
|
)
|
|
–
|
|
|
(174,867
|
)
|
|
|
Currency
translation difference
|
|
–
|
|
|
(8,616
|
)
|
|
–
|
|
|
(8,616
|
)
|
|
|
Total comprehensive loss
|
|
US$ (174,680
|
)
|
$
|
(183,483
|
)
|
$
|
–
|
|
$
|
(183,483
|
)
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
(c)
|
Reconciliation of Statement of Cash
Flows
|
|
|
Year Ended July 31, 2011
|
|
|
|
|
|
|
|
Effect of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to IFRS
|
|
|
|
|
|
|
|
|
CGAAP
(US$)
|
|
|
CGAAP
($)
|
|
|
($)
|
|
|
IFRS
($)
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year
|
|
US$ (174,680
|
)
|
$
|
|
|
$
|
–
|
|
$
|
(174,867
|
)
|
|
|
|
|
|
|
|
(174,867
|
)
|
|
|
|
|
|
|
|
|
Foreign exchange gain
|
|
–
|
|
|
(9,318
|
)
|
|
–
|
|
|
(9,318
|
)
|
|
|
Changes in non–cash working
capital items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts receivable and other
assets
|
|
(8,507
|
)
|
|
(7,287
|
)
|
|
(7,003
|
)
|
|
(14,290
|
)
|
|
|
Amounts due to
related party
|
|
(6,571
|
)
|
|
(7,003
|
)
|
|
7,003
|
|
|
–
|
|
|
|
Amounts payable and other liabilities
|
|
20,833
|
|
|
17,899
|
|
|
–
|
|
|
17,899
|
|
|
|
Net cash used in operating activities
|
|
(168,925
|
)
|
|
(180,576
|
)
|
|
–
|
|
|
(180,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
(168,925
|
)
|
|
(180,576
|
)
|
|
–
|
|
|
(180,576
|
)
|
|
|
Effect of exchange
rate fluctuations on cash held
|
|
–
|
|
|
702
|
|
|
–
|
|
|
702
|
|
|
|
|
|
(168,925
|
)
|
|
(179,874
|
)
|
|
–
|
|
|
(179,874
|
)
|
|
|
Cash and cash
equivalents, beginning of year
|
|
251,240
|
|
|
258,526
|
|
|
–
|
|
|
258,526
|
|
|
|
Cash and cash equivalents, end of the year
|
|
US$ 82,315
|
|
$
|
78,652
|
|
$
|
–
|
|
$
|
78,652
|
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
|
16.
|
E
VENTS
A
FTER THE
R
EPORTING
P
ERIOD
|
|
|
|
|
(a)
|
Acquisition of Galaxie Project
|
|
|
|
|
|
On August 20, 2012, pursuant to an agreement
dated July 27, 2012 ("Galaxie Purchase Agreement") involving Finsbury and
an unrelated publicly-listed company, Bearclaw Capital Corp. ("Bearclaw"),
the Company completed the acquisition of a 100% interest in the Galaxie
Project, and terminated the Galaxie Earn-in Agreement. Bearclaw retains a
1% net smelter returns royalty, capped at aggregate payments of $7,500,000
(the "Galaxie Royalty Agreement").
|
|
|
|
|
|
Finsbury acquired the Galaxie Project from
Bearclaw in 2011 and until the acquisition of the Galaxie Project by the
Company, Finsbury was indebted to Bearclaw for a part of its purchase
price. Pursuant to the Galaxie Purchase Agreement, the Company provided
the following estimated consideration to Finsbury and Bearclaw that
relieved Finsbury from its indebtedness to Bearclaw and transferred the
ownership of the property to the Company:
|
|
|
|
|
Payable to
|
|
|
Payable to
|
|
|
|
|
|
|
|
|
Finsbury
|
|
|
Bearclaw
|
|
|
Total
|
|
|
|
Estimated fair value of the Company's
shares issued
|
|
|
|
|
|
|
|
|
|
|
|
2,038,111 common shares to
Finsbury, and
1,000,000 common shares to
Bearclaw
|
$
|
672,577
|
|
$
|
330,000
|
|
$
|
1,002,577
|
|
|
|
Cash payment
|
|
–
|
|
|
50,000
|
|
|
50,000
|
|
|
|
Convertible
debenture
|
|
–
|
|
|
650,000
|
|
|
650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To be recognized
as an exploration and evaluation expense
|
$
|
672,577
|
|
$
|
1,030,000
|
|
$
|
1,702,577
|
|
The common shares issued to Finsbury
and Bearclaw were valued at the fair market value at the date of issuance ($0.33
per common share).
The convertible debenture bears
interest at a rate of 8% per annum (payable quarterly in arrears) and is
convertible into the Company's common shares at an exercise price of $0.40 per
share on or before maturity of the debenture on October 31, 2013. Any interest
accrued, but unpaid, shall be converted at an exercise price of the higher of
$0.40 per share and the market price at the time of conversion.
Hotai Claims
The Hotailuh Slope mineral claims (the
"Hotai Claims") comprise nine mineral claims totalling 3,846 hectares located in
central British Columbia adjacent to, and forming part of, the Galaxie Project.
In July 2012, the Company entered into
an option agreement (the "Option") with certain arm's length private parties
(the "Optionors") to acquire a 100% interest in the Hotai Claims, subject to 2%
net smelter returns royalty, capped at aggregate payments of $5,000,000. The
Company has the right to acquire half of the royalty (1%) by making a cash
payment of $1,000,000.
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
|
|
Pursuant to the Option, in order to
earn its interest in the Hotai Claims, the Company is required to spend
$1,000,000 on the property within three years from the date of issuance of a
Notice of Work (which was issued on August 23, 2012) and make certain scheduled
payments to the Optionors as follows:
|
|
|
|
|
|
|
Value of
|
|
|
|
|
|
|
|
|
Cash
|
|
|
common shares
|
|
|
|
|
|
|
|
|
payments
|
|
|
required to be
|
|
|
|
|
|
|
Payable on or
before
|
|
required
|
|
|
issued
|
|
|
Status
|
|
|
|
August 1, 2012
|
$
|
5,000
|
|
$
|
5,000
|
|
|
Cash paid and shares issued
|
|
|
|
August 23, 2013
|
$
|
10,000
|
|
$
|
10,000
|
|
|
|
|
|
|
August 23, 2014
|
$
|
20,000
|
|
$
|
20,000
|
|
|
|
|
|
|
August 23, 2015
|
$
|
20,000
|
|
$
|
20,000
|
|
|
|
|
|
|
The value of common shares required to be issued are to
be calculated using volume weighted- average market share price for the
ten days prior to issuance. On August 1, 2012, 14,286 common shares were
issued to the Optionors.
|
|
|
|
|
(b)
|
ZNT Project
|
|
|
|
|
|
After the reporting period, the Company staked an
additional 61 mineral claims for a total of 80 minerals claims, located
approximately 15 kilometres southeast of the town of Smithers, BC, in
central British Columbia (the “ZNT Project”). The claim staking costs
totalled approximately $50,665 for these additional claims.
|
|
|
|
|
(c)
|
Joint Venture Agreement
|
|
|
|
|
|
On November 1, 2012, the Company entered into a binding
letter agreement with a publicly- listed company, Amarc Resources Ltd.
("Amarc") pursuant to which Amarc can earn up to a 50% interest in the
Galaxie and ZNT Projects owned by the Company. The Company and Amarc have
certain directors in common and both are subject to significant influence
by HDSI (note 10(b)). The agreement is subject to regulatory approval and
the parties intend to enter into more detailed definitive
agreements.
|
|
|
|
|
|
The Company and Amarc have agreed that, upon Amarc
earning its interest in the Galaxie and ZNT Projects, the Company will
contribute to an unincorporated joint venture with Amarc its interest in
the properties, including its obligations under the related acquisition
agreements, the Galaxie Royalty Agreement, and the convertible debenture
held by Bearclaw. The Company and Amarc have agreed that the Company will
initially be the manager of the joint venture.
|
|
|
|
|
|
An initial 40% interest will be earned by Amarc by paying to Quartz Mountain $1,000,000 in cash and also funding $1,000,000 of exploration expenses, as defined in the agreements, to be incurred by Quartz Mountain on the Galaxie Project, prior to December 31, 2012. In November, Amarc advanced $1,950,000 to the Company. Should the Company fail to meet any of the conditions precedent in the letter agreement any exploration expenditures funded by Amarc will constitute a demand loan bearing interest at the CIBC prime rate plus 5% from the date of advance.
|
|
Quartz
Mountain
Resources
Ltd.
|
|
Notes
to
the
Consolidated
Financial
Statements
|
|
For the years ended July 31, 2012 and 2011
|
|
(Expressed in Canadian Dollars, unless otherwise stated)
|
Upon earning an initial 40% interest,
Amarc will have an option to earn an additional 10% (for a total of 50%)
interest in these properties by funding $1,000,000 of exploration expenses to be
incurred by Quartz Mountain on the Galaxie and ZNT Projects, prior to September
30, 2013. If Amarc chooses not to, or is unable to, exercise this option, its
interest will remain at 40%, subject to customary dilution provisions.
|
ITEM 18
|
FINANCIAL STATEMENTS
|
Not applicable. See
Item 17
.
The following Exhibits have been filed with the Company's
Annual Report on Form 20-F in previous years:
Exhibit
Number
|
Description of Exhibit
|
Note
|
|
1.1
|
Transition Application dated October 11, 2005
|
Incorporated by reference from our Annual
Report on Form 20-F for the year ended July 31, 2005, filed on January 10,
2006.
|
|
1.2
|
Notice of Articles dated October 11, 2005
|
Incorporated by reference from our Annual
Report on Form 20-F for the year ended July 31, 2005, filed on January 10,
2006.
|
|
1.3
|
Notice of Alteration of Articles dated October
11, 2005
|
Incorporated by reference from our Annual
Report on Form 20-F for the year ended July 31, 2005, filed on January 10,
2006.
|
59
Exhibit
Number
|
Description of Exhibit
|
Note
|
|
1.4
|
Notice of Alteration dated February 17, 2006
|
Incorporated by reference from our Annual
Report on Form 20-F for the year ended July 31, 2006, filed on January 29,
2007.
|
|
1.5
|
Notice of Articles dated February 17, 2006
|
Incorporated by reference from our Annual
Report on Form 20-F for the year ended July 31, 2006, filed on January 29,
2007.
|
|
1.6
|
Articles
|
Incorporated by reference from our Annual
Report on Form 20-F for the year ended July 31, 2010, filed on October 28,
2010.
|
|
4.2
|
Geological and Management Services Agreement
between Hunter Dickinson Inc. and the Company dated June 1, 2008 and
amended July 2, 2010
|
Incorporated by reference from our Annual
Report on Form 20-F for the year ended July 31, 2010, filed on October 28,
2010.
|
The following exhibits are filed with this Annual Report on
Form 20-F:
SIGNATURES
The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this Annual Report on its behalf.
QUARTZ MOUNTAIN RESOURCES LTD.
|
/s/ Ronald W. Thiessen
|
|
|
Ronald W. Thiessen
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
Dated: November 29, 2012
|
|
60
SALE AGREEMENT
THIS AGREEMENT made as of the 27
th
day of July, 2012
BETWEEN:
FINSBURY EXPLORATION LTD.
,
a corporation incorporated
under the laws of the Province of British Columbia
(“
Finsbury
”)
AND:
QUARTZ MOUNTAIN RESOURCES
LTD.
,
a corporation incorporated
under the laws of the Province of British Columbia
(“
Quartz
” and together with
Finsbury, the “
Parties
”)
WHEREAS:
|
A.
|
Finsbury is a party to a mineral property purchase
agreement (the “
Bearclaw Agreement
”) dated October 4, 2011 (as
amended effective as of the date that this Agreement becomes unconditional
pursuant to Section 3 hereof) with Bearclaw Capital Corp.
(“
Bearclaw
”) pursuant to which Bearclaw agreed to sell to Finsbury,
and Finsbury agreed to acquire a 100% interest in certain “Purchased
Assets” (as that term is defined in the Bearclaw Agreement), including,
for greater certainty, those mineral claims described in Schedule A hereto
(the “
Gnat Pass Claims
”) as depicted on the map therein.
|
|
|
|
|
B.
|
Finsbury is also a party to a net smelter return royalty
agreement (the “
NSR Royalty Agreement
”) dated October 31, 2011 with
Bearclaw pursuant to which Finsbury granted to Bearclaw a one percent (1%)
net smelter royalty, up to a maximum aggregate amount of $7,500,000 (the
“
NSR Royalty
”).
|
|
|
|
|
C.
|
Finsbury has staked those mineral claims described in
Schedule B hereto (the “
Finsbury Staked Claims
”).
|
|
|
|
|
D.
|
Finsbury has, as of the date of this Agreement, entered
into an amending agreement (the “
Amending Agreement
”) with Bearclaw
pursuant to which Finsbury and Bearclaw have agreed to amend certain of
the obligations of Finsbury with respect to the payment of consideration
to Bearclaw thereunder and such Amending Agreement is conditional upon
this Agreement becoming unconditional upon its terms.
|
|
|
|
|
E.
|
Pursuant to an option agreement between Finsbury and
Quartz dated July 1, 2012 (the “
Option Agreement
”), Finsbury agreed
to grant to Quartz an option to acquire a fifty percent (50%) interest in
the Purchased Assets and the Finsbury Staked Claims, subject to the
obligations to Bearclaw pursuant to the Bearclaw Agreements, upon Quartz
completing the work obligations set out
therein.
|
|
F.
|
Subject to the terms and conditions hereof, Finsbury
wishes to sell one hundred percent (100%) of its interest in and to the
Finsbury Staked Claims, the Purchased Assets and its rights and
obligations under the Bearclaw Agreement and the NSR Royalty Agreement to
Quartz and Quartz wishes to purchase the Finsbury Staked Claims, the
Purchased Assets and the rights and obligations of Finsbury under the
Bearclaw Agreement and the NSR Royalty Agreement and the Parties wish to
terminate the Option Agreement as of the Effective
Date.
|
THEREFORE
this Agreement witnesses that, in
consideration of the premises and mutual covenants and conditions hereinafter
contained and other good and valuable consideration (the receipt and sufficiency
of which is hereby acknowledged), the Parties agree as follows:
|
1.
|
Sale and Purchase
|
|
|
|
|
|
|
|
(a)
|
Effective as of the date on which each of the conditions
set forth in Section 3(a) is satisfied or waived by the Parties (the
“
Effective Date
”), Finsbury hereby sells to Quartz:
|
|
|
|
|
|
|
|
|
(i)
|
the Purchased Assets, including, for greater certainty,
the Gnat Pass Claims;
|
|
|
|
|
|
|
|
|
(ii)
|
all of Finsbury’s right, title and interest in and to the
Bearclaw Agreement and the NSR Royalty Agreement and all of the benefits
and advantages to be derived therefrom; and
|
|
|
|
|
|
|
|
|
(iii)
|
the Finsbury Staked Claims,
|
|
|
|
|
|
|
|
|
(collectively, the “
Acquired Assets and
Rights
”).
|
|
|
|
|
|
|
|
(b)
|
Effective as of the Effective Date, Quartz hereby (i)
purchases and acquires the Acquired Assets and Rights and agrees with
Finsbury to assume, be bound by and observe, carry out and perform and
fulfill all of the covenants, obligations and liabilities of Finsbury
under the Bearclaw Agreement and the NSR Royalty Agreement, including, for
greater certainty, payment to Bearclaw of the NSR Royalty (collectively,
the “
Assumed Obligations
”), to the same extent and with the same
force and effect as though Quartz had been a party thereto in the place
and stead of Finsbury, and (ii) agrees to release, indemnify and hold
harmless Finsbury, its directors, managers, employees, affiliates,
successors and assigns from and against any loss, cost, damage, claim,
demand, action or cause of action (including all actual legal costs on a
solicitor and own client basis) (collectively, “
Losses
”) in any way
resulting from, connected with, or arising out of the Acquired Assets and
Rights or any failure by Quartz to fulfill its obligations under this
Section 1(b), except to the extent that such Losses arise out of or are
connected with any breach by Finsbury of any provision of this
Agreement.
|
2
2.
Purchase Price
As consideration for the sale by Finsbury of the Acquired
Assets and Rights to Quartz pursuant to Section 1(a), Quartz shall, subject to
Section 3(a) (and in addition to assuming the Assumed Obligations pursuant to
Section 1(b)) on the Effective Date, issue 2,038,111 common shares in the
capital of Quartz (“
Quartz
Shares
”) to Finsbury.
3.
Conditions
Precedent
|
|
(a)
|
The obligations of the Parties pursuant to Sections 1 and
2 are conditional upon satisfaction, or waiver by each of the Parties, of
each of the following conditions:
|
|
|
|
|
|
|
|
|
(i)
|
the Amending Agreement having been duly executed by
Finsbury and Bearclaw and being in full force and effect as of the date
hereof subject only to this Agreement becoming unconditional in accordance
with its terms;
|
|
|
|
|
|
|
|
|
(ii)
|
the TSX Venture Exchange (the “
Exchange
”) either
unconditionally or conditionally approving the issuance of the Quartz
Shares issuable to Finsbury pursuant to Section 2, subject only to
customary conditions acceptable to the Parties acting
reasonably;
|
|
|
|
|
|
|
|
|
(iii)
|
the Exchange either unconditionally or conditionally
approving the issuance of the Quartz Shares issuable to Bearclaw pursuant
to Section 2.02 of the Bearclaw Agreement, subject only to customary
conditions acceptable to the Parties acting reasonably; and
|
|
|
|
|
|
|
|
|
(iv)
|
if required pursuant to applicable securities laws or the
rules and regulations of the Exchange, Finsbury or Quartz, as the case may
be, obtaining any shareholder approvals required to be obtained in order
for Finsbury or Quartz, as the case may be, to perform its obligations
hereunder.
|
|
|
|
|
|
|
|
(b)
|
Notwithstanding any other provision of this Agreement,
the obligations of Quartz pursuant to Sections 1 and 2 are conditional
upon delivery to Quartz, on the Effective Date, of a certificate of an
officer of Finsbury confirming that the representations and warranties of
Finsbury set forth in Section 4 continue to be true and accurate as if
made on and as of the Effective Date.
|
|
|
|
|
|
|
|
(c)
|
If the conditions contained in Sections 3(a) and 3(b)
have not been either satisfied, or waived by each of the parties, on or
before August 20, 2012 or such other date mutually agreed to by the
Parties (the “
Deadline Date
”), then this Agreement shall, at the
option of either Party by written notice to the other Party, terminate and
be of no further force and effect and neither Party shall have any claim
against the other under the terms hereof or arising from the failure of
the conditions precedent.
|
3
4.
Finsbury’s Representations and Warranties
Finsbury makes the following representations and warranties to
Quartz as of the date hereof and such representations and warranties shall be
deemed to be repeated as of the closing date of the transactions contemplated
hereunder:
General Corporate Matters
|
|
(a)
|
It is a corporation duly incorporated and subsisting
under the laws of the Province of British Columbia with the corporate
power to own its assets and to carry on its business and Finsbury holds
all material permits that are required to carry on its business, and has
made all necessary filings under all applicable laws.
|
|
|
|
|
|
|
|
(b)
|
It has the power, authority and right (i) to enter into
and deliver this Agreement; and (ii) to complete the transactions to be
completed by it as contemplated herein and therein.
|
|
|
|
|
|
|
|
(c)
|
This Agreement has been duly authorized, executed and
delivered by it and constitute valid and legally binding obligations of
and enforceable against it in accordance with its terms subject to
applicable bankruptcy, insolvency, reorganization and other laws of
general application limiting the enforcement of creditors’ rights
generally and to the fact that specific performance is an equitable remedy
available only in the discretion of the court.
|
|
|
|
|
|
|
|
(d)
|
The execution, delivery and performance by Finsbury of
this Agreement:
|
|
|
|
|
|
|
|
|
(i)
|
shall not (and shall not with the giving of notice, the
lapse of time or the happening of any other event or condition) result in
a breach or violation of, or a conflict with, or allow any other person to
exercise any rights under, any of the terms or provisions of Finsbury’s
constating documents;
|
|
|
|
|
|
|
|
|
(ii)
|
shall not (and shall not with the giving of notice, the
lapse of time or the happening of any other event or condition) result in
a breach or violation of, or a conflict with, or allow any other person to
exercise any rights under any contracts or instruments to which it is a
party or by which it is bound or pursuant to which any of the Acquired
Assets and Rights may be affected; and
|
|
|
|
|
|
|
|
|
(iii)
|
shall not result in the violation of any applicable
law.
|
|
|
|
|
|
|
|
(e)
|
Other than the Exchange approvals described in Section
3(a) (the “
Exchange Approvals
”) and the approval of Bearclaw with
respect to the assignment by Finsbury to Quartz of the NSR Royalty
Agreement, no approvals and consents are required by Finsbury in
connection with the observance and performance by Finsbury of its
obligations under this Agreement.
|
4
Title, Encumbrances and Obligations Concerning the Acquired
Assets and Rights
|
|
(f)
|
Finsbury is the recorded holder of the Gnat Pass Claims
and the Finsbury Staked Claims (the “
Mineral Properties
”) and is
the owner of a 100% undivided beneficial interest in and to the Acquired
Assets and Rights, free and clear of any encumbrances except the rights of
Bearclaw to receive those payments therefor described in the Bearclaw
Agreement, the “Permitted Encumbrances” as defined in the Bearclaw
Agreement and the NSR Royalty (the “
Bearclaw Encumbrances
”), and
there are no other existing rights or options to acquire any interest in,
or explore, prospect or mine on, the Mineral Properties held by any third
party.
|
|
|
|
|
|
|
(g)
|
Finsbury has the unfettered right to transfer its 100%
undivided beneficial interest in the Acquired Assets and Rights to Quartz
in the manner set out in this Agreement.
|
|
|
|
|
|
|
(h)
|
Except for this Agreement and the Bearclaw Encumbrances,
there does not exist any contract, option or other right of another
binding upon or which at any time in the future may become binding upon
Finsbury to sell or transfer, or that would have the effect of imposing
any encumbrance upon, any of the Acquired Assets and Rights.
|
|
|
|
|
|
|
(i)
|
Except for Quartz’s rights under this Agreement and the
Bearclaw Encumbrances, there are no adverse interests or rights or options
to acquire or purchase any of the Mineral Properties or any portion
thereof or any right, title or interest therein or any minerals, metals,
concentrates or any other products or materials removed or produced from
the Mineral Properties.
|
|
|
|
|
|
|
(j)
|
Finsbury is not in default or breach of any contract or
commitment concerning any of the Acquired Assets and Rights and there
exists no condition, event or act that, with the giving of notice or lapse
of time or both, would constitute such a default or breach of any such
contract or commitment.
|
|
|
|
|
|
|
(k)
|
All material obligations of Finsbury arising under or in
connection with the Mineral Properties prior to the date hereof, and all
payments due or accrued thereunder or in connection therewith prior to the
date hereof, have been fulfilled and paid in full.
|
|
|
|
|
|
|
(l)
|
To the knowledge of Finsbury, the Mineral Properties are
not subject to any reservations of surface rights or other property rights
by the Crown, and the lands comprising the Mineral Properties are not
subject to any other rights granted by the Crown in favour of or for the
benefit of any third party, in each case which could interfere materially
with the commercial exploitation of the Mineral
Properties.
|
5
Royalties
|
|
(m)
|
Other than in respect of the NSR Royalty, no person is
entitled to any royalty or other payment in the nature of a royalty on any
minerals, metals or concentrates or any other products removed or produced
from the Mineral Properties.
|
Permits and Compliance with Laws
|
|
(n)
|
To the knowledge of Finsbury, the Mineral Properties have
been duly issued and are validly registered in accordance with all
applicable laws and are in good standing in all material respects with
respect to the performance of all material obligations required under
applicable laws (including the payment of all rents, taxes maintenance
costs and other charges thereon, the performance of all minimum assessment
work and the filing of reports with respect to minimum assessment work)
with respect thereto and, so far as Finsbury is aware, there are no facts
or circumstances which might give rise to a breach of the terms of the
Mineral Properties or render any of the Mineral Properties liable to
forfeiture.
|
|
|
|
|
|
|
(o)
|
To the knowledge of Finsbury, the physical condition of
the Mineral Properties is in material compliance with all applicable laws
and all orders of all governmental authorities having jurisdiction
thereover.
|
|
|
|
|
|
|
(p)
|
Except as is disclosed in writing to Quartz prior to the
date hereof, all material permits relating to the current status of the
Mineral Properties, if any, are in good standing and no orders impacting
their validity have been issued.
|
|
|
|
|
|
|
(q)
|
Finsbury has provided Quartz with complete and accurate
information regarding all permits, of which Finsbury is aware, which have
in the past been obtained or requested from any governmental authority in
relation to the commercial exploitation of the Mineral
Properties.
|
Claims and Proceedings
|
|
(r)
|
No litigation or other proceeding or inquiry exists, or
is pending or threatened either against Finsbury or in respect of any of
the Acquired Assets and Rights, which may affect the Acquired Assets and
Rights or the completion of the transactions contemplated
herein.
|
|
|
|
|
|
|
(s)
|
There is no adverse claim or challenge against or to the
ownership of or title to any of the Acquired Assets and Rights, and, to
Finsbury’s knowledge, there is not any basis for any such adverse claim or
challenge.
|
Environmental Issues
|
|
(t)
|
Finsbury is in material compliance with all applicable
environmental laws pertaining to the Mineral Properties and all activities
on or in relation to the Mineral Properties carried out by or on behalf of
Finsbury have been carried out in material compliance with all applicable
environmental laws. Finsbury has not received any notice from any governmental authority
alleging that Finsbury or any of its predecessors in interests in respect
of the Mineral Properties have violated or are violating in any material
respect any environmental law to which the Mineral Properties are subject,
and, except as expressly set forth herein, there are no outstanding orders
or directions relating to the environment requiring any work, repairs,
construction or capital expenditures. Finsbury has no knowledge regarding
historical compliance with applicable environmental laws pertaining to the
Mineral Properties.
|
6
|
|
(u)
|
Finsbury has not received any notice, formal or informal,
of any proceeding, with respect to any actual or potential environmental
liability, which is pending as of the date hereof, and no legal or
administrative action exists or, to the knowledge of Finsbury, is
threatened or pending, against Finsbury or the Mineral Properties in
respect of environmental liabilities. To the knowledge of Finsbury, there
are no (i) facts with respect to the Mineral Properties that could give
rise to a notice of non-compliance with any environmental law, or (ii)
environmental liabilities associated with the Mineral
Properties.
|
|
|
|
|
|
|
(v)
|
Finsbury has not been convicted of an offence or been
subjected to any judgment, injunction or other proceeding or been fined or
otherwise sentenced for non- compliance with any environmental laws, and
it has not settled any prosecution or other proceeding short of conviction
in connection therewith, in relation to the Acquired Assets and
Rights.
|
|
|
|
|
|
|
(w)
|
Neither Finsbury nor to the knowledge of Finsbury any of
its predecessors in title has caused or permitted the release of any
hazardous substance at, on, under or near the Mineral Properties, except
in compliance in all material respects with environmental laws.
|
|
|
|
|
|
|
(x)
|
There are no conditions that directly or indirectly
relate to environmental matters or to the condition of the soil or the
groundwater that would adversely affect the Acquired Assets and Rights in
a material manner.
|
|
|
|
|
|
|
(y)
|
Neither Finsbury nor, to the knowledge of Finsbury, any
of its predecessors in title has received written notice of, and Finsbury
does not have knowledge of any facts that could give rise to any notice,
that Finsbury or its predecessors are potentially responsible for any
remedial action under any environmental law in connection with the
Acquired Assets and Rights.
|
First Nations and Treaty Rights
|
|
(z)
|
To the knowledge of Finsbury, there are no First Nations
or treaty rights, titles or claims, proven or unproven, that are
reasonably related to, or may reasonably affect, the Mineral Properties
and no person has purported to be or to represent an identified First
Nations person or group in connection with the Mineral Properties or other
lands or resources that might be affected by the development and
exploitation of the Mineral Properties.
|
7
|
|
(aa)
|
Finsbury is not aware of any First Nations opposition to,
or concerns about, the development or exploitation of the Mineral
Properties, including anything related to the Crown's duty to consult
First Nations peoples.
|
|
|
|
|
|
|
(bb)
|
Finsbury has not engaged, and so far as Finsbury is aware
its predecessors in title to the Mineral Properties have not engaged, in
any negotiations with any First Nations or aboriginal group in respect of
the Mineral Properties or entered into any agreements, understandings or
commitments, including any impact and benefit agreements with any First
Nations or aboriginal groups in respect of the Mineral
Properties.
|
Books and Records
|
|
(cc)
|
The books and records of Finsbury relating to the
Acquired Assets and Rights are true and correct and present fairly and
disclose in all material respects the financial position of the Acquired
Assets and Rights; all material financial transactions of Finsbury
relating to the Acquired Assets and Rights have been accurately recorded
in such books and records; and, to the extent possible, such books and
records have been prepared in accordance with generally accepted
accounting principles consistently applied.
|
|
|
|
|
|
|
(dd)
|
Finsbury has made available to Quartz all books, records,
agreements, and all financial, technical and other information or
documents, in each case concerning the Acquired Assets and Rights, in the
possession or control of Finsbury or its affiliates, including, without
limitation (i) all analyses and monitoring data for soil, groundwater and
surface water and all reports pertaining to any environmental assessments
or audits relating to the Mineral Properties and (ii) all information
regarding, and all correspondence and other documentation evidencing, any
contact with or from, or any arrangements or agreements with or
representations made to, any person, in relation to aboriginal persons or
issues, in each case which may have any relation to the Mineral Properties
or other lands or resources that might be affected by the development or
exploitation thereof.
|
Improvements to Land; Buildings and
Equipment
|
|
(ee)
|
All improvements (including all plants, buildings,
structures, erections, appurtenances and fixtures, and any other
improvements related to environmental protection or remediation) situated
on or forming part of the Mineral Properties have been completed in a good
and competent manner and in accordance with the requirements of all
applicable governmental authorities and all such improvements are free of
material defect.
|
Tax and Similar Matters
|
|
(ff)
|
There are no liens for taxes upon the Acquired Assets and
Rights, except for statutory liens for current taxes not yet
due.
|
8
|
|
(gg)
|
Finsbury is not a non-resident of Canada within the
meaning of Section 116 of the Income Tax Act (Canada).
|
|
|
|
|
|
|
(hh)
|
Finsbury has not received notice of any assessment or any
capital charges or levies assessed or proposed to be assessed against any
of the Acquired Assets and Rights by a governmental authority or that any
governmental authority intends to require Finsbury to pay for any future
roads, utilities or services relating to the Mineral
Properties.
|
Securities Laws
|
|
(ii)
|
Finsbury acknowledges that the issuance of the Quartz
Shares will be made pursuant to an appropriate exemption (the
“
Exemption
”) from the registration and prospectus or equivalent
requirements of all rules, policies, notices, orders and legislation of
any kind whatsoever (collectively, the “
Securities Rules
”) of all
the jurisdictions applicable to such issuance and, as a consequence of
acquiring the Quartz Shares pursuant to this Exemption:
|
|
|
|
|
|
|
|
|
(i)
|
certain protections, rights and remedies provided by the
Securities Rules, including statutory rights of rescission or damages,
will not be available to Finsbury;
|
|
|
|
|
|
|
|
|
(ii)
|
Finsbury may not receive information that might otherwise
be required to be provided to Finsbury, and Quartz is relieved from
certain obligations that would otherwise apply under the applicable
Securities Rules if the Exemption were not being used;
|
|
|
|
|
|
|
|
|
(iii)
|
no securities commission, stock exchange or similar
regulatory authority has reviewed or passed on the merits of the Quartz
Shares;
|
|
|
|
|
|
|
|
|
(iv)
|
there is no government or other insurance covering the
Quartz Shares;
|
|
|
|
|
|
|
|
|
(v)
|
there are risks associated with the acquisition of the
Quartz Shares; and
|
|
|
|
|
|
|
|
|
(vi)
|
there are trade restrictions on Finsbury’s ability to
resell the Quartz Shares and it is the responsibility of Finsbury to find
out what those trade restrictions are and to comply with them before
selling the Quartz Shares.
|
|
|
|
|
|
|
|
(jj)
|
Any Quartz Shares issued to Finsbury will be acquired by
Finsbury as principal for its own account and not for the benefit of any
other person.
|
|
|
|
|
|
|
|
(kk)
|
Because of the trade restrictions imposed by operation of
the Securities Rules, the certificates representing the Quartz Shares or
where such Quartz Shares are entered into a direct registration or other
electronic book-entry system, the written notice delivered to Finsbury in
respect of such Quartz Shares, will bear such legend notation as may be
required by the Securities Rules and, if applicable, by the rules and
policies of the Exchange.
|
9
|
|
(ll)
|
Without in any way limiting the generality of the
foregoing, the trade restrictions provide that Finsbury must hold and not
sell, transfer or in any manner dispose of the Quartz Shares except in
accordance with applicable securities laws and, for purposes of securities
laws in Canada, not before the date that is four months and a day after
the distribution date of the Quartz Shares unless the disposition is made
in accordance with all applicable Securities
Rules.
|
Other
|
|
(mm)
|
Finsbury is not in default under any of the provisions of
the Bearclaw Agreement and the NSR Royalty Agreement and the Bearclaw
Agreement and the NSR Royalty Agreement remain in full force and
effect;
|
|
|
|
|
|
|
(nn)
|
No representation or warranty or other statement made by
Finsbury in this Agreement contains any untrue statement or omits to state
a material fact necessary to make any of them, in light of the
circumstances in which it was made, not
misleading.
|
5.
Conveyance
Upon the satisfaction or waiver by each of the Parties of the
conditions in Sections 3(a) and 3(b), Finsbury shall promptly:
|
|
(a)
|
release to Quartz duly executed transfers and conveyances
of the Mineral Properties, to and in favour of Quartz, in each case in
registrable form, together with anything reasonably required by Quartz to
evidence or give full effect thereto; and
|
|
|
|
|
|
|
(b)
|
release to Quartz the “Technical Information” and the
“Documents and Records”, as those terms are defined in the Bearclaw
Agreement and any other similar records or information acquired by
Finsbury in relation to the Mineral Properties subsequent to the date of
the Bearclaw Agreement.
|
|
6.
|
Transfers
|
|
|
|
|
|
|
(a)
|
Quartz will not assign, transfer or convey any of its
rights under this Agreement without the prior written consent of Finsbury,
such consent not to be unreasonably withheld or conditioned.
|
|
|
|
|
|
|
(b)
|
Subject to applicable laws and the Parties obtaining any
required approvals of the Exchange or such other recognized stock exchange
on which the Quartz Shares are then listed or quoted on for trading,
Finsbury shall have the right to assign, transfer or convey its rights
under this Agreement, including the right to receive the Quartz Shares
pursuant to Section 2, to any third party.
|
10
7.
Termination
of Option Agreement
The Parties agree that, effective as of the Effective Date, the
Option Agreement shall be terminated in its entirety, shall be of no further
force or effect and the Parties shall have no further liability to each other
with respect to the Option Agreement and each of them shall be released and
discharged from any further obligations or liabilities, past, present or future,
under the Option Agreement without the necessity for any further instrument or
formality.
8.
General
|
|
(a)
|
This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective successors and
assigns.
|
|
|
|
|
|
|
(b)
|
This Agreement and the rights of the parties hereunder
shall be governed by and construed according to the laws of the Province
of British Columbia and the laws of Canada applicable therein without
giving effect to any choice of law or conflict of law provision or rule
that would cause the application of the laws of any jurisdiction other
than the Province of British Columbia and the laws of Canada applicable
therein.
|
|
|
|
|
|
|
(c)
|
This Agreement may be executed by the parties hereto by
facsimile signature in one or more counterparts, each of which shall be
deemed to be an original and all of which will constitute together the one
and the same agreement.
|
|
|
|
|
|
|
(d)
|
Each of the parties hereto will from time to time execute
and deliver all such further documents and instruments and do all acts and
things as the other party may reasonably require to effectively carry out
the full intent and meaning of this Agreement.
|
IN WITNESS WHEREOF
the Parties hereto have executed this
Agreement as of the date first set out above.
FINSBURY EXPLORATION LTD.
By:
_______________________________________
Name: Marchand Snyman
Position: Director
QUARTZ MOUNTAIN RESOURCES LTD.
By:
_______________________________________
Name: Gordon
Fretwell
Position:
Director
11
SCHEDULE A
Gnat Pass Claims
|
Tenure
No.
|
Claim
Name
|
FMC#
|
Area (ha)
|
|
512878
|
|
145966
|
681.329
|
|
604847
|
GNAT3
|
145966
|
340.59
|
|
525819
|
GNAT NORTH
|
145966
|
272.423
|
SCHEDULE B
Finsbury Staked Claims
Tenure
Number
|
Claim
Name
|
Map
Number
|
Issue Date
|
Good To
Date
|
Status
|
Area
(ha)
|
|
871889
|
STU 074
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871890
|
STU 080
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871892
|
STU 155
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871893
|
STU 070
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871894
|
STU 019
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871895
|
STU 082
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871909
|
STU 067
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871910
|
STU 023
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871911
|
STU 020
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871912
|
STU 202
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871913
|
STU 063
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871914
|
STU 153
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871915
|
STU 081
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871916
|
STU 018
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871917
|
STU 055
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871918
|
STU 022
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871919
|
STU 050
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871920
|
STU 014
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871921
|
STU 157
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871929
|
STU 015
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871930
|
STU 084
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871931
|
STU 158
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
681.329
|
|
871949
|
STU 201
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.6927
|
|
871950
|
STU 056
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.3287
|
|
871969
|
STU 13
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.6119
|
|
871989
|
STU 075
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
237.9892
|
|
872009
|
STU 162
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.4231
|
|
872011
|
STU 086
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.5456
|
|
872012
|
STU 163
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
271.8003
|
|
872013
|
STU 021
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.324
|
|
872014
|
STU 093
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.7743
|
|
872015
|
STU 161
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
255.3781
|
|
872016
|
STU 203
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.625
|
|
872017
|
STU 071
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.0287
|
|
872018
|
STU 072
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
424.7614
|
|
872019
|
STU 154
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.7672
|
|
872020
|
STU 090
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
341.4619
|
|
872021
|
STU 016
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.5002
|
|
872022
|
STU 065
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
424.7708
|
|
872023
|
STU 156
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.7615
|
|
872024
|
STU 091
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.7671
|
Tenure
Number
|
Claim
Name
|
Map
Number
|
Issue Date
|
Good To
Date
|
Status
|
Area
(ha)
|
|
872025
|
STU 204
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.4282
|
|
872026
|
STU 066
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.0315
|
|
872027
|
STU 088
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.7028
|
|
872028
|
STU
159
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.7588
|
|
872029
|
STU 062
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.0378
|
|
872030
|
STU 078
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.8201
|
|
872031
|
STU 061
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
424.7821
|
|
872032
|
STU 160
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.7533
|
|
872033
|
STU 089
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.7739
|
|
872034
|
STU 054
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.0451
|
|
872035
|
STU 205
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.2316
|
|
872036
|
STU 068
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.5818
|
|
872037
|
STU 053
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
424.7906
|
|
872038
|
STU 139
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.0263
|
|
872039
|
STU 100
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
341.6168
|
|
872040
|
STU 069
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.5797
|
|
872041
|
STU 009
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.8014
|
|
872042
|
STU 141
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.0232
|
|
872043
|
STU 206
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.0346
|
|
872044
|
STU 073
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
339.6999
|
|
872045
|
STU 103
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
341.6088
|
|
872046
|
STU 076
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.575
|
|
872047
|
STU 143
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.0241
|
|
872049
|
STU 052
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.045
|
|
872050
|
STU 008
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.8042
|
|
872051
|
STU 079
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.7906
|
|
872052
|
STU 145
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.0203
|
|
872053
|
STU 099
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.287
|
|
872055
|
STU 049
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.0623
|
|
872056
|
STU 007
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.8155
|
|
872057
|
STU 147
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.0192
|
|
872058
|
STU 104
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.2481
|
|
872059
|
STU 051
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.774
|
|
872060
|
STU 077
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
391.5588
|
|
872061
|
STU 149
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.0196
|
|
872062
|
STU 107
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.94
|
|
872063
|
STU 200
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.4752
|
|
872064
|
STU 048
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
339.8504
|
|
872065
|
STU 005
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.8918
|
|
872066
|
STU 140
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.2724
|
|
872067
|
STU 064
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
357.4498
|
|
872068
|
STU 046
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
374.1315
|
|
872069
|
STU 112
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
410.1905
|
|
872070
|
STU 142
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.2699
|
|
872071
|
STU 024
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.0597
|
|
872072
|
STU 044
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.7283
|
14
Tenure
Number
|
Claim
Name
|
Map
Number
|
Issue Date
|
Good To
Date
|
Status
|
Area
(ha)
|
|
872073
|
STU 004
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.8617
|
|
872074
|
STU 199
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.2306
|
|
872075
|
STU 045
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.9486
|
|
872076
|
STU 060
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
374.7752
|
|
872077
|
STU 003
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.8653
|
|
872078
|
STU
144
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.2707
|
|
872079
|
STU 115
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
410.1413
|
|
872080
|
STU 040
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.1421
|
|
872081
|
STU 058
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.559
|
|
872082
|
STU 146
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.2684
|
|
872083
|
STU 002
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
341.5682
|
|
872084
|
STU 198
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.9373
|
|
872085
|
STU 148
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.2678
|
|
872086
|
STU 057
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
357.6624
|
|
872087
|
STU 039
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
424.8328
|
|
872088
|
STU 113
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.5093
|
|
872089
|
STU 150
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.2681
|
|
872090
|
STU 059
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.5928
|
|
872091
|
STU 043
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.6827
|
|
872092
|
STU 006
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.8274
|
|
872093
|
STU 116
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.5013
|
|
872095
|
STU 037
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.1375
|
|
872096
|
STU 197
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.0825
|
|
872097
|
STU 151
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.0973
|
|
872098
|
STU 083
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.0757
|
|
872099
|
STU 118
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
410.212
|
|
872100
|
STU 012
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.62
|
|
872101
|
STU 038
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
424.805
|
|
872102
|
STU 152
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.0457
|
|
872103
|
STU 085
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.2647
|
|
872104
|
STU 120
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.5001
|
|
872105
|
STU 175
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.8542
|
|
872106
|
STU 030
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.2134
|
|
872107
|
STU 017
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.3691
|
|
872108
|
STU 087
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.5663
|
|
872109
|
STU 119
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
358.9266
|
|
872110
|
STU 196
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.5519
|
|
872111
|
STU 182
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.8529
|
|
872112
|
STU 031
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.0059
|
|
872113
|
STU 001
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.8621
|
|
872114
|
STU 094
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.7817
|
|
872115
|
STU 174
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
204.3277
|
|
872116
|
STU 032
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
305.7929
|
|
872117
|
STU 122
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
410.4224
|
|
872118
|
STU 181
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.6575
|
|
872119
|
STU 092
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.9243
|
15
Tenure
Number
|
Claim
Name
|
Map
Number
|
Issue Date
|
Good To
Date
|
Status
|
Area
(ha)
|
|
872120
|
STU 033
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.6028
|
|
872121
|
STU 128
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
341.7577
|
|
872122
|
STU 010
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.6719
|
|
872123
|
STU 173
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.468
|
|
872124
|
STU 096
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.022
|
|
872125
|
STU 127
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
410.417
|
|
872126
|
STU 192
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.2742
|
|
872127
|
STU
011
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.3831
|
|
872128
|
STU 130
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
358.715
|
|
872129
|
STU 180
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.4698
|
|
872130
|
STU 95
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.9916
|
|
872131
|
STU 025
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
375.0417
|
|
872132
|
STU 129
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.0941
|
|
872133
|
STU 193
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
357.0911
|
|
872134
|
STU 121
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.4959
|
|
872135
|
STU 047
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.376
|
|
872136
|
STU 101
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
256.1003
|
|
872137
|
STU 026
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.9503
|
|
872138
|
STU 126
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.771
|
|
872139
|
STU 041
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.3909
|
|
872140
|
STU 102
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
256.1039
|
|
872141
|
STU 125
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
410.6275
|
|
872142
|
STU 195
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.8865
|
|
872143
|
STU 036
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.4075
|
|
872144
|
STU 027
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.8353
|
|
872145
|
STU 98
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
273.4715
|
|
872146
|
STU 124
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
410.6288
|
|
872147
|
STU 029
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.4206
|
|
872148
|
STU 172
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
357.2539
|
|
872149
|
STU 123
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
410.6317
|
|
872150
|
STU 194
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
356.8847
|
|
872151
|
STU 034
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.9138
|
|
872152
|
STU 028
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.6279
|
|
872153
|
STU 097
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
273.451
|
|
872154
|
STU 179
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.282
|
|
872155
|
STU 035
|
104J
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.6776
|
|
872156
|
STU 105
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
376.201
|
|
872157
|
STU 042
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.6395
|
|
872158
|
STU 117
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
342.1898
|
|
872159
|
STU 106
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.5136
|
|
872160
|
STU 171
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.0923
|
|
872161
|
STU 191
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
425.5205
|
|
872162
|
STU 178
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
408.0938
|
|
872163
|
STU 109
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.5245
|
|
872164
|
STU 108
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
341.828
|
|
872165
|
STU 190
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
357.6688
|
16
Tenure
Number
|
Claim
Name
|
Map
Number
|
Issue Date
|
Good To
Date
|
Status
|
Area
(ha)
|
|
872166
|
STU 168
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
391.0051
|
|
872167
|
STU 111
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
427.0979
|
|
872168
|
STU 114
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
410.6291
|
|
872169
|
STU 170
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.9037
|
|
872170
|
STU 132
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.878
|
|
872171
|
STU 177
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.9061
|
|
872172
|
STU 110
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
410.6443
|
|
872173
|
STU 183
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
424.7537
|
|
872174
|
STU 176
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
424.7062
|
|
872175
|
STU
131
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.851
|
|
872176
|
STU 169
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.7134
|
|
872177
|
STU 184
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
356.9255
|
|
872178
|
STU 133
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
409.654
|
|
872179
|
STU 167
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.7155
|
|
872180
|
STU 185
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
357.0526
|
|
872181
|
STU 134
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.6144
|
|
872182
|
STU 166
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.7126
|
|
872183
|
STU 135
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
358.3119
|
|
872185
|
STU 186
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
357.1796
|
|
872186
|
STU 165
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
407.7062
|
|
872187
|
STU 136
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
358.1866
|
|
872188
|
STU 164
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
339.7521
|
|
872189
|
STU 137
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.3657
|
|
872191
|
STU 187
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
357.3064
|
|
872193
|
STU 138
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
426.2563
|
|
872194
|
STU 188
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
357.4334
|
|
872197
|
STU 189
|
104I
|
2011/jul/28
|
2012/nov/05
|
GOOD
|
357.5605
|
|
872629
|
STU 207
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
426.5166
|
|
872649
|
STU 208
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
426.7613
|
|
872669
|
STU 209
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
426.9964
|
|
872689
|
STU 210
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
136.6952
|
|
872709
|
STU 213
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
426.5164
|
|
872729
|
STU 212
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
426.7611
|
|
872749
|
STU 211
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
358.6655
|
|
872769
|
STU 214
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
426.5164
|
|
872789
|
STU 215
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
426.7608
|
|
872809
|
STU 216
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
358.6367
|
|
872829
|
STU 218
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
426.5175
|
|
872849
|
STU 217
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
426.7594
|
|
872869
|
STU 219
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
426.5165
|
|
872889
|
STU 220
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
290.174
|
|
872909
|
STU 221
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
409.5276
|
|
872929
|
STU 222
|
104I
|
2011/jul/29
|
2012/nov/05
|
GOOD
|
409.5297
|
|
880449
|
STU 244
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.9063
|
|
880450
|
STU 262
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.4747
|
|
880469
|
STU 260
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.2333
|
17
Tenure
Number
|
Claim
Name
|
Map
Number
|
Issue Date
|
Good To
Date
|
Status
|
Area
(ha)
|
|
880489
|
STU 254
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
407.4979
|
|
880509
|
STU 263
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.501
|
|
880529
|
STU 294
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.7169
|
|
880549
|
STU 223
|
104I
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
407.5542
|
|
880569
|
STU 270
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.9699
|
|
880589
|
STU 259
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.2574
|
|
880609
|
STU 277
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
407.52
|
|
880610
|
STU 289
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.2145
|
|
880629
|
STU 264
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.5241
|
|
880649
|
STU 245
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.9099
|
|
880669
|
STU 281
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.7096
|
|
880670
|
STU
290
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.466
|
|
880689
|
STU 224
|
104I
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
407.551
|
|
880709
|
STU 235
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.2729
|
|
880729
|
STU 246
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.9458
|
|
880749
|
STU 280
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.704
|
|
880769
|
STU 240
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.5278
|
|
880789
|
STU 247
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.2065
|
|
880809
|
STU 293
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.7154
|
|
880829
|
STU 225
|
104I
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
407.5126
|
|
880849
|
STU 255
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.682
|
|
880869
|
STU 236
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.2501
|
|
880889
|
STU 239
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.4993
|
|
880909
|
STU 289
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.4673
|
|
880929
|
STU 248
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.1744
|
|
880949
|
STU 226
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
407.4825
|
|
880969
|
STU 256
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.9538
|
|
880989
|
STU 237
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.2425
|
|
881009
|
STU 249
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.1657
|
|
881029
|
STU 295
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.997
|
|
881049
|
STU 238
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.4941
|
|
881069
|
STU 227
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
407.4993
|
|
881089
|
STU 282
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.9683
|
|
881109
|
STU 241
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.7828
|
|
881129
|
STU 283
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.9674
|
|
881130
|
STU 268
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.0038
|
|
881131
|
STU 271
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.1985
|
|
881132
|
STU 242
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.7483
|
|
881189
|
STU 228
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
407.5164
|
|
881209
|
STU 243
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.7461
|
|
881210
|
STU 269
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.9951
|
|
881211
|
STU 288
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.2181
|
|
881212
|
STU 273
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.2319
|
|
881213
|
STU 265
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.7907
|
|
881214
|
STU 287
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.2165
|
|
881215
|
STU 272
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.2211
|
18
Tenure
Number
|
Claim
Name
|
Map
Number
|
Issue Date
|
Good To
Date
|
Status
|
Area
(ha)
|
|
881216
|
STU 253
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
407.4994
|
|
881217
|
STU 266
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.7687
|
|
881219
|
STU 252
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.4674
|
|
881220
|
STU 279
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.6959
|
|
881221
|
STU 267
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.7351
|
|
881222
|
STU 229
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.6693
|
|
881223
|
STU 300
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
358.0354
|
|
881224
|
STU 278
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
356.5742
|
|
881227
|
STU 251
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.4386
|
|
881228
|
STU 230
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.6718
|
|
881229
|
STU 285
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
135.8779
|
|
881230
|
STU 299
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.2356
|
|
881231
|
STU 292
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.6933
|
|
881232
|
STU
231
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
254.8035
|
|
881233
|
STU 250
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.4247
|
|
881234
|
STU 284
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.9579
|
|
881235
|
STU 296
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.0042
|
|
881236
|
STU 297
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.9875
|
|
881237
|
STU 286
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.2031
|
|
881238
|
STU 234
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.0183
|
|
881239
|
STU 276
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.4266
|
|
881240
|
STU 298
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.2263
|
|
881241
|
STU 291
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.4481
|
|
881242
|
STU 233
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
425.0006
|
|
881243
|
STU 301
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
392.3482
|
|
881244
|
STU 275
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.447
|
|
881245
|
STU 274
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.4598
|
|
881246
|
STU 232
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.9905
|
|
881247
|
STU 303
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
426.4647
|
|
881248
|
STU 302
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
358.2415
|
|
881249
|
STU 258
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.9908
|
|
881250
|
STU 257
|
104J
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
424.9654
|
|
881252
|
STU 304
|
104I
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
427.9485
|
|
881253
|
STU 307
|
104I
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
427.9454
|
|
881254
|
STU 261
|
104I
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
427.954
|
|
881255
|
STU 306
|
104I
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
427.9493
|
|
881256
|
STU 305
|
104I
|
2011/aug/03
|
2012/nov/05
|
GOOD
|
342.5021
|
|
888389
|
STU 308
|
104I
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
407.4082
|
|
888429
|
STU 309
|
104J
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
426.463
|
|
888449
|
STU 310
|
104J
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
426.7064
|
|
888469
|
STU 311
|
104J
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
426.4675
|
|
888489
|
STU 312
|
104J
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
426.4643
|
|
888509
|
STU 313
|
104J
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
426.7147
|
|
888529
|
STU 314
|
104J
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
426.7045
|
|
888549
|
STU 315
|
104J
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
426.4673
|
|
888569
|
STU 316
|
104J
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
426.7151
|
19
Tenure
Number
|
Claim
Name
|
Map
Number
|
Issue Date
|
Good To
Date
|
Status
|
Area
(ha)
|
|
888589
|
STU 317
|
104J
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
324.4302
|
|
888609
|
STU 318
|
104J
|
2011/aug/11
|
2012/nov/05
|
GOOD
|
170.7451
|
|
940640
|
STU332
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.2219
|
|
940641
|
STU319
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.7034
|
|
940643
|
STU333
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.2222
|
|
940644
|
STU320
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.6908
|
|
940645
|
STU334
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.2201
|
|
940646
|
STU335
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.2194
|
|
940647
|
STU321
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.6878
|
|
940648
|
STU336
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.2189
|
|
940649
|
STU319
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.6979
|
|
940650
|
STU341
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.9806
|
|
940651
|
STU322
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.6728
|
|
940652
|
STU340
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.9799
|
|
940653
|
STU339
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.9725
|
|
940654
|
STU338
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.9716
|
|
940655
|
STU337
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.9684
|
|
940656
|
STU324
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.655
|
|
940657
|
STU342
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.6916
|
|
940658
|
STU325
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.6839
|
|
940659
|
STU343
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.6974
|
|
940660
|
STU344
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.692
|
|
940661
|
STU326
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.703
|
|
940662
|
STU345
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.6949
|
|
940663
|
STU346
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.6949
|
|
940664
|
STU351
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.4482
|
|
940665
|
STU327
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.7282
|
|
940666
|
STU350
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.4537
|
|
940667
|
STU349
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.4462
|
|
940668
|
STU328
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
375.6573
|
|
940669
|
STU348
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.4493
|
|
940670
|
STU347
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.4496
|
|
940671
|
STU329
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
375.6582
|
|
940672
|
STU352
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
408.1964
|
|
940673
|
STU330
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
375.6605
|
|
940674
|
STU353
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
408.2015
|
|
940675
|
STU354
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.2008
|
|
940676
|
STU331
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
409.7972
|
|
940677
|
STU355
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.2035
|
|
940678
|
STU356
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
425.2043
|
|
940679
|
STU370
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.4692
|
|
940680
|
STU361
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
424.9612
|
|
940681
|
STU360
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
424.9659
|
|
940683
|
STU359
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
424.955
|
|
940684
|
STU371
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
426.7197
|
|
940685
|
STU358
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
424.9576
|
20
Tenure
Number
|
Claim
Name
|
Map
Number
|
Issue Date
|
Good To
Date
|
Status
|
Area
(ha)
|
|
940686
|
STU357
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
424.9587
|
|
940688
|
STU362
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
424.6942
|
|
940689
|
STU363
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
424.6936
|
|
940690
|
STU364
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
424.6859
|
|
940691
|
STU365
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
424.6953
|
|
940692
|
STU366
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
424.7018
|
|
940694
|
STU369
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
407.515
|
|
940695
|
STU368
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
407.5126
|
|
940696
|
STU367
|
104J
|
2012/jan/10
|
2013/jan/10
|
GOOD
|
407.5243
|
|
942614
|
STU 372
|
104I
|
2012/jan/25
|
2013/jan/25
|
GOOD
|
51.0262
|
|
983855
|
STU 372
|
104I
|
2012/may/03
|
2013/may/03
|
GOOD
|
102.3957
|
|
983863
|
STU 373
|
104I
|
2012/may/03
|
2013/may/03
|
GOOD
|
34.1325
|
|
983874
|
STU 374
|
104I
|
2012/may/03
|
2013/may/03
|
GOOD
|
51.1933
|
|
983876
|
STU 374
|
104I
|
2012/may/03
|
2013/may/03
|
GOOD
|
17.07
|
|
991847
|
STU373
|
104J
|
2012/may/31
|
2013/may/31
|
GOOD
|
16.9871
|
|
991824
|
STU374
|
104I
|
2012/may/31
|
2013/may/31
|
GOOD
|
17.0031
|
|
999623
|
STU 375
|
104I
|
2012/jun/21
|
2013/jun/21
|
GOOD
|
85.126
|
|
999624
|
STU 376
|
104I
|
2012/jun/21
|
2013/jun/21
|
GOOD
|
85.1474
|
|
1011415
|
STU
377
|
|
2012/jul/23
|
2013/jul/23
|
GOOD
|
17.06
|
21
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE PROVISIONS OF A MINERAL PROPERTY PURCHASE AGREEMENT ENTERED INTO BY
FINSBURY EXPLORATION LTD. AND BEARCLAW CAPITAL CORP. ON OCTOBER 4, 2011, AS
AMENDED FROM TIME TO TIME, (THE “PURCHASE AGREEMENT
”)
AND SUCH SECURITIES
ARE NOT TRANSFERABLE ON THE BOOKS OF QUARTZ MOUNTAIN RESOURCES LTD. EXCEPT IN
ACCORDANCE AND COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS CERTIFICATE AND
OF THE PURCHASE AGREEMENT.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF
THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A
DAY AFTER THE DATE OF ISSUE HEREOF.
|
PRINCIPAL SUM:
|
$ 650,000 Canadian Funds
|
|
|
|
|
DATE OF ISSUE:
|
August 20, 2012
|
|
|
|
|
MATURITY DATE:
|
October 31, 2013
|
|
1.
|
FOR VALUE RECEIVED, QUARTZ MOUNTAIN RESOURCES LTD. (the
“
Company
”) promises to pay on the Maturity Date to the order of
BEARCLAW CAPITAL CORP. (“
Bearclaw
”) the Principal Sum under this
convertible debenture (the “
Debenture
”) plus all accrued and unpaid
Interest as hereinafter set forth.
|
|
|
|
|
|
2.
|
The Principal Sum outstanding on the Debenture will bear
interest (“
Interest
”) from August 1, 2012 at a rate of 8% per annum
calculated and payable in cash quarterly in arrears on or before each
“
Interest Payment Date
” (which shall mean the 1st day of each of
January, April, July and October in each calendar year, and for any
particular period for which Interest is payable, the Interest Payment Date
shall be the date falling on the 1st day of the next January, April, July
or October) until the earlier of:
|
|
|
|
|
|
|
(a)
|
the date of the conversion of the Debenture, in full,
pursuant to Section 7; and
|
|
|
|
|
|
|
(b)
|
the date of redemption of the Debenture, in full,
pursuant to Section 9.
|
|
|
|
|
|
3.
|
The first Interest Payment Date is October 1,
2012.
|
|
|
|
|
|
4.
|
Bearclaw acknowledges and agrees that, prior to the
Maturity Date (as defined below), it may not demand from the Company the
payment of the Principal Sum, the Interest (except as described in Section
2) or any outstanding portion thereof.
|
|
|
|
|
|
5.
|
The issuance of the Debenture will not restrict or
prevent the Company from obtaining any other financing, or from issuing
additional securities or rights subsequent to issuance of the
Debenture.
|
|
|
|
|
|
6.
|
The Debenture shall not entitle Bearclaw to any rights as
a shareholder of the Company, including without limitation, voting
rights.
|
1
|
7.
|
At any time after the Date of Issue and before the
Maturity Date, Bearclaw may, from time to time in a series of conversions
or pursuant to a single conversion for the whole of the Principal Sum, at
its option, upon 10 days written notice (the “
Conversion Notice
”)
to the Company, convert all or any part of the outstanding Principal Sum
under the Debenture, plus all accrued and unpaid Interest thereon up to,
but excluding, the day that is the 10th day (or the next business day
thereafter) from the date of receipt by the Company of the Conversion
Notice (each such date, a “
Conversion Date
”), into common shares in
the capital of the Company (the “
Shares
”) as follows:
|
|
|
|
|
|
|
(a)
|
the amount of the Principal Sum to be converted pursuant
to a Conversion Notice, shall be converted into Shares at a conversion
price per Share equal to $0.40. Any Interest that has accrued upon the
amount of the Principal Sum to be converted pursuant to such Conversion
Notice but that remains unpaid as of the Conversion Date, shall be
converted into Shares at a conversion price per Share equal to the higher
of $0.40 and the Market Price of the Shares at the time of such
conversion;
|
|
|
|
|
|
|
(b)
|
a Conversion Notice will not be valid, and the Company
will have no obligation to issue any Shares in respect thereof, if such
Conversion Notice purports to convert a portion of the Principal Sum that,
together with the accrued but unpaid Interest thereon, is an amount that
is less than $100,000;
|
|
|
|
|
|
|
(c)
|
following each such Conversion Date, the Company shall,
within 3 business days thereafter, deliver to Bearclaw a certificate(s) or
other document(s) evidencing the Shares issuable upon the conversion of
the outstanding Principal Sum set out in such Conversion Notice and
accrued and unpaid Interest thereon pursuant to this Section 7. As of any
such Conversion Date, Bearclaw shall be treated for all purposes as the
record holder of the converted Shares issued pursuant to such Conversion
Notice;
|
|
|
|
|
|
|
(d)
|
in the event that a Conversion Notice (the “
Final
Conversion Notice
”) received by the Company would cause the conversion
into Shares of all of the remaining outstanding Principal Sum under the
Debenture, plus all accrued and unpaid Interest thereon, then on or before
such Conversion Date (the “
Final Conversion Date
”), Bearclaw shall
deliver to the Company the outstanding Debenture or an affidavit of loss
in a form satisfactory to the Company, evidencing the Principal Sum
outstanding under the Debenture. As of the Final Conversion Date, Bearclaw
shall be treated for all purposes as the record holder of the converted
Shares issued pursuant to such Final Conversion Notice and the Debenture
evidencing the Principal Sum and any accrued and unpaid Interest so
converted shall be cancelled by the Company and the Company shall have no
further obligation to Bearclaw thereunder; and
|
|
|
|
|
|
|
(e)
|
Bearclaw acknowledges and agrees that it is Bearclaw’s
intention that the Principal Sum and any Interest accrued but unpaid
thereon is to be repaid in full by way of set-off against the issuance by
the Company to Bearclaw of the Shares on the basis described in this
Section 7.
|
2
|
8.
|
No fractional Shares shall be issued and if any
conversion provided for herein would result in Bearclaw being entitled to
receive a fraction of a Share, the Company shall instead issue upon such
conversion the next lesser whole number of Shares and Bearclaw shall not
be entitled to any cash payment in respect of any fractional
interest.
|
|
|
|
|
|
9.
|
The Company shall, on October 31, 2013 (the “
Maturity
Date
”), redeem the Debenture in whole plus all accrued and unpaid
Interest on any outstanding Principal Sum to the extent that the Debenture
has not been converted or redeemed as of the Maturity Date and any such
outstanding Principal Sum and all accrued and unpaid Interest thereon will
be payable by the Company to Bearclaw on the Maturity Date.
|
|
|
|
|
|
10.
|
The Debenture will remain convertible, in accordance with
Section 7, by Bearclaw into Shares until 4:00pm (Vancouver time) on the
date prior to the Maturity Date, provided that a Conversion Notice has
been delivered to the Company at least 10 days prior to the Conversion
Date.
|
|
|
|
|
|
11.
|
Subject to Section 10:
|
|
|
|
|
|
|
(a)
|
on or before the Maturity Date, Bearclaw shall deliver to
the Company the outstanding Debenture or an affidavit of loss in a form
satisfactory to the Company, evidencing the Principal Sum outstanding
under the Debenture, and the Debenture, upon repayment, shall be cancelled
by the Company and, subject to this Section 11, the Company shall have no
further obligation to Bearclaw thereunder;
|
|
|
|
|
|
|
(b)
|
on the Maturity Date, the Company shall deliver to
Bearclaw, upon receipt of the Debenture or an affidavit of loss in a form
satisfactory to the Company evidencing the Principal Sum outstanding under
the Debenture, an amount representing the outstanding Principal Sum
repayable by the Company in accordance with Section 9 to Bearclaw together
with any accrued and unpaid Interest thereon; and
|
|
|
|
|
|
|
(c)
|
Bearclaw acknowledges and agrees that it is Bearclaw’s
intention that the Principal Sum and any accrued but unpaid Interest
thereon is, pursuant to Section 9, to be repaid in Canadian dollars by the
Company to Bearclaw.
|
|
|
|
|
|
12.
|
The Company hereby covenants and agrees with Bearclaw
that if this Debenture becomes mutilated, lost, destroyed or stolen, the
Company shall, upon receipt of a declaration of loss from Bearclaw in a
form satisfactory to the Company, issue and deliver to Bearclaw a new
Debenture of like date and tenor as the one mutilated, lost, destroyed or
stolen, in exchange for and in place of and upon cancellation of such
mutilated, lost, destroyed or stolen Debenture.
|
|
|
|
|
|
13.
|
This Debenture is not transferable or assignable by
Bearclaw without the prior written consent of the
Company.
|
3
|
14.
|
Failure of Bearclaw to enforce any of its rights or
remedies under this Debenture will not constitute a waiver of the rights
of Bearclaw to enforce such rights and remedies thereafter.
|
|
|
|
|
15.
|
Any capitalized terms in this Debenture that are not
otherwise defined herein shall bear the meanings associated with such
terms in the Purchase Agreement.
|
|
|
|
|
16.
|
This Debenture (and any transactions, documents,
instruments or other agreements contemplated in this Debenture) shall be
construed and governed exclusively by the laws in force in British
Columbia and the laws of Canada applicable therein, and the courts of
British Columbia (and Supreme Court of Canada, if necessary) shall have
exclusive jurisdiction to hear and determine all disputes arising
hereunder. The undersigned irrevocably attorns to the jurisdiction of said
courts and consents to the commencement of proceedings in such
courts.
|
IN WITNESS WHEREOF the Company has caused its duly authorized
signatory to execute and deliver this Debenture to Bearclaw as of the day and
year first above written.
QUARTZ MOUNTAIN RESOURCES LTD.
Per:
__________________________________
Authorized Signatory
4
November 1, 2012
Quartz Mountain Resources Ltd.
15
th
Floor, 1040
West Georgia Street
Vancouver, British Columbia V6E 4H1
|
Attention:
|
Ronald Thiessen
|
|
|
President
|
Dear Sirs/Mesdames:
RE: Letter Agreement: Galaxie and ZNT Projects – Proposed
Joint Venture
Following our recent discussions, we are pleased to present in
this letter agreement (this “
Letter Agreement
”) the terms and conditions
upon which Amarc Resources Ltd. or its nominated affiliate (“
Amarc
”) will
agree to enter into an unincorporated joint venture (the “
Joint Venture
”)
with Quartz Mountain Resources Ltd. (“
Quartz
”) with respect to the
Galaxie Project (the “
Galaxie Project
”) and the ZNT Project (the “
ZNT
Project
”), each located in the Province of British Columbia as more fully
described in Schedule A hereto (the Galaxie Project and the ZNT Project,
collectively, the “
Projects
”).
Form of Joint Venture
|
1.
|
Notwithstanding the form of the Joint Venture agreed to
herein, the Joint Venture may take a different legal form if each of the
parties determines in writing that such form is to be preferred from a
commercial, legal or tax perspective, following consultation with its
legal and financial advisers.
|
|
|
|
|
2.
|
The Joint Venture will be governed by a definitive
agreement entered into between Amarc and Quartz (the “
Parties
”,
each a “
Party
”) (the “
Definitive Agreement
”).
|
|
|
|
|
3.
|
The Definitive Agreement will include the terms and
conditions contained in Schedule B (the “
Definitive Agreement
Terms
”).
|
|
|
|
|
4.
|
For the purposes of this Letter Agreement, “
Ownership
Interest
” means the undivided beneficial ownership interest of a Party
in the Joint Venture expressed as a percentage of the aggregate of all
ownership interests of the Parties in the Joint Venture, as such ownership
interest may from time to time be adjusted in accordance with the
provisions of this Letter Agreement or the Definitive Agreement. All
rights and obligations which accrue to, and are incurred by, the Parties
as against third parties in pursuing the objects of the Joint Venture,
will accrue to and be incurred by them jointly pro rata to their
respective Ownership Interests, and not jointly and
severally.
|
Ownership Interests
|
5.
|
Amarc will acquire a 40% Ownership Interest (“
Initial
Ownership Interest
”) on the completion of the payments and the funding
of Exploration Expenditures described in Section 6 below. Amarc will
not acquire any Ownership Interest if Amarc does not fulfill
its expenditure requirements within the deadlines set out in Section 6
below.
|
|
6.
|
In order to earn the 40% Initial Ownership Interest,
Amarc will:
|
|
|
|
|
|
|
(a)
|
on or before the effective date of the Joint Venture
under the Definitive Agreement (the “
Effective Date
”) make a cash
payment to Quartz in the amount of $1,000,000; and
|
|
|
|
|
|
|
(b)
|
fund exploration expenditures (“
Exploration
Expenditures
”) in the aggregate amount of at least $1,000,000 to be
incurred by Quartz with respect to the Galaxie Project after the execution
of this Letter Agreement and on or before December 31, 2012 (the
“
Investment Date
”). For the purposes of this Letter Agreement,
Exploration Expenditures means all direct or indirect costs and expenses
incurred by Quartz in respect of prospecting and exploring the Galaxie
Project including, without limitation, expenditures relating to drilling,
permitting, claim acquisition and maintenance, cash payments and
reimbursement for share payments under the agreements described in Section
15(c), geological and geophysical surveys and geological mapping. For
greater certainty, Quartz will direct and incur all such Exploration
Expenditures and 100% of the Canadian exploration expense (CEE)
attributable to such Exploration Expenditures, will have been incurred by
Quartz.
|
|
|
|
|
|
7.
|
In the event that Quartz does not incur at least
$1,000,000 in Exploration Expenditures with respect to the Galaxie Project
on or before the Investment Date, Amarc shall pay to Quartz the difference
between $1,000,000 and the amount of Exploration Expenditures incurred by
Quartz with respect to the Galaxie Project, to be held in trust by Quartz
for the benefit of the Joint Venture, such that the sum of such payment
and any Exploration Expenditures incurred by Quartz, is at least
$1,000,000. All amounts held in trust by Quartz pursuant to this Section 7
shall be used by Quartz to incur Exploration Expenditures in relation to
the Galaxie Project.
|
|
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|
|
|
8.
|
In the event that Amarc funds the Exploration
Expenditures as contemplated under Section 6(b) or makes the payment
described in Section 7, in each case by the Investment Date, and makes the
cash payment as contemplated in Section 6(a) by the Effective Date, Amarc
will have earned its Initial Ownership Interest and such Initial Ownership
Interest will not be subject to divestment. In the event that Amarc does
not fund the Exploration Expenditures as contemplated under Section 6(b)
or make the payment described in Section 7, in each case by the Investment
Date, or does not make the cash payment as contemplated under Section 6(a)
by the Effective Date, Amarc will not earn any interest in the Joint
Venture and will have no further obligations or liabilities to Quartz or
the Projects.
|
|
|
|
|
|
9.
|
Any Exploration Expenditures funded or amounts paid
(including amounts paid into trust) in excess of the amounts specified in
Sections 6 and 7, will be credited towards future obligations of Amarc to
fund the Joint Venture.
|
Option
|
10.
|
Provided that Amarc has earned the Initial Ownership
Interest, Amarc will have an option (the “
Option
”) until September
30, 2013, unless it notifies Quartz in writing on or before May 31, 2013
that it does not intend to exercise the Option (the “
Option Date
”
being the earlier of September 30, 2013 and the date
of receipt by Quartz of such notice), to earn an additional 10% Ownership Interest for a total Ownership Interest of 50%, in consideration for Amarc:
|
2
|
|
(a)
|
funding additional Exploration Expenditures to be
incurred by Quartz in relation to the Projects in the aggregate amount of
at least $1,000,000; or,
|
|
|
|
|
|
|
(b)
|
in the sole discretion of Amarc, paying to Quartz on or
before September 30, 2013 an amount to be held in trust by Quartz for the
benefit of the Joint Venture, such that the sum of the payment into trust
and any Exploration Expenditures incurred, is at least C$ 1,000,000. All
amounts held in trust by Quartz pursuant to this Section 10 shall be used
by Quartz to incur Exploration Expenditures in relation to the Joint
Venture.
|
|
11.
|
For greater certainty, any Exploration Expenditures
incurred or amounts paid (including amounts paid into trust) in excess of
the amounts specified in Section 10, will be credited towards future
obligations of Amarc to incur Exploration Expenditures or otherwise to
fund the Joint Venture.
|
Title
|
12.
|
On and after the Investment Date, Quartz will hold 100%
of the legal title to the Projects in trust for the Parties according to
each Party’s Ownership Interest. The Parties will take all required action
and deliver anything reasonably required for the purposes of completing
the transfer and contribution to the Joint Venture by Quartz of its
interest in the Projects, and implementing the Joint Venture as
contemplated hereunder and will continue to cooperate with such actions as
may be reasonably necessary to give the Joint Venture full
effect.
|
Joint Venture Documents
|
13.
|
The Parties shall use their reasonable commercial efforts
to negotiate any definitive transaction documents (including but not
limited to the Definitive Agreement) that may be required in order to
implement the Joint Venture (collectively, the “
Joint Venture
Documents
”), with the intention that such documents incorporate in
detail the terms and conditions of the transactions contemplated
hereunder, including the Definitive Agreement Terms, together with all
other terms and conditions as the Parties or their legal advisors consider
necessary or desirable. The Parties intend to complete negotiation of the
terms of the Joint Venture Documents and to execute and deliver the Joint
Venture Documents on or before the first business day in British Columbia,
Canada that falls at least 30 days after the Signature Date (the
“
Deadline Date
”).
|
|
|
|
|
14.
|
If the Parties do not negotiate and execute the Joint
Venture Documents on or before the Deadline Date, then this Letter
Agreement (including the Definitive Agreement Terms and any amendments to
this Letter Agreement and the Definitive Agreement Terms as the Parties
may agree in writing) will constitute the Joint Venture Documents with
effect from the Deadline Date, and the Deadline Date will be deemed to be
the Effective Date. The Parties shall promptly thereafter execute and
deliver all documents, deeds, conveyances and other instruments of further
assurance which may be reasonably necessary or advisable to carry out
fully the intent of this Section 14 to implement the Joint
Venture.
|
3
Representations and Warranties
|
15.
|
Quartz hereby represents and warrants the following to
Amarc as at the date of signature of this Letter Agreement by Quartz (the
“
Signature Date
”), the Deadline Date and the Effective Date, which
representations and warranties will also be included with the other
customary representations and warranties to be set out in the Joint
Venture Documents:
|
|
|
|
|
|
|
|
(a)
|
it has full power, authority and capacity to enter into
this Letter Agreement and to carry out the Joint Venture, and the Joint
Venture will not violate or result in a breach of or default under any
applicable laws, its governing documents or any agreements to which it is
a party and no third- party approvals are required for it to enter into
and complete the Joint Venture;
|
|
|
|
|
|
|
|
(b)
|
no third party or regulatory approvals are required in
order for it to enter into, and complete the transactions contemplated
under, this Letter Agreement and any Joint Venture Documents except as may
be contemplated in Section 22(b) hereof;
|
|
|
|
|
|
|
|
(c)
|
it is the registered and beneficial owner of 100% of the
Projects, free and clear of all liens, charges, or encumbrances
whatsoever, and there are no other existing rights or options to acquire
any interest in the Projects held by any third party, other than
obligations of Quartz under the following agreements:
|
|
|
|
|
|
|
|
|
(i)
|
the Mineral Property Purchase Agreement made as of July
27, 2012 between Quartz, Crucible Resources Ltd., Michael Rowley and
Douglas Dale Warkentin;
|
|
|
|
|
|
|
|
|
(ii)
|
the Net Smelter Return Royalty Agreement dated August 1,
2012 between Quartz, Crucible Resources Ltd. and Michael Rowley;
|
|
|
|
|
|
|
|
|
(iii)
|
the Net Smelter Return Royalty Agreement dated October
31, 2011 between Bearclaw Capital Corp. and Quartz; and
|
|
|
|
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|
|
(iv)
|
the Convertible Debenture issued on August 20, 2012 by
Quartz to Bearclaw Capital Corp.;
|
|
|
|
|
|
|
|
(d)
|
no litigation or other proceeding or inquiry exists, or
is pending or threatened against it, or which may affect the Projects, and
which has not been expressly disclosed to Amarc before the Signature
Date;
|
|
|
|
|
|
|
|
(e)
|
Quartz is a valid and subsisting corporation in good
standing under its jurisdiction of incorporation and holds all licenses
and permits required to carry on its business;
|
|
|
|
|
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|
(f)
|
the mineral claims comprising the Projects are in good
standing and have been properly staked, located and recorded in accordance
with applicable laws and regulations;
|
|
|
|
|
|
|
|
(g)
|
all activities on or in relation to the Projects have
been carried out in material compliance with all applicable environmental
laws, regulations, and regulatory prohibitions or orders, and there are no
outstanding orders or directions relating to environmental matters
requiring any work, repairs, construction or capital expenditures;
and
|
4
|
|
(h)
|
there is no adverse claim or challenge against or to the
ownership of or title to any of the mineral claims comprising the
Projects, nor to its knowledge is there any basis
therefor.
|
|
16.
|
Amarc hereby represents and warrants the following to
Quartz as at the Signature Date, the Deadline Date and the Effective Date,
which representations and warranties will also be included with the other
customary representations and warranties to be set out in the Joint
Venture Documents:
|
|
|
|
|
|
|
(a)
|
Amarc has full power, authority and capacity to enter
into this Letter Agreement and to carry out the Joint Venture, and the
Joint Venture will not violate or result in a breach of or default under
its constating documents or any agreement to which it is a
party;
|
|
|
|
|
|
|
(b)
|
no third party or regulatory approvals are required in
order for it to enter into, and complete the transactions contemplated
under, this Letter Agreement and any Joint Venture Documents except as may
be contemplated in Section 22(d) hereof; and
|
|
|
|
|
|
|
(c)
|
Amarc is a valid and subsisting corporation in good
standing under its jurisdiction of incorporation and holds all licenses
and permits required to carry on its business.
|
Confidentiality
|
17.
|
It is recorded that Amarc and Quartz have entered into
two confidentiality agreements dated September 12, 2012 (the
“
Confidentiality Agreements
”) with regard to the Confidential
Information (as such term is defined in the Confidentiality Agreements)
provided or to be provided by Amarc to Quartz and vice versa.
|
|
|
|
|
18.
|
The parties agree that the fact of the discussions
between the parties that led to the execution of this Letter Agreement,
the existence and content of this Letter Agreement, and any ongoing
discussions between the parties and their representatives during the
course of negotiation and execution of the Transaction Documents, shall
constitute Confidential Information under the Confidentiality Agreements
and shall not be disclosed by the parties, except as specifically provided
in the Confidentiality Agreements.
|
|
19.
|
Neither Quartz nor Amarc shall disseminate a press
release or make other public disclosure regarding the existence or
subject-matter of this Letter Agreement or the Joint Venture Documents
without the prior written consent of the other of them, unless such
disclosure is required by applicable law, regulation, regulatory authority
rules or policies, or stock exchange rules, in which event the Party
contemplating disclosure will, if permitted to do so, inform the other
Party of, and obtain its consent to, the form and content of such
disclosure, which consent will not be unreasonably withheld or
delayed.
|
Binding Letter Agreement; Exclusivity
|
20.
|
In consideration of the mutual undertakings of the
Parties pursuant to this Letter Agreement, and for other good and valuable
consideration (the receipt and sufficiency of which is acknowledged by
each signatory hereto), upon execution by Quartz indicating its acceptance
hereof, this Letter Agreement and each provision hereof will constitute a
legally binding and enforceable agreement of Amarc and Quartz. Each such
Party shall do or cause to be done all such acts and things as are
reasonably necessary to implement the Joint Venture contemplated by this
Letter Agreement.
|
5
|
21.
|
Except as provided in this Letter Agreement, neither of
the Parties shall, directly or indirectly, continue or commence any
discussions or negotiations with, or enter into any undertaking, agreement
or commitment with, or accept or consider any proposal unsolicited or
otherwise from, any person with respect to any transaction which would
prevent the Parties from completing the transactions contemplated by this
Letter Agreement.
|
Conditions Precedent
|
22.
|
The obligations of the Parties under this Letter
Agreement and the Joint Venture Documents will be subject to the
fulfilment, or the waiver by Amarc in the case of the items contemplated
in Section 22(a) and the waiver by Quartz in the case of the items
contemplated in Section 22(c), of the following conditions precedent (the
“
Conditions
”) on or before the Effective Date:
|
|
|
|
|
|
|
(a)
|
the representations and warranties of Quartz pursuant to
Section 15 being true and correct; and
|
|
|
|
|
|
|
(b)
|
the receipt by Quartz of such approvals from all relevant
governmental and regulatory authorities and securities exchanges, that may
be necessary or desirable for completion of the Joint Venture;
|
|
|
|
|
|
|
(c)
|
the representations and warranties of Amarc pursuant to
Section 16 being true and correct; and
|
|
|
|
|
|
|
(d)
|
the receipt by Amarc of such approvals from all relevant
governmental and regulatory authorities and securities exchanges, that may
be necessary or desirable for completion of the Joint Venture.
|
|
|
|
|
|
23.
|
Each of the Parties undertakes to use good faith and to
make reasonable efforts to fulfil the Conditions. For greater certainty,
the Conditions in Sections 22(b) and (d) shall not be waived, except by
written agreement of both Parties.
|
|
|
|
|
|
24.
|
In the event that any of the Conditions are neither
fulfilled nor waived on or before the Effective Date, any Exploration
Expenditures funded by Amarc prior to the Effective Date will constitute a
demand loan from Amarc to Quartz bearing interest at the CIBC Prime Rate
plus 5% from the date of the advance.
|
|
|
|
|
|
25.
|
The obligations of the Parties under this Letter
Agreement will become binding on the Signature Date; provided that this
Letter Agreement and any Joint Venture Documents may be terminated on
written notice by Amarc to Quartz in the event that any of the Conditions
has not been either fulfilled, or waived by the relevant Party on or
before the Effective Date, upon which notice the obligations of the
Parties under this Letter Agreement and the Joint Venture Documents will
terminate and neither Party will have any further obligations
hereunder.
|
General
|
26.
|
All currency amounts stated herein are amounts in
Canadian dollars.
|
|
|
|
|
27.
|
For greater certainty, neither this Letter Agreement nor
the Definitive Agreement will: (a) constitute any Party as the partner or
joint venturer of any other Party; (b) except as expressly provided herein
or in the Definitive Agreement, constitute any Party as the agent or legal
representative of any other Party; or (c) create any fiduciary
relationship between any Parties. Except as expressly provided herein, in
the Confidentiality Agreements, or in the Definitive Agreement, each Party
shall have the right independently to engage in and receive full benefits from business
activities outside the Projects, without consultation and whether or not
competitive with the operations of any other Party or the Joint Venture,
and the doctrines of “corporate opportunity” or “business opportunity”
will not apply to such activities.
|
6
|
28.
|
This Letter Agreement, together with the Confidentiality
Agreements constitutes the entire agreement between the Parties and
replaces and supersedes all prior agreements, memoranda, correspondence,
communications, negotiations and representations, whether verbal or
written, express or implied, statutory or otherwise between the Parties
with respect to the subject matter herein.
|
|
|
|
|
29.
|
This Letter Agreement is conclusively deemed to be made
under, and for all purposes, to be governed by and construed in accordance
with, the laws of the Province of British Columbia and the federal laws of
Canada applicable therein.
|
|
|
|
|
30.
|
This Letter Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original and all of
which taken together will be deemed to constitute one and the same
instrument.
|
|
|
|
|
31.
|
Delivery of an executed signature page to this Letter
Agreement by either Party by electronic transmission will be as effective
as delivery of a manually executed copy of the Letter Agreement by such
Party.
|
If the foregoing is acceptable to you, please sign in the space
provided below and return a copy of this Letter Agreement to us by 5:00 PM (PDT)
on November 2, 2012, failing which this offer will lapse and be of no further
force or effect.
Yours faithfully,
AMARC RESOURCES LTD.
Per:
________________________________________
Diane Nicolson
Executive Vice-President
The terms and conditions of the Joint Venture outlined
herein are acceptable.
Accepted by:
QUARTZ MOUNTAIN RESOURCES LTD.
Per:
________________________________________
Lena Brommeland
Executive Vice-President
Date: ___________________________________
Place: __________________________________
7
Schedule A
THE PROJECTS
The Projects are comprised of the following mineral claims,
each as more particularly described and delineated on the maps below:
8
Schedule B
JOINT VENTURE AGREEMENT TERMS
All capitalized terms used, but not defined herein, will have
the meanings ascribed to them in the letter agreement (the “
Letter
Agreement
”) dated November 1, 2012 between Amarc Resources Ltd.
(“
Amarc
”) and Quartz Mountain Resources Ltd. (“
Quartz
”).
For the purposes of this Schedule B, the following terms will
have the following meanings:
|
|
(a)
|
“
Cover Payment
” has the meaning given to such
phrase in Section 38;
|
|
|
|
|
|
|
(b)
|
“
Management Committee
” has the meaning given to
such phrase in Section 8;
|
|
|
|
|
|
|
(c)
|
“
Manager
” means the manager of the Joint Venture
appointed under Section 14;
|
|
|
|
|
|
|
(d)
|
“
NSR
” has the meaning given to such term in
Section 33;
|
|
|
|
|
|
|
(e)
|
“
Reduced Party
” has the meaning given to such
phrase in Section 31;
|
|
|
|
|
|
|
(f)
|
“
Remaining Party
” has the meaning given to such
phrase in Section 33; and
|
|
|
|
|
|
|
(g)
|
“
Withdrawing Party
” has the meaning given to such
phrase in Section 33.
|
The Definitive Agreement Terms are as follows:
Purposes
|
1.
|
The Joint Venture is entered into for the following
purposes:
|
|
|
|
|
|
|
(a)
|
to conduct exploration on the Projects;
|
|
|
|
|
|
|
(b)
|
to acquire additional properties;
|
|
|
|
|
|
|
(c)
|
to complete a study into the development of the
Projects;
|
|
|
|
|
|
|
(d)
|
if economic, to engage in development and mining of the
Projects;
|
|
|
|
|
|
|
(e)
|
to engage in operations on the Projects;
|
|
|
|
|
|
|
(f)
|
to engage in marketing and selling products derived from
the Projects;
|
|
|
|
|
|
|
(g)
|
to dispose of Projects or any portion thereof;
|
|
|
|
|
|
|
(h)
|
to complete and satisfy all environmental compliance
obligations affecting the Projects;
|
|
|
|
|
|
|
(i)
|
to fulfil the obligations of Quartz under the following
agreements:
|
9
|
|
(i)
|
the Mineral Property Purchase Agreement made as of July
27, 2012 between Quartz, Crucible Resources Ltd., Michael Rowley and
Douglas Dale Warkentin (other than the issuance of Quartz shares
thereunder);
|
|
|
|
|
|
|
(ii)
|
the Net Smelter Return Royalty Agreement dated August 1,
2012 between Quartz, Crucible Resources Ltd. and Michael Rowley;
|
|
|
|
|
|
|
(iii)
|
the Net Smelter Return Royalty Agreement dated October
31, 2011 between Bearclaw Capital Corp. and Quartz; and
|
|
|
|
|
|
|
(iv)
|
the Convertible Debenture issued on August 20, 2012 by
Quartz to Bearclaw Capital Corp.; and
|
|
|
(j)
|
to perform any other activity necessary, appropriate, or
incidental to any of the foregoing.
|
Quartz Initial Contribution
|
2.
|
Quartz shall make its contribution to the Joint Venture
consisting of the transfer of a 40% Ownership Interest in the Projects as
contemplated in Section 5 of the Letter Agreement.
|
|
|
|
|
3.
|
Quartz shall pay any costs, including any taxes payable
pursuant to applicable laws, and shall make any relevant filings required
under applicable laws, in respect of the transfer to the Joint Venture of
the rights and properties constituting the Projects as its
contribution.
|
Amarc Initial Contribution and Option
|
4.
|
Amarc shall earn its Initial Ownership Interest and shall
have the option to acquire up to a 50% Ownership Interest, as contemplated
in the Letter Agreement.
|
Ownership Interests
|
5.
|
As contemplated in the Letter Agreement, on the
Investment Date, the Parties will have the following initial Ownership
Interests:
|
Amarc
–
40%
Quartz
–
60%
Pre-Emptive Rights
|
6.
|
A Party may dispose of its entire Ownership Interest (but
not part thereof). If a Party elects to sell its Ownership Interest, other
than to an affiliate or to a member of the Hunter Dickinson group of
companies, the selling Party shall first offer its Ownership Interest to
the other Party. The selling Party may not sell its Ownership Interest to
a third party on terms more favourable to such third party than that
offered to the other Party.
|
10
|
7.
|
Subject to Section 6, neither Party shall transfer,
alienate, encumber or grant any right of use in any part of its Ownership
Interest, except with the express written consent of the other Party or in
connection with financing arrangements to fund its participation in the
Joint Venture.
|
Organization and Composition of Management Committee
|
8.
|
A management committee (the “
Management
Committee
”) will be established to determine overall policies,
objectives, procedures, methods and actions for the exploration and
development of the Projects. The Management Committee will consist of two
(2) representatives appointed by Quartz and two (2) representatives
appointed by Amarc. Each Party, at such time as it has appointed a
representative to the Management Committee, may appoint one (1) or more
alternates to act in the absence of a regular representative of the
Management Committee. Appointments by a Party will be made or changed by
notice to the other Party. Each of the Parties shall be entitled to
designate one (1) of its representatives as the Chairman of the Management
Committee for alternate twelve (12) month periods during the term of the
Joint Venture, and Quartz shall designate one (1) of its representatives
to serve as the Chairman of the Management Committee for the first twelve
(12) month period starting on the Effective Date.
|
Decisions of Management Committee
|
9.
|
Each Party, acting through its appointed
representative(s) in attendance at a Management Committee meeting, will
have votes on the Management Committee in proportion to its Ownership
Interest; provided that each Party will have an equal vote on the
Management Committee notwithstanding their relative Ownership Interests,
for the period from the Effective Date until the Option Date.
|
|
|
|
|
|
10.
|
Subject to Section 9, the vote of the Party with an
Ownership Interest over fifty percent (50%) will determine the decisions
of the Management Committee and, if no single Party has an Ownership
Interest greater than fifty percent (50%), then a simple majority of the
Management Committee will determine such decisions. In the event of a
deadlocked vote, the matter will be resolved in accordance with the
dispute resolution mechanics set out in Section 40 below. For greater
certainty, the Chairman of the Management Committee shall not have a
casting or determinative vote.
|
|
|
|
|
|
11.
|
Notwithstanding any other provision in this Agreement,
the approval of any program and budget in an amount in excess of 120% of
the previously approved program and budget (as adjusted to apply to the
same length of time), will require a minimum of 75% of the votes in favour
on the Management Committee.
|
|
|
|
|
|
12.
|
A majority vote by the Parties holding more than sixty
percent (60%) of the total Ownership Interest, taking into consideration
what is commercially viable and what is prudent, fair and reasonable to
the interests of the Joint Venture, shall determine the following
decisions of the Management Committee:
|
|
|
|
|
|
|
(a)
|
the relinquishment, surrender or disposal of all or
substantially all of the Projects or the land / claims comprising the
Projects;
|
|
|
|
|
|
|
(b)
|
the disposal of any part of the Projects where the value
of such part exceeds one million dollars
($1,000,000);
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11
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|
(c)
|
a decision to initiate, defend or settle any litigation
where the amount in dispute exceeds one million dollars ($1,000,000), save
for litigation between the Joint Venture and any Parties or between any
Parties themselves;
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(d)
|
the permanent or indefinite cessation or suspension of
exploration, development and or mining in respect of any
Project;
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(e)
|
a substantial and material variation in the scope or
direction of work from that contemplated in an approved program and
budget; and
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(f)
|
a decision to expend on any work approved by a program
and budget an amount greater than 20% of the budgeted figure for that work
as set out in the program and budget.
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Meetings
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13.
|
The Management Committee may from time to time hold
meetings at such time and place as mutually agreed to by the
representatives of the Management Committee. The Manager (as defined
below) shall give twenty (20) days’ notice to the representatives of
meetings. Additionally, either Party may call a special meeting upon
fifteen (15) days’ notice to the Manager and the other Party. In case of
emergency, reasonable notice of a special meeting will suffice. At any
such meeting, there will be a quorum if at least one (1) representative of
the Management Committee representing each Party is present; provided,
however, that if a Party, through its duly appointed representatives,
fails to attend two (2) properly called meetings, then a quorum will exist
at the second meeting if the other Party is represented by at least one
(1) duly appointed representative, and a vote of such Party will be
considered the vote required for the purposes of the conduct of all
business properly noticed even if such vote would otherwise require
unanimity.
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Appointment of Manager
|
14.
|
The Management Committee shall appoint a manager (the
“
Manager
”) with overall management responsibility for operations of
the Joint Venture.
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15.
|
The Management Committee shall appoint Quartz as the
Manager until it resigns or is deemed to have resigned as provided in
Section 21.
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Powers and Duties of Manager
|
16.
|
The powers and duties of the Manager will
include:
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(a)
|
managing the day to day operations of the Joint
Venture;
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(b)
|
preparing proposed programs and budgets for presentation
and approval by the Management Committee;
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(c)
|
making monthly cash calls (or for such other period of
time as the Manager determines) to the Parties to meet the funding
requirements of the Joint Venture in accordance with approved
budgets;
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12
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(d)
|
implementing the decisions of the Management
Committee;
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(e)
|
keeping and maintaining all required accounting and
financial records; and
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(f)
|
establishing and maintaining a separate bank account for
the Joint Venture.
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17.
|
During the term of the Joint Venture, the Manager will be
the operator of the Project and shall manage and operate all work programs
on the Projects. Subject to the requirements of British Columbia law, the
directors and officers of the Manager and its servants, agents and
independent contractors, will have the sole and exclusive right in respect
of the Projects and the lands constituting the Projects, to:
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(a)
|
enter thereon;
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(b)
|
have exclusive and quiet possession thereof;
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(c)
|
do prospecting, exploration, development and/or other
mining work thereon and thereunder pursuant to approved programs and
budgets;
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(d)
|
bring upon and erect thereupon buildings, plant,
machinery and equipment as the Manager may deem advisable; and
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(e)
|
remove therefrom and dispose of reasonable quantities of
ores, mineral and metals, for purposes including but not limited to
obtaining assays or making other tests.
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18.
|
For greater certainty, the Manager shall have no express
or implied duty to explore for any mineral or minerals on, in or under the
Projects, or to produce any mineral or minerals from the Projects or to
continue production if commenced.
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Standard of Care
|
19.
|
The Manager shall exercise its powers and discharge its
duties and conduct all operations in respect of the Projects honestly, in
good faith and in what it reasonably believes to be in the best interests
of the Joint Venture, and in a good, workmanlike and efficient manner, in
accordance with sound mining and other applicable industry standards and
practices, and in accordance with applicable laws and with the terms and
provisions of leases, licenses, permits, contracts and other agreements
pertaining to the Projects. The Manager shall not be liable to the Joint
Venture or the Parties for any act or omission resulting in damage or loss
except to the extent caused by or attributable to the Manager’s wilful
misconduct or gross negligence. The Manager shall not be in default of any
of its duties if its inability or failure to perform results from the
failure of the Parties to perform acts or to contribute amounts required
of any of them by the Joint Venture Documents.
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Resignation; Deemed Offer to Resign
|
20.
|
The Manager may resign upon not less than two (2) months’
prior notice to the Management Committee, in which case the Management
Committee shall elect a successor Manager. The Manager shall be deemed to
have resigned upon the occurrence of any event described in Section 21,
and the Management Committee shall elect a successor
Manager.
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13
Deemed Events of Resignation
|
21.
|
The Manager will be deemed to have resigned on the
occurrence of any of the following events:
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(a)
|
the aggregate Ownership Interest of the Party that
appointed the Manager becomes less than fifty percent (50%);
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(b)
|
if the Manager is also an owner of an Ownership Interest,
such Manager ceases to be or is deemed to have ceased to be an owner of an
Ownership Interest;
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(c)
|
in the event that the Parties have provided sufficient
funding the to the Joint Venture for the performance of a material
obligation imposed on the Manager under the Joint Venture Documents, and
the Manager fails to perform such material obligation and such failure
continues for a period of sixty (60) days after notice from any Party
demanding performance;
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(d)
|
the Manager commences a voluntary case under any
applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or consents to the entry of an order for relief in an involuntary
case under any such law or to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official of any substantial part of its assets; or makes a general
assignment of a judgment, decree or order for relief affecting its ability
to serve as Manager or against a substantial part of its Ownership
Interest (if it is also a Party) or its other assets by a court of
competent jurisdiction in an involuntary case commenced under any
applicable bankruptcy, insolvency or other similar law of any jurisdiction
now or hereafter in effect; or
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(e)
|
entry is made against the Manager of a judgment, decree
or order for relief affecting its ability to serve as Manager, or against
a substantial part of its Ownership Interest (if it is also a Party) or
its other assets by a court of competent jurisdiction in an involuntary
case commenced under any applicable bankruptcy, insolvency or other
similar law of any jurisdiction now or hereafter in
effect.
|
Under Sections 21(d) and (e), the appointment of a successor
Manager will be deemed to pre-date the event causing a deemed resignation.
Operations of the Joint Venture Pursuant to Programs and
Budgets
|
22.
|
Except as otherwise provided in the Joint Venture
Documents, operations of the Joint Venture will be conducted, expenses
will be incurred, and assets of the Joint Venture will be acquired only
pursuant to adopted programs and budgets. Every program and budget adopted
pursuant to the Joint Venture Documents will provide for accrual of
reasonably anticipated environmental compliance expenses for all
operations of the Joint Venture contemplated under the program and
budget.
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Presentation of Programs and Budgets
|
23.
|
Prior to the Investment Date, the Manager shall prepare
all programs and budgets for the period from the Effective Date until the
Investment Date, for such amounts as the Manager will determine from time
to time in consultation with Amarc, and such programs and budgets shall be
submitted to the Management Committee for review and consideration. All such proposed
programs and budgets will be reviewed and adopted upon a majority vote of
the Management Committee.
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14
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24.
|
Following the Investment Date, programs and budgets shall
be prepared by the Manager for a period of one (1) year or any other
period as approved by the Management Committee, and shall be submitted to
the Management Committee for review and consideration; provided that all
programs and budgets for the period up to the Option Date will be prepared
by the Manager and provided to the Management Committee for consideration
on or before May 31, 2013. All proposed programs and budgets will be
reviewed and adopted upon a vote of the Management Committee. During the
period of the current program and budget and at least sixty (60) days
prior to its expiration, a proposed program and budget for the succeeding
period will be prepared by the Manager and submitted to the Management
Committee for approval and adoption.
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25.
|
During the period following the expiry of an approved
program and budget but before the approval of a new program and budget by
the Management Committee, the Manager may, subject to the receipt of
necessary funds pursuant to Section 26, continue operations and
expenditure levels at equivalent levels to those set out in the expired
program and budget until a new program and budget is approved.
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26.
|
The Party with the greater Ownership Interest (or the
party that is the Manager in the event that the Parties have equal
Ownership Interests) on the date described in Section 25 may, at its sole
discretion, elect to solely fund the continued operation and expenditures
of the Manager at the levels described in Section 25 and, in the event
that such Party makes such an election and funds such amounts, such funded
amounts will accrue interest at the CIBC Prime Rate plus 5% from the date
of advance of each such amount. In the event that necessary funds pursuant
to this Section 26 have not been received, then, in the period following
the expiry of an approved program and budget but before the approval of a
new program and budget by the Management Committee, the Parties shall fund
in proportion to their Ownership Interests, such maintenance costs that
are determined by the Manager acting reasonably to be necessary in order
to maintain, but not develop, the Projects.
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27.
|
All programs and budgets will, if applicable, also make
provisions for amounts funded pursuant to Section 26 and the Party that
did not fund such amounts may elect at the same time as making its
election in Section 29 to either refund to the other Party all such funded
amounts, plus interest, or to have such amounts, together with interest,
added to the other Party’s contribution to the Joint Venture for the
purposes of any recalculation of the Parties’ Ownership Interests pursuant
to Section 31.
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Project Financing
|
28.
|
If the Management Committee approves the development of a
mine on the Project and also decides to seek project financing for such
mine, the Parties shall seek to obtain joint project financing for such
mine; provided, however, that all fees, charges and costs (including
attorneys’ and technical consultants’ fees) paid to the project financing
lenders will be borne by the Parties in proportion to their Ownership
Interests, except to the extent that such fees are capitalized as a part
of the project financing. If the Parties are not successful in obtaining
joint project financing for such mine, each Party shall, at its own cost,
seek to obtain project financing for its proportion of the costs of the
development of such mine.
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15
Election to Participate
|
29.
|
Prior to the Option Date, Amarc shall contribute 100% of
the cash requirements under all adopted programs and budgets , and all
such contributions will be credited towards obligations of Amarc to fund
Exploration Expenditures or make any payments pursuant to the Letter
Agreement and Sections 24 to 31 inclusive, 34, 37, and 38 will not apply
thereto.
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30.
|
On and after the Option Date, by notice to the Manager
within thirty (30) calendar days after the adoption of a program and
budget, and notwithstanding the Management Committee vote concerning
adoption of a program and budget, a Party may elect to participate in the
approved program and budget: (i) in proportion to its respective Ownership
Interest, (ii) in some lesser amount than in proportion to its respective
Ownership Interest, or (iii) not at all. If a Party makes an election to
contribute in some lesser amount than in proportion to its respective
Ownership Interest, or not at all, such Party’s Ownership Interest will be
diluted in accordance with Section 31 with dilution effective as of the
first day of the period of the relevant program and budget. If a Party
fails to so notify the Manager of the extent to which it elects to
participate within the thirty (30) calendar day period specified above,
the Party will be deemed to have elected not to contribute to such program
and budget, and its Ownership Interest will be diluted in accordance with
Section 31 with dilution effective as of the first day of the period of
the relevant program and budget.
|
Recalculation of Ownership Interest
|
31.
|
If the Ownership Interest of a Party (the “
Reduced
Party
”) is to be diluted, such Ownership Interest will be
provisionally recalculated according to the following
formula:
|
Where:
|
|
R =
|
The recalculated Ownership Interest of the Reduced Party
expressed as a percentage.
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X =
|
The Reduced Party’s aggregate contributions to the Joint
Venture immediately prior to the diluting date, as adjusted for the debits
and credits in terms of the budget and the Reduced Party’s commitment to
fund any contributions to the budget, if any.
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Y =
|
All of the Parties’ aggregate contributions to the Joint
Venture immediately prior to the diluting date, as adjusted for
anticipated debits and credits based on the budget and all of the Parties’
contributions or defaults of contributions to the budget.
|
For the purpose of calculating ‘X’ and
‘Y’ above, Quartz’s initial contribution to the Joint Venture will be deemed to
be equal to $3,000,000. For the purpose of calculating ‘X’ and ‘Y’ above,
Amarc’s initial contribution to the Joint Venture will be deemed to be equal to
$2,000,000; provided that in the event that Amarc exercises the Option, its
initial contribution to the Joint Venture will be deemed to be $3,000,000.
The Ownership Interest of the other
Party will be increased by the amount of the reduction in the Ownership Interest
of the Reduced Party, and if the other Party elects not to fund the entire
deficiency, the Manager shall adjust the program and budget to reflect
the funds available. However, if the adjusted program and budget
contemplates costs of less than 75% of those contemplated in the original
program and budget, the adjusted program will be re-submitted to the
Management Committee for approval and the procedures set out in Section 30
will be repeated.
16
|
32.
|
If the Ownership Interest of a Party is provisionally
recalculated under Section 31, then within ninety (90) days of the
conclusion of such program and budget or at any other time as the Manager
may determine, acting reasonably, the Manager shall recalculate each
Party’s Ownership Interest to reflect actual debits, credits and
contributions made during that period. Each Party will retain all of its
rights and all of its obligations including the right to participate in
future programs and budgets in accordance with its final recalculated
Ownership Interest.
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Elimination of Minority Ownership Interest
|
33.
|
Upon the recalculated Ownership Interest of a Reduced
Party (the “
Withdrawing Party
”) becoming less than ten percent
(10%), such Withdrawing Party will be deemed to have withdrawn from the
Joint Venture and shall relinquish its entire Ownership Interest free and
clear of any encumbrances arising by, through or under the Withdrawing
Party, except any such encumbrances to which the Parties have agreed. Such
relinquished Ownership Interest will be deemed to have accrued
automatically to the other Party (the “
Remaining Party
”), subject
to a right on behalf of the Remaining Party to elect to assign all or a
part of the relinquished Ownership Interest to an affiliate of the
Remaining Party. The Remaining Party shall grant to the Withdrawing Party
a two percent (2%) net smelter returns royalty (“
NSR
”) on the
Projects effective as of the effective date of such resignation
substantially in the from attached as Schedule C hereto. The Withdrawing
Party will thereafter have no further right, title or interest in the
Joint Venture, the Projects, or under the Joint Venture Documents. The
Remaining Party will have the option to acquire one half (1/2) of the NSR
in consideration for the payment to the Withdrawing Party of $1,000,000,
and thereby reduce the NSR to 1%. The remaining one percent (1%) NSR will
be subject to a cumulative aggregate total cap on net smelter return
payments of $5,000,000, or may be purchased at any time by the Remaining
Party for consideration of a payment to the Withdrawing Party of
$5,000,000 at the sole discretion of the Remaining
Party.
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Cash Calls
|
34.
|
On the basis of each adopted program and budget, the
Manager shall submit to the Parties each month or on such other intervals
it may determine estimated cash requirements for the next month or other
interval. Within fifteen (15) days after receipt of each such billing,
each Party shall contribute its share of such cash requirements under
Sections 29 or 30, or maintenance costs under Section 26, as
applicable.
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|
35.
|
In the event that Quartz is required to make any payments
in cash or issue any shares pursuant to any of the agreements described in
Section 1(i), Amarc will, within five (5) days of each such payment in
cash or issuance of shares, reimburse Quartz in cash for:
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|
(a)
|
100% of the amount of the cash payment made and/or the
value of the shares issued by Quartz, in the event that Quartz makes such
payment or issues such shares prior to the Option Date;
or
|
17
|
|
(b)
|
such proportion of the cash payment made and/or the value
of the shares issued by Quartz, that is equal to Amarc’s Ownership
Interest on the date Quartz made such payment in cash or issued such
shares.
|
|
36.
|
For the purposes of Section 35, the value of any shares
issued by Quartz shall be deemed to be the volume weighted average trading
price of such shares on the stock exchange of Quartz’s primary listing for
the ten (10) trading days immediately prior to the date of issuance. For
greater certainty, the amount of any reimbursement by Amarc of Quartz
under Section 35 shall be credited towards future obligations of Amarc to
fund the Joint Venture (including funding contemplated under Sections 6(b)
and 10 of the Letter Agreement), and the amount of any cash paid or value
of any shares issued by Quartz which is not reimbursed by Amarc, shall be
credited towards future obligations of Quartz to fund the Joint
Venture.
|
Failure to Meet Cash Calls
|
37.
|
A Party that fails to meet cash calls in the amount and
at the times specified in Section 34 will be in default, and the amount of
the default will bear interest from the date due. Such interest will
accrue to the benefit of and be payable to the non-defaulting Party, but
will not be deemed to be amounts contributed by the defaulting Party in
the event dilution occurs. If a defaulting Party has not met a cash call
in full within sixty (60) days of the due date, the non-defaulting Party
may elect that the Ownership Interest of the defaulting Party will be
diluted in accordance with Section 31, with such dilution effective as of
the date such cash call is due. In addition to any other rights and
remedies available to it by law, the non- defaulting Party will have those
other rights, remedies, and elections specified in the Joint Venture
Documents.
|
Cover Payment
|
38.
|
If a Party defaults in making a cash call to be made in
accordance with Section 34, the non-defaulting Party may, but will not be
obligated to, advance some portion or all of the amount in default on
behalf of the defaulting Party (a “
Cover Payment
”). Each and every
Cover Payment will constitute a demand loan from the non-defaulting Party
to the defaulting Party bearing interest at the CIBC Prime Rate plus 5%
from the date of the advance. If more than one Cover Payment is made, the
Cover Payments will be aggregated and the rights and remedies described in
the Joint Venture Documents pertaining to an individual Cover Payment will
apply to the aggregated Cover Payments. The failure to repay such loan
upon demand will be a default under such loan.
|
Indemnification
|
39.
|
Quartz shall indemnify and hold harmless Amarc and its
directors, officers, employees, advisors, consultants and agents from and
against any and all liabilities, obligations, costs, charges or damages
whatsoever resulting from any event or circumstance pertaining to the
Projects that existed or arose prior to the Effective
Date.
|
Dispute Resolution
|
40.
|
All disputes arising out of or in connection with the
Joint Venture that have not been resolved by the Parties within twenty
(20) days of both Parties being made aware of such dispute, will be
referred to a committee of the independent directors of each Party and, if not resolved within ten (10) business days of such referral, then non-mining disputes will be referred to and finally resolved by arbitration under the International Commercial Arbitration Rules of Procedure of the British Columbia International Commercial Arbitration Centre. The appointing authority will be the British Columbia International Commercial Arbitration Centre. The case will be administered by the British Columbia International Commercial Arbitration Centre in accordance with its Rules, provided that in the case of a dispute with respect to the approval by the Management Committee of a Program and Budget as contemplated under Section 9above, then the dispute shall be settled by final offer arbitration whereby each party shall submit to the arbitrator(s) a single document not exceeding 50 pages in length (including exhibits and appendices) setting forth its proposed resolution, and in rendering its decision the arbitrator(s) shall accept one, but not more than one, of the Parties' proposed resolutions of the dispute. The place of arbitration will be Vancouver, British Columbia, Canada.
|
18
Mining disputes will, prior to being
referred to arbitration, be referred to an expert to be settled in accordance
with CIMVal and other official standards and guidelines developed by CIM. If
either Party notifies the other that it does not accept such expert’s findings,
such mining dispute will be referred to and finally resolved by arbitration as
described in this Section 40.
Area of Interest
|
41.
|
In the event that a Party acquires, directly or through
any of its controlled affiliates, agents or any of their representatives,
other than from the other Party or its controlled affiliates or agents,
any interest in any mining claims or other properties and mineral
interests within a five kilometre radius of the outermost boundaries of
the Projects, that acquiring Party shall offer the Joint Venture in
writing the right to acquire such acquired interest in exchange for
reimbursement of such acquiring Party’s direct and indirect acquisition
costs. The other Party shall have 30 days after receipt of such offer from
the acquiring Party to accept such offer and 90 days after receipt of such
offer to reimburse the proportion of such costs that is equal to its
Ownership Interest on the date of the offer.
|
19
Schedule C
NET SMELTER RETURNS ROYALTY
NET SMELTER RETURNS
|
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1.01
|
"Net Smelter Returns" for purposes hereof are defined as
follows:
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(a)
|
where all or a portion of the ores or concentrates
derived from the Projects are sold as ores or concentrates, the Net
Smelter Returns shall be the gross amount received from the purchaser
following sale thereof after deduction of: (i) of all smelter charges,
penalties and other deductions; and (ii) all costs of transporting and
insuring the ores or concentrates from the mine to the smelter or other
place of final delivery; and
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(b)
|
where all or a portion of the said ores or concentrates
derived from the Projects are treated in a smelter and a portion of the
metals recovered therefrom are delivered to, and sold by the Royalty-
payor, the Net Smelter Returns shall be the gross amount received from the
purchaser following sale of the metals so delivered, after deduction of
(i) all smelter charges, penalties and other deductions; (ii) all costs of
transporting and insuring the ores or concentrates from the mine to the
smelter, and (iii) if applicable under the smelter contract, all costs of
transporting and insuring the metals from the smelter to the place of
final delivery by the purchaser.
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Where any ores or concentrates are sold to, or treated
in, a smelter owned or controlled by the Royalty-payor, the pricing for
that sale or treatment will be established by the Royalty-payor on an
arm's-length basis so as to be fairly competitive with pricing, net of
transportation, insurance, treatment charges and other related costs, then
available on world markets for product of like quantity and
quality.
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2.
|
PAYMENT OF NET SMELTER
RETURNS
|
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|
2.01
|
The Royalty-payor shall calculate the Net Smelter Returns
and the sums to be disbursed to the Royalty-holder as at the end of each
calendar quarter.
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2.02
|
Royalty-payor shall, within 60 days of the end of each
calendar quarter, as and when any Net Smelter Returns are available for
distribution:
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|
(a)
|
cause to be paid to the Royalty-holder that percentage of
the Net Smelter Returns to which the Royalty-holder is entitled under the
Agreement;
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(b)
|
deliver to the Royalty-holder a statement
indicating:
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(i)
|
the gross amounts received from the purchaser
contemplated in subsection 1.01 of this Schedule
B;
|
20
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(ii)
|
the deductions therefrom in accordance with subsection
1.01 of this Schedule B;
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(iii)
|
the amount of Net Smelter Returns remaining;
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(iv)
|
the amount of those Net Smelter Returns to which the
Royalty-holder is entitled; supported by such reasonable information as to
the tonnage and grade of ores or concentrates shipped as will enable the
Royalty-holder to verify the gross amount payable by the smelter or other
purchaser; and
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(v)
|
the allocation of the Net Smelter Return amongst all the
Royalty-holders.
|
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3.
|
ADJUSTMENTS AND
VERIFICATION
|
|
|
3.01
|
Payment of any Net Smelter Returns by the Royalty-payor
shall not prejudice the right of the Royalty-payor to adjust any statement
supporting the payment; provided, however, that all statements presented
to the Royalty-holder by the Royalty-payor for any quarter shall
conclusively be presumed to be true and correct upon the expiration of 12
months following the end of the quarter to which the statement relates,
unless within that 12-month period the Royalty- payor gives notice to the
Royalty-holder claiming an adjustment to the statement which will be
reflected in subsequent payment of Net Smelter Returns.
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3.02
|
The Royalty-payor shall not adjust any statement in
favour of itself more than 12 months following the end of the quarter to
which the statement relates.
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3.03
|
The Royalty-holder shall, upon 30 days' notice in advance
to the Royalty-payor, have the right to request that the Royalty-payor
have its independent external auditors provide their audit certificate for
the statement or adjusted statement, as it may relate to the Agreement and
the calculation of Net Smelter Returns.
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3.04
|
The cost of the audit certificate shall be solely for the
Royalty-holder's account unless the audit certificate discloses material
error in the calculation of Net Smelter Returns, in which case the
Royalty-payor shall reimburse the Royalty-holder the cost of the audit
certificate. Without limiting the generality of the foregoing, a
discrepancy of one percent in the calculation of Net Smelter Returns shall
be deemed to be material.
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4.
|
ROYALTY-PAYOR TO DETERMINE
OPERATIONS
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4.01
|
The Royalty-payor will have complete discretion
concerning the nature, timing and extent of all exploration, development,
mining and other operations conducted on or for the benefit of the
Projects and may suspend operations and production on the Projects at any
time it considers prudent or appropriate to do so. The Royalty-payor will
owe the Royalty-holder no duty to explore, develop or mine the Projects,
or to do so at any rate or in any manner other than that which the
Royalty-payor may determine in its sole and unfettered discretion. The
Royalty-payor may, but will not be obligated to treat, mill, heap leach,
sort, concentrate, refine, smelt, or otherwise process, beneficiate or
upgrade the ores, concentrates, and other products at sites located on or
off the Projects, prior to sale, transfer, or conveyance to a purchaser,
user, or consumer. The Royalty-payor will not be liable for mineral values
lost in processing under sound practices and procedures, and no royalty
will be due on any such lost mineral values.
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21
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5.01
|
Ores, concentrates and derivatives mined or retrieved
from the Projects may be commingled with ores, concentrates or derivatives
mined or retrieved from other properties. All determinations required for
calculation of Net Smelter Returns, including without limitation the
amount of the metals contained in or recovered from ores, solutions,
concentrates or derivatives mined or retrieved from the Projects, the
amount of the metals contained in or recovered from commingled ores,
solutions, concentrates or derivatives shall be made in accordance with
prudent engineering, metallurgical and cost accounting
practices.
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6.01
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The Royalty-payor may, but need not, engage in forward
sales, futures trading or commodity options trading, and other price
hedging, price protection, and speculative arrangements ("Trading
Activities") which may involve the possible delivery of base or precious
metals produced from the Projects. The parties acknowledge and agree that
the Royalty-holder shall not be entitled to participate in the proceeds or
be obligated to share in any losses generated by the Trading
Activities.
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7.
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RIGHT TO PURCHASE ROYALTY/ROYALTY
CAP
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7.01
|
The Royalty-payor shall have the right at any time to
purchase up to one-half (50%) of the NSR in consideration of the payment
to the Royalty-holder of $1 million and thereby reduce the NSR to 1% of
Net Smelter Returns. The remaining 1% NSR will be subject to a cumulative
aggregate total cap on Net Smelter Return payments of $5 million or may be
purchased at any time by the Royalty-payor in consideration of payment to
the Royalty-holder of $5 million, at the sole discretion of the
Royalty-payor.
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22
QUARTZ MOUNTAIN RESOURCES LTD.
(the
“Company”)
SHARE OPTION PLAN
Dated for Reference February 14, 2012
ARTICLE 1
PURPOSE AND INTERPRETATION
Purpose
1.1 The purpose of this Plan is to
advance the interests of the Company by encouraging equity participation in the
Company through the acquisition of Common Shares of the Company. It is the
intention of the Company that this Plan will at all times be in compliance with
TSX Venture Policies (or, if applicable, NEX Policies) and any inconsistencies
between this Plan and TSX Venture Policies (or, if applicable, NEX Policies)
will be resolved in favour of the latter.
1.2 For United States tax purposes,
this Plan provides for both the grant of Incentive Stock Options and Options
that do not qualify as Incentive Stock Options.
Definitions
1.3 In this Plan
(a)
Affiliate
means a company
that is a parent or subsidiary of the Company, or that is controlled by the same
entity as the Company;
(b)
Associate
has the meaning
set out in the Securities Act;
(c)
Black-out Period
means an
interval of time during which the Company has determined that one or more
Participants may not trade any securities of the Company as a consequence of the
implementation of a general restriction on such trading by an authorized Officer
or Director pursuant to the Company’s governance policies that authorize general
and/or specific restrictions on trading by Service Providers in circumstances
where there may exist undisclosed material changes or undisclosed material facts
in connection with the Company’s affairs;
(d)
Board
means the board of
directors of the Company or any committee thereof duly empowered or authorized
to grant Options under this Plan;
(e)
Business Day
means a day
that the TSX Venture is open for trading;
- 2 -
(f)
Change of Control
includes
situations where after giving effect to the contemplated transaction and as a
result of such transaction:
(i) any one Person holds a sufficient
number of voting shares of the Company or resulting company to affect materially
the control of the Company or resulting company, or,
(ii) any combination of Persons,
acting in concert by virtue of an agreement, arrangement, commitment or
understanding, holds in total a sufficient number of voting shares of the
Company or its successor to affect materially the control of the Company or its
successor,
where such Person or combination of
Persons did not previously hold a sufficient number of voting shares to
materially affect control of the Company or its successor and, in the absence of
evidence to the contrary, any Person or combination of Persons acting in concert
by virtue of an agreement, arrangement, commitment or understanding, holding
more than 20% of the voting shares of the Company or resulting company is deemed
to materially affect control of the Company or resulting company;
(g)
Common Shares
means common
shares without par value in the capital of the Company; provided that such class
is listed on the TSX Venture (or, NEX, as the case may be);
(h)
Company
means the company
named at the top hereof and includes, unless the context otherwise requires, all
of its Affiliates and successors according to law;
(i)
Consultant
means an
individual or Consultant Company, other than an Employee, Officer or Director
that:
(i) provides on an ongoing bona fide
basis, consulting, technical, managerial or like services to the Company or an
Affiliate of the Company, other than services provided in relation to a
Distribution;
(ii) provides the services under a
written contract between the Company or an Affiliate and the Person or the
Consultant Company;
(iii) in the reasonable opinion of the
Company, spends or will spend a significant amount of time and attention on the
business and affairs of the Company or an Affiliate of the Company; and
(iv) has a relationship to provide
services to the Company or an Affiliate of the Company that enables the Person
or Consultant Company to be knowledgeable about the business and affairs of the
Company;
(j)
Consultant Company
means
for an individual consultant, a Person of which the individual is an employee,
shareholder, or partner;
(k)
Directors
means the
directors of the Company as may be elected from time to time;
- 3 -
(l)
Discounted Market Pric
e has
the meaning assigned by Policy 1.1 of the TSX Venture Policies;
(m)
Disinterested Shareholder
Approval
means approval by a majority of the votes cast by all the Company’s
shareholders at a duly constituted shareholders’ meeting, excluding votes
attached to Common Shares beneficially owned by Insiders who are Service
Providers or their Associates;
(n)
Distribution
has the
meaning assigned by the Securities Act, and generally refers to a distribution
of securities by the Company from treasury;
(o)
Effective Date
for an
Option means the date of grant thereof by the Board;
(p)
Employee
means:
(i) an individual who is considered an
employee under the
Income Tax Act
(Canada) (i.e. for whom income tax,
employment insurance and Canada Pension Plan deductions must be made at
source);
(ii) an individual who is considered
an employee under the
Internal Revenue Code of 1986
(United States), that
is, for whom federal, state and local income taxes and deductions, as
applicable, are made at source);
(iii) an individual who works
full-time for the Company or a subsidiary thereof providing services normally
provided by an employee and who is subject to the same control and direction by
the Company over the details and methods of work as an employee of the Company,
but for whom income tax deductions are not made at source; or
(iv) an individual who works for the
Company or its subsidiary on a continuing and regular basis for a minimum amount
of time per week providing services normally provided by an employee and who is
subject to the same control and direction by the Company over the details and
methods of work as an employee of the Company, but for whom income tax
deductions need not be made at source;
(q)
Exchange Hold Period
has
the meaning assigned by Policy 1.1 of the TSX Venture Policies;
(r)
Exercise Price
means the
amount payable per Common Share on the exercise of an Option, as determined in
accordance with the terms hereof;
(s)
Expiry Date
means the day
on which an Option lapses as specified in the Option Commitment therefor or in
accordance with the terms of this Plan;
(t)
Incentive Stock Option
means an Option granted in accordance with Section 422 of the Internal
Revenue Code of 1986 (United States) to an Employee described in §1.3(p)(ii)
above;
- 4 -
(u)
Insider
means an insider as
defined in the TSX Venture Policies or as defined in the Securities Act or an
Associate of any Person who is an Insider;
(v)
Investor Relations Activities
means generally any activities or communications that can reasonably be seen
to be intended to or be primarily intended to promote the merits or awareness of
or the purchase or sale of securities of the Company;
(w)
Listed Shares
means the
number of issued and Outstanding Shares of the Company that have been accepted
for listing on the TSX Venture, but excluding dilutive securities not yet
converted into Listed Shares;
(x)
Management Company Employee
means an individual employed by a Person providing management services to
the Company which are required for the ongoing successful operation of the
business enterprise of the Company, but excluding a Person engaged primarily in
Investor Relations Activities;
(y)
Market Price
has the
meaning assigned by Policy 1.1 of the TSX Venture Policies;
(z)
NEX
means a separate board
of the TSX Venture for companies previously listed on the TSX Venture or the
Toronto Stock Exchange which have failed to maintain compliance with the ongoing
financial listing standards of those markets;
(aa)
NEX Issuer
means a company
listed on NEX;
(bb)
NEX Policies
means the
rules and policies of NEX as amended from time to time;
(cc)
Officer
means a duly
appointed officer of the Company;
(dd)
Option
means the right to
purchase Common Shares granted hereunder to a Service Provider;
(ee)
Option Commitment
means
the notice of grant of an Option delivered by the Company hereunder to a Service
Provider and substantially in the form of Schedule A attached hereto;
(ff)
Optioned Shares
means
Common Shares that may be issued in the future to a Service Provider upon the
exercise of an Option;
(gg)
Optionee
means the
recipient of an Option hereunder;
(hh)
Outstanding Shares
means
at the relevant time, the number of issued and outstanding Common Shares of the
Company from time to time;
(ii)
Participant
means a
Service Provider that becomes an Optionee;
(jj)
Person
includes an
individual and any corporation, incorporated association or organization, body
corporate, partnership, trust, association or other entity other than an
individual;
- 5 -
(kk)
Plan
means this share
option plan, the terms of which are set out herein or as may be amended;
(ll)
Plan Shares
means the
total number of Common Shares which may be reserved for issuance as Optioned
Shares under the Plan as provided in §2.2;
(mm)
Regulatory Approval
means
the approval of the TSX Venture or any other stock exchange where the Company’s
shares may be listed and any other securities regulatory authority that has
lawful jurisdiction over the Plan and any Options issued hereunder;
(nn)
Securities Act
means the
Securities Act, R.S.B.C. 1996, c. 418, or any successor legislation;
(oo)
Service Provider
means a
Person who is a bona fide Director, Officer, Employee, Management Company
Employee, Consultant or Consultant Company, and also includes a corporation, of
which 100% of the share capital of which is beneficially owned by one or more
Service Providers;
(pp)
Share Compensation Arrangement
means any Option under this Plan but also includes any other stock option,
stock option plan, employee stock purchase plan or any other compensation or
incentive mechanism involving the issuance or potential issuance of Common
Shares to a Service Provider;
(qq)
Shareholder Approval
means
approval by a majority of the votes cast by eligible shareholders of the Company
at a duly constituted shareholders’ meeting;
(rr)
Take Over Bid
means a take
over bid as defined in Multilateral Instrument 62-104 (Take-over Bids and Issuer
Bids) or analogous provisions of any other securities legislation applicable to
the Company;
(ss)
TSX Venture
means the TSX
Venture Exchange and any successor thereto; and
(tt)
TSX Venture Policies
means
the rules and policies of the TSX Venture as amended from time to time.
Other Words and Phrases
1.4 Words and phrases used in this Plan
but which are not defined in the Plan, but are defined in the TSX Venture
Policies (and, if applicable, the NEX Policies), will have the meaning assigned
to them in the TSX Venture Policies (and, if applicable, NEX Policies).
Gender
1.5 Words importing the masculine
gender include the feminine or neuter, words in the singular include the plural,
words importing a corporate entity include Persons, and vice versa.
- 6 -
ARTICLE 2
SHARE OPTION PLAN
Establishment of Share Option Plan
2.1 The Plan is hereby established to
recognize contributions made by Service Providers and to create an incentive for
their continuing assistance to the Company and its Affiliates.
Maximum Plan Shares
2.2 The maximum aggregate number of
Plan Shares that may be reserved for issuance under the Plan at any point in
time is 10% of the Outstanding Shares at the time Plan Shares are reserved for
issuance as a result of the grant of an Option, less any Common Shares reserved
for issuance under share options granted under Share Compensation Arrangements
other than this Plan, unless this Plan is amended pursuant to the requirements
of the TSX Venture Policies (and, if applicable, NEX Policies). Notwithstanding
anything to the contrary, subject to provisions in §3.12 relating to adjustments
and subject to the TSX Venture Policies, the aggregate maximum number of shares
that may be issued as Incentive Stock Options is 5,000,000.
Eligibility
2.3 Options to purchase Common Shares
may be granted hereunder to Service Providers of the Company, or its Affiliates,
from time to time by the Board. Service Providers that are not individuals will
be required to undertake in writing not to effect or permit any transfer of
ownership or option of any of its securities, or to issue more of its securities
(so as to indirectly transfer the benefits of an Option), as long as such Option
remains outstanding, unless the written permission of the TSX Venture and the
Company is obtained. Incentive Stock Options may only be granted to Service
Providers who are Employees of the Company or an Affiliate of the Company, or as
an inducement to an individual not previously employed by the Company to become
an Employee of the Company or an Affiliate of the Company.
Options Granted Under the Plan
2.4 All Options granted under the Plan
will be evidenced by an Option Commitment in the form attached as Schedule A,
showing the number of Optioned Shares, the term of the Option, a reference to
vesting terms, if any, and the Exercise Price. The Option Commitment will also
specify whether or not any of the Options granted are intended to be Incentive
Stock Options for US tax purposes.
2.5 Subject to specific variations
approved by the Board, all terms and conditions set out herein will be deemed to
be incorporated into and form part of an Option Commitment made hereunder.
- 7 -
Limitations on Issue
2.6 Subject to §2.11, the following
restrictions on issuances of Options are applicable under the Plan:
(a) no Service Provider can be granted
an Option if that Option would result in the total number of Options, together
with all other Share Compensation Arrangements granted to such Service Provider
in the previous 12 months, exceeding 5% of the Outstanding Shares, unless the
Company has obtained Disinterested Shareholder Approval to do so;
(b) the aggregate number of Options
granted to all Service Providers conducting Investor Relations Activities in any
12-month period cannot exceed 2% of the Outstanding Shares, calculated at the
time of grant, without the prior consent of the TSX Venture (or NEX, as the case
may be); and
(c) the aggregate number of Options
granted to any one Consultant in any 12 month period cannot exceed 2% of the
Outstanding Shares, calculated at the time of grant, without the prior consent
of the TSX Venture.
2.7 No Option granted to an Employee
will qualify as an Incentive Stock Option to the extent that the aggregate fair
market value (determined as of the time such Option is granted) of the Common
Shares with respect to which such Option and any other Incentive Stock Options
of the Company or its Affiliates that have been granted to such Employee, are
exercisable for the first time during any calendar year, exceeds US$100,000.
Options Not Exercised
2.8 In the event an Option granted
under the Plan expires unexercised or is terminated by reason of dismissal of
the Optionee for cause or is otherwise lawfully cancelled prior to exercise of
the Option, the Optioned Shares that were issuable thereunder will be returned
to the Plan and will be eligible for re-issue. For greater certainty options
which are exercised thereupon increase the number available to the Plan by the
relevant percentage of Outstanding Shares as provided hereunder.
Powers of the Board
2.9 The Board will be responsible for
the general administration of the Plan and the proper execution of its
provisions, the interpretation of the Plan and the determination of all
questions arising hereunder. Without limiting the generality of the foregoing,
the Board has the power to
(a) allot Common Shares for issuance
in connection with the exercise of Options;
(b) grant Options hereunder;
(c) subject to any necessary
Regulatory Approval, amend, suspend, terminate or discontinue the Plan, or
revoke or alter any action taken in connection therewith, except that no general
amendment or suspension of the Plan will, without the prior written consent of all Optionees, alter or
impair any Option previously granted under the Plan unless the alteration or
impairment occurred as a result of a change in the TSX Venture Policies or the
Company’s tier classification thereunder or other applicable legal requirements;
and
- 8 -
(d) delegate all or such portion of
its powers hereunder as it may determine to one or more committees of the Board,
either indefinitely or for such period of time as it may specify, and thereafter
each such committee may exercise the powers and discharge the duties of the
Board in respect of the Plan so delegated to the same extent as the Board is
hereby authorized so to do.
Amendment of the Plan by the Board of Directors
2.10 Subject to the requirements of the
TSX Venture Policies and the prior receipt of any necessary Regulatory Approval,
the Board may in its absolute discretion, without shareholder approval, amend or
modify the Plan or any Option granted as follows:
(a) it may make amendments which are
of a typographical, grammatical or clerical nature only;
(b) it may change the vesting
provisions of an Option granted hereunder, subject to prior written approval of
the TSX Venture, if applicable;
(c) it may change the termination
provision of an Option granted hereunder which does not entail an extension
beyond the original Expiry Date of such Option;
(d) it may make amendments necessary
as a result of changes in securities laws applicable to the Company;
(e) if the Company becomes listed or
quoted on a stock exchange or stock market senior to the TSX Venture, it may
make such amendments as may be required by the policies of such senior stock
exchange or stock market; and
(f) it may make such amendments as
reduce, and do not increase, the benefits of this Plan to Service Providers.
Amendments Requiring Disinterested Shareholder
Approval
2.11 The Company will be required to
obtain Disinterested Shareholder Approval prior to any of the following actions
becoming effective:
(a) the Plan, together with all of the
Company’s other previous Share Compensation Arrangements, could result at any
time in:
(i) the aggregate number of Common
Shares reserved for issuance under Options granted to Insiders exceeding 10% of
the Outstanding Shares in the event that this Plan is amended to reserve for
issuance more than 10% of the Outstanding Shares;
- 9 -
(ii) the number of Optioned Shares
issued to Insiders within a one-year period exceeding 10% of the Outstanding
Shares in the event that this Plan is amended to reserve for issuance more than
10% of the Outstanding Shares; or,
(iii) the issuance to any one
Optionee, within a 12-month period, of a number of Common Shares exceeding 5% of
the Outstanding Shares; or
(b) any reduction in the Exercise
Price of an Option previously granted to an Insider.
Options Granted Under the Company’s Previous Share Option
Plans
2.12 Any option granted pursuant to a
stock option plan previously adopted by the Board which is outstanding at the
time this Plan comes into effect shall be deemed to have been issued under this
Plan and shall, as of the date this Plan comes into effect, be governed by the
terms and conditions hereof.
ARTICLE 3
TERMS AND CONDITIONS OF OPTIONS
Exercise Price
3.1 The Exercise Price of an Option
will be set by the Board at the time such Option is allocated under the Plan,
and cannot be less than the Discounted Market Price. The exercise price of an
Incentive Stock Option must be equal to or greater than the fair market value of
the Common Shares on the date of the grant of such Incentive Stock Option.
Term of Option
3.2 An Option can be exercisable for a
maximum of 10 years from the Effective Date.
Option Amendment
3.3 Subject to §2.11(b), the Exercise
Price of an Option may be amended only if at least six (6) months have elapsed
since the later of the date of commencement of the term of the Option, the date
the Common Shares commenced trading on the TSX Venture, or the date of the last
amendment of the Exercise Price.
3.4 An Option must be outstanding for
at least one year before the Company may extend its term, subject to the limits
contained in §3.2.
3.5 Any proposed amendment to the terms
of an Option must be approved by the TSX Venture prior to the exercise of such
Option.
Vesting of Options
3.6 Subject to §3.7, vesting of Options
shall be at the discretion of the Board and, with respect to any particular
Options granted under the Plan, in the absence of a vesting schedule being specified at the time of
grant, all such Options shall vest immediately. Where applicable, vesting of
Options will generally be subject to:
- 10 -
(a) the Service Provider remaining
employed by or continuing to provide services to the Company or any of its
Affiliates as well as, at the discretion of the Board, achieving certain
milestones which may be defined by the Board from time to time or receiving a
satisfactory performance review by the Company or any of its Affiliates during
the vesting period; or
(b) the Service Provider remaining as
a Director of the Company or any of its Affiliates during the vesting
period.
Vesting of Options Granted to Consultants Conducting
Investor Relations Activities
3.7 Notwithstanding §3.6, Options
granted to Consultants conducting Investor Relations Activities will vest:
(a) in stages over a period of not
less than 12 months with no more than 25% of such Options vesting in any three
month period; or
(b) such longer vesting period as the
Board may determine.
Acceleration of Vesting on Change of Control
3.8 In the event of a Change of Control
occurring, Options granted and outstanding, which are subject to vesting
provisions, shall be deemed to have immediately vested upon the occurrence of
the Change of Control, subject to approval of the TSX Venture (or the NEX, as
the case may be) for vesting requirements imposed by the TSX Venture
Policies.
Extension of Options Expiring During Blackout Period
3.9 Should the Expiry Date for an
Option fall within a Blackout Period, or within nine (9) Business Days following
the expiration of a Blackout Period, such Expiry Date shall, subject to approval
of the TSX Venture (or the NEX, as the case may be), be automatically extended
without any further act or formality to that day which is the tenth (10th)
Business Day after the end of the Blackout Period, such tenth Business Day to be
considered the Expiry Date for such Option for all purposes under the Plan.
Notwithstanding §2.9, the ten (10) Business Day period referred to in this §3.9
may not be extended by the Board.
Optionee Ceasing to be Director, Employee or Service
Provider
3.10 Options may be exercised after the
Service Provider has left his/her employ/office or has been advised by the
Company that his/her services are no longer required or his/her service contract
has expired, until the term applicable to such Options expires, except as
follows:
(a) in the case of the death of an
Optionee, any vested Option held by him at the date of death will become
exercisable by the Optionee’s lawful personal representatives, heirs or executors until the earlier of one
year after the date of death of such Optionee and the date of expiration of the
term otherwise applicable to such Option;
- 11 -
(b) an Option granted to any Service
Provider will expire 90 days (or such other time, not to exceed one year, as
shall be determined by the Board as at the date of grant or agreed to by the
Board and the Optionee at any time prior to expiry of the Option) after the date
the Optionee ceases to be employed by or provide services to the Company, and
only to the extent that such Option was vested at the date the Optionee ceased
to be so employed by or to provide services to the Company; provided that to the
extent that any Option expires after such 90 day period, such Option shall be
deemed not to qualify as an Incentive Stock Option; and
(c) in the case of an Optionee being
dismissed from employment or service for cause, such Optionee’s Options, whether
or not vested at the date of dismissal will immediately terminate without right
to exercise same;
(d) in the event of a Change of
Control occurring, Options which are subject to vesting provisions shall be
deemed to have immediately vested upon the occurrence of the Change of Control;
and
(e) in the event of a Director not
being nominated for re-election as a Director of the Company, although
consenting to act and being under no legal incapacity which would prevent the
Director from being a member of the Board, Options granted which are subject to
a vesting provision shall be deemed to have vested on the date of Meeting upon
which the Director is not re-elected.
Non Assignable
3.11 Subject to §3.10, all Options will
be exercisable only by the Optionee to whom they are granted and will not be
assignable or transferable.
Adjustment of the Number of Optioned Shares
3.12 The number of Common Shares
subject to an Option will be subject to adjustment in the events and in the
manner following:
(a) in the event of a subdivision of
Common Shares as constituted on the date hereof, at any time while an Option is
in effect, into a greater number of Common Shares, the Company will thereafter
deliver at the time of purchase of Optioned Shares hereunder, in addition to the
number of Optioned Shares in respect of which the right to purchase is then
being exercised, such additional number of Common Shares as result from the
subdivision without an Optionee making any additional payment or giving any
other consideration therefor;
(b) in the event of a consolidation of
the Common Shares as constituted on the date hereof, at any time while an Option
is in effect, into a lesser number of Common Shares, the Company will thereafter
deliver and an Optionee will accept, at the time of purchase of Optioned Shares
hereunder, in lieu of the number of Optioned Shares in respect of which the right to purchase is then being
exercised, the lesser number of Common Shares as result from the
consolidation;
- 12 -
(c) in the event of any change of the
Common Shares as constituted on the date hereof, at any time while an Option is
in effect, the Company will thereafter deliver at the time of purchase of
Optioned Shares hereunder the number of shares of the appropriate class
resulting from the said change as an Optionee would have been entitled to
receive in respect of the number of Common Shares so purchased had the right to
purchase been exercised before such change;
(d) in the event of a capital
reorganization, reclassification or change of outstanding equity shares (other
than a change in the par value thereof) of the Company, a consolidation, merger
or amalgamation of the Company with or into any other company or a sale of the
property of the Company as or substantially as an entirety at any time while an
Option is in effect, an Optionee will thereafter have the right to purchase and
receive, in lieu of the Optioned Shares immediately theretofore purchasable and
receivable upon the exercise of the Option, the kind and amount of shares and
other securities and property receivable upon such capital reorganization,
reclassification, change, consolidation, merger, amalgamation or sale which the
holder of a number of Common Shares equal to the number of Optioned Shares
immediately theretofore purchasable and receivable upon the exercise of the
Option would have received as a result thereof. The subdivision or consolidation
of Common Shares at any time outstanding (whether with or without par value)
will not be deemed to be a capital reorganization or a reclassification of the
capital of the Company for the purposes of this §3.12;
(e) an adjustment will take effect at
the time of the event giving rise to the adjustment, and the adjustments
provided for in this section are cumulative;
(f) the Company will not be required
to issue fractional shares in satisfaction of its obligations hereunder. Any
fractional interest in a Common Share that would, except for the provisions of
this §3.12, be deliverable upon the exercise of an Option will be cancelled and
not be deliverable by the Company; and
(g) if any questions arise at any time
with respect to the Exercise Price or number of Optioned Shares deliverable upon
exercise of an Option in any of the events set out in this §3.12, such questions
will be conclusively determined by the Company’s auditors, or, if they decline
to so act, any other firm of Chartered Accountants, in Vancouver, British
Columbia (or in the city of the Company’s principal executive office) that the
Company may designate and who will be granted access to all appropriate records
and such determination will be binding upon the Company and all Optionees.
Effect of Take Over Bid
3.13 If a Take Over Bid is made to the
shareholders generally then the Company shall, immediately upon receipt of
notice of the Take Over Bid, notify each Optionee currently holding an Option of
the Take Over Bid, with full particulars thereof whereupon such Option may,
notwithstanding any vesting requirements set out in any Option Commitment, be
permitted to exercise in whole or in part by the Optionee, provided that the Board considers the Take Over Bid to be
successful. A Take Over Bid will be deemed successful in the event that:
- 13 -
(a) a competing bid emerges with
superior terms or conditions;
(b) the Board endorses the Take Over
Bid and recommends that shareholders tender into it; or
(c) holders of at least 20% of the
Company’s Listed Shares, or Insiders who hold at least 50% of the Listed Shares
held by Insiders, agree to, or announce their intention to tender such shares to
the Take Over Bid;
however, provided always that the Board
may also consider other criteria to be adequate evidence that the Take Over Bid
is a successful one.
Notice of Disqualifying Disposition of Incentive Stock
Options
3.14 If a Participant or such a
Participant’s beneficiary sells or otherwise disposes of any Common Shares
acquired pursuant to the exercise of an Incentive Stock Option on or before the
later of (a) the date that is two years after the date of grant of such
Inventive Stock Option, or (b) the date that is one year after the date of
exercise of such Incentive Stock Option, the Participant (or beneficiary) shall
immediately notify the Company in writing of such disposition and may be subject
to income tax withholding by the Company on the compensation income.
ARTICLE 4
COMMITMENT AND EXERCISE
PROCEDURES
Option Commitment
4.1 Upon grant of an Option hereunder,
an authorized officer of the Company will deliver to the Optionee an Option
Commitment detailing the terms of such Options and upon such delivery the
Optionee will be subject to the Plan and have the right to purchase the Optioned
Shares at the Exercise Price set out therein subject to the terms and conditions
hereof, including any additional requirements contemplated with respect to the
payment of required withholding taxes on behalf of Optionees.
Manner of Exercise
4.2 An Optionee who wishes to exercise
his Option may do so by delivering
(a) a written notice to the Company
specifying the number of Optioned Shares being acquired pursuant to the Option;
and
(b) a certified cheque, wire transfer
or bank draft payable to the Company for the aggregate Exercise Price for the
Optioned Shares being acquired, plus any required withholding tax amount subject
to §4.3.
- 14 -
Tax Withholding and Procedures
4.3 Notwithstanding anything else
contained in this Plan, the Company may, from time to time, implement such
procedures and conditions as it determines appropriate with respect to the
withholding and remittance of taxes imposed under applicable law, or the funding
of related amounts for which liability may arise under such applicable law.
Without limiting the generality of the foregoing, an Optionee who wishes to
exercise an Option must, in addition to following the procedures set out in§4.2
and elsewhere in this Plan, and as a condition of exercise:
(a) deliver a certified cheque, wire
transfer or bank draft payable to the Company for the amount determined by the
Company to be the appropriate amount on account of such taxes or related
amounts; or
(b) otherwise ensure, in a manner
acceptable to the Company (if at all) in its sole and unfettered discretion,
that the amount will be securely funded;
and must in all other respects follow
any related procedures and conditions imposed by the Company.
The
Company may appoint a share compensation administrative service at the Company’s
discretion and expense, to co-ordinate and administer the exercise of Optioned
Shares and to co-ordinate the payment of the Exercise Price therefor, including
establishment of web-based exercise and accounting functions.
Delivery of Optioned Shares and Hold Periods
4.4 As soon as practicable after
receipt of the notice of exercise described in §4.2 and payment in full for the
Optioned Shares being acquired, the Company will direct its transfer agent, or a
share compensation administrative service (“administrative service”) chosen by
the Company, to issue to the Optionee the appropriate number of Optioned Shares.
If the Exercise Price is below the current market price of the Common Shares on
the TSX Venture at the time of grant, or if otherwise required pursuant to TSX
Venture Policies, the certificate representing the Optioned Shares or written
notice in the case of uncertificated shares will include a legend stipulating
that the Optioned Shares issued are subject to the Exchange Hold Period
commencing on the date of the Option Commitment.
ARTICLE 5
GENERAL
Employment and Services
5.1 Nothing contained in the Plan will
confer upon or imply in favour of any Optionee any right with respect to office,
employment or provision of services with the Company, or interfere in any way
with the right of the Company to lawfully terminate the Optionee’s office,
employment or service at any time pursuant to the arrangements pertaining to
same. Participation in the Plan by an Optionee will be voluntary.
- 15 -
No Representation or Warranty
5.2 The Company makes no representation
or warranty as to the future market value of Common Shares issued in accordance
with the provisions of the Plan or to the effect of the
Income Tax Act
(Canada),
Internal Revenue Code
(United States), or any other taxing
statute governing the Options or the Common Shares issuable thereunder or the
tax consequences to a Service Provider. Compliance with applicable securities
laws as to the disclosure and resale obligations of each Participant is the
responsibility of such Participant and not the Company.
Interpretation
5.3 The Plan will be governed and
construed in accordance with the laws of the Province of British Columbia.
Continuation of Plan
5.4 This Plan will become effective
from and after March 15, 2012, and will remain effective provided that the Plan,
or any amended version thereof receives Shareholder Approval at each annual
general meeting of the holders of Common Shares of the Company subsequent to
March 15, 2012.
Amendment of the Plan
5.5 The Board reserves the right, in
its absolute discretion, to at any time amend, modify or terminate the Plan with
respect to all Common Shares in respect of Options which have not yet been
granted hereunder. Any amendment to any provision of the Plan will be subject to
any necessary Regulatory Approvals unless the effect of such amendment is
intended to reduce (but not to increase) the benefits of this Plan to Service
Providers.
SCHEDULE A
SHARE OPTION PLAN
OPTION COMMITMENT
Notice is hereby given that, effective this ________ day of
________________ , __________ (the “Effective Date”)
QUARTZ MOUNTAIN
RESOURCES LTD.
(the “Company”) has granted to
___________________________________________ (the “Optionee”), an Option to
acquire ______________ Common Shares (“Optioned Shares”) up to 5:00 p.m.
Vancouver Time on the __________ day of ____________________ , __________ (the
“Expiry Date”) at an Exercise Price of Cdn$ ____________ per share.
Optioned Shares are to vest immediately.
OR
Optioned Shares will vest [INSERT VESTING SCHEDULE AND
TERMS]
The Option shall expire _______ days after the Optionee ceases
to be employed by or provide services to the Company.
The grant of the Option evidenced hereby is made subject to the
terms and conditions of the Plan, which are hereby incorporated herein and form
part hereof.
[Note: if the Option is granted to a US employee and is
intended to qualify as an ISO, include the following statement:
The Option qualifies as an Incentive Stock Option granted in
accordance with Section 422 of the
Internal Revenue Code of 1986
(United
States), except to the extent that the aggregate fair market value of the common
shares with respect to which such Option (together with any other Incentive
Stock Options that have been granted to you) is exercisable for the first time
in any calendar year, exceeds US$100,000.]
To exercise your Option, deliver a written notice specifying
the number of Optioned Shares you wish to acquire, together with a certified
cheque, wire transfer or bank draft payable to the Company for the aggregate
Exercise Price. A certificate or written notice in the case of uncertificated
shares for the Optioned Shares so acquired will be issued by the transfer agent
as soon as practicable thereafter and may bear a minimum four month
non-transferability legend from the date of this Option Commitment, the text of
which is as follows.
[Note: A Company may grant stock options without a hold
period, provided the exercise price of the options is set at or above the market
price of the Company’s shares and as long as the optionee is not a person to be
restricted under TSX Venture Policies. If a four month hold period is
applicable, the following legend must be placed on the certificate or the
written notice in the case of uncertificated shares.]
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"WITHOUT PRIOR WRITTEN APPROVAL OF THE TSX VENTURE
EXCHANGE AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF THE TSX
VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A
CANADIAN RESIDENT UNTIL 12:00 A.M. (MIDNIGHT) ON [insert date 4 months
from the date of grant]”.
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- 2 -
The Company and the Optionee represent that the Optionee under
the terms and conditions of the Plan is a bona fide Service Provider (as defined
in the Plan), entitled to receive Options under TSX Venture Policies.
The Optionee also acknowledges and consents to the collection
and use of Personal Information (as defined in the Policies of the TSX Venture
Exchange) by both the Company and the TSX Venture (or the NEX, as the case may
be) as more particularly set out in the Acknowledgement -Personal Information in
use by the TSX Venture (or the NEX, as the case may be) on the date of this
Option Commitment.
QUARTZ MOUNTAIN RESOURCES LTD.
Per:
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Signature of Optionee:
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Name of Optionee:
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[insert name of optionee]
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AUDIT AND RISK COMMITTEE CHARTER
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1.
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Purpose: Responsibilities and
Authority
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The Audit and Risk Committee (the Audit Committee or
“Committee”) shall carry out its responsibilities under applicable laws,
regulations and stock exchange requirements with respect to the employment,
compensation and oversight of the Company’s independent auditor, and other
matters under the authority of the Committee. The Committee also shall assist
the Board of Directors in carrying out its oversight responsibilities relating
to the Company’s financial, accounting and reporting processes, the Company’s
system of internal accounting and financial controls, the Company’s compliance
with related legal and regulatory requirements, and the fairness of transactions
between the Company and related parties. In furtherance of this purpose, the
Committee shall have the following responsibilities and authority:
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(a)
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Relationship with Independent
Auditor.
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(i) Subject to the law of British
Columbia as to the role of the Shareholders in the appointment of independent
auditors, the Committee shall have the sole authority to appoint or replace the
independent auditor.
(ii) The Committee shall be directly
responsible for the compensation and oversight of the work of the independent
auditor (including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of preparing
or issuing an audit report or related work.
(iii) The independent auditor shall
report directly to the Committee.
(iv) The Committee shall approve in
advance all audit and permitted non-audit services with the independent auditor,
including the terms of the engagements and the fees payable; provided that the
Committee Chairman may approve services to be performed by the independent
auditor between Committee meetings if the amount of the fee does not exceed
$50,000, provided that any such approval shall be reported to the Committee at
the next meeting thereof. The Committee may delegate to a subcommittee the
authority to grant pre-approvals of audit and permitted non-audit services,
provided that the decision of any such subcommittee shall be presented to the
full Committee at its next scheduled meeting.
(v) At least annually, the Committee
shall review and evaluate the experience and qualifications of the lead partner
and senior members of the independent auditor team.
(vi) At least annually, the Committee
shall obtain and review a report from the independent auditor regarding:
(1) the independent auditor’s internal
quality-control procedures;
(2) any material issues raised by the
most recent internal quality-control review, or peer review, of the auditor, or
by any inquiry or investigation by governmental or professional authorities
within the preceding five years respecting one or more independent audits
carried out by the firm;
(3) any steps taken to deal with any
such issues; and
(4) all relationships between the
independent auditor and the Company.
(vii) At least annually, the Committee
shall evaluate the qualifications, performance and independence of the
independent auditor, including considering whether the auditor’s quality
controls are adequate and the provision of permitted non-audit services is
compatible with maintaining the auditor’s independence.
(viii) The Committee shall ensure the
rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit, the concurring partner responsible for reviewing
the audit, and other audit partners as required by law.
(ix) The Committee shall consider
whether, in order to assure continuing auditor independence, it is appropriate
to adopt a policy of rotating the independent auditing firm on a regular
basis.
(x) The Committee shall recommend to
the Board policies for the Company’s hiring of employees or former employees of
the independent auditor who were engaged on the Company’s account or
participated in any capacity in the audit of the Company.
(xi) The Committee shall oversee the
implementation by management of appropriate information technology systems for
the Company, including as required for proper financial reporting and
compliance.
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(b)
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Financial Statement and Disclosure
Review.
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(i) The Committee shall review and
discuss with management and the independent auditor the annual audited financial
statements, including disclosures made in management’s discussion and analysis,
and recommend to the Board whether the audited financial statements should be
filed with applicable securities regulatory authorities and included in the
Company’s annual reports.
(ii) The Committee shall review and
discuss with management (and, to the extent the Committee deems it necessary or
appropriate, the independent auditor) the Company’s quarterly financial
statements, including disclosures made in management’s discussion and analysis,
and recommend to the Board whether such financial statements should be filed
with applicable securities regulatory authorities.
(iii) The Committee shall review and
discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of the
Company’s financial statements, including the independent auditor’s assessment
of the quality of the Company’s accounting principles, any significant changes
in the Company’s selection or application of accounting principles, any major
issues as to the adequacy of the Company’s internal controls over financial
reporting, and any special steps adopted in light of material control
deficiencies.
(iv) At least annually and prior to
the publication of annual audited financial statements, the Committee shall
review and discuss with management and the independent auditor a report from the
independent auditor on:
(1) all critical accounting policies
and practices used by the Company;
(2) all alternative accounting
treatments of financial information that have been discussed with management
since the prior report, ramifications of the use of such alternative disclosures
and treatments, the treatment preferred by the independent auditor, and an
explanation of why the independent auditor’s preferred method was not adopted;
and.
(3) other material written
communications between the independent auditor and management since the prior
report, such as any management letter or schedule of unadjusted differences, the
development, selection and disclosure of critical accounting estimates, and
analyses of the effect of alternative assumptions, estimates or GAAP methods on
the Company’s financial statements.
(v) Prior to their filing or issuance,
the Committee shall review the Company’s Annual Information Form, quarterly and
annual earnings press releases, and other financial press releases, including
the use of “pro forma” or “adjusted” non-GAAP information.
(vi) The Committee shall review and
discuss with management the financial information and earnings guidance provided
to analysts and rating agencies. Such discussion may be specific or it may be in
general regarding the types of information to be disclosed and the types of
presentations to be made.
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(c)
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Conduct of the Annual
Audit
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The Committee shall oversee the annual
audit, and in the course of such oversight the Committee shall have the
following responsibilities and authority:
(i) The Committee shall meet with the
independent auditor prior to the audit to discuss the planning and conduct of
the annual audit, and shall meet with the independent auditor as may be
necessary or appropriate in connection with the audit.
(ii) The Committee shall ascertain
that the independent auditor is registered and in good standing with the
Canadian Public Accounting Board and that the independent auditor satisfies all
applicable independence standards. The Committee shall obtain from the auditor a
written statement delineating all relationships between the auditor and the
Company as per applicable independence standards, and review relationships that
may impact the objectivity and independence of the auditor.
(iii) The Committee shall discuss with
the independent auditor the matters required to be discussed by Statement on
Auditing Standards No. 61 relating to the conduct of the audit, including
(1) the adoption of, or changes to,
the Company’s significant auditing and accounting principles and practices as
suggested by the independent auditor, internal auditors or management;
(2) the management letter provided by
the independent auditor and the Company’s response to that letter; and
(3) any difficulties encountered in
the course of the audit work, including any restrictions on the scope of
activities or access to requested information, and any significant disagreements
with management.
(iv) The Committee shall make such
inquiries to the management and the independent auditor as the Committee members
deem necessary or appropriate to satisfy themselves regarding the efficacy of
the Company’s financial and internal controls and procedures and the auditing
process.
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(d)
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Compliance and
Oversight.
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(i) The Committee shall meet
periodically with management and the independent auditor in separate executive
sessions. The Committee may also, to the extent it deems necessary or
appropriate, meet with the Company’s investment bankers and financial analysts
who follow the Company.
(ii) The Committee shall discuss with
management and the independent auditor the effect of regulatory and accounting
initiatives as well as off-balance sheet structures on the Company’s financial
statements.
(iii) The Committee shall discuss with
management the Company’s major financial risk exposures and the steps management
has taken to monitor and control such exposures, including the Company’s risk
assessment and risk management policies, and regularly review the top risks
identified by management and the policies and practices adopted by the Company
to mitigate those risks.
(iv) At least annually and prior to
the filing of the AIF, the Committee shall review with management and the
independent auditor the disclosure controls and procedures and confirm that the
Company (with CEO and CFO participation) has evaluated the effectiveness of the
design and operation of the controls within 90 days prior to the date of filing
of the AIF. The Committee also shall review with management and the independent
auditor any deficiencies in the design and operation of internal controls and
significant deficiencies or material weaknesses therein and any fraud involving
management or other employees who have a significant role in the Company’s
internal controls. As a part of that review, the Committee shall review the
process followed in preparing and verifying the accuracy of the required CEO and
CFO annual certifications.
(v) At least annually and prior to the
filing of the AIF, the Committee shall review with management and the
independent auditor management’s internal control report and assessment of the
internal controls and procedures, and the independent auditor’s report on and
assessment of the internal controls and procedures.
(vi) The Committee shall establish
procedures for the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls or auditing
matters, and the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
(vii) The Committee shall discuss with
management and the independent auditor any correspondence with regulators or
governmental agencies and any employee complaints or reports which raise
material issues regarding the Company’s financial statements or accounting
policies.
(viii) At least annually, the
Committee shall meet with the Company’s legal counsel and discuss any legal
matters that may have a material impact on the financial statements or the
Company’s compliance policies.
(ix) The Committee shall oversee the
preparation of reports relating to the Audit Committee as required under
applicable laws, regulations and stock exchange requirements.
(x) The Committee shall exercise
oversight with respect to anti-fraud programs and controls.
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(e)
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Related Party
Transactions.
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(i) The Committee shall review for
fairness to the Company proposed transactions, contracts and other arrangements
between the Company and its subsidiaries and any related party or affiliate, and
make recommendations to the Board whether any such transactions, contracts and
other arrangements should be approved or continued. The foregoing shall not
include any compensation payable pursuant to any plan, program, contract or
arrangement subject to the authority of the Company’s Compensation Committee.
(ii) As used herein the term “related
party” means any officer or director of the Company or any subsidiary, or any
shareholder holding a greater than 10% direct or indirect financial or voting
interest in the Company, and the term “affiliate” means any person, whether
acting alone or in concert with others, that has the power to exercise a
controlling influence over the Company and its subsidiaries. "Related party"
includes Hunter Dickinson Services Inc.
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2.
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Structure and Membership
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(a)
Number and qualification
.
The Committee shall consist of three persons unless the Board should from time
to time otherwise determine. All members of the Committee shall meet the
experience and financial literacy requirements of National Instrument NI 52-110
and the rules of the Toronto Stock Exchange.
(b)
Selection and Removal
.
Members of the Committee shall be appointed by the Board, upon the
recommendation of the Nominating and Corporate Governance Committee. The Board
may remove members of the Committee at any time with or without cause.
(c)
Independence
. All of the
members of the Committee shall be “independent” as required for audit committees
by National Instrument NI 52-110, and the rules of the Toronto Stock Exchange.
(d)
Chair
. Unless the Board
elects a Chair of the Committee, the Committee shall elect a Chair by majority
vote.
(e)
Compensation
. The
compensation of the Committee shall be as determined by the Board.
(f)
Term
. Members of the
Committee shall be appointed for one-year terms. Each member shall serve until
his or her replacement is appointed, or until he or she resigns or is removed
from the Board or the Committee.
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3.
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Procedures and
Administration
|
(a)
Meetings
. The Committee
shall meet as often as it deems necessary in order to perform its
responsibilities, but not less than quarterly. The Committee shall keep minutes
of its meetings and any other records as it deems appropriate.
(b)
Subcommittees
. The
Committee may form and delegate authority to one or more subcommittees,
consisting of at least one member, as it deems appropriate from time to time
under the circumstances.
(c)
Reports to the Board
. The
Committee shall regularly report to the Board with respect to such matters as
are relevant to the Committee’s discharge of its responsibilities, and shall
report in writing on request of the Chairman of the Board.
(d)
Charter
. The Committee
shall, at least annually, review and reassess the adequacy of this Charter and
recommend any proposed changes to the Board for approval.
(e)
Independent Advisors
. The
Committee shall have the authority to engage such independent legal and other
advisors as it deems necessary or appropriate to carry out its responsibilities.
Such independent advisors may be regular advisors to the Company. The Committee
is empowered, without further action by the Board, to cause the Company to pay
appropriate compensation to advisors engaged by the Committee.
(f)
Investigations
. The
Committee shall have the authority to conduct or authorize investigations into
any matters within the scope of its responsibilities as it deems appropriate,
including the authority to request any Officer or other person to meet with the
Committee and to access all Company records.
(g)
Annual Self-Evaluation
. The
Committee shall evaluate its own performance at least annually.
The Committee shall have such other duties as may be delegated
from time to time by the Board of Directors.
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5.
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Limitation of Committee’s
Role
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While the Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Committee to plan or conduct
audits or to determine that the Company’s financial statements and disclosures
are complete and accurate and are in accordance with GAAP and applicable rules
and regulations. These are the responsibilities of management and the
independent auditor.
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6.
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Committee Member Independence and Financial Literacy
Requirements
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A.
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Independence
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(a)
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See Appendix 2 of the Company’s Corporate Governance
Overview and Guidelines.
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B.
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Financial Literacy
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NI 52-110
Section 3.1(4) states that each audit committee member must be
financially literate.
Section 1.6 defines the meaning of financial literacy as
follows:
“For the purposes of this Instrument, an individual is
financially literate if he or she has the ability to read and understand a set
of financial statements that present a breadth and level of
complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer’s financial statements”
BUSINESS CORPORATIONS ACT
ARTICLES
OF
QUARTZ MOUNTAIN RESOURCES LTD.
TABLE OF CONTENTS
BUSINESS CORPORATIONS ACT
ARTICLES
OF
QUARTZ MOUNTAIN RESOURCES LTD.
(the “Company”)
Number: BC0253743
PART 1
INTERPRETATION
Definitions
1.1 In these Articles, unless the context otherwise
requires:
(a) “
Act
” means the
Business
Corporations Act
(British Columbia) from time to time in force and all
amendments thereto and includes all regulations and amendments thereto made
pursuant to that Act;
(b) “
board of directors
”,
“
directors
” and “
board
” mean the directors or sole director of the
Company for the time being;
(c) “
Interpretation Act
” means
the
Interpretation Act
(British Columbia) from time to time in force and
all amendments thereto and includes all regulations and amendments thereto made
pursuant to that Act;
(d) “
legal personal
representative
” means the personal or other legal representative of the
shareholder;
(e) “
registered address
” of a
shareholder means the shareholder’s address as recorded in the central
securities register;
(f) “
seal
” means the seal of the
Company, if any;
(g) “
share
” means a share in the
share structure of the Company; and
(h) “
special majority
” means the
majority of votes described in §11.2 which is required to pass a special
resolution.
Act and Interpretation Act Definitions Applicable
1.2 The definitions in the Act and the definitions and rules of
construction in the Interpretation Act, with the necessary changes, so far as
applicable, and except as the context requires otherwise, apply to these Articles as if they were an
enactment. If there is a conflict between a definition in the Act and a
definition or rule in the Interpretation Act relating to a term used in these
Articles, the definition in the Act will prevail. If there is a conflict or
inconsistency between these Articles and the Act, the Act will prevail.
- 2 -
PART 2
SHARES AND SHARE CERTIFICATES
Authorized Share Structure
2.1 The authorized share structure of the Company consists of
shares of the class or classes and series, if any, described in the Notice of
Articles of the Company.
Form of Share Certificate
2.2 Each share certificate issued by the Company must comply
with, and be signed as required by, the Act.
Shareholder Entitled to Certificate, Acknowledgment or
Written Notice
2.3 Unless the shares of which the shareholder is the
registered owner are deemed by the Board to be a class of uncertificated shares,
each shareholder is entitled, without charge, to (a) one share certificate
representing the shares of each class or series of shares registered in the
shareholder’s name or (b) a non-transferable written acknowledgment of the
shareholder’s right to obtain such a share certificate, provided that in respect
of a share held jointly by several persons, the Company is not bound to issue
more than one share certificate and delivery of a share certificate for a share
to one of several joint shareholders or to one of the shareholders’ duly
authorized agents will be sufficient delivery to all. If a shareholder is the
registered owner of uncertificated shares, the Company must send to a holder of
an uncertificated share a written notice containing the information required by
the Act within a reasonable time after the issue or transfer of such share.
Delivery by Mail
2.4 Any share certificate or non-transferable written
acknowledgment of a shareholder’s right to obtain a share certificate, or
written notice of the issue or transfer of an uncertificated share may be sent
to the shareholder by mail at the shareholder’s registered address and neither
the Company nor any director, officer or agent of the Company is liable for any
loss to the shareholder because the share certificate, acknowledgement or
written notice is lost in the mail or stolen.
Replacement of Worn Out or Defaced Certificate or
Acknowledgement
2.5 If a share certificate or a non-transferable written
acknowledgment of the shareholder’s right to obtain a share certificate is worn
out or defaced, the Company must, on production of the share certificate or acknowledgment, as the
case may be, and on such other terms, if any, as are deemed fit:
- 3 -
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(a)
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cancel the share certificate or acknowledgment;
and
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(b)
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issue a replacement share certificate or
acknowledgment.
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Replacement of Lost, Stolen or Destroyed Certificate or
Acknowledgment
2.6 If a share certificate or a non-transferable written
acknowledgment of a shareholder’s right to obtain a share certificate is lost,
stolen or destroyed, a replacement share certificate or acknowledgment, as the
case may be, must be issued to the person entitled to that share certificate or
acknowledgment, if the requirements of the Act are satisfied, as the case may
be, if the directors receive:
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(a)
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proof satisfactory to it of the loss, theft or
destruction; and
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(b)
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any indemnity the directors consider
adequate.
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Splitting Share Certificates
2.7 If a shareholder surrenders a share certificate to the
Company with a written request that the Company issue in the shareholder’s name
two or more share certificates, each representing a specified number of shares
and in the aggregate representing the same number of shares as the share
certificate so surrendered, the Company must cancel the surrendered share
certificate and issue replacement share certificates in accordance with that
request.
Certificate Fee
2.8 There must be paid to the Company, in relation to the issue
of any share certificate under §2.5, §2.6 or §2.7, the amount, if any, not
exceeding the amount prescribed under the Act, determined by the directors.
Recognition of Trusts
2.9 Except as required by law or statute or these Articles, no
person will be recognized by the Company as holding any share upon any trust,
and the Company is not bound by or compelled in any way to recognize (even when
having notice thereof) any equitable, contingent, future or partial interest in
any share or fraction of a share or (except as required by law or statute or
these Articles or as ordered by a court of competent jurisdiction) any other
rights in respect of any share except an absolute right to the entirety thereof
in the shareholder.
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PART 3
ISSUE OF SHARES
Directors Authorized
3.1 Subject to the Act and the rights, if any, of the holders
of issued shares of the Company, the Company may allot, issue, sell or otherwise
dispose of the unissued shares, and issued shares held by the Company, at the
times, to the persons, including directors, in the manner, on the terms and
conditions and for the consideration (including any premium at which shares with
par value may be issued) that the directors may determine. The issue price for a
share with par value must be equal to or greater than the par value of the
share.
Commissions and Discounts
3.2 The Company may at any time pay a reasonable commission or
allow a reasonable discount to any person in consideration of that person’s
purchase or agreement to purchase shares of the Company from the Company or any
other person’s procurement or agreement to procure purchasers for shares of the
Company.
Brokerage
3.3 The Company may pay such brokerage fee or other
consideration as may be lawful for or in connection with the sale or placement
of its securities.
Conditions of Issue
3.4 Except as provided for by the Act, no share may be issued
until it is fully paid. A share is fully paid when:
(a) consideration is provided to the
Company for the issue of the share by one or more of the following:
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(i)
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past services performed for the Company;
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(ii)
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property;
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(iii)
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money; and
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(b) the value of the consideration
received by the Company equals or exceeds the issue price set for the share
under §3.1.
Share Purchase Warrants and Rights
3.5 Subject to the Act, the Company may issue share purchase
warrants, options and rights upon such terms and conditions as the directors
determine, which share purchase warrants, options and rights may be issued alone
or in conjunction with debentures, debenture stock, bonds, shares or any other
securities issued or created by the Company from time to time.
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PART 4
SHARE REGISTERS
Central Securities Register
4.1 As required by and subject to the Act, the Company must
maintain in British Columbia a central securities register and may appoint an
agent to maintain such register. The directors may appoint one or more agents,
including the agent appointed to keep the central securities register, as
transfer agent for shares or any class or series of shares and the same or
another agent as registrar for shares or such class or series of shares, as the
case may be. The directors may terminate such appointment of any agent at any
time and may appoint another agent in its place.
PART 5
SHARE TRANSFERS
Registering Transfers
5.1 A transfer of a share must not be registered unless the
Company or the transfer agent or registrar for the class or series of shares to
be transferred has received:
(a) except as exempted by the Act, a
written instrument of transfer in respect of the share has been received by the
Company (which may be a separate document or endorsed on the share certificate
for the shares transferred) made by the shareholder or other appropriate person
or by an agent who has actual authority to act on behalf of that person;
(b) if a share certificate has been
issued by the Company in respect of the share to be transferred, that share
certificate;
(c) if a non-transferable written
acknowledgment of the shareholder’s right to obtain a share certificate has been
issued by the Company in respect of the share to be transferred, that
acknowledgment; and
(d) such other evidence, if any, as the
Company or the transfer agent or registrar for the class or series of share to
be transferred may require to prove the title of the transferor or the
transferor’s right to transfer the share, that the written instrument of
transfer and the right of the transferee to have the transfer registered.
Form of Instrument of Transfer
5.2 The instrument of transfer in respect of any share of the
Company must be either in the form, if any, on the back of the Company’s share
certificates of that class or series or in some other form that may be approved
by the directors from time to time or by the transfer agent or registrar for
those shares.
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Transferor Remains Shareholder
5.3 Except to the extent that the Act otherwise provides, the
transferor of a share is deemed to remain the holder of it until the name of the
transferee is entered in a securities register of the Company in respect of the
transfer.
Signing of Instrument of Transfer
5.4 If a shareholder, or the shareholder’s duly authorized
attorney, signs an instrument of transfer in respect of shares registered in the
name of the shareholder, the signed instrument of transfer constitutes a
complete and sufficient authority to the Company and its directors, officers and
agents to register the number of shares specified in the instrument of transfer
or specified in any other manner, or, if no number is specified, all the shares
represented by the share certificates or set out in the written acknowledgments
deposited with the instrument of transfer, or if the shares are uncertificated
shares, then all of the shares registered in the name of the shareholder on the
central securities register:
(a) in the name of the person named as
transferee in that instrument of transfer; or
(b) if no person is named as transferee
in that instrument of transfer, in the name of the person on whose behalf the
instrument is deposited for the purpose of having the transfer registered.
Enquiry as to Title Not Required
5.5 Neither the Company nor any director, officer or agent of
the Company is bound to inquire into the title of the person named in the
instrument of transfer as transferee or, if no person is named as transferee in
the instrument of transfer, of the person on whose behalf the instrument is
deposited for the purpose of having the transfer registered or is liable for any
claim related to registering the transfer by the shareholder or by any
intermediate owner or holder of the shares transferred, of any interest in such
shares, of any share certificate representing such shares or of any written
acknowledgment of a right to obtain a share certificate for such shares.
Transfer Fee
5.6 There must be paid to the Company, in relation to the
registration of a transfer, the amount, if any, determined by the directors.
PART 6
TRANSMISSION OF SHARES
Legal Personal Representative Recognized on Death
6.1 In case of the death of a shareholder, the legal personal
representative of the shareholder, or in the case of shares registered in the
shareholder’s name and the name of another person in joint tenancy, the
surviving joint holder, will be the only person recognized by the Company as having any title to the shareholder’s interest in
the shares. Before recognizing a person as a legal personal representative of a
shareholder, the Company shall receive the documentation required by the
Act.
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Rights of Legal Personal Representative
6.2 The legal personal representative of a shareholder has the
same rights, privileges and obligations that attach to the shares held by the
shareholder, including the right to transfer the shares in accordance with these
Articles, provided the documents required by the Act and the directors have been
deposited with the Company. This §6.2 does not apply in the case of the death of
a shareholder with respect to shares registered in the name of the shareholder
and the name of another person in joint tenancy.
PART 7
PURCHASE, REDEEM OR OTHERWISE ACQUIRE SHARES
Company Authorized to Purchase, Redeem or Otherwise Acquire
Shares
7.1 Subject to §7.2, the special rights or restrictions
attached to the shares of any class or series and the Act, the Company may, if
authorized by the directors, purchase, redeem or otherwise acquire any of its
shares at the price and upon the terms determined by the directors.
Purchase When Insolvent
7.2 The Company must not make a payment or provide any other
consideration to purchase, redeem or otherwise acquire any of its shares if
there are reasonable grounds for believing that:
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(a)
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the Company is insolvent; or
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(b)
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making the payment or providing the
consideration would render the Company insolvent.
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Sale and Voting of Purchased, Redeemed or Otherwise Acquired
Shares
7.3 If the Company retains a share redeemed, purchased or
otherwise acquired by it, the Company may sell, gift or otherwise dispose of the
share, but, while such share is held by the Company, it:
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(a)
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is not entitled to vote the share at a meeting of its
shareholders;
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(b)
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must not pay a dividend in respect of the share;
and
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(c)
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must not make any other distribution in respect of the
share.
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Company Entitled to Purchase, Redeem or Otherwise Acquire
Share Fractions
7.4 The Company may, without prior notice to the holders,
purchase, redeem or otherwise acquire for fair value any and all outstanding
share fractions of any class or kind of shares in its authorized share structure
as may exist at any time and from time to time. Upon the Company delivering the
purchase funds and confirmation of purchase or redemption of the share fractions
to the holders’ registered or last known address, or if the Company has a
transfer agent then to such agent for the benefit of and forwarding to such
holders, the Company shall thereupon amend its central securities register to
reflect the purchase or redemption of such share fractions and if the Company
has a transfer agent, shall direct the transfer agent to amend the central
securities register accordingly. Any holder of a share fraction, who upon
receipt of the funds and confirmation of purchase or redemption of same,
disputes the fair value paid for the fraction, shall have the right to apply to
the court to request that it set the price and terms of payment and make
consequential orders and give directions the court considers appropriate, as if
the Company were the “acquiring person” as contemplated by Division 6,
Compulsory Acquisitions, under the Act and the holder were an “offeree” subject
to the provisions contained in such Division,
mutatis mutandis
.
PART 8
BORROWING POWERS
8.1 The Company, if authorized by the directors, may:
(a) borrow money in the manner and
amount, on the security, from the sources and on the terms and conditions that
they consider appropriate;
(b) issue bonds, debentures and other
debt obligations either outright or as security for any liability or obligation
of the Company or any other person and at such discounts or premiums and on such
other terms as the directors consider appropriate;
(c) guarantee the repayment of money by
any other person or the performance of any obligation of any other person;
and
(d) mortgage, charge, whether by way of
specific or floating charge, grant a security interest in, or give other
security on, the whole or any part of the present and future assets and
undertaking of the Company.
8.2 The powers conferred under this Part 8 shall be deemed to
include the powers conferred on a company by Division VII of the
Special
Corporations Powers Act
being chapter P-16 of the Revised Statutes of
Quebec, 1988, and every statutory provision that may be substituted therefor or
for any provision therein.
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PART 9
ALTERATIONS
Alteration of Authorized Share Structure
9.1 Subject to §9.2 and the Act, the Company may by ordinary
resolution (or a resolution of the directors in the case of §9.1(c) or
§9.1(f)):
(a) create one or more classes or
series of shares or, if none of the shares of a class or series of shares are
allotted or issued, eliminate that class or series of shares;
(b) increase, reduce or eliminate the
maximum number of shares that the Company is authorized to issue out of any
class or series of shares or establish a maximum number of shares that the
Company is authorized to issue out of any class or series of shares for which no
maximum is established;
(c) subdivide or consolidate all or any
of its unissued, or fully paid issued, shares;
(d) if the Company is authorized to
issue shares of a class of shares with par value:
(i) decrease the par value of those
shares; or
(ii) if none of the shares of that
class of shares are allotted or issued, increase the par value of those
shares;
(e) change all or any of its unissued,
or fully paid issued, shares with par value into shares without par value or any
of its unissued shares without par value into shares with par value;
(f) alter the identifying name of any
of its shares; or
(g) otherwise alter its shares or
authorized share structure when required or permitted to do so by the Act where
it does not specify by a special resolution;
and, if applicable, alter its Notice of Articles and Articles
accordingly.
Special Rights or Restrictions
9.2 Subject to the Act and in particular those provisions of
the Act relating to the rights of holders of outstanding shares to vote if their
rights are prejudiced or interfered with, the Company may by ordinary
resolution:
(a) 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
(b) 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,
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and alter its Notice of Articles and Articles accordingly.
Change of Name
9.3 The Company may by resolution of the directors authorize an
alteration to its Notice of Articles in order to change its name or adopt or
change any translation of that name.
Other Alterations
9.4 If the Act does not specify the type of resolution and
these Articles do not specify another type of resolution, the Company may by
ordinary resolution alter these Articles.
PART 10
MEETINGS OF SHAREHOLDERS
Annual General Meetings
10.1 Unless an annual general meeting is deferred or waived in
accordance with the Act, the Company must hold its first annual general meeting
within 18 months after the date on which it was incorporated or otherwise
recognized, and after that must hold an annual general meeting at least once in
each calendar year and not more than 15 months after the last annual reference
date at such time and place as may be determined by the directors.
Resolution Instead of Annual General Meeting
10.2 If all the shareholders who are entitled to vote at an
annual general meeting consent in writing by a unanimous resolution to all of
the business that is required to be transacted at that annual general meeting,
the annual general meeting is deemed to have been held on the date of the
unanimous resolution. The shareholders must, in any unanimous resolution passed
under this §10.2, select as the Company’s annual reference date a date that
would be appropriate for the holding of the applicable annual general
meeting.
Calling of Meetings of Shareholders
10.3 The directors may, at any time, call a meeting of
shareholders.
Notice for Meetings of Shareholders
10.4 The Company must send notice of the date, time and
location of any meeting of shareholders (including, without limitation, any
notice specifying the intention to propose a resolution as an exceptional
resolution, a special resolution or a special separate resolution, and any
notice to consider approving an amalgamation into a foreign jurisdiction, an
arrangement or the adoption of an amalgamation agreement, and any notice of a
general meeting, class meeting or series meeting), in the manner provided in
these Articles, or in such other manner, if any, as may be prescribed by
ordinary resolution (whether previous notice of the resolution has been given or
not), to each shareholder entitled to attend the meeting, to each director and
to the auditor of the Company, unless these Articles otherwise
provide, at least the following number of days before the meeting:
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(a)
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if the Company is a public company, 21 days;
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(b)
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otherwise, 10 days.
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Record Date for Notice
10.5 The directors may set a date as the record date for the
purpose of determining shareholders entitled to notice of any meeting of
shareholders. The record date must not precede the date on which the meeting is
to be held by more than two months or, in the case of a general meeting
requisitioned by shareholders under the Act, by more than four months. The
record date must not precede the date on which the meeting is held by fewer
than:
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(a)
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if the Company is a public company, 21 days;
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(b)
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otherwise, 10 days.
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If no record date is set, the record date is 5 p.m. on the day
immediately preceding the first date on which the notice is sent or, if no
notice is sent, the beginning of the meeting.
Record Date for Voting
10.6 The directors may set a date as the record date for the
purpose of determining shareholders entitled to vote at any meeting of
shareholders. The record date must not precede the date on which the meeting is
to be held by more than two months or, in the case of a general meeting
requisitioned by shareholders under the Act, by more than four months. If no
record date is set, the record date is 5 p.m. on the day immediately preceding
the first date on which the notice is sent or, if no notice is sent, the
beginning of the meeting.
Failure to Give Notice and Waiver of Notice
10.7 The accidental omission to send notice of any meeting of
shareholders to, or the non-receipt of any notice by, any of the persons
entitled to notice does not invalidate any proceedings at that meeting. Any
person entitled to notice of a meeting of shareholders may, in writing or
otherwise, waive that entitlement or may agree to reduce the period of that
notice. Attendance of a person at a meeting of shareholders is a waiver of
entitlement to notice of the meeting unless that person attends the meeting for
the express purpose of objecting to the transaction of any business on the
grounds that the meeting is not lawfully called.
Notice of Special Business at Meetings of
Shareholders
10.8 If a meeting of shareholders is to consider special
business within the meaning of §11.1, the notice of meeting must:
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(a)
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state the general nature of the special business;
and
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(b) if the special business includes
considering, approving, ratifying, adopting or authorizing any document or the
signing of or giving of effect to any document, have attached to it a copy of
the document or state that a copy of the document will be available for
inspection by shareholders:
(i) at the Company’s records office,
or at such other reasonably accessible location in British Columbia as is
specified in the notice; and
(ii) during statutory business hours
on any one or more specified days before the day set for the holding of the
meeting.
Place of Meetings
10.9 In addition to any location in British Columbia, any
general meeting may be held in any location outside British Columbia approved by
a resolution of the directors.
PART 11
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS
Special Business
11.1 At a meeting of shareholders, the following business is
special business:
(a) at a meeting of shareholders that
is not an annual general meeting, all business is special business except
business relating to the conduct of or voting at the meeting;
(b) at an annual general meeting, all
business is special business except for the following:
(i) business relating to the conduct
of or voting at the meeting;
(ii) consideration of any financial
statements of the Company presented to the meeting;
(iii) consideration of any reports of
the directors or auditor;
(iv) the setting or changing of the
number of directors;
(v) the election or appointment of
directors;
(vi) the appointment of an auditor;
(vii) the setting of the remuneration
of an auditor;
(viii) business arising out of a
report of the directors not requiring the passing of a special resolution or an
exceptional resolution;
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(ix) any other business which, under
these Articles or the Act, may be transacted at a meeting of shareholders
without prior notice of the business being given to the shareholders.
Special Majority
11.2 The majority of votes required for the Company to pass a
special resolution at a general meeting of shareholders is two-thirds of the
votes cast on the resolution.
Quorum
11.3 Subject to the special rights or restrictions attached to
the shares of any class or series of shares, and to §11.4, the quorum for the
transaction of business at a meeting of shareholders is two persons who are, or
who represent by proxy, shareholders who, in the aggregate, hold at least 10% of
the issued shares entitled to be voted at the meeting.
One Shareholder May Constitute Quorum
11.4 If there is only one shareholder entitled to vote at a
meeting of shareholders:
(a) the quorum is one person who is, or
who represents by proxy, that shareholder, and
(b) that shareholder, present in person
or by proxy, may constitute the meeting.
Persons Entitled to Attend Meeting
11.5 In addition to those persons who are entitled to vote at a
meeting of shareholders, the only other persons entitled to be present at the
meeting are the directors, the president (if any), the secretary (if any), the
assistant secretary (if any), any lawyer for the Company, the auditor of the
Company, any persons invited to be present at the meeting by the directors or by
the chair of the meeting and any persons entitled or required under the Act or
these Articles to be present at the meeting; but if any of those persons does
attend the meeting, that person is not to be counted in the quorum and is not
entitled to vote at the meeting unless that person is a shareholder or proxy
holder entitled to vote at the meeting.
Requirement of Quorum
11.6 No business, other than the election of a chair of the
meeting and the adjournment of the meeting, may be transacted at any meeting of
shareholders unless a quorum of shareholders entitled to vote is present at the
commencement of the meeting, but such quorum need not be present throughout the
meeting.
Lack of Quorum
11.7 If, within one-half hour from the time set for the holding
of a meeting of shareholders, a quorum is not present:
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(a) in the case of a general meeting
requisitioned by shareholders, the meeting is dissolved, and
(b) in the case of any other meeting of
shareholders, the meeting stands adjourned to the same day in the next week at
the same time and place.
Lack of Quorum at Succeeding Meeting
11.8 If, at the meeting to which the meeting referred to in
§11.7(b) was adjourned, a quorum is not present within one-half hour from the
time set for the holding of the meeting, the person or persons present and
being, or representing by proxy, two or more shareholders entitled to attend and
vote at the meeting shall be deemed to constitute a quorum.
Chair
11.9 The following individual is entitled to preside as chair
at a meeting of shareholders:
(a) the chair of the board, if any;
or
(b) if the chair of the board is absent
or unwilling to act as chair of the meeting, the president, if any.
Selection of Alternate Chair
11.10 If, at any meeting of shareholders, there is no chair of
the board or president present within 15 minutes after the time set for holding
the meeting, or if the chair of the board and the president are unwilling to act
as chair of the meeting, or if the chair of the board and the president have
advised the secretary, if any, or any director present at the meeting, that they
will not be present at the meeting, the directors present may choose either one
of their number or the solicitor of the Company to be chair of the meeting. If
all of the directors present decline to take the chair or fail to so choose or
if no director is present or the solicitor of the Company declines to take the
chair, the shareholders entitled to vote at the meeting who are present in
person or by proxy may choose any person present at the meeting to chair the
meeting.
Adjournments
11.11 The chair of a meeting of shareholders may, and if so
directed by the meeting must, adjourn the meeting from time to time and from
place to place, but no business may be transacted at any adjourned meeting other
than the business left unfinished at the meeting from which the adjournment took
place.
Notice of Adjourned Meeting
11.12 It is not necessary to give any notice of an adjourned
meeting of shareholders or of the business to be transacted at an adjourned
meeting of shareholders except that, when a meeting is adjourned for 30 days or
more, notice of the adjourned meeting must be given as in the case of the
original meeting.
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Decisions by Show of Hands or Poll
11.13 Subject to the Act, every motion put to a vote at a
meeting of shareholders will be decided on a show of hands unless a poll, before
or on the declaration of the result of the vote by show of hands, is directed by
the chair or demanded by any shareholder entitled to vote who is present in
person or by proxy.
Declaration of Result
11.14 The chair of a meeting of shareholders must declare to
the meeting the decision on every question in accordance with the result of the
show of hands or the poll, as the case may be, and that decision must be entered
in the minutes of the meeting. A declaration of the chair that a resolution is
carried by the necessary majority or is defeated is, unless a poll is directed
by the chair or demanded under §11.13, conclusive evidence without proof of the
number or proportion of the votes recorded in favour of or against the
resolution.
Motion Need Not be Seconded
11.15 No motion proposed at a meeting of shareholders need be
seconded unless the chair of the meeting rules otherwise, and the chair of any
meeting of shareholders is entitled to propose or second a motion.
Casting Vote
11.16 In case of an equality of votes, the chair of a meeting
of shareholders does not, either on a show of hands or on a poll, have a second
or casting vote in addition to the vote or votes to which the chair may be
entitled as a shareholder.
Manner of Taking Poll
11.17 Subject to §11.18, if a poll is duly demanded at a
meeting of shareholders:
(a) the poll must be taken:
(i) at the meeting, or within seven
days after the date of the meeting, as the chair of the meeting directs; and
(ii) in the manner, at the time and at
the place that the chair of the meeting directs;
(b) the result of the poll is deemed to
be the decision of the meeting at which the poll is demanded; and
(c) the demand for the poll may be
withdrawn by the person who demanded it.
Demand for Poll on Adjournment
11.18 A poll demanded at a meeting of shareholders on a
question of adjournment must be taken immediately at the meeting.
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Chair Must Resolve Dispute
11.19 In the case of any dispute as to the admission or
rejection of a vote given on a poll, the chair of the meeting must determine the
dispute, and the determination of the chair made in good faith is final and
conclusive.
Casting of Votes
11.20 On a poll, a shareholder entitled to more than one vote
need not cast all the votes in the same way.
No Demand for Poll on Election of Chair
11.21 No poll may be demanded in respect of the vote by which a
chair of a meeting of shareholders is elected.
Demand for Poll Not to Prevent Continuance of
Meeting
11.22 The demand for a poll at a meeting of shareholders does
not, unless the chair of the meeting so rules, prevent the continuation of a
meeting for the transaction of any business other than the question on which a
poll has been demanded.
Retention of Ballots and Proxies
11.23 The Company must, for at least three months after a
meeting of shareholders, keep each ballot cast on a poll and each proxy voted at
the meeting, and, during that period, make them available for inspection during
normal business hours by any shareholder or proxy holder entitled to vote at the
meeting. At the end of such three month period, the Company may destroy such
ballots and proxies.
PART 12
VOTES OF SHAREHOLDERS
Number of Votes by Shareholder or by Shares
12.1 Subject to any special rights or restrictions attached to
any shares and to the restrictions imposed on joint shareholders under
§12.3:
(a) on a vote by show of hands, every
person present who is a shareholder or proxy holder and entitled to vote on the
matter has one vote; and
(b) on a poll, every shareholder
entitled to vote on the matter has one vote in respect of each share entitled to
be voted on the matter and held by that shareholder and may exercise that vote
either in person or by proxy.
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Votes of Persons in Representative Capacity
12.2 A person who is not a shareholder may vote at a meeting of
shareholders, whether on a show of hands or on a poll, and may appoint a proxy
holder to act at the meeting, if, before doing so, the person satisfies the
chair of the meeting, or the directors, that the person is a legal personal
representative or a trustee in bankruptcy for a shareholder who is entitled to
vote at the meeting.
Votes by Joint Holders
12.3 If there are joint shareholders registered in respect of
any share:
(a) any one of the joint shareholders
may vote at any meeting of shareholders, personally or by proxy, in respect of
the share as if that joint shareholder were solely entitled to it; or
(b) if more than one of the joint
shareholders is present at any meeting of shareholders, personally or by proxy,
and more than one of them votes in respect of that share, then only the vote of
the joint shareholder present whose name stands first on the central securities
register in respect of the share will be counted.
Legal Personal Representatives as Joint Shareholders
12.4 Two or more legal personal representatives of a
shareholder in whose sole name any share is registered are, for the purposes of
§12.3, deemed to be joint shareholders registered in respect of that share.
Representative of a Corporate Shareholder
12.5 If a corporation, that is not a subsidiary of the Company,
is a shareholder, that corporation may appoint a person to act as its
representative at any meeting of shareholders of the Company, and:
(a) for that purpose, the instrument
appointing a representative must be received:
(i) at the registered office of the
Company or at any other place specified, in the notice calling the meeting, for
the receipt of proxies, at least the number of business days specified in the
notice for the receipt of proxies, or if no number of days is specified, two
business days before the day set for the holding of the meeting or any adjourned
meeting; or
(ii) at the meeting or any adjourned
meeting, by the chair of the meeting or adjourned meeting or by a person
designated by the chair of the meeting or adjourned meeting;
(b) if a representative is appointed
under this §12.5:
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(i) the representative is entitled to
exercise in respect of and at that meeting the same rights on behalf of the
corporation that the representative represents as that corporation could
exercise if it were a shareholder who is an individual, including, without
limitation, the right to appoint a proxy holder; and
(ii) the representative, if present at
the meeting, is to be counted for the purpose of forming a quorum and is deemed
to be a shareholder present in person at the meeting.
Evidence of the appointment of any such representative may be
sent to the Company by written instrument, fax or any other method of
transmitting legibly recorded messages.
Proxy Provisions Do Not Apply to All Companies
12.6 If and for so long as the Company is a public company or a
pre-existing reporting company which has the Statutory Reporting Company
Provisions as part of its Articles or to which the Statutory Reporting Company
Provisions apply, then §12.7 to §12.15 are not mandatory, however the directors
of the Company are authorized to apply all or part of such sections or to adopt
alternative procedures for proxy form, deposit and revocation procedures to the
extent that the directors deem necessary in order to comply with securities laws
applicable to the Company.
Appointment of Proxy Holders
12.7 Every shareholder of the Company entitled to vote at a
meeting of shareholders may, by proxy, appoint one or more (but not more than
two) proxy holders to attend and act at the meeting in the manner, to the extent
and with the powers conferred by the proxy.
Alternate Proxy Holders
12.8 A shareholder may appoint one or more alternate proxy
holders to act in the place of an absent proxy holder.
Proxy Holder Need Not Be Shareholder
12.9 A proxy holder need not be a shareholder of the
Company.
Deposit of Proxy
12.10 A proxy for a meeting of shareholders must:
(a) be received at the registered
office of the Company or at any other place specified, in the notice calling the
meeting, for the receipt of proxies, at least the number of business days
specified in the notice, or if no number of days is specified, two business days
before the day set for the holding of the meeting or any adjourned meeting;
or
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(b) unless the notice provides
otherwise, be received, at the meeting or any adjourned meeting, by the chair of
the meeting or adjourned meeting or by a person designated by the chair of the
meeting or adjourned meeting.
A proxy may be sent to the Company by written instrument, fax
or any other method of transmitting legibly recorded messages, including through
Internet or telephone voting or by email, if permitted by the notice calling the
meeting or the information circular for the meeting.
Validity of Proxy Vote
12.11 A vote given in accordance with the terms of a proxy is
valid notwithstanding the death or incapacity of the shareholder giving the
proxy and despite the revocation of the proxy or the revocation of the authority
under which the proxy is given, unless notice in writing of that death,
incapacity or revocation is received:
(a) at the registered office of the
Company, at any time up to and including the last business day before the day
set for the holding of the meeting or any adjourned meeting at which the proxy
is to be used; or
(b) at the meeting or any adjourned
meeting by the chair of the meeting or adjourned meeting, before any vote in
respect of which the proxy has been given has been taken.
Form of Proxy
12.12 A proxy, whether for a specified meeting or otherwise,
must be either in the following form or in any other form approved by the
directors or the chair of the meeting:
[name of company]
(the “Company”)
The undersigned, being a shareholder of the Company, hereby
appoints [name] or, failing that person, [name], as proxy holder for the
undersigned to attend, act and vote for and on behalf of the undersigned at the
meeting of shareholders of the Company to be held on [month, day, year] and at
any adjournment of that meeting.
Number of shares in respect of which this proxy is given (if no
number is specified, then this proxy is given in respect of all shares
registered in the name of the undersigned): _____________________
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Signed [month, day, year]
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[Signature of shareholder]
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[Name of shareholder—printed]
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Revocation of Proxy
12.13 Subject to §12.14, every proxy may be revoked by an
instrument in writing that is received:
(a) at the registered office of the
Company at any time up to and including the last business day before the day set
for the holding of the meeting or any adjourned meeting at which the proxy is to
be used; or
(b) at the meeting or any adjourned
meeting, by the chair of the meeting or adjourned meeting, before any vote in
respect of which the proxy has been given has been taken.
Revocation of Proxy Must Be Signed
12.14 An instrument referred to in §12.13 must be signed as
follows:
(a) if the shareholder for whom the
proxy holder is appointed is an individual, the instrument must be signed by the
shareholder or the shareholder’s legal personal representative or trustee in
bankruptcy;
(b) if the shareholder for whom the
proxy holder is appointed is a corporation, the instrument must be signed by the
corporation or by a representative appointed for the corporation under
§12.5.
Production of Evidence of Authority to Vote
12.15 The chair of any meeting of shareholders may, but need
not, inquire into the authority of any person to vote at the meeting and may,
but need not, demand from that person production of evidence as to the existence
of the authority to vote.
PART 13
DIRECTORS
First Directors; Number of Directors
13.1 The first directors are the persons designated as
directors of the Company in the Notice of Articles that applies to the Company
when it is recognized under the Act. The number of directors, excluding
additional directors appointed under §14.8, is set at:
(a) subject to §(b) and §(c), the
number of directors that is equal to the number of the Company’s first
directors;
(b) if the Company is a public company,
the greater of three and the most recently set of:
(i) the number of directors set by a
resolution of the directors (whether or not previous notice of the resolution
was given); and
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(ii) the number of directors in office
pursuant to §14.4;
(c) if the Company is not a public
company, the most recently set of:
(i) the number of directors set by a
resolution of the directors (whether or not previous notice of the resolution
was given); and
(ii) the number of directors in office
pursuant to §14.4.
Change in Number of Directors
13.2 If the number of directors is set under §13.1(b)(i) or
§13.1(c)(i):
(a) the shareholders may elect or
appoint the directors needed to fill any vacancies in the board of directors up
to that number; or
(b) if the shareholders do not elect or
appoint the directors needed to fill any vacancies in the board of directors up
to that number then the directors, subject to §14.8, may appoint directors to
fill those vacancies.
Directors’ Acts Valid Despite Vacancy
13.3 An act or proceeding of the directors is not invalid
merely because fewer than the number of directors set or otherwise required
under these Articles is in office.
Qualifications of Directors
13.4 A director is not required to hold a share as
qualification for his or her office but must be qualified as required by the Act
to become, act or continue to act as a director.
Remuneration of Directors
13.5 The directors are entitled to the remuneration for acting
as directors, if any, as the directors may from time to time determine. If the
directors so decide, the remuneration of the directors, if any, will be
determined by the shareholders.
Reimbursement of Expenses of Directors
13.6 The Company must reimburse each director for the
reasonable expenses that he or she may incur in and about the business of the
Company.
Special Remuneration for Directors
13.7 If any director performs any professional or other
services for the Company that in the opinion of the directors are outside the
ordinary duties of a director, he or she may be paid remuneration fixed by the
directors, or at the option of the directors, fixed by ordinary resolution, and
such remuneration will be in addition to any other remuneration that he or she
may be entitled to receive.
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Gratuity, Pension or Allowance on Retirement of
Director
13.8 Unless otherwise determined by ordinary resolution, the
directors on behalf of the Company may pay a gratuity or pension or allowance on
retirement to any director who has held any salaried office or place of profit
with the Company or to his or her spouse or dependants and may make
contributions to any fund and pay premiums for the purchase or provision of any
such gratuity, pension or allowance.
PART 14
ELECTION AND REMOVAL OF DIRECTORS
Election at Annual General Meeting
14.1 At every annual general meeting and in every unanimous
resolution contemplated by §10.2:
(a) the shareholders entitled to vote
at the annual general meeting for the election of directors must elect, or in
the unanimous resolution appoint, a board of directors consisting of the number
of directors for the time being set under these Articles; and
(b) all the directors cease to hold
office immediately before the election or appointment of directors under §(a),
but are eligible for re-election or re-appointment.
Consent to be a Director
14.2 No election, appointment or designation of an individual
as a director is valid unless:
(a) that individual consents to be a
director in the manner provided for in the Act;
(b) that individual is elected or
appointed at a meeting at which the individual is present and the individual
does not refuse, at the meeting, to be a director; or
(c) with respect to first directors,
the designation is otherwise valid under the Act.
Failure to Elect or Appoint Directors
14.3 If:
(a) the Company fails to hold an annual
general meeting, and all the shareholders who are entitled to vote at an annual
general meeting fail to pass the unanimous resolution contemplated by §10.2, on
or before the date by which the annual general meeting is required to be held
under the Act; or
(b) the shareholders fail, at the
annual general meeting or in the unanimous resolution contemplated by §10.2, to
elect or appoint any directors;
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then each director then in office continues to hold office
until the earlier of:
(c) when his or her successor is
elected or appointed; and
(d) when he or she otherwise ceases to
hold office under the Act or these Articles.
Places of Retiring Directors Not Filled
14.4 If, at any meeting of shareholders at which there should
be an election of directors, the places of any of the retiring directors are not
filled by that election, those retiring directors who are not re-elected and who
are asked by the newly elected directors to continue in office will, if willing
to do so, continue in office to complete the number of directors for the time
being set pursuant to these Articles but their term of office shall expire when
new directors are elected at a meeting of shareholders convened for that
purpose. If any such election or continuance of directors does not result in the
election or continuance of the number of directors for the time being set
pursuant to these Articles, the number of directors of the Company is deemed to
be set at the number of directors actually elected or continued in office.
Directors May Fill Casual Vacancies
14.5 Any casual vacancy occurring in the board of directors may
be filled by the directors.
Remaining Directors Power to Act
14.6 The directors may act notwithstanding any vacancy in the
board of directors, but if the Company has fewer directors in office than the
number set pursuant to these Articles as the quorum of directors, the directors
may only act for the purpose of appointing directors up to that number or of
calling a meeting of shareholders for the purpose of filling any vacancies on
the board of directors or, subject to the Act, for any other purpose.
Shareholders May Fill Vacancies
14.7 If the Company has no directors or fewer directors in
office than the number set pursuant to these Articles as the quorum of
directors, the shareholders may elect or appoint directors to fill any vacancies
on the board of directors.
Additional Directors
14.8 Notwithstanding §13.1 and §13.2, between annual general
meetings or by unanimous resolutions contemplated by §10.2, the directors may
appoint one or more additional directors, but the number of additional directors
appointed under this §14.8 must not at any time exceed:
(a) one-third of the number of first
directors, if, at the time of the appointments, one or more of the first
directors have not yet completed their first term of office; or
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(b) in any other case, one-third of the
number of the current directors who were elected or appointed as directors other
than under this §14.8.
Any director so appointed ceases to hold office immediately
before the next election or appointment of directors under §14.1(a), but is
eligible for re-election or re-appointment.
Ceasing to be a Director
14.9 A director ceases to be a director when:
(a) the term of office of the director
expires;
(b) the director dies;
(c) the director resigns as a director
by notice in writing provided to the Company or a lawyer for the Company; or
(d) the director is removed from office
pursuant to §14.10 or §14.11.
Removal of Director by Shareholders
14.10 The Company may remove any director before the expiration
of his or her term of office by special resolution. In that event, the
shareholders may elect, or appoint by ordinary resolution, a director to fill
the resulting vacancy. If the shareholders do not elect or appoint a director to
fill the resulting vacancy contemporaneously with the removal, then the
directors may appoint or the shareholders may elect, or appoint by ordinary
resolution, a director to fill that vacancy.
Removal of Director by Directors
14.11 The directors may remove any director before the
expiration of his or her term of office if the director is convicted of an
indictable offence, or if the director ceases to be qualified to act as a
director of a company and does not promptly resign, and the directors may
appoint a director to fill the resulting vacancy.
PART 15
ALTERNATE DIRECTORS
Appointment of Alternate Director
15.1 Any director (an “appointor”) may by notice in writing
received by the Company appoint any person (an “appointee”) who is qualified to
act as a director to be his or her alternate to act in his or her place at
meetings of the directors or committees of the directors at which the appointor
is not present unless (in the case of an appointee who is not a director) the
directors have reasonably disapproved the appointment of such person as an
alternate director and have given notice to that effect to his or her appointor within a
reasonable time after the notice of appointment is received by the Company.
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Notice of Meetings
15.2 Every alternate director so appointed is entitled to
notice of meetings of the directors and of committees of the directors of which
his or her appointor is a member and to attend and vote as a director at any
such meetings at which his or her appointor is not present.
Alternate for More than One Director Attending
Meetings
15.3 A person may be appointed as an alternate director by more
than one director, and an alternate director:
(a) will be counted in determining the
quorum for a meeting of directors once for each of his or her appointors and, in
the case of an appointee who is also a director, once more in that capacity;
(b) has a separate vote at a meeting of
directors for each of his or her appointors and, in the case of an appointee who
is also a director, an additional vote in that capacity;
(c) will be counted in determining the
quorum for a meeting of a committee of directors once for each of his or her
appointors who is a member of that committee and, in the case of an appointee
who is also a member of that committee as a directors, once more in that
capacity; and
(d) has a separate vote at a meeting of
a committee of directors for each of his or her appointors who is a member of
that committee and, in the case of an appointee who is also a member of that
committee as a director, an additional vote in that capacity.
Consent Resolutions
15.4 Every alternate director, if authorized by the notice
appointing him or her, may sign in place of his or her appointor any resolutions
to be consented to in writing.
Alternate Director an Agent
15.5 Every alternate director is deemed to be the agent of his
or her appointor.
Revocation or Amendment of Appointment of Alternate
Director
15.6 An appointor may at any time, by notice in writing
received by the Company, revoke or amend the terms of the appointment of an
alternate director appointed by him or her.
Ceasing to be an Alternate Director
15.7 The appointment of an alternate director ceases when:
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(a) his or her appointor ceases to be a
director and is not promptly re-elected or reappointed;
(b) the alternate director dies;
(c) the alternate director resigns as
an alternate director by notice in writing provided to the Company or a lawyer
for the Company;
(d) the alternate director ceases to be
qualified to act as a director; or
(e) the term of his appointment
expires, or his or her appointor revokes the appointment of the alternate
directors.
Remuneration and Expenses of Alternate Director
15.8 The Company may reimburse an alternate director for the
reasonable expenses that would be properly reimbursed if he or she were a
director, and the alternate director is entitled to receive from the Company
such proportion, if any, of the remuneration otherwise payable to the appointor
as the appointor may from time to time direct.
PART 16
POWERS AND DUTIES OF DIRECTORS
Powers of Management
16.1 The directors must, subject to the Act and these Articles,
manage or supervise the management of the business and affairs of the Company
and have the authority to exercise all such powers of the Company as are not, by
the Act or by these Articles, required to be exercised by the shareholders of
the Company. Notwithstanding the generality of the foregoing, the directors may
set the remuneration of the auditor of the Company.
Appointment of Attorney of Company
16.2 The directors may from time to time, by power of attorney
or other instrument, under seal if so required by law, appoint any person to be
the attorney of the Company for such purposes, and with such powers, authorities
and discretions (not exceeding those vested in or exercisable by the directors
under these Articles and excepting the power to fill vacancies in the board of
directors, to remove a director, to change the membership of, or fill vacancies
in, any committee of the directors, to appoint or remove officers appointed by
the directors and to declare dividends) and for such period, and with such
remuneration and subject to such conditions as the directors may think fit. Any
such power of attorney may contain such provisions for the protection or
convenience of persons dealing with such attorney as the directors think fit.
Any such attorney may be authorized by the directors to sub-delegate all or any
of the powers, authorities and discretions for the time being vested in him or
her.
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PART 17
INTERESTS OF DIRECTORS AND OFFICERS
Obligation to Account for Profits
17.1 A director or senior officer who holds a disclosable
interest (as that term is used in the Act) in a contract or transaction into
which the Company has entered or proposes to enter is liable to account to the
Company for any profit that accrues to the director or senior officer under or
as a result of the contract or transaction only if and to the extent provided in
the Act.
Restrictions on Voting by Reason of Interest
17.2 A director who holds a disclosable interest in a contract
or transaction into which the Company has entered or proposes to enter is not
entitled to vote on any directors’ resolution to approve that contract or
transaction, 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.
Interested Director Counted in Quorum
17.3 A director who holds a disclosable interest in a contract
or transaction into which the Company has entered or proposes to enter and who
is present at the meeting of directors at which the contract or transaction is
considered for approval may be counted in the quorum at the meeting whether or
not the director votes on any or all of the resolutions considered at the
meeting.
Disclosure of Conflict of Interest or Property
17.4 A director or senior officer who holds any office or
possesses any property, right or interest that could result, directly or
indirectly, in the creation of a duty or interest that materially conflicts with
that individual’s duty or interest as a director or senior officer, must
disclose the nature and extent of the conflict as required by the Act.
Director Holding Other Office in the Company
17.5 A director may hold any office or place of profit with the
Company, other than the office of auditor of the Company, in addition to his or
her office of director for the period and on the terms (as to remuneration or
otherwise) that the directors may determine.
No Disqualification
17.6 No director or intended director is disqualified by his or
her office from contracting with the Company either with regard to the holding
of any office or place of profit the director holds with the Company or as
vendor, purchaser or otherwise, and no contract or transaction entered into by
or on behalf of the Company in which a director is in any way interested is
liable to be voided for that reason.
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Professional Services by Director or Officer
17.7 Subject to the Act, a director or officer, or any person
in which a director or officer has an interest, may act in a professional
capacity for the Company, except as auditor of the Company, and the director or
officer or such person is entitled to remuneration for professional services as
if that director or officer were not a director or officer.
Director or Officer in Other Corporations
17.8 A director or officer may be or become a director, officer
or employee of, or otherwise interested in, any person in which the Company may
be interested as a shareholder or otherwise, and, subject to the Act, the
director or officer is not accountable to the Company for any remuneration or
other benefits received by him or her as director, officer or employee of, or
from his or her interest in, such other person.
PART 18
PROCEEDINGS OF DIRECTORS
Meetings of Directors
18.1 The directors may meet together for the conduct of
business, adjourn and otherwise regulate their meetings as they think fit, and
meetings of the directors held at regular intervals may be held at the place, at
the time and on the notice, if any, as the directors may from time to time
determine.
Voting at Meetings
18.2 Questions arising at any meeting of directors are to be
decided by a majority of votes and, in the case of an equality of votes, the
chair of the meeting has a second or casting vote.
Chair of Meetings
18.3 The following individual is entitled to preside as chair
at a meeting of directors:
(a) the chair of the board, if any;
(b) in the absence of the chair of the
board, the president, if any, if the president is a director; or
(c) any other director chosen by the
directors if:
(i) neither the chair of the board nor
the president, if a director, is present at the meeting within 15 minutes after
the time set for holding the meeting;
(ii) neither the chair of the board
nor the president, if a director, is willing to chair the meeting; or
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(iii) the chair of the board and the
president, if a director, have advised the secretary, if any, or any other
director, that they will not be present at the meeting.
Meetings by Telephone or Other Communications Medium
18.4 A director may participate in a meeting of the directors
or of any committee of the directors:
(a) in person; or
(b) by telephone or by other
communications medium if all directors participating in the meeting, whether in
person or by telephone or other communications medium, are able to communicate
with each other.
A director who participates in a meeting in a manner
contemplated by this §18.4 is deemed for all purposes of the Act and these
Articles to be present at the meeting and to have agreed to participate in that
manner.
Calling of Meetings
18.5 A director may, and the secretary or an assistant
secretary of the Company, if any, on the request of a director must, call a
meeting of the directors at any time.
Notice of Meetings
18.6 Other than for meetings held at regular intervals as
determined by the directors pursuant to §18.1, 48 hours’ notice or such lesser
notice as the Chairman in his discretion determines, acting reasonably, is
appropriate in any unusual circumstances of each meeting of the directors,
specifying the place, day and time of that meeting must be given to each of the
directors by any method set out in §24.1 or orally or by telephone.
When Notice Not Required
18.7 It is not necessary to give notice of a meeting of the
directors to a director if:
(a) the meeting is to be held
immediately following a meeting of shareholders at which that director was
elected or appointed, or is the meeting of the directors at which that director
is appointed; or
(b) the director has waived notice of
the meeting.
Meeting Valid Despite Failure to Give Notice
18.8 The accidental omission to give notice of any meeting of
directors to, or the non-receipt of any notice by, any director, does not
invalidate any proceedings at that meeting.
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Waiver of Notice of Meetings
18.9 Any director may send to the Company a document signed by
him or her waiving notice of any past, present or future meeting or meetings of
the directors and may at any time withdraw that waiver with respect to meetings
held after that withdrawal. After sending a waiver with respect to all future
meetings and until that waiver is withdrawn, no notice of any meeting of the
directors need be given to that director and all meetings of the directors so
held are deemed not to be improperly called or constituted by reason of notice
not having been given to such director. Attendance of a director or alternate
director at a meeting of the directors is a waiver of notice of the meeting
unless that director or alternate director attends the meeting for the express
purpose of objecting to the transaction of any business on the grounds that the
meeting is not lawfully called.
Quorum
18.10 The quorum necessary for the transaction of the business
of the directors may be set by the directors and, if not so set, is deemed to be
a majority of the directors or, if the number of directors is set at one, is
deemed to be set at one director, and that director may constitute a
meeting.
Validity of Acts Where Appointment Defective
18.11 Subject to the Act, an act of a director or officer is
not invalid merely because of an irregularity in the election or appointment or
a defect in the qualification of that director or officer.
Consent Resolutions in Writing
18.12 A resolution of the directors or of any committee of the
directors may be passed without a meeting:
(a) in all cases, if each of the
directors entitled to vote on the resolution consents to it in writing; or
(b) in the case of a resolution to
approve a contract or transaction in respect of which a director has disclosed
that he or she has or may have a disclosable interest, if each of the other
directors who have not made such a disclosure consents in writing to the
resolution.
A consent in writing under this §18.12 may be by signed
document, fax, email or any other method of transmitting legibly recorded
messages. A consent in writing may be in two or more counterparts which together
are deemed to constitute one consent in writing. A resolution of the directors
or of any committee of the directors passed in accordance with this §18.12 is
effective on the date stated in the consent in writing or on the latest date
stated on any counterpart and is deemed to be a proceeding at a meeting of
directors or of the committee of the directors and to be as valid and effective
as if it had been passed at a meeting of the directors or of the committee of
the directors that satisfies all the requirements of the Act and all the
requirements of these Articles relating to meetings of the directors or of a
committee of the directors.
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PART 19
EXECUTIVE AND OTHER COMMITTEES
Appointment and Powers of Executive Committee
19.1 The directors may, by resolution, appoint an executive
committee consisting of the director or directors that they consider
appropriate, and this committee has, during the intervals between meetings of
the board of directors, all of the directors’ powers, except:
(a) the power to fill vacancies in the
board of directors;
(b) the power to remove a director;
(c) the power to change the membership
of, or fill vacancies in, any committee of the directors; and
(d) such other powers, if any, as may
be set out in the resolution or any subsequent directors’ resolution.
Appointment and Powers of Other Committees
19.2 The directors may, by resolution:
(a) appoint one or more committees
(other than the executive committee) consisting of the director or directors
that they consider appropriate;
(b) delegate to a committee appointed
under §(a) any of the directors’ powers, except:
(i) the power to fill vacancies in the
board of directors;
(ii) the power to remove a
director;
(iii) the power to change the
membership of, or fill vacancies in, any committee of the directors; and
(iv) the power to appoint or remove
officers appointed by the directors; and
(c) make any delegation referred to in
§(b) subject to the conditions set out in the resolution or any subsequent
directors’ resolution.
Obligations of Committees
19.3 Any committee appointed under §19.1 or §19.2, in the
exercise of the powers delegated to it, must:
(a) conform to any rules that may from
time to time be imposed on it by the directors; and
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(b) report every act or thing done in
exercise of those powers at such times as the directors may require.
Powers of Board
19.4 The directors may, at any time, with respect to a
committee appointed under §19.1 or §19.2:
(a) revoke or alter the authority given
to the committee, or override a decision made by the committee, except as to
acts done before such revocation, alteration or overriding;
(b) terminate the appointment of, or
change the membership of, the committee; and
(c) fill vacancies in the
committee.
Committee Meetings
19.5 Subject to §19.3(a) and unless the directors otherwise
provide in the resolution appointing the committee or in any subsequent
resolution, with respect to a committee appointed under §19.1 or §19.2:
(a) the committee may meet and adjourn
as it thinks proper;
(b) the committee may elect a chair of
its meetings but, if no chair of a meeting is elected, or if at a meeting the
chair of the meeting is not present within 15 minutes after the time set for
holding the meeting, the directors present who are members of the committee may
choose one of their number to chair the meeting;
(c) a majority of the members of the
committee constitutes a quorum of the committee; and
(d) questions arising at any meeting of
the committee are determined by a majority of votes of the members present, and
in case of an equality of votes, the chair of the meeting does not have a second
or casting vote.
PART 20
OFFICERS
Directors May Appoint Officers
20.1 The directors may, from time to time, appoint such
officers, if any, as the directors determine and the directors may, at any time,
terminate any such appointment.
Functions, Duties and Powers of Officers
20.2 The directors may, for each officer:
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(a) determine the functions and duties
of the officer;
(b) entrust to and confer on the
officer any of the powers exercisable by the directors on such terms and
conditions and with such restrictions as the directors think fit; and
(c) revoke, withdraw, alter or vary all
or any of the functions, duties and powers of the officer.
Qualifications
20.3 No person may be appointed as an officer unless that
person is qualified in accordance with the Act. One person may hold more than
one position as an officer of the Company. Any person appointed as the chair of
the board or as a managing director must be a director. Any other officer need
not be a director.
Remuneration and Terms of Appointment
20.4 All appointments of officers are to be made on the terms
and conditions and at the remuneration (whether by way of salary, fee,
commission, participation in profits or otherwise) that the directors thinks fit
and are subject to termination at the pleasure of the directors, and an officer
may in addition to such remuneration be entitled to receive, after he or she
ceases to hold such office or leaves the employment of the Company, a pension or
gratuity.
PART 21
INDEMNIFICATION
Definitions
21.1 In this Part 21:
(a) “
eligible party
”, in
relation to a company, means an individual who:
(i) is or was a director, alternate
director or officer of the Company;
(ii) is or was a director, alternate
director or officer of another corporation
(A) at a time when the corporation is
or was an affiliate of the Company, or
(B) at the request of the Company;
or
(iii) at the request of the Company,
is or was, or holds or held a position equivalent to that of, a director,
alternate director or officer of a partnership, trust, joint venture or other
unincorporated entity;
and includes, except in the definition
of “eligible proceeding”, and §163(1)(c) and (d) and §165 of the Act, the heirs
and personal or other legal representatives of that individual;
- 34 -
(b) “
eligible penalty
” means a
judgment, penalty or fine awarded or imposed in, or an amount paid in settlement
of, an eligible proceeding;
(c) “
eligible proceeding
” means
a proceeding in which an eligible party or any of the heirs and personal or
other legal representatives of the eligible party, by reason of the eligible
party being or having been a director, alternate director or officer of, or
holding or having held a position equivalent to that of a director, alternate
director or officer of, the Company or an associated corporation
(i) is or may be joined as a party;
or
(ii) is or may be liable for or in
respect of a judgment, penalty or fine in, or expenses related to, the
proceeding;
(d) “
expenses
” has the meaning
set out in the Act and includes costs, charges and expenses, including legal and
other fees, but does not include judgments, penalties, fines or amounts paid in
settlement of a proceeding; and
(e) “
proceeding
” includes any
legal proceeding or investigative action, whether current, threatened, pending
or completed.
Mandatory Indemnification of Eligible Parties
21.2 Subject to the Act, the Company must indemnify each
eligible party and the heirs and legal personal representatives of each eligible
party against all eligible penalties to which such person is or may be liable,
and the Company must, after the final disposition of an eligible proceeding, pay
the expenses actually and reasonably incurred by such person in respect of that
proceeding. Each eligible party is deemed to have contracted with the Company on
the terms of the indemnity contained in this §21.2.
Indemnification of Other Persons
21.3 Subject to any restrictions in the Act, the Company may
agree to indemnify and may indemnify any person (including an eligible party)
against eligible penalties and pay expenses incurred in connection with the
performance of services by that person for the Company.
Authority to Advance Expenses
21.4 The Company may advance expenses to an eligible party to
the extent permitted by and in accordance with the Act.
Non-Compliance with Act
21.5 Subject to the Act, the failure of an eligible party of
the Company to comply with the Act or these Articles or, if applicable, any
former
Companies Act
or former Articles does not, of itself, invalidate
any indemnity to which he or she is entitled under this Part 21.
- 35 -
Company May Purchase Insurance
21.6 The Company may purchase and maintain insurance for the
benefit of any eligible party (or the heirs or legal personal representatives of
any eligible party) against any liability incurred by any eligible party.
PART 22
DIVIDENDS
Payment of Dividends Subject to Special Rights
22.1 The provisions of this Part 22 are subject to the rights,
if any, of shareholders holding shares with special rights as to dividends.
Declaration of Dividends
22.2 Subject to the Act, the directors may from time to time
declare and authorize payment of such dividends as they may deem advisable.
No Notice Required
22.3 The directors need not give notice to any shareholder of
any declaration under §22.2.
Record Date
22.4 The directors must set a date as the record date for the
purpose of determining shareholders entitled to receive payment of a dividend.
The record date must not precede the date on which the dividend is to be paid by
more than two months.
Manner of Paying Dividend
22.5 A resolution declaring a dividend may direct payment of
the dividend wholly or partly in money or by the distribution of specific assets
or of fully paid shares or of bonds, debentures or other securities of the
Company or any other corporation, or in any one or more of those ways.
Settlement of Difficulties
22.6 If any difficulty arises in regard to a distribution under
§22.5, the directors may settle the difficulty as they deem advisable, and, in
particular, may:
(a) set the value for distribution of
specific assets;
(b) determine that money in
substitution for all or any part of the specific assets to which any
shareholders are entitled may be paid to any shareholders on the basis of the
value so fixed in order to adjust the rights of all parties; and
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(c) vest any such specific assets in
trustees for the persons entitled to the dividend.
When Dividend Payable
22.7 Any dividend may be made payable on such date as is fixed
by the directors.
Dividends to be Paid in Accordance with Number of
Shares
22.8 All dividends on shares of any class or series of shares
must be declared and paid according to the number of such shares held.
Receipt by Joint Shareholders
22.9 If several persons are joint shareholders of any share,
any one of them may give an effective receipt for any dividend, bonus or other
money payable in respect of the share.
Dividend Bears No Interest
22.10 No dividend bears interest against the Company.
Fractional Dividends
22.11 If a dividend to which a shareholder is entitled includes
a fraction of the smallest monetary unit of the currency of the dividend, that
fraction may be disregarded in making payment of the dividend and that payment
represents full payment of the dividend.
Payment of Dividends
22.12 Any dividend or other distribution payable in money in
respect of shares may be paid by cheque, made payable to the order of the person
to whom it is sent, and mailed to the registered address of the shareholder, or
in the case of joint shareholders, to the registered address of the joint
shareholder who is first named on the central securities register, or to the
person and to the address the shareholder or joint shareholders may direct in
writing. The mailing of such cheque will, to the extent of the sum represented
by the cheque (plus the amount of the tax required by law to be deducted),
discharge all liability for the dividend unless such cheque is not paid on
presentation or the amount of tax so deducted is not paid to the appropriate
taxing authority.
Capitalization of Retained Earnings or Surplus
22.13 Notwithstanding anything contained in these Articles, the
directors may from time to time capitalize any retained earnings or surplus of
the Company and may from time to time issue, as fully paid, shares or any bonds,
debentures or other securities of the Company as a dividend representing the
retained earnings or surplus so capitalized or any part thereof.
- 37 -
PART 23
ACCOUNTING RECORDS AND AUDITOR
Recording of Financial Affairs
23.1 The directors must cause adequate accounting records to be
kept to record properly the financial affairs and condition of the Company and
to comply with the Act.
Inspection of Accounting Records
23.2 Unless the directors determine otherwise, or unless
otherwise determined by ordinary resolution, no shareholder of the Company is
entitled to inspect or obtain a copy of any accounting records of the
Company.
PART 24
NOTICES
Method of Giving Notice
24.1 Unless the Act or these Articles provide otherwise, a
notice, statement, report or other record required or permitted by the Act or
these Articles to be sent by or to a person may be sent by:
(a) mail addressed to the person at the
applicable address for that person as follows:
(i) for a record mailed to a
shareholder, the shareholder’s registered address;
(ii) for a record mailed to a director
or officer, the prescribed address for mailing shown for the director or officer
in the records kept by the Company or the mailing address provided by the
recipient for the sending of that record or records of that class;
(iii) in any other case, the mailing
address of the intended recipient;
(b) delivery at the applicable address
for that person as follows, addressed to the person:
(i) for a record delivered to a
shareholder, the shareholder’s registered address;
(ii) for a record delivered to a
director or officer, the prescribed address for delivery shown for the director
or officer in the records kept by the Company or the delivery address provided
by the recipient for the sending of that record or records of that class;
(iii) in any other case, the delivery
address of the intended recipient;
- 38 -
(c) sending the record by fax to the
fax number provided by the intended recipient for the sending of that record or
records of that class;
(d) sending the record by email to the
email address provided by the intended recipient for the sending of that record
or records of that class;
(e) physical delivery to the intended
recipient.
Deemed Receipt of Mailing
24.2 A notice, statement, report or other record that is:
(a) mailed to a person by ordinary mail
to the applicable address for that person referred to in §24.1 is deemed to be
received by the person to whom it was mailed on the day (Saturdays, Sundays and
holidays excepted) following the date of mailing;
(b) faxed to a person to the fax number
provided by that person referred to in §24.1 is deemed to be received by the
person to whom it was faxed on the day it was faxed; and
(c) emailed to a person to the e-mail
address provided by that person referred to in §24.1 is deemed to be received by
the person to whom it was e-mailed on the day that it was emailed.
Certificate of Sending
24.3 A certificate signed by the secretary, if any, or other
officer of the Company or of any other corporation acting in that capacity on
behalf of the Company stating that a notice, statement, report or other record
was sent in accordance with §24.1 is conclusive evidence of that fact.
Notice to Joint Shareholders
24.4 A notice, statement, report or other record may be
provided by the Company to the joint shareholders of a share by providing such
record to the joint shareholder first named in the central securities register
in respect of the share.
Notice to Legal Personal Representatives and
Trustees
24.5 A notice, statement, report or other record may be
provided by the Company to the persons entitled to a share in consequence of the
death, bankruptcy or incapacity of a shareholder by:
(a) mailing the record, addressed to
them:
(i) by name, by the title of the legal
personal representative of the deceased or incapacitated shareholder, by the
title of trustee of the bankrupt shareholder or by any similar description;
and
- 39 -
(ii) at the address, if any, supplied
to the Company for that purpose by the persons claiming to be so entitled;
or
(b) if an address referred to in
§(a)(ii) has not been supplied to the Company, by giving the notice in a manner
in which it might have been given if the death, bankruptcy or incapacity had not
occurred.
Undelivered Notices
24.6 If on two consecutive occasions, a notice, statement,
report or other record is sent to a shareholder pursuant to §24.1 and on each of
those occasions any such record is returned because the shareholder cannot be
located, the Company shall not be required to send any further records to the
shareholder until the shareholder informs the Company in writing of his or her
new address.
PART 25
SEAL
Who May Attest Seal
25.1 Except as provided in §25.2 and §25.3, the Company’s seal,
if any, must not be impressed on any record except when that impression is
attested by the signatures of:
(a) any two directors;
(b) any officer, together with any
director;
(c) if the Company only has one
director, that director; or
(d) any one or more directors or
officers or persons as may be determined by the directors.
Sealing Copies
25.2 For the purpose of certifying under seal a certificate of
incumbency of the directors or officers of the Company or a true copy of any
resolution or other document, despite §25.1, the impression of the seal may be
attested by the signature of any director or officer or the signature of any
other person as may be determined by the directors.
Mechanical Reproduction of Seal
25.3 The directors may authorize the seal to be impressed by
third parties on share certificates or bonds, debentures or other securities of
the Company as they may determine appropriate from time to time. To enable the
seal to be impressed on any share certificates or bonds, debentures or other
securities of the Company, whether in definitive or interim form, on which
facsimiles of any of the signatures of the directors or officers of the Company
are, in accordance with the Act or these Articles, printed or otherwise
mechanically reproduced, there may be delivered to the person employed to
engrave, lithograph or print such definitive or interim share certificates or
bonds, debentures or other securities one or more unmounted dies reproducing the
seal and such persons as are authorized under §25.1 to attest the Company’s seal
may in writing authorize such person to cause the seal to be impressed on such
definitive or interim share certificates or bonds, debentures or other
securities by the use of such dies. Share certificates or bonds, debentures or
other securities to which the seal has been so impressed are for all purposes
deemed to be under and to bear the seal impressed on them.
- 40 -
PART 26
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO PREFERRED
SHARES
Special Rights and Restrictions
26.1 The Preferred shares without par value shall have attached
thereto the following special rights and restrictions:
(a) the holders of the Preferred shares
shall be entitled to receive notices of and to attend and vote at all Meetings
of the shareholders of the Company in the same manner and to the same extent as
are the holders of the common shares;
(b) the holders of the Preferred shares
shall be entitled to receive, and the Company shall pay thereon as and when
declared by the board of directors out of the monies of the Company properly
applicable to the payment of dividends, dividends which shall be in the amounts
and upon the conditions that shall have been agreed upon by the board of
directors at the time of issuance and sale of each such share. More
specifically, the directors of the Company shall be entitled, upon agreeing to
sell a Preferred share, to contract as to the rate of dividend which will be
paid on the share, if any, how often the dividends are to be paid, whether they
are to be accumulative and whether the rate is fixed for the life of the share
or shall be subject to declaration by the board of directors each year;
(c) the holders of the Preferred shares
shall be entitled to exchange them for Common shares in the capital of the
Company; provided that when the directors agree to the issuance of any Preferred
shares they shall be entitled to specify the terms, conditions and rates during
which and upon which the holders of these Preferred shares subject to such
specifications shall be entitled to exercise these conversion privileges;
(d) the Company may, upon giving notice
as hereinafter provided, redeem the whole or any part of the Preferred shares on
payment for each share to be redeemed of the amount paid up thereon, together
with all dividends declared thereon and unpaid; in case a part only of the then
outstanding Preferred shares is at any time to be redeemed, the shares so to be
redeemed shall be selected by lot in such manner as the directors in their
discretion shall decide or, if the directors so determine, may be redeemed pro
rata, disregarding fractions, and the directors may make such adjustments as may
be necessary to avoid the redemption of fractional parts of shares; not less
than thirty (30) days' notice in writing of such redemption shall be
given by mailing such notice to the registered holders of the shares to be
redeemed, specifying the date and place or places of redemption; if notice of
any such redemption be given by the Company in the manner aforesaid and an
amount sufficient to redeem the shares be deposited with any trust company or
chartered bank in Canada as specified in the notice on or before the date fixed
for redemption, dividends on the Preferred shares to be redeemed shall cease
after the date so fixed for redemption and the holders thereof shall thereafter
have no rights against the Company in respect thereof except, upon the surrender
of certificates for such shares, to receive payment therefor out of the money so
deposited; after the redemption price of such shares has been deposited with any
trust company or chartered bank in Canada, as aforesaid, notice shall be given
to the holders of any Preferred shares called for redemption who have failed to
present the certificates representing such shares within two (2) months of the
date specified for redemption that the money has been so deposited and may be
obtained by the holders of the said Preferred shares upon presentation of the
certificates representing such shares called for redemption at the said trust
company or chartered bank. The Company will redeem such Preferred shares at the
price so specified, provided the redemption will not be in breach of any of the
provisions of the Act;
- 41 -
(e) the Preferred shares shall rank,
both as regards dividends and return of capital, in priority to all other shares
of the Company, but shall not be entitled to any further right to participate in
the profits or assets of the Company;
(f) in the event of the liquidation,
dissolution or winding-up of the Company, whether voluntary or involuntary, the
holders of the Preferred shares shall be entitled to receive, before any
distribution of any part of the property and assets of the Company among the
holders of any other shares, an amount equal to one hundred percent (100%) of
the amount paid thereon and any dividends declared thereon and unpaid, and no
more;
(g) the directors of the Company may
issue the Preferred shares in one or more series. In addition, the directors
may, by resolution, alter the Notice of Articles to fix the number of shares in
and to determine the designation of the shares of each series; the directors may
also, by resolution, alter the Notice of Articles to create, define and attach
special rights and restrictions to the shares of each series, subject to the
special rights and restrictions attached to the Preferred shares.
EXHIBIT 12.1
SARBANES-OXLEY CEO CERTIFICATION
I, Ronald W. Thiessen, President and Chief Executive Officer of Quartz Mountain Resources Ltd., certify that:
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1.
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I have reviewed this Annual Report on Form 20-F of Quartz Mountain Resources Ltd.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of,
and for, the periods presented in this report;
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4.
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The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect,
the issuer's internal control over financial reporting; and
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5.
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The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the issuer’s auditors and the audit committee of issuer’s board of
directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize
and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.
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Date: November 29, 2012
/s/ Ronald Thiessen
By: Ronald W. Thiessen
Title: President and Chief Executive Officer
EXHIBIT 12.2
SARBANES-OXLEY CEO CERTIFICATION
I, Simon Beller, Chief Financial Officer of Quartz Mountain Resources Ltd., certify that:
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1.
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I have reviewed this Annual Report on Form 20-F of Quartz Mountain Resources Ltd.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of,
and for, the periods presented in this report;
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4.
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The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect,
the issuer's internal control over financial reporting; and
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5.
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The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the issuer’s auditors and the audit committee of issuer’s board of
directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize
and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.
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Date: November 29, 2012
/s/ Simon Beller
By: Simon Beller
Title: Chief Financial Officer
EXHIBIT 13.1
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT
TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Ronald W. Thiessen, President and Chief Executive Officer of
Quartz Mountain Resources Ltd. (the “Company”), hereby certify pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of my knowledge:
(i) the Annual Report on Form 20-F of the Company for the
fiscal year ended July 31, 2012 (the “Annual Report”) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(ii) the information contained in the Annual Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.
Date: November 29, 2012
/s/ Ronald Thiessen
By: Ronald W. Thiessen
Title: President and Chief Executive Officer
This written statement is being furnished to the Securities
and Exchange Commission as an exhibit to the Company’s Annual Report on Form
20-F. A signed original of this statement has been provided to the Company and
will be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.
This certification accompanies this Annual Report on Form
20-F pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not,
except to the extent required by such Act, be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933, as amended, or the
Exchange Act, except to the extent that the Company specifically incorporates it
by reference.
EXHIBIT 13.2
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Simon Beller, Chief Financial Officer of Quartz Mountain Resources Ltd. (the “Company”), hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:
(i) the Annual Report on Form 20-F of the Company for the fiscal year ended July31, 2012 (the “Annual Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii) the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 29, 2012
/s/ Simon Beller
By: Simon Beller
Title: Chief Financial Officer
This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Company’s Annual Report on Form 20-F. A signed original of this statement has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies this Annual Report on Form 20-F pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the
Company specifically incorporates it by reference.
CODE OF ETHICS AND TRADING RESTRICTIONS
Introduction
The Company’s policy is to conduct its business in accordance
with the highest ethical and legal standards. To assist the Company in achieving
this policy, the Board of Directors has adopted this Code of Ethics and Trading
Restrictions. The Code is designed to deter wrongdoing and to promote:
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(1)
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Honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest;
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(2)
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Full, fair, accurate, timely and understandable
disclosure in reports and documents that the Company submits to regulatory
authorities and communicates to the public;
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(3)
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Compliance with applicable governmental laws and
regulations;
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(4)
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Prompt internal reporting of violations of the Code to
appropriate persons identified in the Code; and
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(5)
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Accountability for adherence to the
Code.
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The Code applies to all employees, officers, and directors of
the Company and its subsidiaries. Because Hunter Dickinson Services Inc.
(“HDSI”) employees and officers provide substantial services to the Company, the
Code also applies to all employees, officers and directors of HDSI with respect
to their activities relating to the Company. Depending on the circumstances, it
may also apply to agents and other representatives of the Company. (“You” as
used in this Code refers to all such persons, as appropriate.) In addition to
your complying with the Code, it is your responsibility to prevent others from
violating these standards if you are in a position to do so. If you are not in a
position to do so, it is your responsibility to bring the matter to the
attention of a member of senior management who is in a position to take
appropriate action, or to the attention of an independent member of the Board of
Directors.
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1.
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Avoiding Questionable or Illegal
Practices
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The Company’s policy is to comply with all laws and regulations
that apply to its business, and to avoid any activity that may be regarded as
questionable or unethical. Fraudulent, illegal or unethical acts will not be
tolerated. No action that would otherwise be questionable is permissible simply
because it is customary in a particular location or business.
If you are confronted with a situation that raises an issue
under this policy, ask yourself these questions:
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Does it feel honest, fair and ethical?
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Does it compromise anyone’s trust or integrity?
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Would the public disclosure of the activity in any way be embarrassing to
you, the Company or any other affected employees?
You should be sufficiently familiar with any laws and
regulations and Company policies and procedures that apply to your area of work
and responsibility. That will permit you to recognize possible breaches and to
know when to seek advice. If in doubt, you should discuss the matter with a
member of senior management.
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2.
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Honesty and Fair Dealing.
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When representing the Company, it is important that you deal
honestly and fairly with the Company’s joint venture partners, suppliers,
customers, professional advisors, competitors, other employees, and anyone else
with whom you have contact in the course of performing your job. You should not
take any advantage of anyone through actions such as manipulation, concealment,
misappropriation or abuse of confidential information, falsification,
misrepresentation of material facts, undue influence or any other unfair dealing
practice. You also should not give any advantage to anyone for reason of
personal relationship, personal benefit or other reasons not involving the best
interest of the Company.
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3.
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Policy to Prevent the Corruption of Foreign Public
Officials
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Both Canada and the United States have laws making it illegal
to corrupt officials of foreign governments or to engage in certain related
acts. In Canada, the law is entitled
Corruption of Foreign Public Officials
Act
and in the United States the law is entitled
Foreign Corrupt
Practices Act
. In the discussion that follows, we have always adopted the
more stringent requirement of the two laws.
Persons to Whom the Laws Apply
.
Both laws apply to the Company and its subsidiaries; their employees, officers
and directors; and their agents and representatives. For these purposes, action
by a foreign agent or representative is the equivalent of action by the
Company.
The laws may apply in whole or in part
to foreign companies and joint ventures if a U.S. or Canadian company controls
the foreign company or joint venture or otherwise authorizes, directs or
participates in activity by the foreign company or joint venture. Deciding
whether activities of a foreign company or joint venture are authorized,
directed or participated in by the Company in any particular instance will be an
uncertain exercise with uncertain results. In addition, allegations of illegal
conduct by any company or joint venture in which the Company has a significant
interest can only cause damage to the reputation of the Company. For this
reason, you should assume that any action of any foreign companies and joint
ventures in which the Company has a significant interest, including the actions
of the employees and agents of such foreign companies and joint ventures, will
be attributable to the Company.
(b)
Prohibition.
The laws make
it illegal to offer or provide money or anything of value for the personal
benefit of (i) any foreign government official or any official of a public
international organization (such as the International Monetary Fund, regional
development banks or other multilateral organizations) or (ii) any foreign
political party or its officials or any political candidate for the purpose of:
influencing that official in the exercise of his or her duties (or non-exercise
of those duties); having any such person influence foreign government activity;
or otherwise securing an improper advantage for the purpose of aiding the
Company in obtaining, retaining or directing business. The laws may be violated
if the Company knows, or if it should have been obvious to the Company, that the
payments were made for an illegal purpose.
The laws also apply to indirect
payments,
i.e
., where the Company offers or provides money or anything of
value to any person with the knowledge that the person will make a payment to a
foreign government official, official of a public international organization,
foreign political party or its officials, or any political candidate for such a
prohibited purpose.
The laws also make it illegal to
possess property or proceeds from property known to have been obtained as a
result of the bribery of a public official or to “launder” (
i.e
., deal
with intent to conceal) property or proceeds from property obtained as a result
of the bribery of a public official.
Foreign government-owned corporations
and other instrumentalities are generally treated as if they are governments,
and their employees, officers and directors are treated as government
officials.
(c)
Exception to Prohibition.
There is an exception in the laws for “facilitating payments.” “Facilitating
payments” are payments made to expedite routine governmental action that does
not involve obtaining, retaining or directing business. Example include payments
to (i) secure processing of papers such as visas, work orders and permits, (ii)
induce customs officials to process legally transmitted goods, (iii) obtain
police protection, (iv) obtain installation and maintenance of utility
connections, and (v) induce minor government functionaries (government employees
without discretionary authority over a project or transaction) to complete their
jobs in the manner required and where the situation does not involve the
securing of business.
There are three additional
exceptions:
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It is an affirmative defence if it can be shown
that the payment was legal under the written laws and regulations of the
foreign country. As an example, in some foreign countries, the Company may be
required by law to hire as an agent a national of that country who also is
connected to the government of that country in some way or other.
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It also is an affirmative defence if it can be
shown that the payment was a reimbursement of travel, lodging and other
reasonable and bona fide expenses directly related to the business promotion,
demonstration or explanation of the Company’s business, or the execution or
performance of a contract with the foreign government. As an example, payment
of the travel expenses of a foreign government official to visit one of our
mines, as a part of an effort to promote the Company in that country, would
fit into this category.
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Unconditional gifts having nominal value, when made
openly and as a social amenity, or as a token of esteem, regard or gratitude
in accordance with local custom, generally will not be regarded as a bribe.
(d)
Company Policy
. The
Company’s policy is firm and unconditional. Under no circumstances will the
Company ever pay a bribe prohibited by the laws. If you are ever solicited for
such a bribe, or if you become aware of any instance where any Company employee,
officer, director, agent or representative of the Company or its subsidiaries or
its joint ventures proposes to offer such a bribe or is otherwise involved in
such illegal activity, you are to report the matter to your immediate superior,
or directly to the CEO or CFO of the Company. Any employee, officer, director,
agent or representative who participates in any scheme to pay such an illegal
bribe will be terminated immediately.
With respect to payments that fall
within the exceptions noted above:
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No “facilitating payments” may be made without the
prior written approval of the CEO.
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No payment that would otherwise be an illegal bribe
may be made on the basis that it is legal under the written laws and
regulations of the foreign country without the prior written approval of the
CEO.
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No payment that would otherwise be an illegal bribe
may be made on the basis that it is a reimbursement of travel, lodging or
other reasonable and bona fide expenses directly related to the business
promotion, demonstration or explanation of the Company’s business or the
execution or performance of a contract with the foreign government without the
prior written approval of the CEO.
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With respect to unconditional gifts of nominal
value made openly and as a social amenity, or as a token of esteem, regard or
gratitude in accordance with local custom, the CEO will establish a monetary
limit on the value of any such gift. Any gifts with a value in excess of that
limit must be approved in advance by the CEO.
Accounting Requirements
. The
Company and its affiliated foreign companies and joint ventures must:
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Keep financial records which, in reasonable detail,
accurately and fairly reflect transactions; and
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Maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management authorization, (ii) transactions are properly
recorded as needed to permit preparation of financial statements and to
maintain accountability for assets, (iii) all assets are recorded on the books
of the Company and access to assets is only permitted in accordance with
management authorization, and (iv) periodic auditing is done at reasonable
intervals and action is taken to resolve discrepancies.
As an example, the accounting
provisions require that the Company properly record “facilitating payments” as
such and prohibit their characterization in some other form. The accounting
provisions also prohibit the Company from maintaining off-record cash “slush”
funds or cash that may be accessed without senior management authorization.
Things to Look For
. The
following is a list of “red flags” that may indicate the possible existence of
corrupt practices:
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Foreign agent with a poor reputation or with links
to the government.
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Unusually large commission payments or commission
payments where the agent does not appear to have provided significant
services.
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Cash payments, or payments without paper trail or
compliance with normal internal controls.
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Unusual bonuses to foreign personnel for which
there is little support.
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Payments to third country accounts.
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4.
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Corporate Opportunities and Duty of
Loyalty
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You have a duty of loyalty to the Company, which includes a
duty to advance the Company’s legitimate interests when the opportunity to do so
arises. Accordingly, you may not use your position or the Company’s name,
property, information or good will for personal gain or for the gain of others.
You are further prohibited from taking advantage of an opportunity that is
discovered through the use of any corporate property, information, contacts or
your position with the Company. All such opportunities, actual or perceived,
should be reported to your immediate supervisor.
Business opportunities that come to the employees, officers and
directors of HDSI are dealt with in accordance with the Service Agreement
between the Company and HDSI. The Audit and Risk Committee of the Board of
Directors is charged with the responsibility of reviewing relationships with
HDSI, and it will consider such matters as a part of its periodic review of the
relationship. Directors of the Company who are also directors of HDSI
nevertheless have an overriding fiduciary duty to the Company that is governed
by Canadian law.
Outside directors of the Company may have a variety of other
business relationships involving duties of loyalty. In addition, outside
directors do not, as a general matter, have the same obligation as officers and
employees to bring corporate opportunities to the Company. For these reasons,
the Code does not apply to outside directors of the Company with respect to
issues involving duties of loyalty or corporate opportunities and such
issues, to the extent they arise, are to be resolved directly with the Board of
Directors.
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5.
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Avoiding Conflicts of
Interest
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A conflict of interest occurs when your private interests, or
the private interests of your family, interfere, or appear to interfere, in any
way with the best interests of the Company. For these purposes, “family” would
generally include your parents and grandparents, spouse, children and
grandchildren, siblings, in-laws and other persons who share a residence with
you or another member of your family. You must take care to avoid any direct or
indirect involvement or understanding that might result in such a conflict or
create the appearance of such a conflict. Whether a situation involves a
conflict of interest depends on all of the circumstances. Generally, the Company
would not consider it a conflict of interest if an employee’s brother or sister
were an officer of a competitor. However, the Company would consider it a
conflict of interest if a Company employee in charge of procurement were to
purchase products or services from a company owned by the employee’s brother or
sister or from a company owned by a close personal friend of the employee. The
following are examples of conflict of interest situations which generally must
be avoided or which may raise a question:
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Acting as an employee, officer or director of, or a consultant to, a
competitor or potential competitor of the Company;
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Having a financial interest in or loan from a business which is a joint
venture partner, optionor or optionee, competitor, customer or supplier of the
Company or which otherwise does business with the Company (an investment in
the securities of a publicly traded company normally would not be considered
to present a conflict of interest unless it represented a material part of
your savings);
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Placing of Company business with any other company that is directly or
beneficially owned or controlled by you or by members of your family.
Some conflicts are clear-cut; others are less obvious. In
addition, there may be circumstances where it is necessary or in the best
interests of the Company to have a business relationship with a business or
company in which an employee or officer, or his or her family, may have an
interest. For example, where Company operations are in a remote location, it may
be necessary from time to time to enter into a business relationship with a
business controlled by an employee’s family members. For these reasons, you must
fully disclose to your supervisor, the CEO or the CFO all circumstances that
could be perceived as involving a conflict of interest between the Company and
you or members of your family. Full disclosure enables the Company to resolve
unclear situations and to ethically handle conflicts of interest before any
difficulty can arise. To the extent a conflict of interest cannot be avoided in
a reasonable fashion, then appropriate procedures will be put in place to ensure
that there is full disclosure and to minimize the involvement of the conflicted
individuals in the relationship giving rise to the conflict.
The Company recognizes that there is a potential for a conflict
of interest inherent in the Company’s relationship with HDSI. The Board of
Directors believe that the Company derives substantial benefits on a
cost-effective basis from its continuing relationship with HDSI. The Audit and Risk Committee of the Board of Directors will
periodically (not less than annually) review the service agreement with HDSI and
transactions under such agreement to confirm the fairness to the Company.
Outside directors of the Company are not expected to devote
their time and effort solely on behalf of the Company, and they may have a
variety of other business relationships that could give rise to a conflict of
interest. Any such potential conflicts of interest are not subject to the Code
and are to be resolved directly with the Board of Directors.
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6.
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Giving or Accepting Gifts
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The giving or accepting of gifts can adversely affect the
Company’s reputation for fair dealing and also create conflicts of interest. You
should avoid:
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Giving or offering to give any gift, favour, entertainment, reward, or any
other thing of value that might influence or appear to influence the judgment
or conduct of the recipient in the performance of his or her job. This
includes transactions with government personnel, customers and suppliers. Such
action may damage the Company’s reputation for fair dealing and may be
illegal.
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Accepting or soliciting a gift, favour, or other thing of value that is
intended to, or might appear to, influence your decision-making or
professional conduct. In addition to damaging the Company’s reputation for
fair dealing, receipt of such gifts could interfere with your ability to make
judgments solely in the best interest of the Company, and thus create the
appearance of a conflict of interest.
You may give or receive unsolicited gifts or entertainment only
in cases where the gifts or entertainment are of nominal value, are customary to
the industry, will not violate any laws, and will not influence nor appear to
influence the recipient’s judgment or conduct.
Outside activities must not conflict with the proper
performance of your duties.
(a)
Other Business Activity
.
Full-time employees and officers are expected to devote substantial effort and
attention to the furtherance of the Company’s business. In the usual case, this
would make it difficult for you to properly perform your duties while also being
engaged in other business ventures. For this reason, you may not serve as the
proprietor, general partner, officer or director of any other business without
first obtaining the written consent of the CEO or CFO. In the case of family
owned businesses, the CEO or CFO will normally grant such consent if he or she
is satisfied that the involvement in the family business will not conflict with
your duties and will not involve any conflict with the interests of the Company.
In addition, the CEO may grant consent to an officer or employee serving as a
member of the board of directors of another company in special circumstances.
(The Board of Directors will consider any proposal for the CEO or the CFO of the
Company to serve on the board of another entity, other than not-for-profit
entities or family businesses that in no material way compete with the Company
or do any material business with the Company.)
This policy does not apply to employees
or officers who are also employees or officers of HDSI with respect to services
performed by them for other companies.
Professional Associations and
Charitable Organizations
. The Company encourages employees and officers to
participate in geological, engineering and other professional associations and
activities that do not conflict with their duties for the Company and do not
involve conflicts of interest. The Company also encourages officers and
employees to participate in charitable organizations and activities. However,
you should consult with the CEO or CFO before you undertake any such outside
activities requiring a substantial amount of time. In addition, you should not
accept a position as an officer or director of a professional or charitable
organization without prior consultation with the CEO or CFO, so that they can be
satisfied that your activity on behalf of such organizations cannot be
attributed to the Company.
Political and Government
Affairs
. No Company contributions may be made, directly or indirectly, to
any election or issue campaign in any jurisdiction or circumstance that would be
unlawful. Corporate contributions may be made in appropriate cases where and
when permitted by applicable law, but only with the approval of the CEO. Use of
Company equipment, supplies or facilities to support any political party,
candidate or campaign, as well as employee activity during normal business
hours, may constitute a political contribution. You may not engage in any such
activity where it involves Company equipment, supplies or facilities or activity
during normal business hours without the prior approval of the CEO. In addition,
no action which presents, or may appear to present, the position of the Company
with respect to any political or governmental matter may be taken without the
prior approval of the CEO.
The Company encourages employees and
officers, as individuals, to take part in political and governmental affairs to
the extent that such activity does not interfere with the proper performance of
their duties or involve the use of Company assets or a conflict of interest.
However, if you wish to run for public office or hold an appointed public
position, you must confer with the CEO and counsel for the Company to ensure
that the proposed activity is consistent with your duties to the Company and
does not involve a conflict of interest.
The outside directors of the Company are not expected to devote
their full time and effort solely on behalf of the Company and accordingly this
policy does not apply to them.
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8.
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Accounting and Recordkeeping, Internal Accounting
Controls and Auditing Matters.
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Many employees of the Company, not just accountants and
controllers, participate in the financial control and reporting processes of the
Company. If you have ANY responsibility for any aspect of the Company’s
financial activities (for example: processing or approval of payments; creation,
processing or approval of invoices and credit memos; payroll and benefits
decisions; approval of expense reports and other transactions; the estimation of
financial reserves or other claims or the amount of any accrual of deferral; or
the recording of any of the foregoing in the Company’s records) and/or the
preparation of the Company’s financial statements or other financial reports, you must ensure your involvement complies
with complete and accurate procedures as per established Company practice.
(a)
Accounting and
Recordkeeping
. You may not maintain funds or assets for any improper
purposes or make false or misleading statements in any Company documents,
reports or records. No undisclosed or unrecorded accounts may be established
using the Company’s funds or other assets. All accounting records and the
financial reports produced from those records must be kept and presented in
accordance with applicable law, must accurately and fairly reflect in reasonable
detail the Company’s assets, liabilities, revenue and expenses and, where
applicable, must be in accordance with generally accepted accounting principles.
Transactions must be supported by
accurate and reasonably detailed documentation and recorded in the proper
account. Best efforts are to be made to record transactions in the proper
accounting time period. To the extent that estimates are necessary, they must be
based on your good faith judgment and be supported by appropriate documentation.
No payment or the related accounting entry may be approved or made with the
intention or understanding that any part of the payment will be used for any
purpose other than that described by the document supporting the entry or
payment.
Internal Accounting Controls
.
Internal accounting controls have been established to provide reasonable
assurances that (i) transactions are executed in accordance with management
authorization, (ii) transactions are properly recorded as needed to permit
preparation of financial statements and to maintain accountability for assets,
(iii) all assets are recorded on the books of the Company and access to assets
is only permitted in accordance with management authorization, and (iv) periodic
auditing is done at reasonable intervals and action is taken to resolve
discrepancies. You must comply with all internal control requirements and ensure
that no action is taken to avoid the internal controls requirements.
Auditing
. The Company employs a
firm of independent chartered accountants to audit the Company’s annual
financial statements. The annual audit has a number of purposes, including (i)
compliance with regulatory requirements, (ii) providing an independent
assessment of whether the Company’s financial statements fairly present the
financial condition, results of operations and cash flow of the Company, (iii)
assessment of the accounting principles used and significant estimates made by
the Company in preparing its financial statements, and (iv) assessment of the
Company’s system of internal controls over financial reporting as required by
applicable law and regulatory policies. Each employee is responsible for
providing whatever assistance may be required by the auditors. If you receive
inquiries from the Company’s independent accountants, you must respond promptly,
fully and accurately.
If you have any concerns as to weaknesses in the Company’s
accounting system or in the Company’s internal controls; or if you believe that
any instances of fraud,* or incorrect or questionable accounting practices may
have occurred; or if you believe that any instances of fraudulent, incorrect or
questionable practices may have occurred in connection with the annual audit of
the Company’s financial statements, you should consult with your immediate
supervisor or with the Company’s CEO or CFO. Alternatively, you may
contact the Audit and Risk Committee of the Board of Directors using the
procedures outlined below under the heading “Reporting of Possible Violations or
Other Questionable Practices - Procedures to Submit a Report.” Those procedures
include a procedure for confidential, anonymous submission of concerns.
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9.
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Use of Company Property
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You are entrusted with the care, management and cost-effective
use of the Company’s property and you are not to make use of these resources for
your own personal benefit or for the personal benefit of anyone else. Passwords
are to be kept confidential and use of the computer systems is limited to
authorized business purposes, although occasional personal use of the internet,
e-mail and voice mail will normally be permitted unless your supervisor believes
that this privilege is being abused.
However, in order to protect the Company’s interests -
including for example, to ensure that the Company’s computers and voice mail are
not being used for improper purposes, such as sexual harassment - the Company
reserves the right to review the contents of the Company’s computers, its e-mail
system, and its voice mail system. No employee has a right of personal privacy
with respect to information that is placed in the Company’s computers, the
e-mail system, or the voice mail system.
You are responsible to ensure that all Company property
assigned to you is maintained in good condition, and you should be able to
account for such equipment. Any disposition of Company property should be for
the benefit of the Company and not for personal benefit.
Company letterhead stationery is to be used only for
correspondence related to the Company’s business. Do not use it for personal
correspondence or charitable solicitation.
You are to return all documents and property in your possession
upon termination of your employment for any reason.
__________
*For purposes of the Code, “fraud” includes any deliberate
misstatements or omissions in connection with preparation or reporting (internal
or external) of financial and/or operating information about the Company,
whether or not material and without regard to whether the employee receives any
personal benefit.
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10.
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Proprietary Information
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We want our employees to be well informed about our business,
our plans for the future, and the successes and challenges we have along the
way. In return for this openness, the Company places trust in its employees to
maintain the confidentiality of our proprietary information without need for
court orders or other legal requirement.
You are to take all reasonable measures to protect the
confidentiality of proprietary information obtained or created by you, or
otherwise made known to you, in connection with your activities on behalf of the
Company. In addition, you must use proprietary information only for the
Company’s legitimate business purposes, and not for your personal benefit or the
benefit of anyone else.
To provide the Company with reasonable protection against
unauthorized disclosure or unauthorized use of its proprietary information, all
employees are required to sign an employment agreement prior to their start with
the Company that includes provisions addressing confidentiality. These
agreements state in part that the Company retains exclusive ownership of all
project information and opportunities arising out of employment or consulting
relationships and any information pertaining to the exploration plans of the
Company.
For these purposes, “proprietary information” means information
developed or secured for use of the Company in its business, where that
information is not generally known to or otherwise readily available to the
public and members of our industry. Proprietary information includes, without
limitation:
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The Company’s ideas, discoveries, projects, data, contact information and
production processes.
-
Information concerning actual or projected expenditures, corporate
transactions, earnings or operating results or business transactions that has
not been disclosed by the Company.
-
Investor lists, relationships with consultants, contracts, business plans
and strategies.
-
Personnel information.
It is your responsibility to know what information is
proprietary and ensure that you use and disclose it only in the performance of
your duties with the Company. If you are unsure, consider the information to be
confidential until you obtain clarification.
If your employment terminates, you will continue to be bound to
your obligations of confidentiality to the maximum extent permitted by law.
The purpose of this policy is to avoid the risk of allegation
of unauthorized use or disclosure of another person’s proprietary rights, ideas
or information.
When an idea, prospect, opportunity, or other confidential or
proprietary information is submitted to the Company by an outsider, care must be
taken to ensure that the outsider signs an agreement defining the Company’s
rights and obligations before the idea or prospect or information is disclosed
to employees qualified to evaluate it or use it. Outsiders who propose to submit
information should be told to submit the information in writing. Outsiders
should also be told that any submission constitutes their agreement that the
Company’s brief review to determine possible interest will not create any
non-use, confidentiality or area of interest agreement or obligation of the Company. If they do not so
agree, they should be told not to submit their information.
On its receipt, any such information should be sent to the CEO
or CFO or persons authorized by them to evaluate outside submissions. No one
other than the CEO or CFO and persons authorized by them are to evaluate any
outside submission.
Each written submission will first be reviewed to see if it
purports to impose non-use, confidentiality or area of interest obligations. If
it does, no further review should be made and, unless the CEO upon being
notified otherwise directs, the material should be returned without further
review. If the material does not purport to impose such an obligation, it should
be reviewed briefly to see if it might be of interest. If it is not of interest,
it is to be returned with a letter stating that the information was briefly
reviewed to determine possible interest, that the information is not of
interest, and that the Company has no non-use, confidentiality or area of
interest agreement or obligation to the sender. If the sender was previously so
informed, the letter should also refer to that prior advice. If the material
appears to be of interest, then the Company will need to enter into an
appropriate confidentiality agreement setting out the parties’ rights and
obligations before any further review or use of the information.
Third party data subject to confidentiality obligations should
be so marked, all confidentiality obligations should be noted on the relevant
document or file, and all such obligations must be strictly adhered to.
The Company has both legal and ethical obligations to provide
appropriate disclosure of material information, and to ensure that employees and
others do not benefit from having and using undisclosed material information.
“Material information” is any information that reasonably could be expected to
affect the market for the Company’s stock or to influence an investor’s decision
to buy, sell or hold the stock. The wrongful use of undisclosed material
information may make both the Company and the individual involved liable for
criminal and/or civil penalties and damage awards.
(a)
Control of Confidential
Information
. All employees have the responsibility to inform senior
management on a timely basis of events or developments that might have a
material effect on the Company. Such information should be communicated to your
superior or to members of senior management.
Strict confidentiality must be
maintained with regard to disclosure of confidential information to persons
within the Company who have no need to know, and to anyone outside of the
Company. Care must be taken when handling confidential correspondence, assay
results, reports, documents, memos and facsimiles. Documents containing
confidential information should be shredded or otherwise destroyed, and not
placed in rubbish bins. Visitors to the offices or work sites of the Company are
not to be left unattended at any time, except in designated “safe” locations,
e.g.
reception area and conference rooms. Discussions by Company
personnel concerning Company business should be confined to Company personnel
only and on a “need to know” basis, and should never occur in public places such
as elevators or airplanes.
Public Disclosure
Responsibilities
. The Company has a variety of disclosure obligations under
laws and stock exchange rules. The Company fulfills those obligations through
regulatory filings, periodic reports to shareholders, press releases, and web
site disclosure. The Company also provides information to shareholders and
others through communications with the media, analysts and others in the
financial community, by way of industry presentations, and in response to
inquiries. In carrying out the Company’s disclosure responsibilities:
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The CEO, the CFO, and other members of senior
management, as appropriate, have the sole responsibility to determine (i)
whether a particular matter is sufficiently material to the Company to require
disclosure, and (ii) the content, time and manner of disclosure.
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Company Spokespersons have the exclusive authority
to speak for the Company with respect to matters of public disclosure. The
Company Spokespersons consist of the CEO and any other persons who are
authorized by the CEO, generally or in a specific instance, to speak for the
Company.
NO OTHER PERSONS ARE
AUTHORIZED TO COMMUNICATE AS TO
MATTERS OF PUBLIC
DISCLOSURE ON BEHALF OF THE COMPANY
.
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It is the responsibility of the Company to ensure
that that undisclosed material information is disseminated in such a way that
all members of the public have equal access to the information. Substantial
security holders and analysts in particular MUST NOT receive preferential
treatment in the matter of information disclosure. Persons given early access
to undisclosed material information may not use that information to trade in
the Company’s securities, and they, the Company and the individual who causes
the early disclosure may be liable for civil and criminal penalties and damage
awards if there is trading on undisclosed material information.
External Communications and
Inquiries from Analysts, Media and Other Outsiders
. Communications intended
for dissemination outside of the Company and concerning the Company’s business
must be referred to the CEO or to one of the designated Company Spokespersons
prior to dissemination. This includes presentations to analysts and papers or
presentations to professional groups and others.
All inquiries from the press,
securities analysts, investors and other outsiders concerning the Company’s
business and affairs must be referred to one of the designated Company
Spokespersons. This will ensure that information is disclosed consistently and
equitably. Unless specifically authorized, no one is authorized to respond to
such inquiries.
Comments on and Dissemination of
Analysts’ Reports and Other Media Stories
. From time to time, the Company
may be asked to review or comment on analysts’ reports or other media stories
about the Company. No employee, officer or director is to review or comment on
analysts’ reports or media stories except an authorized Company Spokesperson, and any such inquiry
should be forwarded to such an authorized person without any comments. If a
Company Spokesperson does review such a report or story, the Company
Spokesperson should review the report or story ONLY for factual information and
limit his/her comments to discussion or correction of facts. Furthermore, no
undisclosed material information is to be communicated in the course of such a
review and comment. If factual correction would result in the disclosure of
undisclosed material information, the Company Spokesperson must take the
necessary steps to ensure that such information is communicated to the public
generally before it is communicated to the particular analyst or other person
making the inquiry.
Employees, officers or directors of the
Company may be asked to forward or recommend analysts’ reports or may consider
forwarding analysts’ reports or media stories about the Company. The forwarding
or recommending of such reports or stories may be regarded as verifying or
validating the information contained in the reports or stories. If any of the
information in the report or story is not accurate, the act of forwarding or
recommending the report or story may constitute the dissemination of false or
misleading information in violation of securities laws. In addition, if any of
the information in the report or story is accurate but has not been generally
disseminated by the Company, the forwarding or recommending of the report or
story may constitute selective disclosure in violation of securities laws.
Finally, copying and dissemination of analysts’ reports and media stories may
violate copyright laws or the proprietary rights of the authors of the reports
or stories. For these reasons, no employee, officer or director should reproduce
and distribute or otherwise disseminate such reports and stories unless
specifically approved by the CEO. Persons requesting such materials should be
referred to the author or organization that published the material. In addition,
employees, officers and directors should not recommend particular analysts’
reports on the Company to any person.
Comments on Rumours and Correction
of Selective Disclosure
. Employees, officers and directors must not comment,
whether positively or negatively, on rumours about the Company’s business.
Information about such rumours should be reported to the Company Spokespersons.
In general, the Company’s policy is not to comment on rumours. If a stock
exchange or securities regulatory authority requests the Company to make a
definitive statement in response to rumours, a Company Spokesperson will
consider the matter in consultation with legal counsel.
If any employee, officer or director
makes an unauthorized or premature disclosure of undisclosed material
information (inadvertently or otherwise), the person responsible for the
disclosure, and any other employee, officer or director learning of it, must
contact the CEO or other Company Spokesperson as soon as possible, and the CEO
and other Company Spokespersons will consider the Company’s responsibilities
under applicable law.
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13.
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Securities Transactions
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(a)
Restrictions on Trading
. In
general, employees, officers and directors, and their family members, may trade
in Company securities unless:
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A Blackout Period (see below) is in place, or
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The person has knowledge of undisclosed material
information.
If a Blackout Period exists, or if you
have knowledge of undisclosed material information, neither you nor your family
members may trade in Company securities. For purposes of this policy, “family
member” means your spouse, your minor children, any person substantially
dependent on you for support, and other persons who share a residence with you.
There are two exceptions to this policy: (i) you may exercise any fixed price
option or warrant issued by the Company, BUT you may not sell the security
acquired on exercise of the option or warrant so long as either condition
exists; and (ii) you may sell securities pursuant to a previously existing
Trading Plan entered into with a qualifying broker under Section 161 of the
rules to the Securities Act of British Columbia and pursuant to SEC Rule 10b5-1,
provided that you were not in possession of undisclosed material information
(unless it has since been disclosed) at the time you established the Trading
Plan.
In addition, while you are in
possession of undisclosed material information, you and your family members must
not trade in the securities of companies that have a significant legal or
financial business relationship, direct or indirect, with the Company (generally
joint venture partners) if the undisclosed material information relates to the
subject matter of that business relationship.
Blackout Period
. From time to
time, the CEO or other Company Spokesperson may institute a Blackout Period
because of the existence of undisclosed material information. If a Blackout
Period is instituted, you will be notified, generally by e-mail. Once notified
of the existence of a Blackout Period, except as noted above, you and your
family members may not trade in the Company’s securities until you have been
notified that the Blackout Period has been terminated. The existence of a
Blackout Period is itself an item of confidential information that is not to be
disclosed to persons outside of the Company.
Special Considerations in Investing
in Company Securities
. You and your family members are urged not to purchase
securities of the Company using borrowed funds in an amount or on terms and
conditions which are not prudent in light of your financial condition. In
addition, careful consideration should be given before pledging Company
securities for a loan because of the potential insider trading liability that
could arise if the lender should seek to sell the securities at a time when
there is undisclosed material information about the Company.
Certain Additional Policies
.
These additional policies apply to officers and directors and in regards to
short sales, employees, of the Company.
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No employee, officer or director shall engage in
short sales of securities of the Company or sales of borrowed securities of
the Company. For purposes hereof, the short sale of Company shares as a method
of facilitating the exercise of a valid option granted by the Company shall be
deemed not to be a short sale for purposes of the aforementioned restriction
notwithstanding any such sale-against-an-option must be treated as a short
sale under Canadian securities legislation. Before selling short against an
option, the holder of the option should bring the proposed transaction to the
attention of the Company’s CEO or CFO so as to ensure the transaction is
treated properly.
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No officer or director shall place automatic buy or
sell orders with brokers except for a Trading Plan entered into with a
qualifying broker under Section 161 of the rules to the Securities Act of
British Columbia and pursuant to SEC Rule 10b5-1, provided that you were not
in possession of undisclosed material information (unless it has since been
disclosed) at the time you established the Trading Plan.
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No officer or director of the Company shall buy or
sell equity securities of the Company during the period that begins five
trading days before and ends one trading day after the public release of
quarterly and annual results of operation of the Company.
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14.
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Administration and
Distribution
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The Company’s Board of Directors, the Audit and Risk Committee,
and the Nominating and Governance Committee have established the standards of
business ethics and conduct contained in the Code, and it is their
responsibility to oversee compliance with the Code. Any change in or waiver of
any provision of the Code shall require approval of the Audit and Risk Committee
or the Nominating and Governance Committee, as applicable, and shall be publicly
disclosed in the time period and manner as required by law or regulation.
The Code is to be distributed to each employee, officer and
director of the Company and to the employees, officers and directors of HDSI. It
will also be made available via the Company’s Internet site.
Strict adherence to the Code is vital. Directors will confirm
on an annual basis in connection with the preparation of the Management
Information Circular that they have read and understand the Code of Ethics.
Management will adopt appropriate policies to ensure that officers and employees
are provided with and have read the Code of Ethics. All managers are responsible
for ensuring that employees under their supervision are aware of and understand
the provisions of the Code For clarification or guidance on any point in the
Code, please consult the CEO or CFO.
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15.
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Reporting of Possible Violations or Other Questionable
Practices
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The following procedures govern the reporting and treatment of
reports of possible violations of the Code. The Company's Audit and Risk
Committee Charter provides that the Audit and Risk Committee is to establish
procedures for the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls or auditing
matters, and the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters. The Audit and Risk
Committee has adopted these procedures as to complaints and submissions
regarding accounting, internal accounting controls or auditing matters, and the Nominating and Governance Committee has
adopted these procedures as to all other complaints and submissions regarding
the Code.
(a)
When to Make a Report
. You
should make a report if you believe that any employee, officer or director of
the Company or HDSI, or any agent or representative of the Company, may have or
is about to engage in any conduct which you believe may be:
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A violation of the Code or any internal policy or
code of practice,
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A violation or otherwise involve questionable
practices in connection with accounting, internal accounting controls or
auditing matters,
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A violation of any law or regulation,
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Corruption, mismanagement or fraud, or
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A danger to the public or danger to worker health
and safety or the environment.
If you are unsure about the matter but
concerned about the possibility of a violation or questionable practice, you
should nonetheless report the matter. Delays in bringing the information to the
attention of senior management, the Audit and Risk Committee, or the Nominating
and Governance Committee may cause damage, complications, and irreversible
consequences for the Company. Following the steps outlined below will allow the
Company to address the issues and ensure that timely remedial action is
taken.
Procedures to Submit a Report
.
You may make a report under this procedure in one of the following ways:
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Bring the matter to the attention of your immediate
supervisor. Any supervisor receiving such a report is to immediately bring the
matter to the attention of the CEO, the CFO, or other member of senior
management.
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Bring the matter to the attention of the CEO, the
CFO, or any other member of senior management.
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Bring the matter to the attention of an independent
director of the Company. Matters relating to accounting, internal accounting
controls or auditing matters should be reported to the Chairman of the Audit
and Risk Committee. All other matters should be reported to the Chairman of
the Nominating and Governance Committee. If you are uncertain as to whether
the matter should go to the Audit and Risk Committee or the Nominating and
Governance Committee, you may choose either one. You may make the report
orally, in writing, or by e-mail. All reports will be treated as confidential
to the extent possible, and only revealed on a need-to-know basis or as
required by law or court order. Contact information for the Chairman of the
Audit and Risk Committee and the Chairman of the Nominating and Governance
Committee is as follows:
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Chairman of the Audit Committee
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Chairman of the Nominating and
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Governance Committee
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Name:
James Kerr
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Name:
Gordon J. Fretwell
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Address:
1020 – 800 West Pender Street
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Address:
1780 - 400 Burrard Street
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Vancouver, BC V6C 2V6
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Vancouver, BC V6C 3A6
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Telephone No.
604-760-8355
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Telephone No.
604-684-1280
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Fax No.
604-630-0022
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Fax No.
604-684-1288
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E-mail address:
jamesdkerr@shaw.ca
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E-mail address:
gord@fretwell.ca
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With respect to matters involving the
possible violation of laws or regulations, you also may choose to bring such
concerns to an outside regulatory authority. However, the Company is committed
to taking internal action in response to employee concerns, and would appreciate
the opportunity to do so, if appropriate.
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(c)
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Follow-up and Outcome
.
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(i) On receipt of a complaint, the complaint will be
reported promptly to the Chairman of the Audit and Risk Committee if it
relates to accounting, internal accounting controls or auditing matters,
and to the Chairman of the Nominating and Governance Committee if it
relates to other matters under the Code. In the case of an oral complaint,
the party receiving the complaint is to report it orally and also to
prepare a written summary for the Chairman of the Audit and Risk Committee
or Nominating and Governance Committee, as applicable.
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(ii) The appropriate Committee Chairman will promptly
commission the conduct of an investigation. At the election of the
Committee Chairman, the investigation may be conducted by Company
personnel, or by outside counsel, accountants or other persons employed by
the appropriate Committee.
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(iii) The identity of a person filing a complaint will be
treated as confidential to the extent possible, and only revealed on a
need-to-know basis or as required by law or court order.
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(iv) On completion of the investigation, an oral and/or
written investigative report will be provided to management and the Audit
and Risk Committee or Nominating and Governance Committee, as applicable.
If any unlawful, violative or other questionable conduct is discovered,
the appropriate Committee will cause to be taken such remedial action as
the Committee deems appropriate under the circumstances to achieve
compliance with the applicable law, regulation or policy and to otherwise
remedy the unlawful, violative or other questionable
conduct.
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The Chairman of the appropriate
Committee will prepare, or cause to be prepared, a written summary of the
remedial action taken.
(v) In each case, the written
investigative report (or summary of any oral report), and a written summary of
the remedial action taken in response to the investigative report will be
retained along with the original complaint by or under the authority of the
appropriate Committee Chairman for a period of four years after the resolution
of the matter.
(d)
Prohibition Against
Retaliation
. The Company welcomes the courage and honesty of an employee who
voices concern over a particular course of action that he or she believes to be
unlawful or harmful. Any attempts to intimidate, threaten, harass or retaliate
against any employee based upon a good faith report made by an employee pursuant
to the Code is strictly prohibited and will result in disciplinary action up to
and including termination of the person responsible for any such intimidation,
threat, harassment or retaliation.
However, groundless or unwarranted
complaints - including those with vindictive intent –are not acceptable.
Appropriate disciplinary measures will be taken if allegations are initiated for
malicious reasons or in bad faith.
(e)
Governmental or Company
Inquiry
. If you receive an inquiry from a governmental authority concerning
suspected unlawful conduct, you should immediately direct the inquiry to your
immediate superior, the CEO, the CFO or other member of senior management. In
such circumstances, you should take measures to preserve documents and other
items relevant to the investigation. To conceal an offence or to alter or
destroy evidence is illegal and may result in criminal prosecution. It also
violates the Company’s commitment of conducting its business in a legal and
ethical manner and is strictly prohibited.
If you receive an inquiry from the
Company representative or a Board committee in connection with an investigation
under the Code, you are equally obligated to take measures to preserve documents
and other items relevant to the investigation.
(f)
Failure to Comply or File a
Report
. The Company is committed to complying with all applicable laws,
regulations and policies. Such compliance is only possible if all employees,
officers and directors ensure that they follow all applicable laws, and Company
policies and guidelines. When in doubt, ask the CEO, CFO or other members of
senior management. Personnel who violate the law or the Company’s compliance
policies or knowingly fail to report a violation of law or compliance policy may
be subject to disciplinary action, up to and including dismissal. The nature and
extent of the action will be determined on a case-by-case basis. In reviewing
the situation, the following is a partial list of considerations:
Personnel are encouraged to report
their own wrongdoing or possible wrongdoing. This action will be taken into
account when assessing the appropriate discipline, if any. The Company will also
recognize situations where a person has made an honest mistake and will take it
into account in deciding the course of action to pursue.