UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 20F

T
ANNUAL REPORT PURSUANT TO SECTION 12( b ) OR ( g ) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

£
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15( d ) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011

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

Date of event requiring this shell company report:                                                                                      Not Applicable

For the transition period from  _________________________________to______________________________                                

Commission File Number   001-32670

MINCO GOLD CORPORATION
  (Exact name of registrant as specified in its charter)

A CORPORATION FORMED UNDER THE LAWS OF BRITISH COLUMBIA, CANADA
(Jurisdiction of incorporation or organization)

Suite 2772, 1055 West Georgia Street, PO Box 11176, Vancouver, British Columbia, Canada , V6E 3P3
(Address of principal executive offices)

Jennifer Trevitt, (604) 688-8002 Ext.   107 , (604) 688-8030,  Suite 2772, 1055 West Georgia Street, PO Box 11176, Vancouver, British Columbia, Canada, B6E 3P3
(Name, Telephone, Facsimile number and/or E-mail, and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Common Shares
NYSE Amex Equities
Title of each class
Name of each exchange on which registered

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Common Shares, no par value
(Title of Class)

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: 50,348,215 common shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.

Yes £                       No   T

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes £                       No T

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes T                       No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “Accelerated filer and large accelerated file” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large accelerated filer:    £    Accelerated file:    £ Non-accelerated filer:   T

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
U.S. GAAP £ International Financial Reporting Standards as issued Other   £
  By the International Accounting Standards Board T  
 
If “other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

          £    Item 17                                            £ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £                       No   T
 
 
 
 
TABLE OF CONTENTS
     
INTRODUCTION AND USE OF CERTAIN TERMS
1
FORWARD-LOOKING STATEMENTS 1
GLOSSARY OF TERMS
1
PART 1
 
6
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
6
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
6
ITEM 3.
KEY INFORMATION
7
ITEM 4.
INFORMATION ON THE COMPANY
15
ITEM 5
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
38
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
45
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
54
ITEM 8.
FINANCIAL INFORMATION
57
ITEM 9.
THE OFFER AND LISTING
57
ITEM 10.
ADDITIONAL INFORMATION
58
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
67
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
69
    
PART II
69
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
69
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDER AND USE OF PROCEEDS
69
ITEM 15.
CONTROLS AND PROCEDURES
69
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
70
ITEM 16B.
CODE OF ETHICS - BOARD OF DIRECTORS AND OFFICERS
70
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
71
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS
71
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATE PURCHASERS
71
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
71
ITEM 16G.
CORPORATE GOVERNANCE
71
ITEM 16H.
MINE SAFETY
71
   
PART III
72
ITEM 17.
FINANCIAL STATEMENTS
72
ITEM 18.
FINANCIAL STATEMENTS
72
ITEM 19.
EXHIBITS
73

 
 
 
 
INTRODUCTION AND USE OF CERTAIN TERMS

Minco Gold Corporation (formerly “Minco Mining & Metals Corporation”) is incorporated under the laws of the province of British Columbia, Canada.  In this document, the term “Company” refers to Minco Gold Corporation and its consolidated subsidiaries. Where required, the term “Minco Gold” refers to Minco Gold Corporation as a standalone entity. The Company’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by International Accounting Standards Board ("IFRS") and are presented in Canadian dollars.  Unless otherwise indicated, references to dollar amounts in this Annual Report relate to Canadian dollars.  Minco Gold Corporation files reports and other information with the Securities and Exchange Commission ("SEC") located at 100 F St. NE, Washington, D.C. 20549.   Copies of the Company’s filings with the SEC may be obtained by accessing the SEC’s website located at www.sec.gov .   Further, the Company also files reports under Canadian regulatory requirements on SEDAR.  Copies of the Company’s reports filed on SEDAR can be obtained by accessing SEDAR’s website at www.sedar.com . The principal executive office of the Company is located at Suite #2772, 1055 West Georgia Street, PO Box 11176, Vancouver, British Columbia, Canada , V6E 3P3, Tel: 604-688-8002, Fax: 604-688-8030, email address info@mincomining.ca   and website www.mincomining.ca .

FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking information and statements, including statements relating to matters that are not historical facts and statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, which constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 , collectively referred to as "forward-looking statements". Forward-looking statements are typically identified by words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "plan", "estimate", "believe" and similar expressions suggesting future outcomes or statements regarding an outlook.   Such statements are subject to risks and uncertainties that could cause the Company’s actual results and financial position to differ materially from those anticipated in forward looking statements.  These risk factors include, but are not limited to, the fact that the Company is in the exploration stage, will need additional financing to develop its properties and will be subject to certain risks since its prospects are located in China, all of which factors are set forth in more detail in the section entitled “Risk Factors” in Item 3.D. and “Operating and Financial Review and Prospects” at Item 5.

GLOSSARY OF TERMS

 “ 757 Team ”                                       
means the No. 757 Geo-Exploration Team, an entity owned and controlled by the Guangdong Geological Bureau (“GGB”) of the PRC government.
“ Additional Permits ”                                       
means collectively the Guyegang-Sanyatang Permit, the Guanhuatang Permit   and the Hecun Permit Property.
“ alteration ”                                       
chemical and mineralogical changes in a rock mass resulting from reaction with hydrothermal fluids or changes in pressure and temperature.
“ Amending Contract ”
means the contract dated January 10, 2006 between Minco Silver Corporation and GGB.
“ anomalous ”                                       
adjective describing a sample, location or area at which either (i) the concentration of an element(s) or (ii) a geophysical measurement is significantly different from (generally higher than) the average background concentrations in an area.  Though it may not constitute mineralization, an anomalous sample or area may be used as a guide to the possible location of mineralization.
“ anomaly ”                                       
an area defined by one or more anomalous points.
 
 
1
 
 
“antimony ”                                       
A trivalent and pentavalent metalloid element that is commonly metallic silvery white, crystalline, and brittle yet rather soft.
“ assay ”                                       
an analysis of the contents of metals in mineralized rocks.
“ Au ”                                       
Gold.
“ Baojiang ”                                       
means Foshan Baojiang Nonferrous Metals Corporation.
“ breccia ”                                       
a coarse grained rock composed of large, >2mm angular rock fragments that have been cemented together in a fine grained matrix.
“ Changkeng JV Agreement ”  
means the formal joint venture agreement dated September 28, 2004 between the Company, GGB, Zhenjie, Baojiang and GD Gold.
“ Changkeng Permit ”                                       
means the reconnaissance survey exploration permit (#T01120080102000011) which expires on October 13, 2013 in respect of the 1.18 km 2 Changkeng gold property in Gaoyao City of Guangdong Province in southern China.
“ Changkeng Property ”
means the 1.18 km 2 Changkeng gold property in Gaoyao City of Guangdong Province in southern China which adjoins the property underlying the Fuwan Silver Permit.
“ CIM ”                                       
Canadian Institute of Mining, Metallurgy and Petroleum.
“ Company ” or “ Minco ”
means Minco Gold Corporation (formerly “Minco Mining & Metals Corporation”).
“ concentrates ”                                       
to separate ore or metal from its containing rock or earth.
“ deposit ”                                       
a mineralized body which has been physically delineated by drilling, trenching and/or underground work and may contain a sufficient average grade of metal or metals to warrant further exploration and/or development expenditures; such a deposit does not qualify as a commercially mineable ore body until final technical, legal and economic factors have been resolved.
“ diamond drill holes ”                                       
a drilling method whereby rock is drilled with a diamond impregnated, hollow drilling bit which produces a continuous, in-situ record of the rock mass intersected in the form of solid cylinders of rock which are referred to as core.
“ fault ” or “ block fault ”
a fracture in a rock across which there has been displacement.  Block faults are usually steep, and break the earth’s crust into “blocks” that are displaced vertically and/or laterally relative to each other.
“ Fuwan Permits ”                                       
means, collectively, the Fuwan Silver Permit and the Additional Permits.
“ Fuwan Property ”                                       
means the Fuwan silver property which is located in Guangdong Province in southern China beside the Xijiang River consisting of the following three components: (i) the properties which are the subject of the Fuwan Silver Permit; (ii) the properties which are the subject of the Luoke-Jilinggang Permit and the Guyegang-Sanyatang Permit; (iii) the Guanhuatang permit; and (iv) Minco Gold’s interests in the silver mineralization located on the Changkeng Property.
 
 
2
 
 
“ Fuwan Silver Permit ”
means the reconnaissance survey exploration permit (# 0100000730293) in respect of the 0.79 km 2 Fuwan silver property in Gaomong Region, Foshan City of Guangdong Province issued to Minco China and initially having validity from August 20, 2007 to July 20, 2009.   The Fuwan Silver Permit was transferred to Foshan Minco, a subsidiary of Minco Silver, before the permit’s original expiry date in conjunction with the combination of the Fuwan Silver Permit and the “ Luoke-Jilinggang Permit ” as one permit having validity from July 20, 2011 to July 20, 2013.
“ g/t ”                                       
unit of grade expressed in grams/tonne.
“ GD Gold ”                                       
means Guangdong Gold Corporation.
“ geophysical ”                                       
the use of geophysical instruments and methods to determine subsurface conditions by analysis of such properties as specific gravity, electrical conductivity, and magnetic susceptibility.
“ GGB ”                                       
means Guangdong Geological Bureau, an entity owned and controlled by the Guangdong Geological Bureau of the PRC government.
“ gouge ”                                       
a thin layer of soft earthy putty-like rock material along the containing wall of a mineral vein.
“ grade ”                                       
the amount of valuable mineral in each tone of ore, expressed as ounces per ton or grams per tonne for precious metal and as a percentage by weight for other metals.
“ Guanhuatang Permit ”
means the reconnaissance survey exploration permit (#T01120080502000491) in respect of the 37.29 km2 Guanhuatang silver and multi-metals property in Foshan City of Guangdong Province held by Minco China in trust for Foshan Minco.
“ Guyegang-Sanyatang Permit ”
means the reconnaissance survey exploration permit (#T01120080402000421) in respect of the 74.74km 2 silver and multi-metals property in Gaoming Region, Foshan city of Guangdong Province issued to Minco China in trust for Foshan Minco.
" Hecun Permit "                                       
means the reconnaissance survey exploration permit (#T01120080402000422) in respect of the 16.96km 2 lead-zinc property in Gaoming region, Foshan City of Guangdong province held by Minco China in trust for Foshan Minco.
“ hydrothermal ”                                       
of or pertaining to heated water, to the action of heated water, or to the products of the action of heated water.
“ JVs ”                                       
means Joint Venture established with Chinese partners.  The Company owns controlling interests of over 50% in all JVs in China.  Joint Venture as used in reference to “Chinese joint venture”, “co-operative joint venture”, “equity joint venture”, “Sino-foreign co-operative joint venture” does not refer to a joint venture as contemplated by US or Canadian GAAP.  The term reflects the nomenclature of the related agreements.
“ limestone ”                                       
A sedimentary rock consisting of chiefly >50% calcium carbonate.
“ Luoke-Jilinggang Permit ”
means the reconnaissance survey exploration permit (#T01120080402000336) in respect of the 76.62 km2 Luoke-Jilinggang silver and multi-metals property in Gaoyao City and Gaomin City of Guangdong Province issued to Foshan Minco and having validity from July 20, 2011 to July 20, 2013, incorporating the original Fuwan permit and original Luoke-Jilinggang permits)
 
 
3
 
 
“ Minco Base Metals ”                                       
means Minco Base Metals Corporation
“ Minco BVI ”                                       
means Minco Silver Ltd.
“ Minco China ”                                       
means Minco Mining (China) Corporation.
“ Minco Gold ”                                       
means Minco Gold Corporation (formerly “Minco Mining & Metals Corporation”).
“ Minco Silver ”                                       
means Minco Silver Corporation.
“ mineral reserve ”                                       
the economically mineable part of a measured mineral resource or indicated mineral resource demonstrated by at least a preliminary feasibility study.  This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.  A mineral reserve includes diluting minerals and allowances for losses that may occur when the material is mined.
“ mineral resource ”                                       
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.
“ mineralization ”                                       
the process or processes by which a mineral or minerals are introduced into a rock, resulting in an economically valuable or potentially valuable deposit.
“ MOLAR ”                                       
Means the Ministry of Land and Resources
“ outcrop ”                                       
an exposure on the surface of the underlying rock.
“ oz ”                                       
Troy ounce consisting of 31.1035 grams.
“ Pb ”                                       
Lead.
" PRC "                                       
Means the People's Republic of China.
“ Preliminary Changkeng JV Agreement ”
means the preliminary joint venture agreement dated April 16, 2004 between Minco Gold, GGB, Zhenjie and Baojiang.
“ pyrite ”                                       
A sulphide mineral of iron and sulphur.
“ Pyroclastic ”                                       
refers to a sedimentary rock composed or airborne volcanic material from a volcanic eruption.
“ Qualified Person ”                                       
an individual who is an engineer or geoscientist with at least five yeas experience in mineral exploration, mine development, production activities and project assessment, or any combination thereof, including experience relevant to the subject matter of the project or report and is a member in good standing of an approved self-regulating organization.
“ quartz ”                                       
A common rock-forming mineral comprised of silicon and oxygen (SiO 2 ).
“ RMB ”                                       
means the Chinese currency Renminbi.
“sample”                                       
a sample of selected rock chips from within an area of interest.
 
 
4
 
 
“ sandstone ”                                       
A medium grained clastic sedimentary rock.
“ Sb ”                                       
Antimony.
“ Second Confirmation Agreement ”
means the confirmation agreement dated August 24, 2006 between Minco Gold, Minco China and Minco Silver.
“ sedimentary rock ”                                       
A rock that has been formed by the consolidation of loose sediment that has accumulated in layers.
“ sedimentary ”                                       
formed by the deposition of solid fragmented material that originates from weathering of rocks and is transported from a source to a site of disposition.
“ State ”                                       
means the central government of China
“ strike ”                                       
the direction or trend that a structural surface takes as it intersects the horizontal.
“ sulphide ”                                       
a class of minerals commonly combining various elements in varying ratios with sulphur.
“ tonne ”                                       
metric unit of weight consisting of 1,000 kilograms.
“ Transfer Confirmation Agreement ”
means the confirmation agreement dated November 19, 2004 between 757 Team, GGB and Minco China.
“ Triassic ”                                       
the period of geological time from 225 to 195 million years before present.
“ vein ”                                       
A tabular mineral deposit formed in or adjacent to faults or fractures by the deposition of minerals from hydrothermal fluids.
“ veinlet ”                                       
A small vein; the distinction between vein and veinlet tends to be subjective.
“ volcanic ”                                       
pertaining to the activity, structures or rock types of a volcano.
“Zhenjie”                                       
means Zhuhai Zhenjie  Development Ltd.

All disclosure about our exploration properties in this Annual Report conforms to the standards of United States Securities and Exchange Commission Industry Guide 7, Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations, other than disclosure of “Mineral Resources”, “Measured Mineral Resources”, “Indicated Mineral Resources” and “Inferred Mineral Resources”, which are Canadian geological and mining terms as defined in accordance with Canadian National Instrument 43-101 under the guidelines set out in the CIM Standards.

In this Annual Report references to “Canadian National Instrument 43-101” are references to National Instrument 43-101, Standards of Disclosure for Mineral Projects, of the Canadian Securities Administrators and references to “CIM Standards” are references to Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on December 11, 2005 as may be amended from time to time by the CIM.

Cautionary Note to U.S. Investors concerning estimates of Measured Mineral Resources and Indicated Mineral Resources.

This Annual Report uses the terms “Measured Mineral Resource” and “Indicated Mineral Resource.” We advise U.S. investors that while such terms are recognized and permitted under Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. U.S. investors are cautioned not to assume that any part or all of the Mineral Resources in these categories will ever be converted into Mineral Reserves.
 
 
5
 


PART 1

ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A.                     DIRECTORS AND SENIOR MANAGEMENT

The following table sets forth as of April 20, 2012, the names, business addresses and functions of the Company’s directors and senior management.

Name
Business Address
Position
Ken Cai
Suite #2772, 1055 West Georgia Street, Vancouver, British Columbia, Canada , V6E 3P3
President, Chief Executive Officer and Director
Robert M. Callander
 
43 Delhi Avenue
North York, Ontario, Canada  M5M 3B8
Director
Michael Doggett
Suite #2772, 1055 West Georgia Street, Vancouver, British Columbia, Canada , V6E 3P3
Director
Malcolm F. Clay
Suite #2772, 1055 West Georgia Street, Vancouver, British Columbia, Canada , V6E 3P3
Director
Ellen Wei
Suite #2772, 1055 West Georgia Street, Vancouver, British Columbia, Canada , V6E 3P3
Interim Chief Financial Officer and Controller
Ute Koessler
Suite #2772, 1055 West Georgia Street, Vancouver, British Columbia, Canada , V6E 3P3
Vice President Corporate Communications

B.                     ADVISERS

The Company's registrar and transfer agent for its common shares is Computershare Trust Company of Canada, located at 510 Burrard Street, Vancouver, British Columbia, V6C 3B9, Canada, telephone: 604-661-0224, fax: 604-661-9401, internet: www.computershare.com .  The principal executive office of the Company is located at Suite #2772, 1055 West Georgia Street, PO Box 11176, Vancouver, British Columbia, Canada , V6E 3P3, Tel: 604-688-8002, Fax: 604-688-8030, email address info@mincomining.ca   and website www.mincomining.ca .  The Company's legal advisors are Sangra Moller LLP, located at 925 West Georgia Street, Suite 1000, Vancouver, British Columbia, Canada. V6C 3L2

C.                     AUDITORS

The Company's auditors are   PricewaterhouseCoopers, LLP, Chartered Accountants, located at 250 Howe Street, Suite 700, Vancouver, British Columbia, Canada, V6C 3S7.

ITEM 2.           OFFER STATISTICS AND EXPECTED TIMETABLE

NOT APPLICABLE.
 
 
6
 

ITEM 3.     KEY INFORMATION

A.                     SELECTED FINANCIAL DATA

The following selected financial information for the fiscal years ended December 31, 2011 and 2010 are derived from the financial statements of the Company and should be read in conjunction with the financial statements and the notes attached to this Annual Report.  The Company’s financial statements are prepared in accordance with International Financial Reporting Standards as issued by International Accounting Standards Board ("IFRS").  Over the period reviewed, there have been significant differences between IFRS and United States GAAP.

IFRS

   
December
31, 2011
   
December
31, 2010
 
Operations
           
Finance and other income
  $ 238,218     $ 59,709  
Exploration expense
    1,963,874       1,467,641  
Loss from continuing operations
    862,446       (2,058,649 )
Net Income (loss)
    (862,446 )     (451,348 )
Loss per Common share
from continuing operations
 
 
       
(basic and diluted)
  $ 0.02     $ (0.01 )
Common shares used in calculations
               
Basic
    50,228,592       48,582,347  
Diluted
    51,580,329       48,582,347  
                 
Consolidated Balance Sheet Data
               
Total assets
    22,176,773       23,700,260  
Total liabilities
    7,715,102       13,469,839  
Non-controlling interest
    2,415,029       2,444,005  
Net assets
    14,461,671       10,230421  
Share capital
  $ 41,758,037     $ 40,335,033  
Dividends
    0       0  
 
Exchange Rates

The following table sets forth information as to the average period end, high and low exchange rate for Canadian dollars and US dollars for the periods indicated based on the exchange rates posted by the Board of Governors of the Federal Reserve System (USD to CAD) in Canadian dollars (USD$1.00 = CAD$ 0.9927 as at March 30, 2012 ).

 
Year Ended December 31
 
Average
 
Period End
 
High
 
Low
 
2011
2010
 
0.9886
1.0297
 
1.0168
1.0009
 
1.0605
1.0776
 
0.9448
0.9960
2009
 
1.1411
 
1.0461
 
1.2995
 
1.0289
2008
 
1.0659
 
1.2240
 
1.2971
 
0.9717
2007
 
1.0734
 
0.9818
 
1.1852
 
0.9168
 

 

B.                     CAPITALIZATION AND INDEBTEDNESS

NOT APPLICABLE.

C.                     REASONS FOR THE OFFER AND USE OF PROCEEDS

NOT APPLICABLE
 
 
7
 

D.         RISK FACTORS

An investment in our securities should be considered highly speculative and involves a high degree of financial risk due to the nature of our activities and the current status of our operations. A prospective investor should carefully consider the risks summarized below and all other information contained in this Annual Report before making an investment decision relating to our shares.  Some statements in this Annual Report (including some of the following risk factors) are forward-looking statements.  Please refer to the discussion of forward-looking statements in the introduction to this Annual Report.  Any one or more of these risks could have a material adverse effect on the value of any investment in our Company and the business, financial position or operating results of our Company and should be taken into account in assessing our activities.  The risks noted below do not necessarily comprise all those faced by us.

Risks Relating to the Company

Title to Properties

To the knowledge of the Company, none of its property interests have been surveyed to establish boundaries. There can be no assurance that any governmental authority in the PRC could not significantly alter the conditions of or revoke the applicable exploration or mining authorizations held by the Company or that the Company's interest in such properties will not be challenged or impugned by third parties or governmental authorities.

In addition, there can be no assurance that the properties or other assets in which the Company has an interest are not subject to prior unregistered agreements, transfers, pledges, mortgages or claims and title may be affected by undetected defects as it is difficult to verify that no agreements, transfers, claims, mortgages, pledges or other encumbrances exist given the state of the legal and administrative systems in the PRC.

China Political and Economic Considerations

The business operations of the Company will be located in, and the revenues of the Company derived from activities in the PRC. Likewise, the Company's operations in the PRC are currently conducted through and with the assistance of Minco China, a WFOE. Accordingly, the business, financial condition and results of operations of the Company could be significantly and adversely affected by economic, political and social changes in the PRC. The economy of the PRC has traditionally been a planned economy, subject to five-year and annual plans adopted by the state, which set national economic development goals. Since 1978, the PRC has been moving the economy from a planned economy to a more open, market-oriented system. The economic development of the PRC is following a model of market economy under socialism. Under this direction, it is expected that the PRC will continue to strengthen its economic and trading relationships with foreign countries and that business development in the PRC will follow market forces and the rules of market economics.

However, the Chinese government continues to play a significant role in regulating industry by imposing industrial policies. In addition, there is no guarantee that a major turnover of senior political decision makers will not occur, or that the existing economic policy of the PRC will not be changed. A change in policies by the PRC could adversely affect the Company's interests in China by changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports and sources of supplies, or the expropriation of private enterprises. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations and permits governing operations and activities of companies engaged in mineral resource exploration and development, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or production costs or reduction in levels of production at producing properties or require abandonment or delays in development of new mining properties. Companies with a foreign ownership component operating in the PRC may be required to work within a framework which is different to that imposed on domestic Chinese companies. The Chinese government is opening up opportunities for foreign investment in mining projects and this process is expected to continue. However, if the Chinese government should reverse this trend and impose greater restrictions on foreign companies, the Company's business and future earnings could be negatively affected.
 
 
8
 

Peoples Republic of China Legal System and Enforcement

Most of the material agreements to which the Company or its affiliates are party or will be party in the future with respect to mining assets in the PRC are expected to be governed by Chinese law and some may be with Chinese governmental entities. The PRC legal system embodies uncertainties that could limit the legal protection available to the Company and its shareholders. The outcome of any litigation may be more uncertain than usual because: (i) the experience of the PRC judiciary is relatively limited, and (ii) the interpretation of PRC laws may be subject to policy changes reflecting domestic political changes. The laws that do exist are relatively recent and their interpretation and enforcement involve uncertainties, which could limit the available legal protections. Even where adequate law exists in the PRC, it may be impossible to obtain swift and equitable enforcement of such law or to obtain enforcement of judgments by a court of another jurisdiction. The inability to enforce or obtain a remedy under such agreements could have a material adverse impact on the Company. Many tax rules are not published in the PRC, and those that are published can be ambiguous and contradictory, leaving a considerable amount of discretion to local tax authorities. The PRC currently offers tax and other preferential incentives to encourage foreign investment. However, the tax regime of the PRC is undergoing review and there is no assurance that such tax and other incentives will continue to be available. There is also no guarantee that the pursuit of economic reforms by the State will be consistent or effective and as a result, changes in the rate or method of taxation, reduction in tariff protection and other import restrictions, and changes in state policies affecting the mining industry may have a negative effect on its operating results and financial condition.

Government Regulation of Mineral Resources and Ownership

Ownership of land in China remains with the States, and the State, at the national, regional and local levels, is extensively involved in the regulation of exploration and mining activities. Transfers and issuances of exploration and mining rights are also subject to governmental approval.  Failure or delays in obtaining necessary approvals could have a materially adverse effect on the financial condition and results of operations of the Company. Nearly all mining projects in the PRC require government approval. There can be no certainty that any such approvals will be granted (directly or indirectly) to the Company in a timely manner, or at all.

Exploration and Development is a Speculative Business

Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but also from finding mineral deposits that, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, the availability of mining equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection, the combination of which factors may result in the Company not receiving an adequate return of investment capital. The long-term profitability of the Company's operations will in part be directly related to the costs and success of its exploration programs, which may be affected by a number of factors.  Substantial expenditures are required to establish reserves through drilling and to develop the mining and processing facilities and infrastructure at any site chosen for mining.  If our exploration costs are greater than anticipated, we will have fewer funds for our exploration activities and for our general and administrative expenses, which in turn will adversely affect our financial condition and ability to pursue our exploration programs.  Although substantial benefits may be derived from the discovery of a major mineralized deposit, no assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operations that commercially viable mineral deposits exist on our properties or that funds required for development can be obtained on a timely basis.

Future Financing

The Company currently has limited financial resources and there is no assurance that additional funding will be available to it for further exploration and development of its projects. There can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favourable. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of its projects with the possible loss of such properties.
 
 
9
 

Joint Venture Agreement

There is no guarantee that Minco Gold and its other joint venture partners will be able to fund the Changkeng joint venture. Mingzhong, the entity that holds the Changkeng Permit, is owned in part by certain state-owned entities which require government approvals before they are able to increase their investment in Mingzhong.  It is unclear when these approvals will be forthcoming, if at all.

Industry Specific Risks

The exploration, development, and production of minerals are capital-intensive businesses, subject to the normal risks and capital expenditure requirements associated with mining operations, which even a combination of experience, knowledge and careful evaluation may not be able to overcome.

Operations that we undertake will be subject to hazardous risks incidental to exploration and test mining, including, but not limited to work stoppages, date to property and possible environmental damage.  Liabilities resulting from such events may result in us being forced to incur significant costs that could have a material adverse effect on our financial condition and business prospects.

Limited Experience with Development-Stage Mining Operations

The Company has limited experience in placing resource properties into production, and its ability to do so will be dependent upon using the services of appropriately experienced personnel or entering into agreements with other major resource companies that can provide such expertise. There can be no assurance that the Company will have available to it the necessary expertise if the Company places its resource properties into production.

Factors Beyond Company's Control

Discovery, location and development of mineral deposits depend upon a number of factors, not the least of which is the technical skill of the exploration personnel involved. The exploration and development of mineral properties and the marketability of any minerals contained in such properties will also be affected by numerous factors beyond the control of the Company. These factors include government regulation, high levels of volatility in market prices, availability of markets, availability of adequate transportation and refining facilities and the imposition of new, or amendments to existing, taxes and royalties. The effect of these factors cannot be accurately predicted.

Potential Conflicts of Interest

Certain members of the Company's board and officers of the Company also serve as officers or directors of other companies involved in natural resource exploration and development. Consequently, there exists the possibility that those directors and officers may be in a position of conflict. In particular, Ken Z. Cai is a director of and serves in management in each of the Company, Minco Silver and Minco Base Metals.

In addition, Ellen Wei serves as Interim Chief Financial Officer and Controller and Jennifer Trevitt serves as Corporate Secretary, respectively, of the Company,  Minco Silver and Minco Base Metals. Any decision made by such directors and officers will be made in accordance with their duties and obligations to deal fairly and in good faith with the Company and such other companies. In addition, such directors and officers will declare, and refrain from voting on any matter in which such directors or officers may have a conflict of interest. Nevertheless, there remains the possibility that the best interests of the Company will not be served because its directors and officers have other commitments.  Matters between the Company and Minco Silver which put any of the directors or officers of the Company in a position of conflict are approved by the audit committee of the board of directors which is comprised of solely independent directors.

In addition to the potential conflicts described above, some of the directors of the Company are also directors or officers of other reporting and in non-reporting issuers who are engaged in other industry sectors. Accordingly, conflicts of interest may arise which could influence the decisions or actions of directors or officers acting on behalf of the Company.

Scope of Business
 
  In China companies are granted a business license which specifies the scope of activities that they are permitted to undertake.   Although   Minco China has taken steps to ensure that all of its business activities are within the scope of its business license, there is no assurance that the relevant Chinese authorities will agree with such assessment.  If Minco China is determined to have exceeded the scope of its business license it could be subject to penalties or other sanctions.

 

 

10
 
 

Uninsured Risks

The Company's mining activities are subject to the risks normally inherent in mineral exploration, including, but not limited to, environmental hazards, industrial accidents, flooding, periodic or seasonal interruptions due to climate and hazardous weather conditions, and unusual or unexpected formations. Such risks could result in damage to or destruction of mineral properties or production facilities, personal injury, environmental damage, delay in mining and possible legal liability.  The Company may become subject to liability for pollution and other hazards against which it cannot insure or against which it may elect not to insure because of high premium costs or other reasons. The payment for such liabilities would reduce the funds available for exploration and mining activities and may have a material impact on the Company's financial position.

Currency Exchange Rates

The Company maintains its accounts Canadian dollars and RMB denominations. Given that most of Minco Gold's expenditures are currently and are anticipated to be incurred in  RMB, Minco Gold is subject to foreign currency fluctuations which may affect its financial position and operating results. The Company does not currently have a formal hedging program to mitigate foreign currency exchange risks.

Repatriation of Capital Located in China

The Company may face delays repatriating funds held in China if at any time the Company needs additional resources to enable it to undertake projects elsewhere in the world. There are certain restrictions on the repatriation of funds held in China as more particularly described below.

Under Chinese law, repatriation of funds in China falls under several categories: (1) profit repatriation, (2) capital repatriation, (3) liquidation, and (4) overseas loan repayment.  The major requirements for each of the repatriation methods is as follows:

1.  
Profit repatriation – A WFOE may repatriate its after-tax profits out of China with few restrictions.  Minco China is classified as a WFOE.  Profit repatriation can only be undertaken once a year.

2.  
Capital repatriation – Under Chinese law, capital repatriation can only be made under the following circumstances:

(a)  
Share/Equity Interest Sale – In the event that a foreign investor, as an assignor, intends to sell its equity interest in the WFOE to any other foreign or domestic entities/individuals, as an assignee, the approval from the original approving authority, such as the local Department of Commerce (" DOC ") is required. Such governmental approval for an equity sale is not difficult to obtain in normal circumstances and it would normally take one to two months after all of the required documents have been submitted, subject to local practice.
 
Once the governmental approval is obtained, the assignee is obliged to apply to the local State Administration for Foreign Exchange (" SAFE "), for the approval of mailing the payment of the transfer price to the assignor, which can normally be done within 20 business days after all of the required documents have been submitted.
 
(b)  
Capital Decrease – Generally, a WFOE must not decrease its registered capital during its operating term, however, if its registered capital needs to be decreased due to the change of the total investment amount or operation scale or for other reasons, such decrease could be done after approval from the original approval authority has been obtained. The procedures for capital decrease are as follows:
 
 
11
 
 
(i)  
The WFOE would apply to the local DOC for a preliminary approval of a capital decrease;

(ii)  
After receiving the preliminary reply, the WFOE would notify all of its creditors in writing for such capital decrease and the WFOE would publically disclose such capital decrease in provincial newspapers at least three times;

(iii)  
The creditors may require the WFOE to pay off all debts or provide corresponding guarantees to pay any outstanding debts;

(iv)  
After the WFOE has made at least three public notices in provincial newspapers, it would apply to the local DOC for formal approval of the capital decrease;

(v)  
Once the DOC has approved the decrease of the registered capital, the WFOE would conduct the registration change at the local Administration for Industry and Commerce (" AIC "); and

(vi)  
Upon completion of the above procedures, if the then contributed capital of the WFOE exceeds the registered capital after the decrease, the WFOE would apply for the capital repatriation approval of the decreased capital to its investor(s) at the local SAFE.  Once approval is received, the bank can remit the exceeded capital.

The above process takes around six months to complete.

3.  
Liquidation – The investor may also voluntarily liquidate the WFOE in accordance with relevant Chinese law and the articles of association of the WFOE.  The procedures for the liquidation of a foreign investment are as follows:

(a)  
A resolution to liquidate the WFOE is adopted;

(b)  
The WFOE applies to the local DOC for approval of the liquidation;

(c)  
The WFOE sets up a liquidation committee to conduct the liquidation;

(d)  
The notices to creditors and the public announcements about the liquidation must be made;

(e)  
The liquidation committee would handle the sale of the assets of the WFOE and the distribution of the liquidation proceeds and submit a distribution report to the local DOC; and

(f)  
The deregistration of the WFOE must be conducted with the local AIC and local tax, customs, foreign exchange and other authorities.

(g)  
Upon completion of the above procedures, the investor would apply to the local SAFE for repatriation of the liquidated proceeds.  Once approval is received, the bank can remit the liquidated proceeds.

The above process takes approximately six months to complete.

4.  
Overseas Loan Repayment - Under Chinese law, a WFOE may borrow overseas loans from its investors or other overseas companies or financial institutions, provided that the overseas loan amount shall not exceed the balance between the total investment amount and the registered capital of the WFOE.  The procedures for registration and repayment of such overseas loans are as follows:
 
 
12
 
 
(a)  
The WFOE would register the overseas loan with the local SAFE and obtain loan registration certificates issued by the local SAFE;

(b)  
After registration, the WFOE would open a special foreign exchange cash account with domestic banks to receive the overseas loan;

(c)  
When the WFOE repays the overseas loan, it would apply to the local SAFE for the repayment approval; and

(d)  
Upon the issuance of the repayment approval of the local SAFE, the WFOE would submit the overseas loan registration certificate and the repayment approval issued by the local SAFE to the banks and the banks would conduct payment operations through the WFOE's special foreign exchange cash account for the overseas loan or the special foreign exchange cash account for the overseas loan repayment.

Competition

The precious metal minerals exploration industry and mining business are intensely competitive. The Company competes with numerous other companies and individuals in the search for and the acquisition of attractive precious metal mining properties. Many of these competitors have substantially greater technical and financial resources than the Company. Competition could adversely affect the Company's ability to acquire suitable properties or prospects in the future.

Uncertainty of Estimates

Resource and reserve estimates of minerals are inherently imprecise and depend to some extent on statistical inferences drawn from limited drilling, which may prove unreliable. Although estimated recoveries are based upon test results, actual recovery may vary with different rock types or formations in a way which could adversely affect operations.

Reliance on Management and Directors

The success of the Company is currently largely dependent on the performance of its officers. The loss of the services of these persons will have a materially adverse effect on the Company's business and prospects. There is no assurance the Company can maintain the services of its officers or other qualified personnel required to operate its business.

Failure to do so could have a material adverse effect on the Company and its prospects. The Company has not purchased any "key-man" insurance with respect to any of its directors or officers to the date hereof. The loss of any key officer of the Company could have an adverse impact on the Company, its business and its financial position.

Fluctuating Mineral Prices

Factors beyond the control of the Company may affect the marketability of metals discovered, if any. Metal prices have fluctuated widely, particularly in recent years. The effect of these factors cannot be predicted.  Fluctuations in the price of gold may also adversely affect our ability to obtain future financing to fund our planned exploration programs.

The Mining Industry Is Highly Speculative

The Company is engaged in the exploration for minerals which involves a high degree of geological, technical and economic uncertainty because of the inability to predict future mineral prices, as well as the difficulty of determining the extent of a mineral deposit and the feasibility of extracting it without the expenditure of considerable money.
 
 
13
 

Environmental Considerations

Although the PRC has enacted environmental protection legislation to regulate the mining industry, due to the very short history of this legislation, national and local environmental protection standards are still in the process of being formulated and implemented. The legislation provides for penalties and other liabilities for the violation of such standards and establishes, in certain circumstances, obligations to rehabilitate current and former facilities and locations where operations are being or have been conducted.

Although the Company intends to fully comply with all environmental regulations, there is a risk that permission to conduct exploration and development activities could be withdrawn temporarily or permanently where there is evidence of serious breaches of such standards.

The following risk factors apply to the business of Minco Silver and as such could affect the Company's investment therein:

Permitting Requirements

The ability of Minco Silver to carry out successful mining activities will depend on a number of factors. One of the most critical factors will be the ability of the Company to obtain mining licences and permits in China. Although the Company, through Foshan Minco, has applied for and obtained various permits for the Fuwan Project, additional permits and licenses will also be required in order to put the deposit into commercial production. These include permits and licenses pertaining to environmental matters, land use rights, water and forestry matters and, ultimately, a mining license. While applications for the additional required permits and licences have been, and will be, made by Foshan Minco to the relevant Chinese government authorities, there is no assurance that such permits or licenses will be issued in a timely manner, or at all.

Many of the required licences and permits are, or will be, subject to conditions imposed by the PRC government as well as mining legislation of the PRC. No assurances can be given that all necessary permits, licenses or tenures will be granted to the Company through Foshan Minco, or, if they are granted, that the Company, through Foshan Minco, will be in a position to comply with all conditions and legal requirements that are imposed. For example, the business licenses of Minco China and Foshan Minco restrict the activities that may be carried on by these companies and in particular, Foshan Minco is not permitted under its business license to conduct exploration activities. To date, exploration activities conducted at the Fuwan Project have been conducted by Minco China. As the Fuwan Project is currently at development stage, Foshan Minco, as the operating company, has to obtain mining licence and other permits required for commercial production on the project. There is no certainty that such approvals will be obtained in a timely manner or at all. Furthermore, each of Minco China and Foshan Minco is subject to an annual review process pursuant to which it must pass annual inspections of the Administration for Industry and Commerce in the PRC. As a result, if Foshan Minco does not pass its annual review it will not be authorized to carry on business in the PRC which may adversely affect the Company's interests in the Fuwan Project. The Company believes that it and Minco China and/or Foshan Minco are operating in material compliance with all applicable rules and regulations.

Management of Minco Silver also believe that reasonable measures have been taken to ensure that the permits for the Fuwan Project have been duly approved by and registered with all relevant authorities in the People's Republic of China in accordance with the laws and regulations in effect and that Minco China and Foshan Minco are the registered owners of such permits. However, no legal opinion has been obtained to date concerning the land, assets, permits and licenses relating to the properties over which the Company, through Minco China and Foshan Minco, has or may acquire an interest.

The Luoke-Jilinggang permit held by Foshan Minco, one of the four permits comprising the Fuwan Project, has been renewed until July 20, 2013. The other three permits, the Guanhuatang, Guyegang and Hecun permits held by Minco China, expire on April 7, 2013.

Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions.
 
 
14
 

Capital Costs, Operating Costs and Production and Economic Returns

The capital costs to take the Company's Fuwan Project into production may be significantly higher than estimated in the feasibility study technical report on the Fuwan project (the " Fuwan Technical Report "). The pre-production capital costs set out in the Fuwan Technical Report were estimated at US$73.1 million and pricing and quantity data was considered to be reasonable as at the date of the estimates. Changes in metal prices, exchanges rates and other factors since the date of the Fuwan Technical Report may result in greater costs than those estimated, which may have an adverse impact on the Company's ability and timing to bring the Fuwan Project into production.

The Fuwan Project does not have an operating history upon which the Company can base estimates of future operating costs. Decisions about the development of the Fuwan Project and other mineral properties will ultimately be based upon feasibility studies. Feasibility studies derive estimates of cash operating costs based upon, among other things:

·  
anticipated tonnage, grades and metallurgical characteristics of the ore to be mined and processed;
·  
anticipated recovery rates of silver and other metals from the ore;
·  
cash operating costs of comparable facilities and equipment; and
·  
anticipated climatic conditions.

Cash operating costs, production and economic returns, and other estimates contained in studies or estimates prepared by or for the Minco Silver, including the Fuwan Technical Report or other feasibility studies, if prepared, may differ significantly from those anticipated, and there can be no assurance that the Company's actual operating costs will not be higher than currently anticipated.

Future Financing

The funds raised by the public offering completed by Minco Silver in 2011 will not be sufficient to meet all of the its ongoing financial requirements relating to the exploration, development or operation of the Fuwan Project. Although it has received a conditional commitment of a project debt facility in the amount of RMB 300 million (approximately US$44.17 million) from the Guangdong Branch of ICBC for the Fuwan Project, this commitment represents only a portion of the funds required to construct the Fuwan silver mine and the facility is subject to certain conditions including receipt by the Company of the mining license.

Minco Silver currently has limited financial resources and there is no assurance that additional funding will be available to it for further exploration and development of its projects. There can be no assurance that it will be able to obtain adequate financing in the future or that the terms of such financing will be favourable. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of its projects with the possible loss of such properties.

Currency Exchange Rates

The Company maintains its accounts in US dollar, Canadian dollar and RMB denominations. The government of the PRC maintained the exchange rate between the RMB and the US dollar as a constant until July 2005 and thus exchange rates between the Canadian dollar and the RMB fluctuated in tandem with the changing exchange rates between the US and Canadian dollars. Since July 2005, the value of the RMB has been tied to a basket of currencies of China's largest trading partners.  Given that most of Minco Silver's expenditures are currently and are anticipated to be incurred in U.S. dollars and RMB, Minco Silver is subject to foreign currency fluctuations which may materially affect its financial position and operating results. The Company does not currently have a formal hedging program to mitigate foreign currency exchange risks.
 
ITEM 4.     INFORMATION ON THE COMPANY

Cautionary Note to U.S. Investors

We describe our properties utilizing mining terminology such as "measured resources" and "indicated resources" that are required by Canadian regulations but are not recognized by the SEC. U.S. investors are cautioned not to assume that any part of the mineral deposits in these categories will ever be converted into reserves.
 
 
15
 

A.                    HISTORY AND DEVELOPMENT OF THE COMPANY

Name, Address and Incorporation

Minco Gold Corporation was incorporated under the Business Corporations Act (British Columbia) on November 5, 1982, under the name "Caprock Energy Ltd."  The Company changed its name to Minco Gold Corporation on January 29, 2007.  The Company has subsidiaries which are also engaged in the acquisition and exploration of mineral projects in China. See "Organizational Chart"

The principal executive office and registered office of the Company is located at Suite #2772, 1055 West Georgia Street, Vancouver, British Columbia, Canada , V6E 3P3, telephone number 604-688-8002, fax number 604-688-8030 and email address info@mincomining.ca.  The Company's shares trade on the Toronto Stock Exchange (the " TSX ") under the trading symbol MMM.  The Company began trading on the NYSE AMEX on November 22, 2005 with its trading symbol on the AMEX as "MMK".  On February 1, 2007 the trading symbol on the AMEX was changed from MMK to MGH.

On November 15, 2008 the Company completed its intended Plan of Arrangement and spun off the White Silver Mountain Project to Minco Base Metals Corporation (“Minco Base Metals”) with the intention to build a strong base metals company.  The Plan of Arrangement resulted in the shareholders of the Company receiving one common share of Minco Base Metals for every five common share of the Company held on the record date, which was November 15, 2007.  The Company now holds no shares of Minco Base Metals.

The table below breaks out the Corporation's exploration expenditures, by property, over the past two financial years.

Year ended December 31,
 
2011
IFRS
   
2010
IFRS
 
    $       $    
Gansu
   - Longnan
    1,870,486       1,330,745  
Guangdong
   - Changkeng
    66,522       135,727  
Hunan
   - Gold Bull Mountain
    26,866       1,169  
Total
    1,963,874       1,467,641  

Inter-corporate Relationships

The Company has two significant investments in two companies with current or planned business operations, which were created for the exploration and acquisition of mineral projects in China as described below:

·  
Minco Silver, incorporated on August 20, 2004, under the laws of British Columbia.  This company was incorporated to acquire and develop silver projects in China and is currently involved with the development of the Fuwan Silver Property, Guangdong Province, China, described under "Description of Mineral Properties." The Company owns a 22.15% interest in Minco Silver; and

·  
Minco China, incorporated in China on May 12, 2004, for the purposes of managing the Company's projects in China, enhancing the Company's management team in China, and to expand upon certain mining activities (such as staking) in China.

B.                     BUSINESS OVERVIEW

Background

All disclosure about our material exploration properties in this Annual Report conforms to the standards of United States Securities and Exchange Commission Industry Guide 7, Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations, other than disclosure of “Mineral Resources”, “Measured Mineral Resources”, “Indicated Mineral Resources” and “Inferred Mineral Resources”, which are geological and mining terms as defined in accordance with Canadian National Instrument 43-101 under the guidelines set out in the CIM Standards. U.S. investors in particular are advised to read carefully the definitions of these terms as well as the explanatory and cautionary notes in the Glossary, and the cautionary notes below, regarding use of these terms.
 
 
16
 

Three Year History

The Company's business has been focused on exploring its gold projects.  As outlined in greater detail below, the focus of the Company's activities over the past three years has been the exploration of its Longnan and the Changkeng Gold Project in China.  See "Description of Properties" for more detailed descriptions of these properties.

The Company signed a 30-year joint venture contract with four other Chinese companies for the exploration and development of the Changkeng Gold Project in late 2004.  A business license was granted on March 30, 2007 to Mingzhong, a joint venture company established for pursuing the Changkeng Gold Project and a subsidiary of the Company.  In January 2009, MOLAR approved the transfer of the Changkeng Exploration Permit from the 757 Exploration Team to Mingzhong.  Between late 2007 and the end of 2008, the Company completed a comprehensive exploration program on the Changkeng Gold Project which consisted of the drilling of 66 diamond holes, an extensive hydrological study as well as a geotechnical survey.  In March 2009, a resource estimate was prepared by P&E Mining Consultants Inc. (" P&E ") for the Changkeng Gold Project utilizing diamond drill data from a total of 127 drill holes and 13 surface trenches.  See "Description of Properties – Changkeng Gold Property ".

Minco China entered into a Joint Venture Agreement in December 2010 (the " JV Agreement ") with the 208 Exploration Team (the " 208 Team "), a subsidiary of China National Nuclear Corporation (the " CNNC "), to acquire a 51% equity interest in the Tugurige Gold Project located in Inner Mongolia, China.  To secure the project, Minco China provided RMB 60 million (approximately $9 million) in the form of a secured short-term loan to the Tugurige Gold Mine. The loan was repaid on March 25, 2011 in full with interest.  As at December 31, 2011, the 208 Team has not complied with certain of its obligations under the JV agreement, including its obligation to set up a new entity (the " JV Co ") and transfer its 100% interest in the Tugurige Gold Project to the JV Co. The Company is proactively engaged in resolving this dispute with the 208 Team.

Over the past a few years, the Company reviewed its portfolio of mineral properties and sold several projects, including BYC, Gobi Gold, and Xiaoshan Projects,  which are not core holdings with less exploration potential. The Company recovered the exploration costs on those projects with some profits.

In the Longnan region, the 2011 field program commenced at the beginning of March and was focused on Yejiaba sub-project where Minco discovered zones of significant mineralization in 2010.  The program resulted in the discovery of the Baimashi gold-antimony zone on the boundary between the Weiziping-Baimashi and Shajinba-Yangjiagou permits, Yejiaba sub-project.  In the second half of 2011, the Company completed a drilling program at the Shajinba Zone, Yejiaba sub-project.  The program targeted two zones of mineralization: (a) a zone of gold mineralization at the south-east corner of the Shajinba Zone, and (b) a zone of poly-metallic mineralization at the north-west corner of the area.  The drill program returned lower gold values than the surface trenching program conducted in 2009 and 2010 but allowed the Company to verify structural interpretation and provided several significant mineralized intersections at depth.   A limited trenching program was undertaken at the Shajinba Zone at the end of 2011.  Although the program failed to uncover significant anomalies, the Company believes there is high potential for better discoveries on the surface and at depth.

The Company has a significant ownership interest (22.15%) in Minco Silver, a related party engaged in developing the Fuwan Silver Deposit, located in Guangdong Province, China.  Minco Silver has made significant progress in permitting on the Fuwan Silver Deposit, including the following:

·  
The Mining Area Permit was approved by MOLAR in 2009. The Mining Area Permit covers approximately 0.79 km 2 , defines the mining limits of the Fuwan deposit and restricts the use of this land to mining activities.  The permit was renewed by MOLAR and expires on April 4, 2014;

·  
Minco Silver has made significant progress on the Environmental Impact Assessment (" EIA ").  New water guidelines (the " Guidelines ") issued by the Ministry of Environmental Protection of China, became effective on June 1, 2011, which all applicants for the EIA are subject to.  Minco Silver signed an agreement with General Station for Geo-Environmental Monitoring of Guangdong Province to provide a water monitoring study to comply with the Guidelines.  The field work for the water monitoring study has been completed and the results will be used to prepare a comprehensive water monitoring report for the project.  The revised EIA is expected to be resubmitted to the Chinese Environmental Protection Authority for approval in the first half of 2012;
 
 
17
 
 
·  
The exploration permits for the Fuwan Silver Project were renewed by MOLAR in July 2011, and expires in July 2013; and

·  
The preliminary mine design, carried out by the Nanching Engineering & Research Institute of Nonferrous Metals (" NERIN "), has been completed.  The design is subject to final revision upon the approval of the regulatory EIA before the final report of the design will be released to Minco Silver.
 
BACKGROUND TO MINING IN CHINA

General Background

Industry is the most important sector of the economy of the China, accounting for 52.9% of its gross domestic product (" GDP ") in 2004. The mining industry accounted for an estimated 6 percent of the national industrial output in 2004. In 2003, the mining industry employed more than 20 million people. Since 1978, China has been moving from a planned economy to a more open, market-oriented system, with the result that the economic influence of privately owned enterprises and foreign investors has been steadily increasing. The result of this economic development has been the quadrupling of GDP since 1978.

Agricultural output doubled in the 1980s, and industry has posted major gains, especially in coastal provinces, where foreign investment has helped spur output of both domestic and export goods. Growth has not been without setbacks, as issues such as inflation, excessive capital investment, inefficient state owned enterprises and banks, and deterioration in the environment have periodically caused the State to backtrack, re-tightening central controls from time to time.

The Chinese legal system is comprised of written statutes and the interpretation of these statutes by the People's Supreme Court. Continuing efforts are being made to improve civil, administrative, criminal and commercial law, especially since China's accession into the WTO. This effort includes the development of laws governing foreign investment in China, including a regime for Sino-foreign cooperative joint ventures and increased foreign participation in mineral resource exploration and mining.

Foreign Investment

Direct foreign investment in China usually takes the form of equity joint ventures (" EJVs "), cooperative joint ventures (" CJVs ") and WFOEs. These investment vehicles are collectively referred to as foreign investment enterprises (" FIEs "). An EJV is a Chinese legal person and consists of at least one foreign party and at least one Chinese party. The EJV generally takes the form of a limited liability company. It is required to have registered capital to which each party to the EJV subscribes. Each party to the EJV is liable to the EJV up to the amount of the registered capital subscribed by it.

The profits, losses and risks of the EJV are shared by the parties in proportion to their respective contributions to the registered capital. There are also rules and regulations governing specific aspects of EJVs or FIEs, including capital contribution requirements, debt equity ratio, foreign exchange control, labour management, land use and taxation. Unlike an EJV, a CJV may be, but need not be, incorporated as a separate legal entity. The relationship between the parties is contractual in nature. The rights, liabilities and obligations of the parties are governed by the CJV contract, as is each party's share of the goods produced or profits generated. A CJV is considered a legal person with limited liability if it is incorporated as a separate legal entity.
 
 
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The establishment of FIEs requires the approval of various Chinese government authorities. Generally, the approval authority is determined on the basis of the total amount of investment involved and the location of the project in question. The State Council must approve restricted foreign invested projects having an investment of US$100 million or more and encouraged and permitted foreign investment projects having an investment of US$500 million or more. Subject to the above, the State Development and Reform Commission and the Ministry of Commerce are authorized by the State Council to approve foreign investment projects under restricted catalogue having an investment of US$50 million or more, and foreign investment projects under the encouraged or permitted catalogue having an investment of US$100 million or more.

Provincial authorities are authorized to approve projects less than the above thresholds under various catalogues. However, companies which conduct exploration or mining are required to obtain the approval of the Ministry of Commerce as required by doc. 70 issued by the State of Council in 2000.

Cooperative Joint Ventures

CJVs are a form of foreign direct investment in China and are governed by the Law of the PRC on Sino-foreign Cooperative Joint Ventures (implemented in 1988 and revised in 2000) and the PRC Sinoforeign Cooperative Joint Venture Law Implementing Rules (implemented in 1995) (collectively the " CJV Law "). Foreign investment in mining in China may also take the form of Sino-foreign equity joint ventures or WFOEs. The CJV Law permits a CJV to choose to operate as a "legal person" by forming a limited liability company, subject to approval by relevant governmental authorities.

A limited liability company would own all of the CJV's assets, and the liabilities of the investor are limited as provided in the CJV contract entered into between them. The CJV Law requires investors in a CJV to make an investment or other contribution, which may take the form of cash, material, technology, land use rights, or other property rights. Investors must satisfy their contribution obligations within the time frame prescribed by their CJV subject to applicable Chinese regulations.

Failure to satisfy contribution obligations by investors may lead to penalties and even to the business license being revoked by the governmental authorities. Profits of a CJV are distributed as agreed by investors in the CJV contract and distributions need not be proportionate to each investor's contributions. The CJV contract also determines how liquidation proceeds are to be distributed when the CJV contract is terminated.

Government Regulations of Mineral Resources and Ownership

Exploration for and exploitation of mineral resources in China are governed by the Mineral Resources Law of the PRC of 1986, amended effective January 1, 1997, and the Implementation Rules for the Mineral Resources Law of the PRC , effective March 26, 1994. In order to further implement these laws, on February 12, 1998, the State Council issued three sets of regulations: (i) Regulation for Registering to Explore Mineral Resources Using the Block System , (ii) Regulation for Registering to Mine Mineral Resources , and (iii) Regulation for Transferring Exploration and Mining Rights (together with the mineral resources law and implementation rules being referred to herein as the " Mineral Resources Law "). Under the Mineral Resources Law, MOLAR is charged with supervision nationwide of mineral resources prospecting and development.
 
The mineral resources administration authorities of provinces, autonomous regions and municipalities, under the jurisdiction of the State, are charged with supervision of mineral resources prospecting and development in their respective administration areas. The people's governments of provinces, autonomous regions and municipalities, under the jurisdiction of the State, are charged with coordinating the supervision by the mineral resources administration authorities on the same level. The Mineral Resources Law, together with the Constitution of the PRC , provides that mineral resources are owned by the State.  The State Council, the highest executive body of the State, regulates mineral resources on behalf of the State. The ownership rights of the State include: (i) occupy, (ii) use, (iii) earn, and (iv) dispose of, mineral resources, regardless of the rights of owners or users of the land under which the mineral resources are located. Therefore, the State is free to authorize third parties to enjoy its rights to legally occupy and use mineral resources and may collect resource taxes and royalties pursuant to its right to earn. In this way, the State can direct and regulate the development and use of the mineral resources of PRC.
 
Mineral Resources Permits

The Provisions in Guiding Foreign Investment and the Industrial Catalogue in Guiding Foreign Investment , which was updated on April 1, 2002, January 1, 2005 and October 31, 2007 (collectively the " Investment Guiding Regulations ") govern foreign investment in PRC and categorize industries into four types where foreign investment is: (i) encouraged, (ii) permitted, (iii) restricted, or (iv) prohibited.

 
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The Provisions in Guiding Foreign Investment and the Industrial Catalogue in Guiding Foreign Investment , which was updated on April 1, 2002, January 1, 2005 and October 31, 2007 (collectively the " Investment Guiding Regulations ") govern foreign investment in PRC and categorize industries into four types where foreign investment is: (i) encouraged, (ii) permitted, (iii) restricted, or (iv) prohibited.

In mining industries, "encouraged" projects include the exploration and mining of coal (and its derived resources), iron, manganese, copper and zinc minerals, etc. "Restricted" projects include the exploration and mining of the minerals of tin, antimony and other noble metals including gold and silver, etc. "Prohibited" projects include the exploration and mining of radioactive minerals and rare earth. Foreign investment is "permitted" if the exploration and mining of the minerals is not included in the other three categories. Subject to the Investment Guiding Regulations, foreign investment in the exploration and mining of minerals is generally encouraged, in particular in relation to minerals in the western region of China.

Until January 2000, the production, purchasing, distributing, manufacturing, using, recycling, import and export of silver was strictly regulated by the Regulations of the PRC on the Control of Gold and Silver . Since then, China's silver market has been fully opened and silver is now treated as a commodity not subject to any special control or restrictive regulation by the State. However, foreign investment in the exploration and mining of silver remains restricted. China has adopted, under the Mineral Resources Law, a licensing system for the exploration and exploitation of mineral resources. MOLAR and its authorized provincial or local departments are responsible for approving applications for exploration permits and mining permits. The approval of MOLAR is also required to transfer those rights.

Applicants must meet certain conditions for qualification set by the State. Pursuant to the Mineral Resources Law, the applicant for a mining right must present stated documents, including a plan for development and use of the mineral resources and an evaluation report of the environmental impact thereof. The Mineral Resources Law allows individuals to excavate sporadic resources, sand, rocks and clay for use as materials for construction and a small quantity of mineral resources for sustenance. However, individuals are prohibited from mining mineral resources that are more appropriate to be mined in scale by an enterprise, the specified minerals that are subject to protective mining by the State and certain other designated mineral resources, as may be determined by MOLAR. Once granted, all exploration and mining rights are protected by the State from encroachment or disruption under the Mineral Resources Law. It is a criminal offence to steal, seize or damage exploration facilities, or disrupt the working order of exploration areas.

Exploration Rights

Exploration permits are registered and issued to "licensees". The period of validity of an exploration permit can have a maximum term of three years. The exploration permit is described by a "basic block". An exploration permit for metallic and non-metallic minerals has a maximum of 40 basic blocks.

When a mineral that is capable of economic development is discovered, the licensee may apply for the right to develop such mineral. The period of validity of an exploration permit can be extended by application and each extension can be no more than two years in duration. During the term of the exploration permit, the licensee has the privileged priority to obtain the mining right to the mineral resources in the exploration area covered by the exploration permit provided it meets the conditions of qualification for mining rights holders. Further, the licensee has the rights, among others, to: (i) explore without interference within the area under permit during the permit term, (ii) construct exploration facilities, and (iii) pass through other exploration areas and adjacent ground to access the permitted area. After the licensee acquires the exploration permit, the licensee is obliged to, among other things: (i) start exploration within the prescribed term, (ii) explore according to a prescribed exploration work scheme, (iii) comply with State laws and regulations regarding labour safety, water and soil conservation, land reclamation and environmental protection, (iv) make detailed reports to local and other licensing authorities, (v) close and occlude the wells arising from prospect work, (vi) take other measures to protect against safety concerns after the prospect work is completed, and (vii) complete minimum exploration expenditures as required by the Regulations for Registering to Explore Resources Using the Block .

 
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Mining Rights

Holders of mining rights, or "concessionaires", are granted licenses to mine for maximum terms of 10 to 30 years, based on the magnitude of the mining project. The concessionaires may extend the term of a mining license with an application at least 30 days prior to expiration of the term. The user fee for the mining right is equal to RMB 1,000 per square kilometre per year. Where there is any prior State investment in or State sponsored geological work conducted on a mineral property, the State must be compensated based on the assessed value of the State input before mining rights can be granted. Concessionaires enjoy the rights, among others, to: (i) conduct mining activities during the term and within the mining area prescribed by the mining license, (ii) sell mineral products (except for mineral products that the State Council has identified for unified purchase by designated units), (iii) construct production and living facilities within the mine area, and (iv) use the land necessary for production and construction, in accordance with applicable law. Concessionaires are obliged to, among other things: (i) conduct mine construction or mining activities within a defined time period, (ii) conduct efficiently production, rational mining and comprehensive use of the mineral resources, (iii) pay resources tax and mineral resources compensation (royalties) pursuant to law, (iv) comply with State laws and regulations regarding labour safety, water and soil conservation, land reclamation and environmental protection, (v) be subject to the supervision and management from both the departments in charge of geology and mineral resources, and (vi) complete and present mineral reserves forms and mineral resources development and use statistics reports, according to applicable law.

Transferring Exploration and Mining Rights

A mining enterprise may transfer its exploration or mining rights to others, subject to the approval of MOLAR or its authorized departments at the provincial or local level, as the case may be. An exploration permit may only be transferred if the transferor has: (i) held the exploration permit for two years as of the issue date, or discovered minerals in the exploration block, which are able to be explored or mined further, (ii) a valid and subsisting exploration permit, (iii) completed the stipulated minimum exploration expenditure, (iv) paid the user fees and the price for prospect rights pursuant to the relevant regulations, and (v) obtained the necessary approval from the authorized department in charge of the minerals. Mining rights may only be transferred if the transferor needs to change the ownership of such mining rights because it is: (i) engaging in a merger or split, (ii) entering into equity or cooperative joint ventures with others, (iii) selling its enterprise assets, or (iv) engaging in a similar transaction that will lead to the alteration of the property ownership of the enterprise. A mining permit may only be transferred if the transferor has: (i) commenced production for no less than one year, (2) a valid and subsisting mining permit without title dispute, and (iii) paid the user fees, the price for the mining right, resource tax and mineral resource compensation pursuant to laws.

Environmental Laws

In the past ten years, laws and policies for environmental protection in China have moved towards stricter compliance and stronger enforcement. The basic laws in China governing environmental protection in the mineral industry sector of the economy are the Environmental Protection Law , the Environment Impact Assessment Law and the Mineral Resources Law . The State Administration of Environmental Protection and its provincial counterparts are responsible for the supervision of implementation and enforcement of environment protection laws and regulations. Provincial governments also have the power to issue implementing rules and policies in relation to environmental protection in their respective jurisdictions. Applicants for mining rights must submit environmental impact assessments and those projects that fail to meet environmental protection standards will not be granted licenses.

In addition, after exploration the licensee must perform water and soil maintenance and take steps towards environmental protection. After the mining rights have expired or the concessionaire stops mining during the permit period and the mineral resources have not been fully developed, the concessionaire shall perform water and soil maintenance, land recovery and environmental protection in compliance with the original development scheme, or must pay the costs of land recovery and environmental protection. After closing, the mining enterprises shall perform water and soil maintenance, land recovery and environmental protection in compliance with mine closure approval reports, or must pay the costs of land recovery and environmental protection.
 
Chinese Foreign Cooperative Joint Ventures

LEGAL FRAMEWORK

Each of the various joint venture entities through which the Company carries or may carry out business in China has been or will be formed under the laws of China as a sino-foreign CJV enterprise and is or will be a legal person with limited liability. All joint ventures entered into, or to be entered into, by the company must be approved by both the Ministry of Commerce (" MOC ") and the State Development and Reform Commission (" SDRC ") in Beijing or their provincial bureaus.

 
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The establishment and activities of each of the Company's joint venture entities are governed by the Law of the PRC on Sino-Foreign Cooperative Joint Ventures and the regulations promulgated there under (the " China Joint Venture Law "). As with all sino-foreign CJV enterprises, the Company's joint venture enterprises will be subject to an extensive and reasonably well-developed body of statutory law relating to matters such as establishment and formation, distribution of revenues, taxation, accounting, foreign exchange and labour management. On January 1, 1997, an amendment to the Mineral Resources Law of China became effective. Among other things, the amended law deals with foreign ownership of Chinese mines and mineral rights, and allows, under some circumstances, the transfer of exploration rights and mining rights.

Pursuant to this law, new regulations were made effective on February 12, 1998. MOLAR administers a new computerized central mineral title registry established in Beijing which has streamlined the application for exploration and mining permits.

A joint venture contract sets out the entire agreement among the parties and contemplates the establishment of a "Chinese Legal Person," a separate legal entity. Before a joint venture can be created, an assessment or feasibility study of the proposed joint venture must be prepared and approved by the SDRC or its provincial bureau, which will consider whether the proposed project broadly conforms to the economic policy issued by the government and any prescribed regulations.

Upon receiving SDRC approval in principle, the parties then negotiate and prepare a joint venture contract and submit it to the MOC, or its provincial bureaus, which approves the specific terms of all joint venture contracts between Chinese and foreign parties. Within one month after the receipt of a certificate of approval from MOC, a joint venture must register with the State Administration of Industry and Commerce (the " SAIC "). Upon registration of the joint venture, a business license is issued to the joint venture. The joint venture is officially established on the date on which its business license is issued. Following the receipt of its business license, the joint venture applies to the MOLAR to approve and grant to the joint venture its exploration permits and/or mining licenses.

GOVERNANCE AND OPERATIONS

Governance and operations of a sino-foreign CJV enterprise are governed by the a Chinese Joint Venture Law, the parties' joint venture agreement and by the articles of association of each joint venture entity. Pursuant to relevant Chinese laws, certain major actions of the joint venture entity require unanimous approval by all of the directors present at the meeting called to decide upon actions, such as amendments to the joint venture agreement and the articles of association; increase in, or assignment of, the registered capital of the joint venture; a merger of the joint venture with another entity; or the termination and dissolution of the joint venture enterprise.

TERM

Under the joint venture agreement, the parties will agree to a term of the joint venture enterprise from the date a business license is granted. However, the term may be extended with the unanimous approval of the board of directors of the joint venture entity and the approval of the relevant Chinese governmental entities.

EMPLOYEE MATTERS

Each joint venture entity is subject to the Chinese employment laws and regulations. In compliance with these laws and regulations, the management of the joint venture enterprise may hire and discharge employees and make other determinations with respect to wages, welfare, insurance and discipline of its employees. Generally, in the joint venture agreement, the standard of salary, social welfare insurance and traveling expenses of senior management will be determined by the board of directors of the joint venture entity. In addition, the joint venture will establish a special fund for enterprise development, employee welfare and incentive fund, and a general reserve. The amount of after-tax profits allocated to the special funds is determined at the discretion of the board of directors on an annual basis.
 
DISTRIBUTIONS

After provision for a reserve fund, an enterprise development fund and an employee welfare and incentive fund, and after provision for taxation, the profits of a joint venture enterprise will be available for distribution to the Company and its other shareholders, such distribution to be authorized by the board of directors of the joint venture entity.
 
 
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ASSIGNMENT OF INTEREST

Under the China Joint Venture Law, any assignment of an interest in a joint venture entity must be approved by the relevant governmental authorities. The China Joint Venture Law also provides for pre-emptive rights and consent of the other party for proposed assignments by one party to a third party.

LIQUIDATION

Under the China Joint Venture Law, the joint venture entity may be liquidated in certain limited circumstances including the expiry of its term or any term of extension, inability to continue operations due to severe losses, failure of a party to honour its obligations under the joint venture agreement and articles of association in such a manner as to impair the operations of Chinese governmental entities and force majeure.

RESOLUTION OF DISPUTES

In the event of a dispute between the parties, attempts will be made to resolve the dispute through consultation. This is the practice in China and the Company believes that its relationship with Chinese governmental entities is such that it will be able to maintain a good working relationship with respect to the operations of its joint venture enterprises. In the absence of a friendly resolution of any dispute, the parties may agree that the matter will be settled by an arbitration institute. The parties may jointly select an arbitration institute to resolve disputes in the joint venture contract if it has been stated in the joint venture contract or when the dispute is raised. Awards of the arbitration institute are enforceable in accordance with the laws of China by Chinese courts. In the absence of a valid arbitration agreement, both parties or either party may decide to resort to Chinese courts to resolve disputes between them over the terms of the joint venture contract.

EXPROPRIATION

The China Joint Venture Law also provides that China generally will not nationalize and requisition enterprises with foreign investment. However, in special circumstances where demanded by social public interest, enterprises with foreign investment may be requisitioned by legal procedures, and appropriate compensation [as determined by the state] will be paid.

DIVISION OF REVENUES

Revenues derived from operating joint ventures, once all necessary agreements, permits and licenses are obtained, will be divided between the Company and the entities which are parties to the joint venture according to the terms of each individual joint venture, which terms will vary from project to project. The Company will be subject to various taxes on its revenues.

C.               ORGANIZATIONAL STRUCTURE

The following chart sets forth the Company's corporate structure, including its significant subsidiaries, related parties and their jurisdictions of incorporation along with the various mineral properties held by each of them, as at the date of this Annual Report:
 
 
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INTERCORPORATE RELATIONSHIPS
MINCO GOLD CORPORATION
(formerly “ Minco Mining & Metals Corporation ” )
 


The chart above shows that Guangzhou Mingzhong Mining Co. Ltd. (" Mingzhong ") owns 100% of the silver mineralization on the Changkeng Property.  The Company assigned its 51% interest in the Silver Mineralization to Foshan Minco.  The remaining 49% interest in the silver mineralization on the Changkeng property remains with the other minority shareholders of Mingzhong.

Minco Silver is a publically traded company listed on the TSX under the symbol "MSV", and is a related party to the Company through common management.  The Company also owns approximately 22.15% of the common shares of Minco Silver.  Foshan Minco, a subsidiary of Minco China and the Company, is beneficially owned by Minco Silver pursuant to a confirmation agreement between Minco Silver, Minco Gold and Minco China dated August 24, 2006 (the " Confirmation Agreement ").  Pursuant to the Confirmation Agreement, Minco Gold and Minco China agreed hold all licenses, permits and other assets held by Minco China in respect of the Fuwan Project and all licenses, permits and other assets acquired subsequent to the date of the Confirmation Agreement in trust for Minco Silver.  Foshan Minco is consolidated into Minco Silver for accounting purposes.

The legal structure described above, reflects restrictions under Chinese law for foreign companies to invest in registered Chinese entities. Funding from Minco Silver to Foshan Minco must pass through Minco China. Minco China is a wholly foreign owned entity (" WFOE ") for the purposes of Chinese law and is the parent company of Foshan Minco under Chinese law.  This transaction flow will be necessary until such time as Foshan Minco becomes Minco Silver's legal subsidiary in China when Minco Silver incorporates a WFOE to allow it to pass funds directly to Foshan Minco.  As Foshan Minco is a subsidiary of Minco Silver for accounting purposes, loans or funds advanced from Minco Silver to Minco Gold or Minco China are discharged when such funds are advanced from Minco China to Foshan Minco as the funds have moved back inside the Minco Silver consolidated group.  Minco Gold and Minco China are used by Minco Silver as conduits to transfer funds to Foshan Minco, however, they have no ongoing obligation with respect to funds advanced through to Foshan Minco and are not subject to repayment obligations.
 
 
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D.                    DESCRIPTION OF PROPERTIES

The following is a discussion of the properties that Minco Gold holds directly and through its subsidiaries.

I.                       CHANGKENG GOLD PROPERTY

Location

The Changkeng gold deposit is located approximately 45 km southwest of Guangzhou, the fourth largest city in China with 13 million people and the capital city of Guangdong Province. The project is adjacent to Minco Silver Corporation's Fuwan Silver Deposit and situated close to well established water, power, and transportation infrastructure.
 
 
Ownership

Guangzhou Mingzhong Mining Co., Ltd. ("Mingzhong"), a cooperative joint-venture established among Minco China, GGB, Guangdong Gold Corporation, and two private Chinese companies to jointly explore and develop the Changkeng Property, signed a purchase agreement in January 2008 to buy a 100% interest in the Changkeng Permit on the Changkeng Property from 757 Team. Total purchase price (the "Purchase Price") has been appraised to be RMB 49 million (approx. US $6.8 million). The transfer of the Changkeng Exploration Permit from 757 Exploration Team to Mingzhong was approved by MOLAR in 2009.


 
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Minco Gold, through Minco China, owns 51% equity interest in Mingzhong. Minco China committed to a total contribution of RMB 51 million (approximately CAD $8.2 million) and the remaining, minority shareholders, committed to contributions totaling RMB 49 million (approximately CAD $7.9 million) for their 49% equity interest in Mingzhong. Of the amount of RMB 100 million (approximately CAD $16.1 million), RMB 48 million (approximately CAD $7.3 million) will be used to purchase the exploration permit from the 757 Team and the remaining funds will be used for exploration and development of the Changkeng Property.

The Geology

The Changkeng Gold Property is covered by the 1.18 km2 area over the Changkeng Permit.

The Changkeng Gold Deposit is located at the northwest margin of a triangular Upper Paleozoic fault basin, at the margin with the northeast trending Shizhou fault to the northwest, the east-west trending Dashi fault to the south and the northwest trending Xijiang fault to the northeast. Precious and base metal occurrences and deposits are known to occur predominantly along the margins of the 550 km² basin.

The major structural control at Changkeng is an upright, open syncline with its axis trending northeast. The syncline is composed of Lower Carboniferous limestone and Triassic siliciclastic rocks. A low-angle fault zone is developed along the contact between the Lower Carboniferous unit and the Upper Triassic unit. The fault zone is from several meters to tens of meters in width and is occupied by lenticular, brecciated and silicified rocks, brecciated limestone, and silicified sandy conglomerate. The fault zone may have acted as both a feeder conduit and as a host structure for the gold and silver mineralization in the area. A set of second-order faults parallel to the major fault were developed in the limestone at the footwall, and silver mineralization is known to occur in the second-order faults on the Fuwan Property to the south.

Gold was discovered at Changkeng in early 1990 by systematic follow up of stream sediment and soil geochemical anomalies identified from surveys completed by the Guangdong Provincial government. Illegal, small scale mining began in 1991 and removed most of the oxidized, near surface mineralization. Based on 13 surface trenches and 81 diamond drill holes, P&E Mining Consultants Inc. ("P&E") of Brampton, Ontario, prepared an initial NI 43-101 compliant resource estimate on the deposit in March of 2008 with a resource update in March 2009 (collectively, the "Technical Reports") The Technical Reports can be found on SEDAR and are incorporated by reference herein.  The detailed resource estimates are provided below.

The Changkeng deposit is comprised of three mineralized zones, termed the CK1, CK2 and CK3 Zones. The overall strike length of the deposit, incorporating these zones, is approximately 1200 metres in a N065° direction, with a cross-strike width of between 110 to 380 metres. The deposit outcrops on surface and the deepest zone of mineralization intersected by drilling to date is approximately 280 metres below surface. The average width of a mineralized intersection is 10.4 metres (apparent thickness).

The Changkeng Gold Deposit falls into the broad category of sediment hosted epithermal deposits. Gold mineralization occurs as lenticular bodies in the brecciated Triassic clastic rocks at the upper portion of the synform zone. The gold zone tends to pinch out toward the hinge of the syncline where it is replaced by silver mineralization at the Fuwan Silver Deposit.

Drilling Program

The Company completed a comprehensive exploration program on the Project during late 2007 to the end of 2008. The exploration program consisted of drilling of 66 diamond holes and extensive hydrological study as well as geotechnical survey. The drilling program was designed to expand the known resources through step-out drilling, as well as increase the indicated resources through in-fill drilling, with the first 22 holes mainly testing the wider spaced drill targets throughout the entire property. Drilling was conducted on an approximate 40 meter section spacing with holes on section between 20 meters to 80 meters apart.

At the completion of the 2008 drilling program, the known gold mineralization at the Changkeng Property was extended by approximately 400 meters along strike to the east-northeast; from just less than 900 meters to approximately 1200 meters in length. Mineralization was also extended down dip in localized areas along the eastern end of the known mineralization.
 
 
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Resource Estimates

A resource estimate was made by P&E Mining Consultants Inc. for the Changkeng Gold Project by utilizing diamond drill data from a total of 127 drill holes and 13 surface trenches. On March 25, 2009, the Company reported an updated NI 43-101 resource estimate for the Changkeng project, including the calculations of the distinct and separate gold dominant and silver dominant zones.

The following is a summary of the updated resource calculation prepared for the Changkeng Property. The definitions of Indicated and Inferred Resources are in compliance with the CIM Definitions and Standards on Mineral Resources and Mineral Reserves, December 11, 2005.

Minco Gold has 51% ownership of the Changkeng Project which has 2 distinct and separate mineralized zones (a gold ("Au") dominant zone and a silver ("Ag") dominant zone). The gold portion of the resource estimate has been expanded and upgraded to contain indicated resources of 4.0 million tonnes @ 4.89 g/t Au for a total of 623,100 oz Au. This represents a 65% increase in gold ounces for the indicated resource category. The estimate also contains inferred resources of 4.0 million tonnes @ 3.01 g/t Au for a total of 386,800 oz Au.

March 2009 P&E Gold Dominant Portion of Resource Estimate @ 1.2 g/t AuEq Cut-Off

Classification
Tonnes
Au
(g/t)
Au
(oz)
Ag
(g/t)
Ag
(oz)
AuEq **
(g/t)
AuEq **
(oz)
Indicated
3,961,000
4.89
623,100
11.2
1,423,000
5.08
646,800
Inferred
4,001,000
3.01
386,800
9.5
1,218,000
3.16
407,000

**The AuEq grade was calculated from Au US$800/oz and Ag US$14/oz with respective recoveries of 95% and 90%. The calculated Au:Ag ratio was 60:1 Pb and Zn values were too low to be of economic interest for resource reporting purposes.

1.  
Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.
2.  
The quantity and grade of reported inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these inferred resources as an indicated or measured mineral resource and it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category.

The Changkeng Project also contains a portion of a second distinct deposit which is silver dominant. Minco Gold assigned its 51% ownership in these resources to Minco Silver Corporation pursuant to the assignment agreement dated August 20, 2004. The deposit contains indicated resources of 5.6 million tonnes @ 170 g/t Ag for a total of 30,708,000 oz Ag and inferred resources of 1.1 million tonnes @ 220 g/t Ag for a total of 7,517,000 oz Ag. This represents a 70% increase in silver ounces for the indicated resource category. The increase is due to the recent drilling which upgraded inferred resources and outlined new resources.

March 2009 P&E Silver Dominant Portion of Resource Estimate @ 35 g/t Ag Cut-Off

Classification
Tonnes
Ag
(g/t)
Ag
(oz)
Au
(g/t)
Pb
(%)
Zn
(%)
Indicated
5,622,000
170
30,708,000
0.33
0.35
1.02
Inferred
1,063,000
220
7,517,000
0.24
0.61
1.36

1.  
Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.
2.  
The quantity and grade of reported inferred resources in this estimation are uncertain in nature and there has been insufficient exploration to define these inferred resources as an indicated or measured mineral resource and it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category.

 
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The resource estimate prepared on the Changkeng Deposit also includes minor amounts of lead (Pb) and zinc (Zn).

The most recent site visit was made to the Changkeng Property on January 9, 2009. Independent verification samples of the current drill core were taken at that time.
 
Future Plan

Minco Gold plans to complete the necessary permitting requirements, the national exploration report, further metallurgical studies for the Changkeng Gold Property.

II. Longnan Properties (Yangshan, Yejiaba And Xicheng Projects)
 
 
Minco Gold’s wholly-owned subsidiary, Minco China, presently holds 12 exploration permits in the Longnan region of south Gansu Province, China. Five of the permits are located in the Tangshan belt situated east and north of the Anba deposit and the four Yejiaba exploration permits are located on a regional structural belt parallel to the Yangshan gold belt.  Three permits are located in a geological terrain immediately north of the Yangshan belt on the Xicheng Pb – Zn belt and are referred to as the Xicheng East permits.  All 12 exploration permits are located over regional geochemical gold anomalies with host rocks and structure similar that at Anba and other gold and base metal deposits in the region.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

The Longnan projects are located at the southern part of Gansu province, 30km north-east from Longnan (Wudu) city and 250km south-west from the nearest rail way station and the airport in Tienshui city. The area is connected with the  
provincial center Lanzhou and major cities with paved roads, A new highway and a railway are under construction to connect Longnan city with Chengdu and Lanzhou. The construction is to be completed in 2014. The project area lies in the transition area of China's steppes with the Southern Gansu Plateau in the west, Sichuan Basin in the south, Qinling Mountains and Hanzhong Basin in the east, as well as the Loess Plateau in the north. The terrain is higher in the northwest and lower in the southeast. High peneplenized mountains and deep valleys interweave with hills and basins. Elevations vary from 1900m to 2600m above the sea level. Longnan area has a temperate, monsoon-influenced semi-arid climate with chilly winters and hot, moderately humid summers. Due to the protected valley location and the southerly location within the province, the area is one of the warmest in Gansu, with annual temperatures ranging from 10 to 15 °C (50 to 59 °F). The annual precipitation is 400 to 1000 mm, while there are between 160 to 280 frost free days and the annual mean sunshine total is 1,850 sunlight hours. Rainfall tends to be greatest during the summer.
The population of Longnan district is 540,000 (estimated in 2004). The area surrounding the Yejiaba Project is sparsely populated by people in small scattered villages. Labor is available locally. The area is rich with building materials.


 
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Yejiaba Project

Project Description and Location

The Yejiaba Sub-project Area (the "Yejiaba Project") consists of four exploration permits.  Initially 14 multi-element anomalies in stream sediment samples have been delineated in the Yejiaba project area, a belt parallel to and north of the Yangshan Project.  The largest composite anomaly, the Madigou anomaly, is 23 km 2 in area and characterized by coincident Au, Ag, As, and Sb values.  Subsequent follow-up for selected stream sediment anomalies was conducted with detailed soil sampling. Peak values in soil anomalies are more than 100 ppb for gold and from 1,000 to 14,000 ppb for silver.

History

The area comprising the Longnan properties was staked by the Company.  To its knowledge, no exploration work was previously undertaken on the property.

Exploration

Several zones of multi-metal mineralization were discovered in the Shajinba area during the 2009 exploration program which highlighted a +10 km hydrothermally altered structural zone along the regional unconformity.  The width of the mineralized zone varies from 5 to 25 m.   In the southwest portion of the structural trend poly-metallic (iron – silver – lead - zinc) mineralization is located in the hanging wall while the gold mineralization is located in the footwall in the northeast portion of the structural trend.

In the Shajinba area, a large poly-metallic mineralized zone 5 to 25 m in width in a regional unconformity ywas identified during the 2009 exploration program which consisted of traversing and trenching.  The regional unconformity divides massive hanging wall limestone from the heavily folded thin-bedded footwall limestone which are intruded by highly altered dykes.  This type of mineralization can contain of high contents of iron, silver, lead and zinc.   Further geological mapping, soil geochemical, ground magnetic and IP surveys of the area have been completed.  The geochemical soil sampling highlighted numerous gold anomalies over an area of 700 metres long by 100 metres wide. The anomalies are open along strike to the east.  Trenching in the area revealed a 5 metre wide zone of silicification with arsenopyrite, galena and stibnite. Mineralization is controlled by a regional thrust fault zone dividing phyllite in the foot wall and conglomerate in the hanging wall.

As a part of the 2010 exploration program, Minco completed ground magnetic and induced polarization (IP) surveys at the Yejiaba property to test previously discovered zones of silver and gold mineralization. The ground magnetic survey covers area of 10.8 sq.km where 73.95 lin.km of magnetic measurements were completed at 10.0 spacing. IP surveys only covered the central area of the Shajinba target area with known mineralization and corresponding geochemical anomalies. Maximum depth of investigation was approximately 550 metres. The result was the successful mapping of the regional thrust fault which is the main control to known gold mineralization in the area. The fault is very distinctive in both resistivity and IP methods and it was tracked for 1200 metres along strike and 500 metres down dip. The geophysical survey results have been successful in targeting  possibilesignificant gold mineralization at the Yejiaba property and will be used in the designing of a drilling program.
 
 
29
 

Mineralization

Major semi-regional geochemical anomalies delineated in 2005 were followed up with traverse line investigation, soil sampling, and sketch mapping in 2006 and 2007.  Further detailed trenching and test drilling were conducted over significant soil gold anomalies and alteration and mineralization zones.  Significant gold, silver, antimony, lead and zinc mineralization has been discovered in all the three sub-project areas, including the following mineral occurrences:

Shajinba Poly-metallic Occurrences : Within the Yejiaba project area, detailed traversing and surface trenching identified a significant silver - iron – lead - zinc enriched poly-metallic zone with a width of 5 to 25 m.  The best continuous surface channel sample results are:  4.24 g/t Ag, 5.09 % Pb, 0.65 % Zn, 29.5 % Fe over 11.0 m; 102.8 g/t Ag, 0.15 % Pb, 0.17 % Zn, 26.1 % Fe over 8.0 m; 117.9 g/t Ag and 31.5 % Fe over 3.0 m; 100.2 g/t Ag, 1.25 % Pb and 46.6 % Fe over 5.0 m; and 61.5% Fe over 2.29 m.

Shajinba Gold Occurrences : Within the Yejiaba project area, detailed traversing and surface trenching identified significant gold associated with regional structural trends . The best channel sample results to date are:  5.56 g/t Au over 4.7 m; 1.63 g/t Au over 2.0 m; 3.56 g/t Au over 4.3 m; and 1.18 g/t Au over 3.0 m.

Baimashi Gold Occurrences : High-grade occurrences of gold and antimony were discovered 3km west from the Shajina occurrences in the same structural trend and lithological package. The best channel sampling results averaged:  11.82 g/t Au over 3.5m; 3.62 g/t Au over 6.4m; and 4.41 g/t Au over 2.0 m.

Sampling and Security of Samples

In 2009, channel sampling was undertaken on sections of the Shajinba area identified during the 2009 exploration program.  The regional unconformity divides massive hanging wall limestone from the heavily folded thin-bedded footwall limestone which are intruded by highly altered dykes.

The following channel sample results have been completed and were previously disclosed by the Company in a news release disseminated on March 23, 2011 entitled " Minco Gold Defines Significant Poly-Metallic Mineralization at Yejiaba Property":
 
 
30
 

 

   

Average Grade

 
Sample No.

Width (m)

Ag (g/t)

Pb (%)

Zn (%)

Fe (%)

Alteration

YJB-09-2250 to
YJB-09-2252

2.3m

89.00

0.27

0.01

-

Silicification with limonite and antimonite

YJB-09-2269 to
YJB-09-2279

11.0m

4.24

5.09

0.65

29.5

Silicification with hematite, pyrolusite

YJB-09-2430

1.1m

71.0

0.14

0.004

-

Silicification

YJB-09-2487 to
YJB-09-2494

8.0m

102.8

0.15

0.17

26.1

Silicification with hematite, pyrolusite

YJB-09-2561 to
YJB-09-2563

3.0m

117.9

0.55

0.18

31.5

Silicification with hematite, pyrolusite

YJB-09-2585 to
YJB-09-2589

5.0m

100.2

1.25

0.11

46.6

Silicification with hematite, pyrolusite

YJB-09-2631 to
YJB-09-2632

2.0m

169.7

1.15

0.32

41.5

Silicification with hematite, pyrolusite

 

In 2010, additional channel sampling from trenches returned gold values ranging from 0.12 to 5.58 g/t Au over widths from 1.7 to 10.2 m. Certain of these channel sample results were disclosed in the Company's news release disseminated on October 13, 2010 entitled Minco Gold Expands Mineralization Zones Along Regional Trend At Yejiaba Property.  The channel sample results are as follows.

 
 
31
 

 

 

 

Trench No.

Width (m)

Average Grade

Alteration

Au (g/t)

Ag (g/t)

Pb (%)

Zn (%)

Sb (%)

As (%)

YJB-09-04

2.0

0.38

<1

0.00

0.01

0.07

0.01

Silicification with hematite, limonite

YJB-09-04

4.0

0.62

<1

0.00

0.00

0.01

0.02

Silicification with limonite

YJB-10-04

4.0

0.12

6.0

1.30

0.45

1.60

0.13

Silicification with stibnite, galena

YJB-10-06

2.0

0.01

17.5

0.00

0.01

0.00

0.01

Quartz stringers with pyrite

YJB-10-12

3.0

0.29

7.3

0.11

0.01

0.08

0.01

Silicification with hematite

YJB-10-14

7.0

0.23

3.6

0.01

0.01

0.00

0.06

Silicification with limonite

YJB-10-14

10.2

0.27

10.1

0.05

0.01

0.00

0.08

Silicification with limonite

YJB-10-14

4.7

5.58

47.1

0.20

0.02

0.01

1.35

Silicification with limonite, arsenopyrite

YJB-10-16

4.0

0.28

1.7

0.04

0.02

0.02

0.05

Silicification with hematite

YJB-10-20

2.0

1.63

0.5

0.00

0.01

0.00

0.16

Silicification with pyrite, arsenopyrite

YJB-10-21

3.0

0.35

2.4

0.03

0.00

0.08

0.01

Silicification with hematite

YJB-10-22

2.0

0.13

36.2

0.17

0.02

0.11

0.03

Silicification with pyrite

YJB-10-23

1.7

0.36

0.6

0.00

0.01

0.01

0.02

Silicification

YJB-10-28

2.1

0.21

2.3

0.00

0.01

0.05

0.23

Silicification

YJB-10-29

4.3

3.56

7.1

0.06

0.02

0.06

0.10

Silicification with hematite, limonite

YJB-10-35

3.0

1.18

4.6

0.01

0.02

0.12

0.01

Silicification with hematite, pyrite

YJB-10-36

1.0

1.12

<0.5

0.00

0.00

0.00

0.01

Silicification with hematite, pyrite


The information summarized in the tables above is based on representative channel sampling, majority of the samples was 10cm wide, 5cm deep and 1.0m long. Length of channel samples never exceeded 1.5m. Depending on specific gravity of sampled material, weight of samples varied from 12.0kg to 20.0kg for 1.0m long samples. The sampled material is weathered to different extents: the poly-metallic mineralization with high silver and iron is hosted by limestone and is resistant against weathering, the gold mineralization is hosted by calcareous phyllite and granite dykes that were moderately weathered with loss of sulphydes 10% to 50%.  Samples were taken by experienced Company’s samplers under supervision of geologists.

Samples were prepared and assayed at SGS - CSTC Standards Technical Company, TEDA Tianjin, PRC under the supervision of an International certified assayer. Samples were analyzed with fire assay with AAS finish for gold and aqua regia with an AAS finish for other elements. Samples with high iron content were additionally analyzed with XRF method for iron. External check samples were sent to Intertek Laboratories in Beijing, PRC for additional check analysis.
 
 
32
 

2011 EXPLORATION PROGRAM

The 2011 exploration program on the Yejiaba Project was designed to further test the gold mineralization zone discovered in 2010.  It was comprised of an initial drilling program at the Shajinba gold zone and a trenching program at the Baimashi gold zone located only 3.0km away within the same structural and metallogenic trend.  The company is planning an exploration program including 3000m of drilling, 3000m of tunneling and surface exploration in 2012.

Highlights of the 2011 exploration program, which were disseminated in a news release by the company on March 30, 2012 entitled "Minco Gold Expands Mineralization at Shajinba and Baimashi Gold Zones, Yejiaba Property", include:

A.  
Shajinba Zone

DRILLING:

Drilling totaled 2,829.02 metres, covering an area of 1000m by 400m. Drill hole spacing ranged from 250m to 400m, depths ranged from 288.03m to 501.4m, targeting two zones trenched in 2009 and 2010: targeted zones were gold mineralized, coinciding with surface trace of a thrust fault, gold-in-soil anomaly, and a poly-metallic mineralized zone. Drill results returned lower gold values than surface trenching, but provided verification of the structural interpretation based on surface work and geophysical surveys and discovery of several significant mineralized intersections at depth.

Drill hole SJB-003A: in an area with no surfical signs of mineralization, due to conglomerate cover, intersected a wide fault zone comprised of black carbonaceous phyllite and tectonic gouge with numerous dykes of porphyry granite to quartz diorite, a portion of which averaged 0.13g/t Au over 43.56 metres. Additional drilling in the vicinity may lead to a wide ore-grade zone of mineralization.

Drill hole SJB-005: within poly-metallic mineralization, intersected a pure hematite vein in massive limestone. Iron content averaged 61.5% over 2.29 m. The vein was traced on surface for 200 metres at similar grade and width. The drill intersection doubles its strike extension to 400 metres. The vein is open down-dip and along strike to the East.

The following table provides more details on results of drilling completed at the Shajinba Zone in 2011.
 
 
33
 

Hole-ID
Location,
Azimuth
And Dip
 
Down hole Depth, m
Width,
M
Average Grade
Alteration
 
From
To
Au,
g/t
Ag,
g/t
Fe,
%
SJB-001
37193
18505408.00E
Az163, Dip-65
 
No mineralized intersection
-
-
-
Brecciation in phyllitic limestone, calcareous phyllite
SJB-002
37192
18505088.00E
Az171, Dip-65
 
No mineralized intersection
-
-
-
Brecciation in phyllitic limestone, calcareous phyllite
SJB-003A
37194
18505233.00E
Az173, Dip-71.8
 
287.57
331.13
43.56
0.13
-
-
Granite dykes and phyllite with quartz-carbonate veinlets
SJB-004
37196
18504817.00E
Az193, Dip-69
 
117.02
118.12
1.10
1.38
-
-
Brecciated and silicified dyke of granite
 
348.7
350.7
2.0
0.40
-
-
Calcite with limonite in massive limestone
SJB-005
 
37197
18504954.00E
Az180, Dip-65
 
104.96
107.25
2.29
-
-
61.50
Massive hematite in massive limestone
 
293.99
294.99
1.00
0.60
-
-
Brecciated and limonitized dyke of granite
 
302.76
308.76
6.00
0.17
-
-
Thin bedded phyllitic limestone with hematite in rock matrix
SJB-006
37197
18504954.00E
Az338, Dip-60
 
21.47
26.13
4.66
0.22
12.2
-
Quartz-carbonate veining with pyrite in brecciated granite and limestone
SJB-007
37197
18504634.00E
Az183, Dip-55
 
118.35
119.57
1.22
0.66
-
-
Silicified dyke of granite
 
125.57
126.87
1.30
0.57
-
-
Silicified dyke of granite

Induced Polarization (IP):

Continuous and distinctive IP anomalies were tested within three trenches at the Shajinba Zone. Two 80m spaced trenches returned the following results:

0.59 g/t Au over 6.6 m;
0.20 g/t Au over 6.0 m.

The IP anomaly extends for further 800 metres and remains untested.

B. Baimashi Zone

Trenching:

The Baimashi gold-antimony zone covers an area of 3km by 1 km, located 3.0 km west from the Shajinba zone. It possesses numerous occurrences of gold and antimony, clustered in four Zones, hosted in massive limestone and calcareous phyllite.  Widely spread grab samples returned gold values between 5.0 Au g/t to 50.0 Au g/t  and antimony content was up to 15.0%. Mineralized intersections in the trenches were sampled with 5cm deep by 10cm wide and generally 1m long channel samples.

Zone 1 Significant Values:

3.62 g/t Au over 6.4 m;
4.41 g/t Au over 2.0 m;
2.26 g/t Au over 1.2 m, and
0.53 g/t Au over 6.0 m.

The zone extends for 500 metres and has been tested with six trenches.

Zone 2 Significant Values:

11.82 g/t Au over 3.5 m.
 
 
34
 

The zone is 1.0km long and was tested with 12 trenches but gold content in trenches is generally less than 1.0 g/t Au.

The Company has commissioned a NI 43-101 compliant technical report on the Yejiaba Project.

Yangshan Project Area

The Yangshan sub-project Area (the "Yangshan Project") consists of five exploration permits.  The geochemical data in the Company’s stream sediment sampling program at the northeast extension of the Anba gold deposit outlines 20 composite anomalies of Au, As, Sb or Ag which have been delineated in the survey area.  The gold anomalies coincide with strong As and Sb values located in a Devonian clastic rock unit closely associated with a regional arcuate fault structure.  The structural and geological setting and geochemical features of these anomalies are comparable to those of the known areas of gold mineralization along the Yangshan gold trend.  The geochemical anomalies and structural interpretations provided a base or starting point for follow-up exploration over the years. The Yangshan Project is 267.3km 2 .

History

The area comprising the Longnan properties was staked by the Company.  To its knowledge, no exploration work has been undertaken on the property.

Exploration

In 2009, the Company commenced a traversing and trenching program in the Jiangjiashan-Henjiawan and Oujiaba-Dianziping blocks at the Yangshan Project. The amount of work completed is as follows: traversing – 167.0 km, trenching – 971.9 lineal m, channel sampling – 387 samples, chip sampling – 253 samples, grab sampling – 428 samples.

The Company discovered a large anomalous gold zone on its 100% owned Oujiaba property, within the Yangshan gold belt. The discovery has been traced for approximately 6 kilometres and has the same host lithologies as the Anba gold deposit.

Continuous channel samples were taken in four sections along the 6 km mineralized structure. Significant results were:

·  
Line 0                           1.18g/t Au over 4.7 m
·  
Line 400                      13.2 g/t Au over 10.0 m
·  
Line 496                      0.33 g/t Au over 4.0 m
·  
Line 60                        80.60g/t Au over 1.5 m

The gold enriched, hydrothermally altered structural trend was discovered during the 2009 exploration program.  The mineralization has a width ranging from 5 to 10 m and is hosted along the contact of hanging wall limestone and heavily folded footwall phyllite which is intruded by numerous intrusive dykes.

Ground magnetic surveying, soil sampling, geological mapping and sampling have been completed at the Yangshan Project.  Priority was given to geochemical methods that tested larger areas along the Yangshan main structure zone.  3,000 geochemical samples were taken in the area in 2010. Geochemical soil, stream and rock chip sampling revealed anomalies of gold and arsenic over zones of regional faults, unconformities, shear zones and other structural features in the area. Approximately 4% of the total number of samples returned gold values greater than 0.1 g/t and 1% of gold values was greater than 1.0 g/t. The best concentrations of gold were clustered  within the central and eastern parts of the Oujiaba-Dianziping permit as well as at the south-western part of the Zoujiashan-Jiaoyanshan permit.

Mineralization

Major semi-regional geochemical anomalies delineated in 2005 were followed up with traverse line investigation, soil sampling, and sketch mapping in 2006 and 2007.  Further detailed trenching and test drilling were conducted over significant soil gold anomalies and alteration and mineralization zones.  Significant Au, As, Sb and Ag mineralization has been discovered in all the three sub-project areas, including the following mineral occurrences:
 
 
35
 

Yangshanli Gold Occurrence :   Eight structurally controlled alteration and mineralization zones have been identified with the largest and strongest composite anomalies of Au, As, Sb and Ag at the central section of the Yangshan Project.  Individual zones range from several hundred to more than 1,600 metres in length.  The average grade of gold mineralization intersected in trenches is from 0.3 to 1.03g/t and width of mineralization zones varies from 4 to 13.4 metres.  Significant channel sample intersections include 1.02g/t Au over 7m, 0.79g/t Au over 10.3m, and 0.5g/t Au over 10.9m.

Yuezhao Gold Occurrence : A gold zone has been identified on the Yuezhao area located at the east end of the Yangshan Project. Gold mineralization occurs in the Devonian dark-grey carbonaceous phyllite and the strata-bound gold zone can be traced over 1,000 m at surface. Continuous channel sampling across the mineralization zone revealed an average gold grade of 2.17g/t gold over 11 metres.

Oujiaba Permit Occurrences : A new gold enriched structural trend was discovered on the Oujiaba permit within the Yangshan Project and was identified intermittently over a strike length of approximately 6 km with significant gold mineralization being intersected in surface trenches in four areas.  The best continuous channel samples results are:   1.18g/t Au over 4.7 m; 13.2 g/t Au over 10.0 m; 0.33 g/t Au over 4.0 m; and 0.60g/t Au over 1.5 m .

Xicheng Project Area

The Xicheng sub-project Area (the "Xicheng Project") is located at the east extension of the Xicheng Pb-Zn metallogenic belt northeast of Yejiana and consists of three exploration permits. Eleven multi-element anomalies have been delineated in the project area. The largest anomaly is about 16 square km in area and consists of coincident Au, Ag, Pb and Zn values.

Since 2009, verification soil sampling and trenching have been conducted in the Caopingshan zone of the Chengjiashan-Heiwanliang block. The work completed includes: trenching – 97.0 lin.m; channel sampling – 35 samples; chip sampling – 55 samples; grab sampling – 92 samples; and soil sampling – 90 samples.

In 2009, verification of soil gold anomalies in Caopingshan area by trenching  resulted in discovery of argillization and silicification zones in metasandstone.  The width of these zones is from 1 to 5m, strike 315 to 330 degrees, dip 65 degrees.  Intensity of alteration is weak, pyrite and rare galena disseminations have been observed in altered rocks.  The most significant concentrations were discovered in the trench TC1-1 on the soil sampling line XIV, where continuous trench samples returned 0.43 g/t Au over 4.0 m.  The assays received for trenching samples in the Caopingshan area confirm that soil anomalies correspond with elevated gold concentrations in bedrock.  Nine trenches in total were completed in the vicinity of trench TC1-1, one of which intersected a zone of weak silicification with disseminations of fine arsenopyrite.  The average gold content in these trenches was 0.33 g/t Au over 2.3 m. Due to disappointing results, no further exploration work has been conducted or is planned in this area, and the Company is considering divesting these permits.

III. TUGURIGE GOLD PROJECT

Minco China, entered into a Joint Venture Agreement in December 2010 (the “JV Agreement”) with the 208 Exploration Team (the “208 Team”), a subsidiary of China National Nuclear Corporation (the “CNNC”), to acquire a 51% equity interest in the Tugurige Gold Project located in Inner Mongolia, China. Under the terms of the JV Agreement, the 208 Team will set up a new entity (the "JV Co") and transfer its 100% interest in the Tugurige Gold Project into the JV Co, Minco China has the right to contribute a total of RMB 250 million (approximately $37 million) (the “Earn-In Amount”) to earn a 51% equity interest in the JV Co, with RMB 180 million (approximately $27 million) to be contributed upon conclusion of the JV agreement. The Earn-In Amount is subject to an independent evaluation of the value of the Tugurige Project.

To secure the project, Minco China provided RMB 60 million (approximately $9 million) in the form of a secured short-term loan to the Tugurige Gold Mine as at December 31, 2010. The loan was repaid on March 25, 2011 in full with interest.

As of the date of this Annual Report, the 208 Team has not complied with certain of its obligations under the JV agreement, including its obligation to set up a new entity (the “JV Co”) and the transfer of its 100% interest in the Tugurige Gold Project to the JV Co. The Company is proactively engaged in resolving this dispute with the 208 Team. As a result, the Company has not commenced the commissioning of a NI 43 -101 compliance resource estimate on the property.
 
 
36
 

On March 14, 2012, Minco China engaged an external law firm in China to resolve the dispute with the 208 Team in terms of the JV Agreement compliance. The ultimate outcome is uncertain.

IV .       JINNIUSHAN GOLD PROJECT
           (Gold Bull Mountain Project)

On November 14, 2006 the Company announced that its wholly-owned subsidiary, Minco China had acquired a mining license on the Jinniushan Gold Mine (Gold Bull Mountain), covering 0.18 km 2 , and an exploration permit (16.68 km 2 ), covering the strike extension of the Jinniushan Gold Mine.  Total consideration for the acquisition of the mining license and the exploration permit was approximately US$1 million.  Minco China incorporated a local operation wholly owned subsidiary, Yuanling Minco Co., Ltd in Hunan and the Gold Bull Mountain mining licenses were transferred to Yuanling Minco.

The 16.86 km 2 GBM gold project covers most part of the Jinniushan gold mineralization belt which extends for more than 15 kilometers and is recognizable with the distribution of abandoned artisan mining adits and tunnels. The Gold Bull Mountain mining license is located in the middle of the belt.  High grade quartz-vein style gold mineralization is hosted in the late Proterozoic sandy slate characterized with obvious silification, seritization and pyritization.

The Company commissioned the preparation of a NI 43-101 report on the Jinniushan Gold Project which is incorporated by reference herein. The technical report dated December 28, 2006 was prepared by Peter G. Folk, P. Eng., of 280 Wood Dale Drive, Comp. 47, Site 21, Mayne Island, B.C., Canada, V0N 2J2 and filed on SEDAR on January 3, 2007.

During the period of 2007 to 2008, the Company conducted a systematice exploration programs on the project, including :regional geological mapping, trenching,  and sampling over the area surounding the the GBM Mining License area; a drilling program at strike and the down dip extention of the know gold zones at the GBM Mining License area; an extensive underground tunneling program to follow the known gold zones at the GBM mine area, and a pilot production to test the recovery of gold. Total completed exploration work included 3,987.5m drilling, 1,745.2m tunneling, 17km 2 sketch mapping, 3,964.5m artisan adit investigation, and 3.64km 2 geochemical soil sampling.  It is confirmed that the mineralization zone at GBM is highly uncontinuous along strike and dip directions and grade of gold is extremely unevenly distributed in mineralization zones because of significant nugget effect.

In the process of managing and prioritizing cash flow needs, the Company made the decision to cease exploration program at GBM in June 2008.  As of the date of this Annual Report, the property has not been sold and this project is treated as a non-material project by the Company.
 
 
37
 

ITEM 5                 OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This discussion and analysis of the operating results and the financial position of the Company for the financial years ended December 31, 2011 and 2010 should be read in conjunction with the consolidated financial statements and the related notes.

A.                          OPERATING RESULTS

General

The Company is in the exploration stage and had no operating revenue during the years ended December 31, 2011 and 2010.  Since the signing of the Company’s first co-operative agreement in China in 1995, the Company has been active in mineral exploration, property evaluation and acquisition in China and plans to build a portfolio of precious  metals properties in China.

Results of Operations (IFRS)

Year Ended December 31, 2011 compared to Year Ended December 31, 2010

EXPLORATION COSTS

Exploration costs for the year ended December 31, 2011 were $1.96 million compared to $1.46 million in the comparative period in 2010. The increase was due to the increased exploration activities on the Longnan project. There were no exploration activities on the Changkeng project and Gold Bull Mountain project except for the maintenance of the exploration permits.

For the year 2011, exploration costs totaled $1,963,874 compared to $1,467,641 in 2010.

Year ended December 31,
 
2011
IFRS
   
2010
IFRS
 
         $     $  
Gansu
   - Longnan
    1,870,486       1,330,745  
Guangdong
   - Changkeng
    66,522       135,727  
Hunan
   - Gold Bull Mountain
    26,866       1,169  
Total
    1,963,874       1,467,641  

For the year ended December 31, 2011 and 2010

Net income for the year ended December 31, 2011 was $0.86 million (income of $0.02 per share) compared to a net loss of $0.45 million (loss of $0.01 per share) in the year of 2010. The following is a summary and discussion on significant components of income and expenses recorded during the year compared to the prior year.

ADMINISTRATIVE EXPENSES

The Company’s administrative expenses include overhead associated with administering and financing the Company’s exploration activities. For the year ended December 31, 2011, the Company incurred a total of $4.4 million (2010 - $2.3 million) in administrative expenses.  Significant changes in expenses are as follows:
 
·  
In the year ended 2011, the Company granted 2.4 million stock options to its consultants and employees at a weighted average exercise price of $2.18 per share. The Company recorded share-based compensation expense of $2.3 million for the year ended December 31, 2011 compared to $0.4 million for the prior year in 2010.
 
 
38
 

·  
Accounting and auditing fees for the year ended December 31, 2011 were $0.2 million (2010 - $0.1 million). The increase was due to the Company engaging its external auditor to review its interim condensed consolidated financial statements prepared in compliance with IFRS.

·  
The Company incurred investor relations expense of $0.5 million for the year ended December 31, 2011 (2010 - $0.3 million). The increase is mainly due to the increase of investor activities including increased attendance at events in 2011. Also, due to the close relationship between the Company and Minco Silver, when Minco Silver is busy with an event like its 2011 bought deal, it drives a higher level of interest in the affairs of the Company. The Company generally tries to capitalize on the interest being generated in its operations by Minco Silver and times its investor relations activities accordingly.

·  
Legal, regulatory and filing fees were $0.2 million for the year ended December 31, 2011 (2010- $0.09 million).  The increase was mainly due to the Company’s decision to engage external legal counsel to assist with regulatory compliance.

·  
Property investigation expense was $0.1 million for the year ended December 31, 2011 (2010 - $0.2 million). In 2011, the Company focused on its Gansu Longnan properties.

To date the Company has been in the exploration stage and has not earned revenue from operations. Income earned has been interest income, rental income and sundry income.

Finance and other income (expense)

In the year ended December 31, 2011, the net amount of finance expense (income) and other expenses was $0.1 million compared to the net amount of finance expense (income) and other expenses of $0.03 million in the same period of 2010. The increase in finance expenses, net of finance income, is mainly due to the timing of the repayment of the funds borrowed and loaned by the Company. While the funds of RMB 60 million loaned by the Company to Tugurige Gold Mine were repaid on March 25, 2011 in full with 8% interest per annum . The funds of RMB 50 million borrowed by the Company from Zhongjia to finance Tugurige Gold Mine were repaid in June 2011 in full with 10 % interest per annum.

Cash and short-term investment

As at December 31, 2011, cash and cash equivalents consisted of short term deposits with a maturity term of seven days that can be renewed automatically. The yields on the short term deposits are 1.5%

As at December 31, 2011, short-term investments, which consisted of cashable guaranteed investment certificates with terms of greater than ninety days but not greater than one year, totaled $Nil (December 31, 2010 – $0.3 million).

MARKETABLE SECURITIES

As at December 31, 2011, the company held 420,000 common shares (2010 – 420,000 common shares) of Nanika Resources Inc.  The market value of the shares was $0.01 million (2010 - $0.03 million).
 
 
39
 

SUMMARY OF QUARTERLY RESULTS (IFRS)

The following table summarizes selected financial information of the eight most recently completed quarters derived from the unaudited interim financial statements and audited financial statements.

   
2011
 
2010
 
 
Q4
 
Q3
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
Q1
   
$
 
$
 
$
 
$
 
$
 
$
 
$
 
$
Exploration costs
 
547,559
 
776,242
 
356,227
 
283,846
 
577,505
 
309,488
 
367,527
 
213,121
Administrative expenses
 
717,642
 
870,625
 
1,406,807
 
1,333,890
 
662,423
 
590,795
 
609,001
 
457,538
Foreign exchange loss (gain)
 
3,356
 
(18,284)
 
(22,910)
 
20,689
 
(28,158)
 
(138,708)
 
2,031
 
52,934
Operating loss
 
(1,268,557)
 
(1,628,583)
 
(1,740,124)
 
(1,638,425)
 
(1,211,770)
 
(761,575)
 
(978,559)
 
(723,593)
Unrealized gain (loss)on marketable securities
 
(2,100)
 
(2,100)
 
(4,200)
 
(6,300)
 
-
 
8,400
 
(10,500)
 
(8,400)
Finance and other income (loss)
 
23,829
 
153,194
 
(254,301)
 
(36,496)
 
14,598
 
3,226
 
3,578
 
7,096
Loss for the period before gain (loss) from equity investment and dilution gain
 
(1,246,828)
 
(1,477,489)
 
(1,998,625)
 
(1,681,221)
 
(1,197,172)
 
(749,949)
 
(985,481)
 
(724,897)
Dilution gain
 
31,000
 
2,000
 
199,000
 
8,478,000
 
1,891,000
 
193,000
 
739,000
 
22,000
Share of gain (loss) from equity investment in Minco Silver
 
(342,432)
 
52,355
 
(476,160)
 
(677,154)
 
(498,254)
 
(467,577)
 
184,040
 
(464,359)
Income (loss) from continuing operations
 
(1,558,260)
 
(1,423,134)
 
(2,275,785)
 
6,119,625
 
195,574
 
(1,024,526)
 
(62,441)
 
(1,167,256)
Income (loss) from discontinued operations
 
-
 
-
 
-
 
-
 
-
 
(110,606)
 
1,712,164
 
5,743
Net income (loss) for the period
 
(1,558,260)
 
(1,423,134)
 
(2,275,785)
 
6,119,625
 
195,574
 
(1,135,132)
 
1,649,723
 
(1,161,513)
Other comprehensive income (loss)
 
(36,643)
 
368,026
 
116,834
 
(128,840)
 
(151,983)
 
38,772
 
281,589
 
(231,630)
Comprehensive income (loss ) for the period
 
(1,594,903)
 
(1,055,108)
 
(2,158,951)
 
5,990,785
 
43,591
 
(1,096,360)
 
1,931,312
 
(1,393,143)
Basic and diluted income (loss) per share
 
(0.03)
 
(0.03)
 
(0.05)
 
0.12
 
0.00
 
(0.02)
 
0.03
 
(0.03)
Weighted average number of shares outstanding
 
50,341,041
 
50,318,498
 
50,268,972
 
49,980,910
 
48,967,175
 
48,436,115
 
48,436,115
 
43,321,430
 
FOREIGN CURRENCY TRANSLATION
 
(i) Functional and presentation currency
 
The financial statements of each entity in the group are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Canadian dollars.
 
The functional currency of Minco Gold is the Canadian dollar.
 
The functional currency of the Company’s Chinese subsidiaries is Renminbi (“RMB”).
 
The financial statements of the Company’s Chinese subsidiaries (“foreign operations”) are translated into the Canadian dollar presentation currency as follows:
 
 
40
 
 
●    Assets and liabilities – at the closing rate at the date of the statement of financial position
●    Income and expenses – at the average rate of the period (as this is considered a reasonable approximation to actual rates).
 
All resulting changes are recognized in other comprehensive income as cumulative translation adjustments.
 
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from the item are considered to form part of the net investment in a foreign operation and are recognized in other comprehensive income.
 
When an entity disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in other comprehensive income related to the foreign operation are recognized in profit or loss. If an entity disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount of foreign currency gains or losses accumulated in other comprehensive income related to the subsidiary are reallocated between controlling and non-controlling interests.
 
(ii) Transactions and balances
 
Foreign currency transactions are translated into the functional currency of an entity using the exchange rates prevailing at the dates of the transactions. Generally, foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation’s functional currency are recognized in the statement of income (loss)
 
INFLATION

The Company does not believe that inflation will have a materially adverse effect on its financial condition.  However, no assurance can be given that the Company will not experience a substantial increase in inflation.

EXPLORATION AND EVALUATION COSTS

Exploration and evaluation costs include costs to acquire the rights to explore, geological studies, exploratory drilling and sampling and directly attributable administrative costs.

Exploration and evaluation costs relating to non-specific projects or properties or those incurred before the Company has obtained legal rights to explore an area are expensed in the period incurred. In addition, exploration and evaluation costs, other than direct acquisition costs, are expensed before a mineral resource is identified as having economic potential.
 
Exploration and evaluation costs are capitalized as mineral interests when a mineral resource is identified as having economic potential on a property. A mineral resource is considered to have economic potential when it is expected that documented resources can be legally and economically developed considering long-term metal prices. Therefore, prior to capitalizing such costs, management determines that the following conditions have been met:
 
i) There is a probable future benefit that will contribute to future cash inflows;
 
ii) The Company can obtain the benefit and control access to it;
 
iii) The transaction or event giving rise to the benefit has already occurred.
 
 
41
 
 
Once the technical feasibility and commercial viability of the extraction of resources from a particular mineral property has been determined, mineral interests are reclassified to mine properties within property, plant and equipment and carried at cost until the properties to which they relate are placed into commercial production, sold, abandoned or determined by management to be impaired in value.
 
Costs relating to any producing mineral interests would be amortized on a unit of production basis over the estimated ore reserves. Costs incurred after the property is placed into production that increase production volume or extend the life of a mine are capitalized.
 
Proceeds from the sale of properties or cash proceeds received from option payments are recorded as a reduction of the related mineral interest.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company’s financial statements requires management to make various judgments with respect to estimates and assumptions. On an ongoing basis, management regularly reevaluates its estimates and assumptions; however actual amounts could differ from those based on such estimates and assumptions.   In the opinion of management, none of the accounting estimates reflect matters that are highly uncertain at the time the accounting estimate is made or that would have a material impact on the Company’s financial condition, changes in financial condition or results of operations.

SHARE-BASED PAYMENTS

The Company grants stock options to directors, officers, employees and service providers. Each tranche in an award is considered a separate award with its own vesting period. The Company applies the fair-value method of accounting for share-based payments and the fair value is calculated using the Black-Scholes option pricing model.

Share-based payments for employees and others providing similar services are determined based on the grant date fair value. Share based payments for non-employees is determined based on the fair value of the goods/services received or option granted measured at the date on which the Company obtains such goods/services.

Compensation expense is recognized over each tranche’s vesting period, in earnings or capitalized as appropriate, based on the number of awards expected to vest. If stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.

The Company’s other significant accounting policies are described in the notes to the audited financial statements for the year ended December 31, 2011.

SIGNIFICANT CHANGES IN ACCOUNTING POLICIES

The Company’s significant accounting policies are described in the note 3 to the audited financial statements of 2011.

B.                          LIQUIDITY AND CAPITAL RESOURCES

The Company does not generate revenues from operations. In the long-term, the Company relies on equity financing for its working capital requirements to fund its exploration, investment, permitting and administrative activities. The Company depends on a combination of its current on and resources; its ability to raise capital, its ability to work with its minority partners and other joint venture partners; and its ability to manage the timing of exploration expenses, to complete its exploration business plan and support the basic operations expenses for the next 12 months.

At December 31, 2011, the Company had a cash and cash equivalents balance of $6.7 million (December 31, 2010 - $6.0 million).
 
 
42
 

All of the cash denominated in RMB is maintained in China where the remittance of funds to jurisdictions outside China may be subject to government rules and regulations on foreign currency controls.  Such remittance may require approval by the relevant government authorities or designated banks in China or both.

The Company plans on meeting any short-term cash requirements through funds advanced from Minco Silver. In addition, the Company could raise funds through the sale of its equity investment in Minco Silver.  The market for these instruments is liquid and the Company does not foresee a loss of capital due to liquidity risk.

The Company’s marketable securities are comprised of publicly-traded shares. The market for these instruments is liquid and the Company does not foresee loss of capital due to liquidity risk.

CASH FLOW

Operating Activities
The net income from continuing operations for the year ended December 31, 2011 was $0.9 million which was mainly a result of an equity loss on investment in Minco Silver of $1.4 million, a dilution gain of $8.7 million and share-based compensation of $2.0 million to arrive at cash used in operating activities of continued operations of $3.9 million compared to $1.6 million cash used in the comparative year of 2010.

Investing activities

For the year ended December 31, 2011 , the Company generated cash of $9.2 million ( 2010 – used $7.0 million) in investing activities from continuing operations which was primarily due to the repayment of the loan made to Tugurige Gold Mine of $8.9 million.

Financing Activities

For the year ended December 31, 2011, the Company received proceeds of $0.8 million from the exercise of options and $1.6 million in advance payments from Mingzhong’s five minority shareholders.  This was offset by $7.4 million repaid to MBM to arrive at cash used in financing activities of $5.1 million compared to $9.4 million cash generated in the comparative year of 2010.

Available Resources

The Company’s cash and short-term investment balance at December 31, 2011 amounted to $6.7 million (2010 - $6.3 million).

Accounts payable and accrued liabilities

Minco China is the controlling shareholder in Guangzhou Mingzhong Mining Co., Ltd. (“Mingzhong”) with a 51% interest.

Mingzhong signed an exploration permit transfer agreement with 757 Exploration Team and on January 5, 2008 Mingzhong received the Changkeng exploration permit. This exploration permit was renewed for a two-year period ending on September 10, 2013, which was granted by MOLAR in Beijing in September 2011. The value of the exploration permit was RMB 48 million (approximately $7.3 million). As at December 31, 2008, the first payment for the Changkeng Exploration Permit to 757 Exploration Team was made in an amount of RMB 19 million (approximately $2.87 million).

In order to pay the remaining RMB 29 million (approximately $4.7 million), shareholders of Mingzhong agreed to inject capital of RMB 32 million ($5.1 million). As of December 31, 2011, Minco China paid RMB 16.3 million ($2.6 million) and the five minority shareholders paid RMB 15.7 million ($2.5 million) to Mingzhong.

The Company’s share of the remaining payment for the permit is RMB 14.8 million ($2.2 million).

Two of the minority shareholders of Mingzhong are State-owned entities, which require approval from the Guangdong provincial government’s Minister of Finance for increasing their share of registered capital. The process to increase Mingzhong’s registered capital is in progress. The funds received from the five minority shareholders are classified as a current liability as at December 31, 2011, pending approval of the capital injection.
 
 
43
 

The remaining amount payable for the Changkeng Exploration Permit of $4.7 million (RMB $29 million) was also classified as a current liability as of December 31, 2011.

Investment in Minco Silver Corporation

As at December 31, 2011, the Company owns 13,000,000 common shares of Minco Silver (December 31, 2010 - 13,000,000 common shares) that were acquired in 2004 in exchange for the transfer of the Fuwan property and the silver interest in the Changkeng property

On March 3, 2011, Minco Silver concluded a share offering of 7,600,000 common shares at $5.95 per share.  The Company did not participate in this offering.  As a result, its ownership interest has decreased to 22.15% (December 31, 2010 – 26.20%).  As the offering price for the Minco Silver shares significantly exceeded the carrying value of the Company’s investment in Minco Silver, the Company recorded a non-cash dilution gain in the amount of $8.7 million.

The Company’s equity accounts for its investment in Minco Silver.

Comprehensive income (loss) on the investment in Minco Silver is as follows:

Year ended December 31,
2011
 
2010
 
$
 
$
Dilution gain in Minco Silver
8,710,000
 
2,845,000
Equity loss of Minco Silver Corporation
(1,443,391)
 
(1,246,150)
Accumulated translation adjustment
287,268
 
(69,906)
Comprehensive income from investment in Minco Silver
7,553,877
 
1,528,944

The carrying value and market value of the Minco Silver shares held by the Company and accounted for using the equity basis, are as follow:

 
December 31, 2011
 
December 31, 2010
 
$
 
$
Investment in Minco Silver Corporation on an equity basis
14,528,016
 
6,935,139
Market value of Minco Silver shares
25,870,000
 
82,550,000

 
REPATRIATION OF FUNDS FROM CHINA

The Company may face delays repatriating funds held in China by its subsidiaries if at any time it needs additional resources to enable it to undertake projects elsewhere in the world.  For a discussion of the restrictions on repatriation of funds held in China please see Item 3.D "Repatriation of Capital Located in China", above.

C.
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

The Company does not engage in research and development activities and does not have any patents or licenses.

D.           TREND INFORMATION

As the Company is an exploration company with no producing properties, information regarding trends in production, sales and inventory and similar are not meaningful.
 
 
44
 

E.                      OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements.

F.                      TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

(a)           The Company has contractual commitments requiring payments in the amounts as follows:

 

 

Payments due by period

Contractual obligations

Total

Less than 1 year

1-3 years

4-5 years

After 5 years

$

$

$

$

$

Long-term debt

-

-

-

-

-

Capital lease obligations

-

-

-

-

-

Changkeng permit payable

4,681,156

4,681,156

-

-

-

Operating leases (1)

473,293

140,629

332,664

-

-

Other obligations (2)

387,779

387,779

-

-

-

Total contractual obligations

861,072

528,408

332,664

-

-


G.                     SAFE HARBOR

We intend that all forward-looking statements we make will be subject to safe harbor protection of the federal securities laws pursuant to Section 27A of the Securities Act of 1933 , as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 , as amended (the "Exchange Act").

Readers are referred to the documents filed by the Company with the pertinent security exchange commissions, specifically the most recent quarterly reports, annual report and material change reports, each as it may be amended from time to time, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements.

ITEM 6.           DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.                     DIRECTORS AND SENIOR MANAGEMENT

The following table sets forth all current directors and executive officers of the Company as of the date of this Annual Report, with each position and office held by them in the Company, their terms of office and the period of service as such.  Each director’s term of office expires at the next annual general meeting of shareholders to be held on April 30, 2012.  At such meeting, each current director will be seeking re-election.   [The Company is not party to any arrangement or understanding with a major shareholder, customer, supplier or others, pursuant to which any person referred to below was selected as a director or member of senior management.]

Name
 
Present Position
     
Ken Z. Cai
 
President, CEO and Director
Robert Callander (1)(2)(3)
 
Director
Michael Doggett (1)(2)(3)
 
Director
Malcolm Clay (1)(2)(3)
 
Director
Ellen Wei
 
Interim Chief Financial Officer and Controller
Ute Koessler
 
Vice President
Corporate Communications
Notes:
(1)   
Member of the Audit Committee
(2)   
Member of the Compensation Committee
(3)   
Member of the Nominating Committee

 
 
45
 
The business background and principal occupations of the Company’s officers and directors are as follows:

Ken Z. Cai
President, Chief Executive Officer and Director

Dr. Cai, age 48 has served as president, chief executive officer and a director of the Company since February 29, 1996.  Dr. Cai holds a Ph.D. in mineral economics from Queen's University in Kingston, Ontario.  Dr. Cai has 25 years' experience in mineral exploration, project evaluation, corporate financing and company management. He has been the driving force behind the Company and responsible for negotiating the property agreements in China. He has a wide range of high-level contacts in the Chinese mining communities and this has allowed the Company to access data on a large number of projects throughout China.  Dr. Cai is also currently the CEO and a director of Minco Base Metals Corporation and Minco Silver Corporation.

Robert Callander
Director

Mr. Callander has been a director since August 1996.  Mr. Callander, age 67.  He holds an MBA from York University, Toronto, Ontario, Canada, as well as a CFA from the Institute for Investment Management, Charlotte, Virginia.  Mr. Callander has worked for Caldwell Securities Ltd. since 1992 and currently serves as a vice-president with that firm.  Prior to his engagement with Caldwell Securities Ltd., Mr. Callander served as a corporate finance analyst with Nesbitt Burns.

Michael Doggett
Director

Dr. Doggett, age 52 has been a director since July 2007.  Dr. Doggett is the President of HanOcci Mining Advisors, a mineral industry consulting group based in Toronto and Vancouver.  He is also an Adjunct Professor in the Department in Geological Sciences and Geological Engineering at Queen’s University.  He holds degrees in geology and mineral economics from Mount Allison University and Queen’s University.  Dr. Doggett has taught professional development seminars in exploration and project evaluation to more than 600 industry participants in a dozen countries and has carried out a range of consulting activities with mining companies, governments and international agencies.  He currently sits as a Director of Murgor Resources Inc., Pacific Link Mining Corp., Inter-Citic Minerals, Riverside Resources Inc. and Altan Nevada Minerals Ltd.

Malcolm F. Clay
Director

Mr. Clay, age 71 , was appointed a Director of the Company and Chairman of the Audit Committee on November 16, 2007.  Mr. Clay is a Chartered Accountant (FCA) and was a partner of KPMG and its predecessor firms for 27 years, retiring in 2002.  As a public accountant, he served as lead audit or concurring partner for public companies listed on AMEX, NYSE and Canadian Stock Exchanges.  He was the Partner-in-Charge of the KPMG Vancouver Audit practice for ten years.  In 1997, he was elected as the non-executive Chairman of KPMG Canada.  During his career he acted as an accountant and advisor for numerous private companies and is currently the Chairman of the audit committee for four TSX Venture Exchange listed companies.    He currently sits as a Director of Versatile Systems Inc., Zongshen PEM Power Systems Inc., Powertech Uranium Corp., Hanwei Energy Services Corp., Oakmont Capital Corp. and Wolverine Minerals Corp.
 
 
46
 

Ellen Wei

Interim Chief Financial Officer and Controller
Ms. Wei, age 50, served as the Chief Financial Officer for Minco Mining (China) Ltd. from February 2005 to December 2008.  She was appointed Corporate Controller of the Company in January 2009 and appointed as Interim Chief Financial Officer on April 13, 2012.  Ms. Wei is a member of the Institute of Chartered Accountants of British Columbia and a Certified Public Accountant in Washington State.  She also holds a CPA designation in China.  Ms. Wei has more than 10 years experience working with a major Chinese auditing firm and 3 years with Ernst & Young LLP respectively before she began working for a private company as Controller.
 
Ute Koessler

Vice President Corporate Communications

Ms. Koessler, age 56, has worked for the Minco Mining Group since November 2006, initially as Investor Relations Co-ordinator, being promoted to V.P. Corporate Communications in July 2011. Ms. Koessler has worked in various areas of the mining industry over the past 30 years with both on site, and head office experience, with a strong focus on communications.

Directors and officers of the Company are required to file insider reports with SEDI the System for Electronic Disclosure by Insiders at www.sedi.ca and file their reports individually.  To the best of the Company’s knowledge, as at December 31, 2011, the directors and officers of the Company, as a group, held approximately as a group beneficially own, directly or indirectly, 6,187,131 common shares of the Company, representing 12.29% of the issued and outstanding common shares of the Company.

Family Relationships

There are no family relationships between any of our directors and executive officers.
 
 
47
 

B.                      COMPENSATION

Certain information about payments to the Company’s executive officers is set out in the following table:

Executive Officers

The following table provides a summary of compensation paid by us during the fiscal year ended December 31, 2011 to the senior management of the Company:

Name and principal position
Year
Salary
($)
Share
-based awards
($)
Option-
based awards
($) (5)
Annual non-equity incentive plan compensation
($) (6)
Pension value
($)
All Other Compensation
($)
Total Compensation
($)
Ken Z. Cai
Chairman and CEO (1)(2)
2011
83,333
N/A
725,968 (8)
Nil
N/A
7,300
816,601
Paul Zhang
Former Vice President Finance and CFO (3)(4)
2011
98,958
N/A
217,791 (9)
10,000
N/A
Nil
326,749
Dwayne Melrose
Former Vice President of Exploration (7)
2011
169,488
N/A
217,790 (10)
Nil
N/A
4,748
392,026
Ute Koessler
Vice President Corporate Communications
2011
58,113
N/A
184,576 (11)
Nil
N/A
Nil
242,689

 
(1)  
As a management director of the Corporation, Dr. Cai does not collect any director's fees relating to his role as a director.
(2)  
Fees are paid to MLK Capital Corporation, a company controlled by Dr. Cai.
(3)  
Mr. Zhang was hired as Vice President Finance and CFO of the Corporation on June 8, 2009.
(4)  
Fees paid to 7177429 Canada Limited, a company controlled by Mr. Zhang.  Mr. Zhang resigned from the Company effective April 19, 2012.
(5)  
The Black Scholes valuation methodology was used to determine fair value on the date of grant.
(6)  
Amounts represent bonus awarded to the NEO in respect of the financial year.
(7)  
Mr. Melrose's consulting agreement was terminated by the Corporation on September 7, 2011.
(8)  
Represents options to purchase up to 500,000 common shares of the Company, which are exercisable at a price of $2.14 per common share and expire on January 14, 2016.
(9)  
Represents options to purchase up to 150,000 common shares of the Company, which are exercisable at a price of $2.14 per common share and expire on January 14, 2016.
(10)  
Represents options to purchase up to 150,000 common shares of the Company, which are exercisable at a price of $2.14 per common share and expire on January 14, 2016.
(11)  
Represents options to purchase up to 110,000 and 20,000 common shares of the Company, which are exercisable at a price of $2.14 and $1.83 respectively per common share and expire on January 14, 2016 and July 7, 2016 respectively.

 
48
 
 
Directors' Compensation

The following table provides a summary of compensation paid by us during the fiscal year ended December 31, 2011 to the non-management directors of the Company:

Name
Fees earned
($)
Share-based awards
($)
Option-based awards
($)
Non-equity incentive plan compensation
($)
Pension value ($)
All other compensation
($)
Total
($)
Robert M. Callander
15,000
N/A
181,492 (1)
Nil
N/A
Nil
196,492
Malcolm Clay
16,000
N/A
145,194 (2)
Nil
N/A
Nil
161,194
Michael Doggett
14,500
N/A
145,194 (3)
Nil
N/A
Nil
159,694
 
(1)  
Represents options to purchase up to 125,000 common shares of the Company, which are exercisable at a price of $2.14  per common share and expire on January 14, 2016.
(2)  
Represents options to purchase up to 100,000 common shares of the Company, which are exercisable at a price of $2.14 per common share and expire on January 14, 2016.
(3)  
Represents options to purchase up to 100,000 common shares of the Company, which are exercisable at a price of $2.14  per common share and expire on January 14, 2016.

 
Pension Plan Benefits

As of December 31, 2011, the Company did not have any defined benefit, defined contribution or deferred compensation plans for any of its senior officers or directors.
 
 
C.
BOARD PRACTICES

Directors are elected annually at the annual general meeting of shareholders. The Company has no contract with any of its directors that provides for payment upon termination.

Mr. Clay is a Chartered Accountant (FCA) and was a partner of KPMG and its predecessor firms for 27 years, retiring in 2002.  As a public accountant, he served as lead audit or concurring partner for public companies listed on AMEX, NYSE and Canadian Stock Exchanges.  He was the Partner-in-Charge of the KPMG Vancouver Audit practice for ten years.  In 1997, he was elected as the non-executive Chairman of KPMG Canada.  During his career he acted as an accountant and advisor for numerous private companies and is currently the Chairman of the audit committee for four TSX Venture Exchange listed companies.

Audit Committee

The Company has an audit committee consisting of Messrs. Callander, Doggett and Clay.  The board of directors has determined that Mr. Clay is a "audit committee financial expert" and is "independent" as such terms are used in Section 303A.02 of the NYSE Listed Company Manual.

The following is the Company’s Charter of the Audit Committee.

Mandate

The primary function of the audit committee (the " Audit Committee ") is to assist the board of directors in fulfilling its financial oversight responsibilities by reviewing the financial reports and other financial information provided by the Company to regulatory authorities and shareholders, the Company's systems of internal controls regarding finance and accounting and the Company's auditing, accounting and financial reporting processes. The Audit Committee's primary duties and responsibilities are to:
 
 
49
 

·  
Serve as an independent and objective party to monitor the Company's financial reporting and internal control system and review the Company's financial statements.
·  
Review and appraise the performance of the Company's external auditors.
·  
Provide an open avenue of communication among the Company's auditors, financial and senior management and the Board of Directors.

Composition

The Audit Committee shall be comprised of three directors as determined by the Board of Directors, the majority of whom shall be free from any relationship that, in the opinion of the Board of Directors, would interfere with the exercise of his or her independent judgment as a member of the Audit Committee. At least one member of the Audit Committee shall have accounting or related financial management expertise. All members of the Audit Committee that are not financially literate will work towards becoming financially literate to obtain a working familiarity with basic finance and accounting practices. For the purposes of the Audit Committee Charter, the definition of "financially literate" is 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 presumably be expected to be raised by the Company's financial statements.

The members of the Audit Committee shall be elected by the Board of Directors at its first meeting following the annual shareholders' meeting. Unless a Chair is elected by the full Board of Directors, the members of the Audit Committee may designate a Chair by a majority vote of the full Audit Committee membership.

Meetings

The Audit Committee shall meet a four times annually , or more frequently as circumstances dictate. As part of its job to foster open communication, the Audit Committee will meet at least annually with the Chief Financial Officer and the external auditors in separate sessions.

Responsibilities and Duties

To fulfill its responsibilities and duties, the Audit Committee shall:

Documents/Reports Review

(a)  
Review and update the Charter annually.

(b)  
Review the Company's financial statements, MD&A and any annual and interim earnings, press releases before the Company publicly discloses this information and any reports or other financial information (including quarterly financial statements), which are submitted to any governmental body, or to the public, including any certification, report, opinion, or review rendered by the external auditors.

External Auditors

(a)  
Review annually, the performance of the external auditors who shall be ultimately accountable to the Board of Directors and the Audit Committee as representatives of the shareholders of the Company.

(b)  
Recommend to the Board of Directors the selection and, where applicable, the replacement of the external auditors nominated annually for shareholder approval.

(c)  
Review with management and the external auditors the audit plan for the year-end financial statements and intended template for such statements.

(d)  
Review and pre-approve all audit and audit-related services and the fees and other compensation related thereto, and any non-audit services, provided by the Company's external auditors.
 
 
50
 
 
Provided the pre-approval of the non-audit services is presented to the Audit Committee's first scheduled meeting following such approval such authority may be delegated by the Audit Committee to one or more independent members of the Audit Committee.

Financial Reporting Processes

(a)  
In consultation with the external auditors, review with management the integrity of the Company's financial reporting process, both internal and external.

(b)  
Consider the external auditors' judgments about the quality and appropriateness of the Company's accounting principles as applied in its financial reporting.

(c)  
Consider and approve, if appropriate, changes to the Company's auditing and accounting principles and practices as suggested by the external auditors and management.

(d)  
Following completion of the annual audit, review separately with management and the external auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.

(e)  
Review any significant disagreement among management and the external auditors in connection with the preparation of the financial statements.

(f)  
Review with the external auditors and management the extent to which changes and improvements in financial or accounting practices have been implemented.

(g)  
Review any complaints or concerns about any questionable accounting, internal accounting controls or auditing matters.

(h)  
Review certification process.

(i)  
Establish a procedure for the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

Other

Review any related-party transactions.

 
Compensation Committee

The Company has a Compensation Committee consisting of Messrs. Callander, Doggett and Clay.  The primary purpose of the Compensation Committee is to:

(a)  
establish, review and recommend to the Board of Directors of Minco Gold Corporation compensation and incentive plans and programs; and
(b)  
review and approve compensation and awards under compensation and incentive plans and programs for the CEO and senior officers;

with the intention of attracting, retaining and appropriately rewarding employees in order to motivate their performance in the achievement of the Company’s business objectives and align their interests with the long-term interests of the Company’s shareholders.

Independence

The members of the Compensation Committee must be "independent" of the Company as defined in Canadian National Instrument 58-101 - Disclosure of Corporate Governance Practices .  The duties and responsibilities of the Compensation Committee include:
 
 
51
 

·  
reviewing and making recommendations to the Board of Directors with respect to the compensation, including compensation criteria and incentives and annual performance review, of the Chief Executive Officer, for final approval by the Board of Directors;
·  
reviewing and providing guidance to the Board of Directors with respect to the compensation, including compensation criteria and incentives, of the executive officers of the Company, as recommended by the Chief Executive Officer, for final approval by the Board of Directors;
·  
reviewing and providing guidance to the Board of Directors with respect to the compensation, including compensation criteria and incentives, of the directors of the Company;
·  
reviewing and making recommendations to the Board of Directors regarding other plans that are proposed for adoption or adopted by the Company for the provision of compensation to employees of, directors of and consultants to the Company;
·  
advising on the development of management succession plans by the Board;
·  
preparing an annual report on executive compensation to the shareholders of the Company for the management information circular for the annual and general meeting of the Company’s shareholders;
·  
reviewing and assessing, annually, the Compensation Committee charter and submitting any changes deemed necessary or advisable for approval of the Board of Directors; and
·  
performing other functions as requested by the Board of Directors.

D.           EMPLOYEES

The Company currently shares offices in Vancouver and Beijing and 21 employees and consultants with Minco Silver, of which 12 are located in its Vancouver office, British Columbia and the other 9 are located in Beijing, China.  In addition, the Company has 15 employees in China which are employed at the Longnan projects.

E.           SHARE OWNERSHIP

The following table sets forth, as of April 20, 2012, common stock held by the Company’s officers and directors and all outstanding options and warrants to purchase common shares of the Company.

Common Shares Owned by Officers and Directors

Name and Title
Common
Shares Held
Percentage of Common Shares Outstanding at April 18, 2012
Stock Options Held
Ken Cai, President, Chief Executive Officer and Director
825,400 (1)
1.64%
2,250,000
Robert Callander, Director
9,000
< 1%
320,000
Michael Doggett, Director
12,000
< 1%
500,000
Malcolm Clay, Director
30,000
< 1%
415,000
Ellen Wei, Interim Chief Financial Officer and Controller
NIL
< 1%
190,000
TOTAL
876,400
1.74%
3,675,000

Note:

(1)
5,310,731 common shares held by Pacific Canada Resources Inc., a private company, over which Dr. Cai exercises control or direction.
 
 
52
 
 
Stock Option Plan
The Corporation adopted the Option Plan for certain directors, employees and consultants (collectively, the " Eligible Persons ") of the Corporation or any of its affiliates.  The Option Plan provides that Options may be granted to Eligible Persons on terms determined within the limitations set out in the Option Plan. The maximum number of common shares to be reserved for issuance at any one time under the Option Plan is 15% of the issued and outstanding common shares of the Corporation.  As of the date of this Annual Report, there were 6,525,667 issued and outstanding Options, representing 12.96% of the total amount issuable under the Option Plan.  Under the terms of the Option Plan, the maximum number of common shares that may be reserved for issuance to insiders of the Corporation as a group within any 12 month period shall not exceed 10% of the number of common shares then outstanding.  In addition, the aggregate number of common shares issuable to insiders under the plan and any other security based compensation arrangement of the Corporation shall not exceed 10% of the issued and outstanding common shares of the Corporation.  The exercise price for an Option granted under the Option Plan may not be less than the Market Price (as such term is defined in the Option Plan) of the Corporation's common shares on the date of the grant.  Options granted under the Option Plan are subject to vesting requirements.  One third of the Options granted vest within six months of the grant date, one third of the Options granted vest within 12 months of the grant date and the final one third of the Options granted vest within 18 months of the grant date.  Options granted under the plan may include stock appreciation rights (a " SAR ").  A SAR granted under the Option Plan shall entitle the Eligible Person to elect to surrender to the Corporation an unexercised Option, or any portion thereof, and to receive from the Corporation in exchange for that number of shares having an aggregate value equal to the excess of the market value of one share over the purchase price of one share specified in such Option, multiplied by the number of shares called for by the option, or portion thereof, which is so surrendered. To date, no SARs have been issued under the Option Plan.

Options will be granted for a period which may not exceed five years from the date of grant (unless otherwise extended in accordance with the terms of the Option Plan) but will expire within 30 days of an Eligible Person ceasing to be a director, employee of or consultant to the Corporation in most circumstances.  In cases of death, Options granted shall be exercisable by the Eligible Person's heirs or legal representatives within 12 months of the Eligible Person's death. No rights under the Option Plan and no Option awarded pursuant to the provisions of the Option Plan are assignable or transferable by any Eligible Person.

 
53
 


ITEM 7.                  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.                            MAJOR SHAREHOLDERS

As of March 31, 2012, the Company believes that 4,631,107 (approximately 9.2%) of the issued and outstanding common shares were held by 40 registered shareholders with addresses in the United States.

As far as known to the Company, and except as disclosed herein, the Company is not directly or indirectly owned or controlled by another corporation(s) or by any foreign government.  The following table sets forth, as of March 31, 2012, information with respect to (i) any person who is known to the Company to be the owner of more than 5% of any class of the Company’s outstanding voting securities and (ii) the total amount of any class of the Company’s voting securities owned by the officers and directors as a group.

Title of Class
Identity of Holder
 
Amount Owned
Percent of Class (1)
Common shares
Ken Z. Cai
6,136,131
12.17%
Common shares
IDG-Accel China Growth Fund II L.P.
5,040,000
10%

Notes:

(1)
5,310,731 common shares held by Pacific Canada Resources Inc., a private company, over which Dr. Cai exercises control or direction.

The voting rights of our major shareholders do not differ from the voting rights of holders of our Company's common shares.

B.                             RELATED PARTY TRANSACTIONS

Year Ended December 31, 2011 (IFRS)

       Shared office expenses

 
a)
Minco Silver and Minco Gold  share offices and certain administrative expenses in Beijing and Minco Silver, Minco Base Metals Corporation (“MBM”) and Minco Gold share offices and certain administrative expenses in Vancouver.

 
At December 31, 2011, the Company has $429,114 due from Minco Silver  and consisted of the following:

 
Amount due from Foshan Minco as at December 31, 2011 of $1,167,282, representing the expenditures incurred by Minco China on behalf of Foshan Minco and shared office expenses.

 
Amount due to Minco Silver as at December 31, 2011 of $738,168 representing funds advanced from Minco Silver to Minco Gold to support its operating activities in Canada.

The amounts due are unsecured, non-interest bearing and payable on demand.

The above two amounts will be net settled and accordingly has been presented as a net balance on the consolidated financial statements.

 
b)
At December 31, 2011, the Company has $20,774 due from MBM, in relation to shared office expenses. The Company is related to MBM through one common director and common management.

The amount due is unsecured, non-interest bearing and payable on demand.
 
 
54
 

 
Loan with Minco Base Metals

In connection to Minco China’s loan of RMB 60 million (approximately $9 million) to the Tugurige Gold Mine, Minco Gold and MBM entered into a loan agreement whereby Minco Gold borrowed $7,561,779 million (RMB 50 million) in December 2010. On June 16, 2011, the loan was repaid in full to Zhongjia Kailong Technology Development Co. Ltd. (“Zhongjia”), the trustee of MBM.

 
Funding of Foshan Minco
 
Minco Silver cannot invest directly in Foshan Minco as Foshan Minco is legally owned by Minco China. All funding supplied by Minco Silver for exploration of the Fuwan Project must first go through Minco China via the Company to comply with the Chinese Law. In the normal course of business Minco Silver uses trust agreements when providing cash, denominated in US dollars, to Minco China via the Company for the purpose of increasing the registered capital of Foshan Minco. Minco China is a registered entity in China however it is classified as being a wholly foreign owned entity and therefore can receive foreign investment. Foshan Minco is a Chinese company with registered capital denominated in RMB and therefore can only receive domestic investment from Minco China. Increases to the registered capital of Foshan Minco must be denominated in RMB.

(a)  
On June 9, 2011, Minco Silver advanced US$10 million (December 31, 2011 - $10,199,000) to the Company, the ultimate legal shareholder of Foshan Minco.  During 2011, the Company received  government approvals to increase the registered capital of its wholly owned subsidiary, Minco China.  Minco China has undertaken to exchange the US$10 million into RMB and will then invest the funds, on behalf of Minco Silver, to increase the registered capital of Foshan Minco.

 
In August, 2011, the Company, Minco Silver and Minco China entered into a trust agreement in which the Company and Minco China confirmed they have received the US$10 million, and Minco China is required to exchange these US fund into RMB in order to increase Foshan Minco’s registered share capital. Once all the funds are transferred from Minco China to Foshan Minco, the trust agreement is effectively settled and no repayment is expected by Minco Silver from Minco China.

 
As at December 31, 2011, Minco China held US$8,110,500 in trust and has undertaken the process to exchange US$1,889,500 into RMB on behalf of Minco Silver.

(b)  
Prior to executing the above transfer of funds, on April 25, 2011, Minco Silver entered into a loan agreement to advance up to US$22 million to Minco China, the immediate legal shareholder of Foshan Minco. The purpose of this loan was to provide a mechanism to increase the registered capital of Foshan Minco. The loan bore interest at a rate equal to LIBOR plus 3 per cent per annum. Minco Silver advanced US$6 million ($5,860,800) to Minco China under this facility. This loan arrangement was not accepted by the State Administration of Foreign Exchange in China. Accordingly, Minco China repaid  US$6 million back to Minco Silver on August 19, 2011. The interest was waived on the understanding that Minco Silver’s subsidiary, Foshan Minco, was the beneficiary of the loan.

 
Key management compensation

 
a) 
In the year ended December 31, 2011, the following compensation was paid to key management. Key management includes the Company’s directors and senior management.  This compensation is included in exploration costs, development costs and administrative expenses

 
 
December 31, 2011
   
 
Cash remuneration
 
Share-based compensation
 
Total
 
$
 
$
 
$
       Directors
48,527
 
391,886
 
440,413
Senior management
398,892
 
979,274
 
1,378,166
Total
447,419
 
1,371,160
 
1,818,579

 
55
 
Year Ended December 31, 2010 (IFRS)
 
              Shared office expenses

 
a)
At December 31, 2010, the Company has $839,305 due from Minco Silver and consisted of the following:

 
Amount due from Foshan Minco as at December 31, 2010 of $754,067, representing the expenditures incurred by Minco China on behalf of Foshan Minco and shared office expenses.

 
Amount due from Minco Silver as at December 31, 2010 of $85,238 representing funds advanced from Minco Silver to Minco Gold to support its operating activities in Canada.

The amounts due are unsecured, non-interest bearing and payable on demand.

 
b)
At December 30, 2010, the Company has $77,027 due from MBM in relation to shared office expenses.

The amount due is unsecured, non-interest bearing and payable on demand.

 
Loan with Minco Base Metals

In connection to Minco China’s loan of RMB 60 million (approximately $9 million) to the Tugurige Gold Mine, Minco Gold and MBM entered into a loan agreement whereby Minco Gold borrowed $7,561,779 million (RMB 50 million) in December 2010. On June 16, 2011, the loan was repaid in full to Zhongjia Kailong Technology Development Co. Ltd. (“Zhongjia”), the trustee of MBM.

 
Key management compensation

 
a)
In the year ended December 31, 2010, the following compensation was paid to key management. Key management includes the Company’s directors and senior management.  This compensation is included in exploration costs, development costs and administrative expenses.

 
December 31, 2010
   
 
Cash remuneration
 
Share-based compensation
 
Total
 
$
 
$
 
$
Directors
43,500
 
16,959
 
60,459
Senior management
392,938
 
133,052
 
525,990
Total
436,438
 
150,011
 
586,449
 
 
56
 
 
Year Ended December 31, 2009 (Canadian GAAP)

a)  
At December 31, 2009, the Company has $2,109,285 due from Minco Silver in relation to expenditures on shared office expenses. The amount is unsecured, non-interest bearing and repayable on demand.

b)  
At December 31, 2009, the Company has $120,576 due from MBM in relation to expenditures on the White Silver Mountain project and shared office expenses.  The amount is unsecured, non-interest bearing and repayable on demand.

c)  
In the year ended December 31, 2009, the Company paid consulting fees totaling $303,082 to companies controlled by the Chief Executive Officer, Chief Financial Officer, and Vice President, Exploration of the Company.

The above transactions were conducted in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the parties.

C.                INTEREST OF EXPERTS AND COUNSEL

NOT APPLICABLE.

ITEM 8. FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

The following financial statements of the Company are attached to this Annual Report:

 
Consolidated audited financial statements for the Company for the year ended December 31, 2011 (in Canadian dollars) with comparative figures for the year ended December 31, 2010.
 
Consolidated audited financial statements of Minco Silver Corporation for the year ended December 31, 2011 (in Canadian dollars) with comparative figures for the year ended December 31, 2010.
 

Dividend policy

The Company has never paid any dividends and does not intend to pay any dividends in the near future.

ITEM 9. THE OFFER AND LISTING

Since February 24, 1998, the Company’s common shares have been listed on the Toronto Stock Exchange.  Previously, the Company’s common shares were dual listed on the Canadian National Exchange - CDNX (formerly the Vancouver Stock Exchange and now the TSX Venture Exchange) and the Toronto Stock Exchange.  On January 29, 1999, the Company voluntary delisted its common shares from the CDNX.    The Company’s common shares were listed in the United States on the Over The Counter market (“OTC”) under the symbol MMAXF”.  On November 11, 2005 the Company received listing approval on NYSE Amex Equities (“AMEX”).  The Company began trading on the AMEX on November 22, 2005 with its trading symbol on the AMEX as “MMK”.  The following tables set forth the reported high and low prices for the five most recent fiscal years (Table A), each quarterly period for the past two fiscal years and for the first quarter of 2012 (Table B) and each month for the past six months (Table C).
 
 
57
 

Table A

High and low price for the five most recent fiscal years.

YEAR
 
TSX
(CDN$)
HIGH
TSX
(CDN$)
LOW
AMEX
(US$)
HIGH
AMEX
(USD$)
LOW
December 31, 2011
2.85
0.64
2.97
0.62
December 31, 2010
2.85
0.70
2.86
0.65
December 31, 2009
1.35
0.46
1.30
0.35
December 31, 2008
1.80
0.24
1.83
0.18
December 31, 2007
2.40
0.67
2.07
0.65

Table B

High and low prices for each quarterly period for the past two fiscal years ended December 31, 2011 and 2010 and the first quarter of 2012.

FISCAL PERIOD
 
TSX
(CDN$)
HIGH
TSX
(CDN$)
LOW
AMEX
(USD$)
HIGH
AMEX
(USD$)
LOW
Quarter Ended March 31, 2012
0.97
0.65
0.98
0.65
Quarter Ended December 31, 2011
1.32
0.64
1.28
0.62
Quarter Ended September 30, 2011
1.94
0.83
2.04
0.81
Quarter Ended June 30, 2011
2.85
1.41
2.97
1.45
Quarter Ended March 31, 2011
2.79
1.97
2.91
2.00
Quarter Ended December 31, 2010
2.85
1.15
2.86
1.11
Quarter Ended September 30, 2010
1.40
0.82
1.39
0.77
Quarter Ended June 30, 2010
1.29
0.90
1.30
0.84
Quarter Ended March 31, 2010
1.55
0.70
1.50
0.65

Table C

High and low prices for each month for the past six months.

MONTH/YEAR
 
TSX
(CDN $)
HIGH
TSX
(CDN $)
LOW
AMEX
(USD $)
HIGH
AMEX
(USD $)
LOW
March 2012
0.88
0.65
0.89
0.65
February 2012
0.95
0.79
0.94
0.79
January 2012
0.97
0.68
0.98
0.66
December 2011
0.93
0.64
0.92
0.62
November 2011
1.16
0.87
1.15
0.84
October 2011
1.32
0.75
1.28
0.71
 
 
ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

The Company has an unlimited number of common shares authorized, without par value, of which 50,348,215 common shares were issued and outstanding as at December 31, 2011.  Each of the common shares has equal dividend, liquidation and voting rights.  Voters of the common shares are entitled to one vote per share on all matters that may be brought before them.  Holders of the common shares are entitled to receive dividends when declared by the board of directors from funds legally available for that purpose.  The common shares are not redeemable, have no conversion rights and carry no pre-emptive or other rights to subscribe for additional shares.  The outstanding common shares are fully paid and non-assessable.  Of the Company’s common shares outstanding, none are currently held in escrow, subject to release or cancellation upon certain conditions.  The following table sets forth a history of the share capital for the Company for the last three fiscal years, and through March 31, 2012.
 
 
58
 
 
     
Issuance
   
Common Share
Balance
 
December 31, 2008
Issued and Outstanding
          42,989,051  
July 2009
$0.48 options exercised
    8,333          
May 2009
$0.83 common shares sold
    16,500          
October 2009
$0.46 options exercised
    34,900          
October 22, 2009
Private Placement
    5,000,000          
November 2009
$0.48 options exercised
    86,666          
December 2009
$0.62 options exercised
    22,332          
December 31, 2009
Issued and Outstanding
            48,157,782  
January 2010
$0.53 options exercised
    91,667          
February 2010
$0.59 options exercised
    111,666          
March 2010
$1.35 options exercised
    75,000          
August 2010
$0.55 options exercised
    246,667          
September 2010
$0.66 options exercised
    5,000          
November 2010
$0.89 options exercised
    185,100          
December 2010
$0.82 options exercised
    642,000          
December 31, 2010
Issued and Outstanding
            49,514,882  
January 2011
$1.22 options exercised
    370,000          
February 2011
$0.87 options exercised
    163,333          
March 2011
$0.66 options exercised
    195,100          
April 2011
$0.56 options exercised
    10,700          
May 2011
$0.59 options exercised
    29,300          
June 2011
$1.08 options exercised
    30,000          
August 2011
$0.66 options exercised
    14,900          
November 2011
$0.48 options exercised
    20,000          
December 31, 2011
Issued and Outstanding
            50,348,215  
March 31, 2012
Issued and Outstanding
            50,348,215  

Except for finder’s fees, all issuances noted above were for cash. No shares issuances in the period covered by the above table were subject to discounts, special terms or installment payments.

B.                      MEMORANDUM AND ARTICLES OF ASSOCIATION

Our Articles do not contain a description of our objects and purposes.

Our Articles restrict a director's power to vote on a proposal, arrangement or contract in which the director is materially interested unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of
those directors may vote on such resolution.  There is no mandatory retirement age for our directors and our directors are not required to own securities of our company in order to serve as directors.

Our authorized capital consists of an unlimited number of common shares without par value.

Holders of our common shares are entitled to vote at all meetings of shareholders, receive any dividend declared by us and, subject to the rights, privileges, restrictions and conditions attaching to any other class of shares, receive the remaining property of our company upon dissolution.

Subject to the Business Corporations Act (British Columbia), the Company may by special resolution: (i) create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or (ii) vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued.
 
 
59
 

Each director holds office until the expiry of his term or until his successor is elected or appointed, unless his office is earlier vacated in accordance with our Articles or with the provisions of the British Columbia Business Corporations Act . At each annual meeting of our company, directors are elected to hold office until the next annual meeting of shareholders.  A director appointed or elected to fill a vacancy on the board of directors holds office until the next annual general meeting of shareholders.

An annual meeting of shareholders must be held at such time in each year that is not later than fifteen months after the last preceding annual meeting and at such place as our board of directors may from time to time determine. The holders of not less than five percent of our issued shares that carry the right to vote at a meeting may requisition our directors to call a meeting of shareholders for the purposes stated in the requisition. The quorum for the transaction of business at any meeting of shareholders is two shareholders, or one of more proxyholders representing two shareholders, or one shareholder and a proxyholder representing another shareholder. Only persons entitled to vote, our directors and auditors and others who, although not entitled to vote, are otherwise entitled or required to be present, are entitled to be present at a meeting of shareholders.

Except as provided in the Investment Canada Act , there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or British Columbia, or in our charter documents. See the section of this annual report on Form 20-F entitled " Exchange Controls " below for a discussion of the principal features of the Investment Canada Act for non-Canadian residents proposing to acquire our common shares.

Our Articles do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed.

Our Articles are not significantly different from the requirements of the Business Corporations Act (British Columbia), and the conditions imposed by our Articles governing changes in capital are not more stringent than what is required by the Business Corporations Act (British Columbia).

C.                     MATERIAL CONTRACTS

The only material contracts not in the ordinary course of business entered into by the Company during the most recent two financial years are:

1.  
Assignment Agreement dated March 10, 2010 among the Company, Minco Silver and Minco China.

2.  
Cost Sharing Agreement dated March 10, 2010 between the Company and Minco Silver.

3.  
Co-operation Framework Agreement dated December 16, 2010 between Minco China, Inner Mongolia Urat Middle Banner Tugurige Gold Mine and The 208 Team of China National Nuclear Corporation.

4.  
Supplementary Agreement to the Co-operation Framework Agreement dated December 24, 2010 between Minco China, Inner Mongolia Urat Middle Banner Tugurige Gold Mine and The 208 Team of China National Nuclear Corporation.

5.  
Trust Agreement dated June 9, 2011 between the Company, Minco Silver Corporation and Minco China.

The preceding summary of certain material provisions of the agreements described above is not complete and is qualified in their entirety by reference to the full text of such agreements.  The above-noted agreements can be found on SEDAR (www.sedar.com).

D.                      EXCHANGE CONTROLS

Except as provided in the Investment Canada Act , there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or British Columbia or in our charter documents. The following summarizes the principal features of the Investment Canada Act for non-Canadian residents proposing to acquire our common shares.
 
 
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This summary is of a general nature only and is not intended to be, and should not be construed to be, legal advice to any holder or prospective holder of our common shares, and no opinion or representation to any holder or prospective holder of our common shares is hereby made. Accordingly, holders and prospective holders of our common shares should consult with their own legal advisors with respect to the consequences of purchasing and owning our common shares.

The Investment Canada Act governs the direct or indirect acquisition of control of an existing Canadian business by non-Canadians. Under the Investment Canada Act , non-Canadian persons or entities acquiring "control" (as defined in the Investment Canada Act ) of a corporation carrying on business in Canada are required to either notify, or file an application for review with, Industry Canada, unless a specific exemption, as set out in the Investment Canada Act , applies. Industry Canada may review any transaction which results in the direct or indirect acquisition of control of a Canadian business, where the gross value of corporate assets exceeds certain threshold levels (which are higher for investors from members of the World Trade Organization, including United States residents, or World Trade Organization member-controlled companies) or where the activity of the business is related to Canada's cultural heritage or national identity. No change of voting control will be deemed to have occurred, for purposes of the Investment Canada Act , if less than one-third of the voting control of a Canadian corporation is acquired by an investor. In addition, the Investment Canada Act permits the Canadian government to review any investment where the responsible Minister has reasonable grounds to believe that an investment by a non-Canadian could be injurious to national security. No financial threshold applies to a national security review. The Minister may deny the investment, ask for undertakings, provide terms or conditions for the investment or, where the investment has already been made, require divestment. Review can occur before or after closing and may apply to corporate re-organizations where there is no change in ultimate control.

If an investment is reviewable under the Investment Canada Act , an application for review in the form prescribed is normally required to be filed with Industry Canada prior to the investment taking place, and the investment may not be implemented until the review has been completed and the Minister responsible for the Investment Canada Act is satisfied that the investment is likely to be of net benefit to Canada. If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian applicant must not implement the investment, or if the investment has been implemented, may be required to divest itself of control of the Canadian business that is the subject of the investment. The Minister is required to provide reasons for a decision that an investment is not of net benefit to Canada.

Certain transactions relating to our common shares will generally be exempt from the Investment Canada Act , subject to the Minister's prerogative to conduct a national security review, including:

(a)  
the acquisition of our common shares by a person in the ordinary course of that person's business as a trader or dealer in securities;

(b)  
the acquisition of control of our company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Canada Act ; and

(c)  
the acquisition of control of our company by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of our company, through ownership of our common shares, remains unchanged.

Chinese Currency

The Renminbi currently is not a freely convertible currency.  Although the Chinese central government's policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or security, requires the approval of the State Administration of Foreign Exchange and other relevant authorities.  The People's Bank of China, or PBOC, sets and publishes daily a base exchange rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day.

The PBOC also takes into account other factors, such as the general conditions existing in the international foreign exchange markets. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and U.S. dollars, has been based on rates set by the PBOC, which are set daily based on the previous day's interbank foreign exchange market rates and current exchange rates in the world financial markets.  From 1994 to July 20, 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable.
 
 
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On July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by 2% against the U.S. dollar.  The PRC government has since made and in the future may make further adjustments to the exchange rate system. The PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day.

E.                      TAXATION

Canadian Federal Income Tax Consequences

The following summarizes the principal Canadian federal income tax consequences applicable to the holding and disposition of common shares in the capital of the Company by a United States resident, and who holds common shares solely as capital property (a “US Holder” as defined below).  This summary is based on the current provisions of the Income Tax Act (Canada) (the “Tax Act”), the regulations there under, all amendments thereto publicly proposed by the government of Canada, the published administrative practices of Canada Revenue Agency, and on the current provisions of the Canada-United States Income Tax Convention, 1980, as amended (the “Treaty”).

Except as otherwise expressly provided, this summary does not take into account any provincial, territorial or foreign (including without limitation, any US) tax law or treaty.  It has been assumed that all currently proposed amendments will be enacted substantially as proposed and that there is no other relevant change in any governing law or practice, although no assurance can be given in these respects.  Each US Holder is advised to obtain tax and legal advice applicable to such US Holder’s particular circumstances.  Every US Holder is liable to pay a Canadian withholding tax on every dividend that is or is deemed to be paid or credited to the US Holder on the US Holder’s common shares.  The statutory rate of withholding tax is 25% of the gross amount of the dividend paid.  The Treaty reduces the statutory rate with respect to dividends paid to a US Holder for the purposes of the Treaty.  Where applicable, the general rate of withholding tax under the Treaty is 15% of the gross amount of the dividend, but if the US Holder is a company that owns at least 10% of the voting stock of the Company and beneficially owns the dividend, the rate of withholding tax is 5% for dividends paid or credited after 1996 to such corporate US Holder.  The Company is required to withhold the applicable tax from the dividend payable to the US Holder, and to remit the tax to the Receiver General of Canada for the account of the US Holder.

Pursuant to the Tax Act, a US Holder will not be subject to Canadian capital gains tax on any capital gain realized on an actual or deemed disposition of a common share, including a deemed disposition on death, provided that the US Holder did not hold the common share as capital property used in carrying on a business in Canada, and that neither the U. S. Holder nor persons with whom the US Holder did not deal at arm's length (alone or together) owned or had the right or an option to acquire 25% or more of the issued shares of any class of the Company at any time in the five years immediately preceding the disposition.

United States Tax Consequences

The following summarizes the principal U.S. federal income tax consequences to the holding and disposition of common shares in the capital of the Company by US Holders (defined below) and who holds their shares as capital assets within the meaning of Section 1221 of the U.S. Internal Revenue Code (“Code”).
 
 
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US Holders

As used herein, a “US Holder” includes a holder of Common Shares who is a citizen or resident of the United States, a corporation (including any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any political subdivision thereof, and an estate whose income is subject to U.S. federal income taxation regardless of its source, or a trust (a) if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) that has elected to be treated as a U.S. person under applicable U.S. Treasury Regulations .If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) holds common shares, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If a U.S. Holder is a partner in a partnership that holds the common shares, the U.S. Holder should consult its tax advisor regarding the specific tax consequences of owning and disposing of its shares.  A US Holder does not include (1) those who own (directly, or indirectly by attribution) 10% or more of the share capital or voting power of the Company; (2) are persons subject to the alternative minimum tax; (3) persons holding the shares as part of a straddle, hedging or conversion transaction and (4)persons subject to special provisions of federal income tax laws, such as tax exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of common shares is effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their stock through the exercise of employee stock options or otherwise as compensation.

The following discussion is based upon the sections of the Code, Treasury Regulations, published Internal Revenue Service rulings, published administrative positions of the Internal Revenue Service and court decisions that are currently applicable, any or all of which could be materially adversely changed, possibly on a retroactive basis, at any time.  In addition, this discussion does not consider the potential effects, both adverse and beneficial, of recently proposed legislation which, if enacted could be applied, possibly on a retroactive basis, at any time.  This discussion does not address all U.S. federal income tax matters that may be relevant to a US Holder in light of its particular circumstances, and it does not address any state, local and non-U.S. tax consequences of purchasing, owning and disposing of the common shares of the Company.  Each US Holder should consult with his or her own tax advisor with respect to the tax considerations relevant to such US Holder and its particular circumstances.

Dividends and Other Distributions on the Common Shares
 
Subject to the passive foreign investment company rules discussed below under “Passive Foreign Investment Company,” the gross amount of all our distributions to a U.S. Holder with respect to the common shares (including any Canadian taxes withheld there from) will be included in the U.S. Holder’s gross income as foreign source ordinary dividend income on the date of receipt by the U.S. Holder, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits, it will be treated first as a tax-free return of a U.S. Holder’s tax basis in its common shares, and to the extent the amount of the distribution exceeds the U.S. Holder’s tax basis, the excess will be taxed as capital gain. We do not currently, and we do not intend to, calculate our earnings and profits, if any, under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution, if any, will be treated as a dividend. The dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.
 
With respect to non-corporate U.S. Holders for taxable years beginning before January 1, 2011, dividends may constitute “qualified dividend income” that is taxed at the lower applicable capital gains rate provided that (1) the common shares are readily tradable on an established securities market in the United States or we are eligible for the benefits of the income tax treaty between the United States and Canada, (2) we are not a passive foreign investment company (as discussed below) for either our taxable year in which the dividend was paid or the preceding taxable year, (3) certain holding period requirements are met and (4) the U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. U.S. Treasury guidance indicates that our common shares, which are listed on NYSE Amex Equities, are readily tradable on an established securities market in the United States. There can be no assurance that our common shares will be considered readily tradable on an established securities market in later years. U.S. Holders should consult their tax advisors regarding the availability of the lower rate for dividends paid with respect to our common shares.  There can be no assurance that the Company’s dividends will be qualifying dividend income because there can be no assurance of the Company’s PFIC status in either the year of the distribution or the year preceding the distribution.
 
Subject to certain limitations, Canadian taxes withheld from a distribution to a U.S. Holder will be eligible for credit against such U.S. Holder’s U.S. federal income tax liability. If a refund of the tax withheld is available to the U.S. Holder under the laws of Canada or under the income tax treaty between the United States and Canada, the amount of tax withheld that is refundable will not be eligible for such credit against the U.S. Holder’s U.S. federal income tax liability (and will not be eligible for the deduction against the U.S. Holder’s U.S. federal taxable income). If the dividends are qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will in general be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to common shares generally will constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.” The rules relating to the determination of the U.S. foreign tax credit are complex, and U.S. Holders should consult their tax advisors to determine whether and to what extent a credit would be available. A U.S. Holder that does not elect to claim a foreign tax credit with respect to any foreign taxes for a given taxable year may instead claim an itemized deduction for all foreign taxes paid in that taxable year.
 
 
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Subject to the PFIC rules discussed below, upon the sale, exchange or other disposition of the Company’s Common Shares, a US Holder generally will recognize capital gain or loss equal to the difference between the amount realized upon the sale, exchange or other disposition of the Common Shares and the US Holder’s adjusted tax basis in the Common Shares.  The capital gain or loss generally will be long-term capital gain or loss if, at the time of sale, exchange or other disposition, the US Holder has held the Common Shares for more than one year.  Net long-term capital gains of non-corporate US Holders, including individuals, are eligible for reduced rates of taxation.  The deductibility of capital losses is subject to limitations.  Any gain or loss that a US Holder recognizes generally will be treated as gain or loss from sources within the United States for purposes of the U.S. foreign tax credit limitation discussed above.

If the Company pays distributions on the Common Shares in Canadian dollars, the U.S. dollar value of such distributions should be calculated by reference to the exchange rate prevailing on the date of actual or constructive receipt of the distributions, regardless of whether the Canadian dollars are converted into U.S. dollars at that time.  If Canadian dollars are converted into U.S. dollars on the date of actual or constructive receipt of such distributions, a US Holder’s tax basis in such Canadian dollars will be equal to their U.S. dollar value on that date and, as a result, the US Holder generally will not be required to recognize any foreign currency exchange gain or loss.  Any gain or loss recognized on a subsequent conversion or other disposition of the Canadian dollars generally will be treated as U.S. source ordinary income or loss for purposes of the U.S. foreign tax credit limitation discussed above.

Passive Foreign Investment Companies

We believe we were not a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for our taxable year ended December 31, 2011. A non-U.S. corporation is considered to be a PFIC for any taxable year if either:

§  
at least 75% of its gross income is passive income which includes dividends, interest, royalties, rents (other than rents and royalties derived in the active conduct of a trade or business and not derived from a related person), certain gains from the sales of commodities, annuities and gains from assets that produce passive income , or
§  
at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”).

There can be no assurance that in any given year 75% or more of the Company's gross income will not be passive income and we will not become a PCIF in this or any future taxable year.

We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.

A determination of the Company’s PFIC status should be done on an annual basis (assuming that we can continue to be a publicly traded entity) . As a result, our PFIC status may change. In particular, because the total value of our assets for purposes of the asset test will be calculated using the market price of our common shares (assuming that we continue to a publicly traded corporation for purposes of the applicable PFIC rules), our PFIC status will depend in large part on the market price of our common shares. Accordingly, fluctuations in the market price of our common shares may result in our being a PFIC for any year. If we are a PFIC for any year during which a U.S. Holder holds common shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds common shares, absent a special election. For instance, if we cease to be a PFIC, a U.S. Holder may avoid some of the adverse effects of the PFIC regime by making a deemed sale election with respect to the common shares. If we are a PFIC for any taxable year and any of our non-U.S. subsidiaries is also a PFIC, a U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. U.S. Holders are urged to consult their tax advisors about the application of the PFIC rules to any of our subsidiaries. For purposes of the PFIC provisions, passive income generally includes dividends, interest, royalties, rents (other than rents and royalties derived in the active conduct of a trade or business and not derived from a related person), certain gains from the sales of commodities, annuities and gains from assets that produce passive income.
 
 
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If we are a PFIC for any taxable year during which a U.S. Holder holds common shares, such U.S. Holder will be subject to special tax rules with respect to any “excess distribution” that it receives and any gain it realizes from a sale or other disposition (including a pledge) of the common shares, unless the U.S. Holder makes a “mark-to-market” election as discussed below. Distributions received by a U.S. Holder in a taxable year that are greater than 125% of the average annual distributions such U.S. Holder received during the shorter of the three preceding taxable years or its holding period for the common shares will be treated as an excess distribution. Under these special tax rules:

§  
the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the common shares,
§  
the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we became a PFIC, will be treated as ordinary income, and
§  
the amount allocated to each other year will be subject to the highest tax rate for the US Holder in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the common shares cannot be treated as capital, even if the U.S. Holder holds the common shares as capital assets.

Alternatively, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election with respect to shares of a PFIC to elect out of the tax treatment discussed above. If a U.S. Holder makes a valid mark-to-market election for the common shares, the U.S. Holder will include in income each year an amount equal to the excess, if any, of the fair market value of the common shares as of the close of its taxable year over its adjusted basis in such common shares. The U.S. Holder is allowed a deduction for the excess, if any, of the adjusted basis of the common shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the common shares included in the U.S. Holder’s income for prior taxable years. Amounts included in a U.S. Holder’s income under a mark-to-market election, as well as gain on the actual sale or other disposition of the common shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the common shares, as well as to any loss realized on the actual sale or disposition of the common shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such common shares. A U.S. Holder’s basis in the common shares will be adjusted to reflect any such income or loss amounts. If a U.S. Holder makes such an election, the tax rules that ordinarily apply to distributions by corporations that are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for “qualified dividend income” discussed above under “Dividends and Other Distributions on the Common Shares” would not apply.

The mark-to-market election is available only for “marketable stock,” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter on a qualified exchange, including NYSE Amex Equities, or other market, as defined in applicable U.S. Treasury regulations. We expect that our common shares will continue to be listed on NYSE Amex Equities and, consequently, the mark-to-market election would be available to U.S. Holders of common shares were we to be a PFIC.

If a non-U.S. corporation is a PFIC, a holder of shares in that corporation can avoid taxation under the rules described above by making a “qualified electing fund” election to include its share of the corporation’s ordinary earnings and net capital gain income on a current basis. However, a U.S. Holder can make a qualified electing fund election with respect to its common shares only if we furnish the U.S. Holder annually with certain tax information, and we do not intend to prepare or provide such information.
 
 
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A U.S. Holder that holds common shares in any year in which we are a PFIC will be required to file IRS Form 8621 regarding distributions received on the common shares and any gain realized on the disposition of the common shares.

U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to the ownership and disposition of common shares.

Other Consequences

To the extent a shareholder is not subject to the tax regimes outlined above with respect to foreign corporations that are PFICs, the following discussion describes the United States federal income tax consequences arising from the holding and disposition of the Company’s Common Shares.

Foreign Tax Credit

A US Holder may be entitled to claim a U.S. foreign tax credit for, or deduct, Canadian taxes that are withheld on distributions received by the US Holder, subject to applicable limitations in the Code.  Dividends paid on the common shares will be “passive category income” or “general category income” for U.S. foreign tax credit purposes. The amount of foreign income taxes that may be claimed as a credit in any year is subject to complex limitations and restrictions, which must be determined on an individual basis by each US Holder.  A US Holder that does not elect to claim a foreign tax credit with respect to any foreign taxes paid for a given taxable year may instead claim a deduction for all foreign paid in that taxable year.  US Holders are urged to consult their tax advisors regarding the availability of the U.S. foreign tax credit in their particular circumstances.

Information Reporting and Backup Withholding
 
Dividends on common shares and the proceeds of a sale or redemption of a common share may be subject to information reporting to the IRS and possible U.S. backup withholding at a current rate of 28%, unless the conditions of an applicable exemption are satisfied. Backup withholding will not apply to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status can provide such certification on IRS Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
 
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s U.S. federal income tax liability, and a U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information.

U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF COMMON SHARES.
 
F.                      DIVIDENDS AND PAYING AGENTS

There are no restrictions on the payment of dividends by the Company. While dividends may be declared at the discretion of the Company’s board of directors, the Company has not declared any dividends as of the date of this Registration Statement, nor does it intend to do so in the foreseeable future. Accordingly the Company has not appointed any financial organization to act as paying agents of the Company.

G.                      STATEMENT BY EXPERTS

We have included in “Item 4. Information on the Company” information about the Changkeng Gold Project from a technical report by P & E Mining Consultants Inc., of 2 County Court Blvd., Suite 202, Brampton. Ontario, Canada, L6W 3W8. The authors of the report are Eugene Puritch P.Eng., Antoine Yassa, P. Geo. and Tracy Armstrong P.Geo. The technical report was prepared under the guidelines of Canadian National Instruments 43-101.  The Company filed the Updated 43-101 technical report on April 24, 2008, an amended and restated technical report on October 6, 2008 and an updated technical report on May 11, 2009 via SEDAR.
 
 
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We have included in “Item 4. Information on the Company” information about the Jinniushan Gold Project from a technical report prepared by Peter G. Folk, P. Eng., of 280 Wood Dale Drive, Comp. 47, Site 21, Mayne Island, B.C., Canada, V0N 2J0. The technical report was prepared under the guidelines of Canadian National Instruments 43-101.  The Company filed the Updated 43-101 technical report on January 3, 2007 via SEDAR.  Peter G. Folk has consented to the inclusion of this information and has authorized the relevant contents of “Item 4. Information on the Company”.

H .     DOCUMENTS ON DISPLAY

The Company files annual reports and furnishes other information with the SEC. You may read and copy any document that we file at the SEC's Public Reference Room at 100 F St. NE, Washington, D.C. 20549 or by accessing the Commission’s website (www.sec.gov). The Company also files its annual reports and other information with the Canadian Securities Administrators via SEDAR (www.sedar.com).  Copies of the Company’s material contracts are kept in the Company’s administrative headquarters at 2772-1055 West Georgia Street, Vancouver, BC. V6E 3P3.

I.                      SUBSIDIARY INFORMATION

The Company incorporated separate Companies with current or planned business operations, which are all created for the exploration and acquisition of mineral projects in China as described below.

·  
Minco Mining (China) Corporation, incorporated in China on May 12, 2004, for the purposes of  managing Minco Gold’s projects in China, enhancing the Company’s management team in China, and expanding upon certain mining activities (such as staking) in China.  This company currently has eight full time and part time employees.

·  
Minco Silver Corporation, incorporated on August 20, 2004, under the laws of British Columbia.  Minco Silver was a 100% owned subsidiary of the Company.  This company was incorporated to acquire and develop silver projects in China and is currently involved with the development of the Fuwan silver property in Guangdong Province, China.

At December 31, 2004, the Company owned a 70% interest in Minco Silver but following a subsequent financing by Minco Silver, Minco Gold’s interest decreased to 55.56%.  On December 2, 2005, Minco Silver became a report issuer listed on the Toronto Stock Exchange (“TSX”) under the trading symbol “MSV”.  The Company currently owns 13,000,000 common shares of Minco Silver or 22.15% of the issued and outstanding common shares of Minco Silver.  Minco Silver and GGB agreed pursuant to the Amending Contract that, subject to the payment of the applicable purchase price, Minco Silver (through Minco China) would hold a 100% interest in the Fuwan Permits, subject to GGB retaining a 10% net profit interest in the properties subject to the Fuwan Permits.

More information on the Company's subsidiaries can be found in Section 4.C " Organizational Structure".

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk, primarily related to foreign exchange.  The Company uses the Canadian dollar as its reporting currency and is therefore exposed to foreign exchange movements in China where the Company is conducting exploration activities.

Year Ended December 31, 2011

The following table sets forth the principal components of the balance sheet at December 31, 2011 showing the sensitivity to exchange risk:

 
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Denominated in

      Total Value in $    
Effect of a 10% Change in Exchange Rate  
in $
 
    $      RMB
Cash and Cash equivalents
    82,106       41,288,949       6,696,805       661,470  
Receivables (including due from Minco Silver and Minco Base Metals)
    (620,908 )     7,012,348       502,506       112,341  
Prepaid expenses and deposits
    122,234       673,213       230,086       10,785  
Accounts payable and accrued liabilities
    272,356       46,457,614       7,715,102       744,275  
 
The following table sets forth the principal components of statement of operations for the year ended December 31, 2011 showing the sensitivity to exchange risk:

   

Denominated in

      Total Value in $       Effect of a 10% Change in Exchange Rate  
          $RMB
Exploration costs
    440,179       10,008,753       1,963,874       152.760  
Administrative expenses
    3,835,185       3,122,831       4,311,815       47,663  
Other losses
    13,618       752,539       128,474       11,486  

Year Ended December 31, 2010

The following table sets forth the principal components of the balance sheet at December 31, 2010 showing the sensitivity to exchange risk:

   

Denominated in

      Total Value in $       Effect of a 10% Change in Exchange Rate  
          $RMB
Cash and equivalents
    325,656       37,545,230       6,003,832       567,818  
Receivables (including due from Minco Silver)     122,060       5,122,021       896,692       77,463  
Loan receivable
    -       60,000,000       9,074,136       907,414  
Prepaid expenses and deposits
    107,749       484,269       180,989       7,324  
Accounts payable and accrued liabilities (including due to Minco Base Metals)
    383,607       86,528,785       13,469,839       1,308,623  
 
The following table sets forth the principal components of statement of operations for the year ended December 31, 2010 showing the sensitivity to exchange risk:

   

Denominated in

      Total Value in $       Effect of a 10% Change in Exchange Rate  
          $RMB
Exploration costs
    312,964       7,599,680       1,467,641       115,468  
Administrative expenses
    1,791,268       3,426,673       2,223,864       52,064  
Other income
    23,885       66,617       34,006       1,012  

We believe that the selected rate change of 10% is reasonably possible in the near term.  The Company has not entered into any material foreign exchange contracts to minimize or mitigate the effects of foreign exchange fluctuations on the Company’s operations.  The Company exchanges Canadian dollars to fund its Chinese operations.  The Company has no long-term debt, therefore, the Company does not believe that the interest rate market risk to be material.
 
 
68
 
 
ITEM 12.                      DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

NOT APPLICABLE.
 
PART II

ITEM 13.                      DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

NOT APPLICABLE.

ITEM 14.                      MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDER AND USE OF PROCEEDS

NOT APPLICABLE.

ITEM 15.                      CONTROLS AND PROCEDURES

(a)           Disclosure controls and procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is collected and communicated to management, as appropriate, to allow timely decisions regarding required disclosure.

At the end of the period covered by this report, the fiscal year ended December 31, 2011, an evaluation was carried out under the supervision of, and with the participation of, the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")).  Management concluded that the disclosure controls and procedures was effective as at December 31, 2011.

(b)           Management’s annual report on internal controls over financial reporting

Management is also responsible for establishing and maintaining adequate internal controls over financial reporting. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The control framework used to design the Company’s internal control over financial reporting is the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management has evaluated the effectiveness of design and operation of the Company’s internal controls over financial reporting as at December 31, 2011. Based on the result of this assessment, management has concluded that the Company’s internal controls over financial reporting are effective.

(c)           Attestation report of the registered public accounting firm

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 current rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

(d)           Changes in internal controls

During the year ended December 31, 2011, there have been no material changes in the Company’s internal control over financial reporting.

 
69
 
 
ITEM16A.    AUDIT COMMITTEE FINANCIAL EXPERT
 
The Company’s board of directors has determined that the Company has one audit committee financial expert serving on its audit committee and that the individual is “independent”.  Mr. Malcolm F. Clay, Chairman of the Audit Committee serves as the Audit Committee’s financial expert. He is a Chartered Accountant, with over 29 years' experience in both public and private companies.

ITEM 16B.                      CODE OF ETHICS - BOARD OF DIRECTORS AND OFFICERS

The following is the Company’s Code of Ethics for the Board of Directors and senior officers.  The Code of Ethics is available on the Company's website (www.mincogold.com).  A hard copy of the Code of Ethics may be requested from the Company by writing to the Company's Corporate Secretary at 2772-1055 West Georgia Street, Vancouver, BC. V6E 3P3.

Introduction

Our board of directors has adopted a code of ethics to provide principles for the purpose of promoting:

·  
honest and ethical conduct, including the ethical handling of actual or apparent  conflicts of interest between personal and professional relationships;
·  
full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications;
·  
compliance with applicable governmental laws, rules and regulations;
·  
the prompt internal reporting of violations of our code of ethics; and
·  
accountability for adherence to our code of ethics.

Our code of ethics applies to our chief executive officer and other senior financial officers performing similar functions as these individuals are responsible for our financial management and satisfying our reporting requirements to securities commissions, stock exchanges and shareholders as well as reporting to our board of directors.  In our code of ethics these individuals are referred to as “you”.

Principles

1.  
You shall act with honesty and integrity in the performance of your duties, shall comply with all laws, rules and regulations of federal, provincial, state and local governments and other private and public regulatory agencies that affect the conduct of our business and our financial reporting.
2.  
You are responsible for full, fair, accurate, timely and understandable disclosure in the reports and documents that we file with, or submit to, the Securities and Exchange Commission and in our other public communications.  Accordingly, each of you is responsible for promptly bringing to the attention of the chairman of the board any material information of which you may become aware that affects our disclosure in our public filings.
3.  
You shall promptly bring to the attention of the chairman of the board any information you may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to us and the operation of our business or any violation of this Code of Ethics.  In either event, any reporting is confidential and you are protected from retaliation.
4.  
You shall promptly bring to the attention of the chairman of the board any information you may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect our ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in our financial reporting, disclosures or internal controls.
5.  
You must avoid any personal activity or association that could appear to influence your judgment or affect our best interests.  You shall promptly bring to the attention of the chairman of the board any information you may have concerning any actual or apparent conflicts of interest between personal and professional relationships, involving any management or other employees who have a significant role in our financial reporting, disclosures or internal controls.
 
 
70
 
 
Violations and Waivers
 
Our chairman of the board is to advise the board of directors in writing of all violations of this code of ethics reported to him.  Our board of directors is to determine, with or without the advice of others, appropriate actions to be taken in the event you violate this code of ethics.  These actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to this code of ethics and may include actions ranging from: (a) writing notices to the individual involved that the Board has determined that there has been a violation to (b) termination of the individual’s employment.  In determining what action is appropriate in a particular case, the board of directors will take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in question had committed other violation in the past.

No waivers of any provision of this code of ethics may be made except by the board of directors.  Only the board of directors may amend this code of ethics.  Any waiver or amendment shall be reported as required by law or regulation.

ITEM 16C.                   PRINCIPAL ACCOUNTANT FEES AND SERVICES

During the past two fiscal years, the Company has paid the following fees to its principal accountants, PricewaterhouseCoopers LLP.

   
 
2011
   
2010
 
Audit fees (1)
  $ 68,111     $ 115,592  
Audit-related fees (2)
    42,800       9,849  
Tax fees (3)
    -       4,056  
All other fees (4)
    -       9,450  
Total
  $ 110,911     $ 138,947  
 
Notes :
(1)  
The aggregate fees billed for audit services.
(2)  
The aggregate fees billed for consultation, assurance and related services that are reasonably related to the performance of the audit or review of our Company's financial statements.
(3)  
The aggregate fees billed for tax compliance, corporate income tax returns, tax advice, tax compliance, and tax planning services.
(4)  
The aggregate fees billed for professional services other than those listed in the other columns items.

ITEM 16D.                   EXEMPTIONS FROM THE LISTING STANDARDS
FOR AUDIT COMMITTEES

Each member of the Audit Committee is "independent" from management.

ITEM 16E.                   PURCHASES OF EQUITY SECURITIES BY  THE ISSUER AND AFFILIATE PURCHASERS

None

ITEM 16F.                   CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

NOT APPLICABLE.

ITEM 16G.                  CORPORATE GOVERNANCE

NOT APPLICABLE.

ITEM 16H.                  MINE SAFETY

NOT APPLICABLE.

 
71
 
 
PART III

ITEM 17.                      FINANCIAL STATEMENTS

Not applicable .  Please see Item 18.

ITEM 18.                FINANCIAL STATEMENTS

Attached hereto.

Financial Statement

DOCUMENT
PAGE
 
Audited consolidated Financial Statements of the Company for the years ended December 31, 2011 and 2010 including Report of Independent Registered Public Accounting Firm
75
 
Audited consolidated Financial Statements of Minco Silver for the years ended December 31, 2011 and 2010 including Report of Independent Registered Public Accounting Firm
115
 
 

 

 

 

 

 

 

 

 

 

 

72
 

ITEM 19.                EXHIBITS

EXHIBIT
NUMBER
 
DESCRIPTION
1.1
1.2
4.1
4.2
4.3
4.4
4.5
4.6
8.1
12.1
12.2
13.1
13.2
15.1
15.2
 
 

 

 

 

 

 

73
 

 

 

 

 

 

 

 

 

 

 

 

 
Minco Gold Corporation
(An exploration stage enterprise)

Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Canadian dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 
74
 

 

 

 

 

 
Management's Responsibility for Financial Reporting
 
The consolidated financial statements are the responsibility of the Board of Directors and management. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by International Accouting Standard Board  and include certain estimates that reflect management’s best judgments on information currently available. In the opinion of management, the accounting practices utilized are appropriate in the circumstances and the consolidated financial statements fairly reflect the financial position and results of operations of the Company within reasonable limits of materiality.
 
The Audit Committee of the Board of Directors is composed of three Directors and meets quarterly with management and the independent auditors to review the scope and results of the annual audit and to review the consolidated financial statements and related financial reporting matters prior to submitting the consolidated financial statements to the Board of Directors for approval.
 
The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, Chartered Accountants, who were appointed by the shareholders. The auditors’ report outlines the scope of their examination and their opinion on the consolidated financial statements.
 
Dr. Ken Cai  Paul Zhang, C.A.
President and CEO CFO and VP Finance
 
Vancouver, Canada
March 28, 2012
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75
 
 

March 29, 2012

Independent Auditor’s Report

To the Shareholders of Minco Gold Corporation
 
We have audited the accompanying consolidated financial statements of Minco Gold Corporation and its subsidiaries, which comprise the consolidated statement of financial position as at December 31, 2011, December 31, 2010 and January 1, 2010 and the consolidated statements of income (loss), comprehensive income (loss), changes in equity and cash flows for each of the two years in the period ended December 31, 2011, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.
 
Management’s responsibility for the consolidated financial statements
 
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
 
Auditor’s responsibility
 
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Canadian generally accepted auditing standards require that we comply with ethical requirements.
 
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 auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. We were not engaged to perform an audit of the company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
 
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
 
Opinion
 
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Minco Gold Corporation and its subsidiaries as at December 31, 2011, December 31, 2010 and January 1, 2010 and their financial performance and their cash flows for each of the two years in the period ended December 31, 2011 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
 
signed “PricewaterhouseCoopers LLP”
 
Chartered Accountants
 
Vancouver, British Columbia
 
 

 

 

 

76
 
 
Index
 
 
Page
   
Consolidated Financial Statements
5 - 9
     
 
Consolidated Statements of Financial Position
5
     
 
Consolidated Statements of Income (Loss)
6
     
 
Consolidated Statements of Comprehensive Income (Loss)
7
     
 
Consolidated Statements of Changes in Equity
8
     
 
Consolidated Statements of Cash Flow
9
     
Notes to the Consolidated Financial Statements
10 - 40
     
1
General information
10
     
2
Basis of preparation and adoption of IFRS
10
     
3
Summary of significant accounting policies
10
     
4
Critical accounting estimates and judgments
18
     
5
Cash and short-term investments
19
     
6
Property, plant and equipment
20
     
7
Loan receivable
21
     
8
Mineral interests
21
     
9
Equity investment in Minco Silver Corporation
23
     
10
Discontinued operation
25
     
11
Share capital
25
     
12
Income tax
27
     
13
Earnings (loss) per share
29
     
14
Commitments
29
     
15
Related party transactions
30
     
16
Segment reporting
32
     
17
Financial instruments and fair values
33
     
18
Capital management
36
     
19
First-time adoption of IFRS
37
     
20 Subsequent event 40
 
 
 
77
 
 
Minco Gold Corporation
(An exploration stage enterprise)
Consolidated Statements of Financial Position
(in Canadian dollars)
 
   
December 31,
   
December 31,
   
January 1,
 
   
2011
   
2010
   
2010
 
Assets
  $       $       $    
Current assets
                       
Cash and cash equivalents (note 5)
    6,696,805       6,003,832       3,505,268  
Short-term investments (note 5)
    -       293,770       2,475,936  
Marketable securities
    10,500       25,200       35,700  
Receivables
    52,618       57,387       370,767  
Due from related parties (note 15)
    449,888       839,305       2,229,861  
Loan receivable (note 7)
    -       9,074,136       -  
Prepaid expenses and deposits
    176,959       116,477       85,572  
Assets of discontinued operation (note 10)
    -       -       4,617  
      7,386,770       16,410,107       8,707,721  
                         
Long-term deposit
    53,127       64,512       51,764  
Property, plant and equipment (note 6)
    247,860       290,502       324,429  
Equity investment in Minco Silver (note 9)
    14,489,016       6,935,139       5,406,195  
Assets of discontinued operation (note 10)
    -       -       43,585  
      22,176,773       23,700,260       14,533,694  
Liabilities
                       
Current liabilities
                       
Accounts payable and accrued liabilities
    521,931       647,618       751,762  
Accounts payable for Changkeng permit (note 8(a))
    4,681,156       4,419,070       4,449,832  
Advance from non-controlling interest (note 8(a))
    2,512,015       764,345       -  
Due to related party (note 15(c))
    -       7,638,806       -  
Liabilities of discontinued operation (note 10)
    -       -       2,250  
      7,715,102       13,469,839       5,203,844  
Equity
                       
Equity attributable to owners of the parent
                       
Share capital (note 11(a))
    41,758,037       40,335,033       38,553,755  
Contributed surplus
    6,982,376       5,355,953       5,722,060  
Accumulated other comprehensive income
    256,125       (63,252 )     -  
Deficits
    (36,949,896 )     (37,841,318 )     (37,439,392 )
      12,046,642       7,786,416       6,836,423  
Non-controlling interests
    2,415,029       2,444,005       2,493,427  
Total equity
    14,461,671       10,230,421       9,329,850  
      22,176,773       23,700,260       14,533,694  
 
Commitments (note 14)
   
Subsequent events (notes 7, 8 and 20)
   
     
Approved by the Board of Directors
   
(signed) Malcolm Clay             Director    (signed) Robert Callander  Director
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
78
 
 
Minco Gold Corporation
(An exploration stage enterprise)
Consolidated Statements of Income (Loss)
For the years ended December 31, 2011 and 2010
(in Canadian dollars, except per share data)

   
2011
   
2010
 
    $       $    
Exploration costs
    1,963,874       1,467,641  
Administrative expenses (note 15)
               
Accounting and audit
    246,900       140,176  
Amortization
    71,919       81,371  
Consulting
    122,654       143,350  
Directors' fees
    48,527       43,500  
Foreign exchange gain
    (17,149 )     (111,901 )
Investor relations
    449,813       220,853  
Legal
    99,879       8,628  
Office and miscellaneous
    316,359       396,635  
Property investigation
    117,605       210,416  
Regulatory and filing
    157,475       121,176  
Salaries and benefits
    369,242       500,677  
Share-based compensation (note 11(b))
    2,264,809       383,282  
Travel and transportation
    63,782       85,701  
      4,311,815       2,223,864  
Operating loss
    (6,275,689 )     (3,691,505 )
Unrealized loss on marketable securities
    (14,700 )     (10,500 )
Finance expense
    (351,992 )     (15,203 )
Finance and other income
    238,218       59,709  
Loss for the year before loss from equity investment and dilution gain      (6,404,163 )       (3,657,499  )
Share of loss from equity investment in Minco Silver (note 9)
    (1,443,391 )     (1,246,150 )
Dilution gain (note 9)
    8,710,000       2,845,000  
Net income (loss) for the year from continuing operations
    862,446       (2,058,649 )
Earnings for the year from discontinued operations
    -       1,607,301  
Net income (loss) for the year
    862,446       (451,348 )
Net income (loss) attributable to:
               
Shareholders of the Company
    891,422       (401,926 )
Non-controlling interest
    (28,976 )     (49,422 )
      862,446       (451,348 )
Earnings (loss) per share:
               
     basic
    0.02       (0.01 )
     diluted
    0.02       (0.01 )
Weighted average number of common shares outstanding –
     basic
    50,228,592       48,582,347  
     diluted
    51,580,329       48,582,347  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
79
 
 
Minco Gold Corporation
(An exploration stage enterprise)
Consolidated Statements of Comprehensive Income (Loss)
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
   
2011
   
2010
 
    $       $    
Net income (loss) for the year
    862,446       (451,348 )
Other comprehensive income (loss)
               
Cumulated translation adjustment from Minco Silver
investment
    251,688       (57,217 )
Exchange differences on translation from functional to
presentation currency
    67,689       (6,035 )
                 
Total comprehensive income (loss) for the year
    1,181,823       (514,600 )
 
Comprehensive income (loss) attributable to:
               
Shareholders of the Company
    1,210,799       (465,178 )
Non-controlling interest
    (28,976 )     (49,422 )
      1,181,823       (514,600 )
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
80
 

Minco Gold Corporation
(An exploration stage enterprise)
Consolidated Statements of Changes in Equity
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
   
Attributable to equity owners of the Company
             
                                                 
   
Number of shares
   
Share capital
   
Contributed surplus
   
Accumulated other comprehensive income
   
Deficits
   
Subtotal
   
Non-controlling interest
   
Total equity
 
            $       $       $       $       $       $       $  
                                                               
Balance - January 1, 2010
    48,157,782       38,553,755       5,722,060       -       (37,439,392 )     6,836,423       2,493,427       9,329,850  
Loss for the year
    -       -       -       -       (401,926 )     (401,926 )     (49,422 )     (451,348 )
Exchange differences from translation from functional to presentation currency
    -       -       -       (63,252 )     -       (63,252 )     -       (63,252 )
Share-based compensation
    -       -       383,282       -       -       383,282       -       383,282  
Proceeds on issuing shares from exercise of options
    1,357,100       1,781,278       (749,389 )     -       -       1,031,889       -       1,031,889  
Balance - December 31, 2010
    49,514,882       40,335,033       5,355,953       (63,252 )     (37,841,318 )     7,786,416       2,444,005       10,230,421  
                                                                 
 
Balance - January 1, 2011
    49,514,882       40,335,033       5,355,953       (63,252 )     (37,841,318 )     7,786,416       2,444,005       10,230,421  
Net income (loss) for the year
    -       -       -       -       891,422       891,422       (28,976 )     862,446  
Exchange differences from translation from functional to presentation currency
    -       -       -       319,377       -       319,377       -       319,377  
Share-based compensation
    -       -       2,264,809       -       -       2,264,809       -       2,264,809  
Proceeds on issuing shares from exercise of options
    833,333       1,423,004       (638,386 )     -       -       784,618       -       784,618  
Balance - December 31, 2011
    50,348,215       41,758,037       6,982,376       256,125       (36,949,896 )     12,046,642       2,415,029       14,461,671  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
81
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Consolidated Statetements of Cash Flow
For the years ended December 31, 2011 and 2010
(in Canadian dollars)

   
2011
   
2010
 
Cash flow provided by (used in)
  $       $    
                 
Operating activities
               
Net income (loss) for the period from continuing operations 862,446                
Adjustments for:
               
        Amortization
    71,919       81,371  
        Equity loss on investment in Minco Silver
    1,443,391       1,246,150  
        Dilution gain
    (8,710,000 )     (2,845,000 )
        Share-based compensation (note 11(b))
    2,264,809       383,282  
        Foreign exchange gain (loss)
    11,255       (60,323 )
        Unrealized loss on marketable securities
    14,700       10,500  
Changes in items of working capital:
               
        Receivables
    5,663       313,380  
        Due from related parties
    370,971       1,467,583  
        Prepaid expenses and deposits
    (43,323 )     (43,654 )
        Accounts payable and accrued liabilities
    (191,235 )     (84,144 )
Cash used in operating activities of continuing operations
    (3,899,404 )     (1,589,504 )
Cash generated from activities of discontinued operation
    -       1,649,604  
Net cash generated from (used in) operating activities
    (3,899,404 )     60,100  
                 
Investing activities
               
Loan receivable
    8,937,482       (9,122,284 )
Property, plant and equipment
    (15,041 )     (43,881 )
Short-term investments
    293,770       2,182,166  
Net cash generated from (used in) investing activities
    9,216,211       (6,983,999 )
                 
Financing activities
               
Advanced from minority shareholders
    1,597,438       768,693  
Proceeds from issuance of shares
    784,618       1,045,126  
Advanced from Minco Base Metals
    (7,483,798 )     7,601,904  
Net cash generated from (used in) financing activities
    (5,101,742 )     9,415,723  
                 
Effect of exchange rate changes on cash and cash equivalents
    477,908       3,091  
Increase in cash and cash equivalents
    692,973       2,494,915  
Cash and cash equivalents - Beginning of year
    6,003,832       3,508,917  
Cash and cash equivalents - End of year
    6,696,805       6,003,832  
Cash paid for income tax
    -       -  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
82
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 

1.  

General information
 
Minco Gold Corporation (“Minco Gold” or the “Company”) was incorporated in 1982 under the laws of British Columbia, Canada as Caprock Energy Ltd. Following a number of name changes the Company became Minco Gold in 2007. It is an exploration stage company engaged in exploration and evaluating gold-dominant mineral properties and projects in China. The registered office of the Company is 2772 – 1055 West Georgia Street, British Columbia, Canada. The Company has listed its common shares on the Toronto Stock Exchange (“TSX”) under the symbol “MMM”, and the NYSE Amex Equities (“AMEX”) under the symbol “MGH”.
 
As at December 31, 2011, Minco Gold owned a 22.15% (December 31, 2010 – 26.20%, and January 1, 2010 – 32.01%) equity interest in Minco Silver.
 

2.  

Basis of preparation and adoption of IFRS
 
The Company prepares its financial statements in accordance with Canadian generally accepted accounting principles as defined in the Handbook of the Canadian Institute of Chartered Accountants (“CICA Handbook”). In 2010, the CICA Handbook was revised to incorporate International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Boards (“IASB”) and to require publicly accountable enterprises to apply these standards effective for years beginning on or after January 1, 2011. Accordingly, these are the Company’s first annual consolidated financial statements prepared in accordance with IFRS as issued by the IASB. In these financial statements, the term “Canadian GAAP” refers to Canadian GAAP before the adoption of IFRS.
 
These consolidated financial statements have been prepared in compliance with IFRS as issued by IASB. Subject to certain transition elections and exemption disclosed in note 20, the Company consistently applied the accounting policies used in the preparation of its opening IFRS statement of financial position at January 1, 2010 throughout all periods presented, as if these policies has always been in effect. Note 20 discloses the impact of the transition to IFRS on the Company’s reported financial position, financial performance and cash flows, including the nature and effect of significant changes in accounting policies from those used in the Company’s consolidated financial statements for the year ended December 31, 2010 prepared under Canadian GAAP.
 
These financial statements were approved by the board of directors for issue on March 28, 2012.
 
3.
Summary of significant accounting policies
 
Basis of measurement
 
The consolidated financial statements have been prepared under the historical cost convention.
 
Consolidation
 
These consolidated financial statements include the accounts of Minco Gold, its wholly-owned Chinese subsidiaries Minco Mining (China) Corporation (“Minco China”), Yuanling Minco Mining Ltd. (“Yuanling Minco”) and Huaihua Tiancheng Mining Ltd. (“Huaihua Tiancheng”), its wholly owned British Virgin Island subsidiary Triple Eight Mineral Corporation (“Temco”) and its 51% interest in Guangzhou Mingzhong Mining Co. Ltd. (“ Mingzhong”).
 
 
83
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
3.              Summary of significant accounting policies (continued)
 
Subsidiaries are those entities which the Company controls by having the power to govern the financial and operating policies. Subsidiaries are fully consolidated from the date on which controls is obtained by the Company and are de-consolidated from the date that control ceases. All intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation.
 
Minco China’s subsidiary, Foshan Minco Mining Co. Ltd. (“Foshan Minco”), is legally owned by Minco China in trust for Minco Silver. Minco Gold does not consolidate Foshan Minco as it does not control this entity. Minco China also holds certain other assets and exploration permits in trust for Minco Silver. These assets are held for the exlusive benefit of Minco Sivler and have not been included in these financial statements.
 
Equity investment
 
Associates are entities over which the Company has significant influence, but not control. The Company accounts for its investment in associates using the equity method. The Company’s share of income or loss of associates is recognized in the consolidated statement of income (loss).
 
Dilution gains and losses arising from changes in interests in investments in associates are recognized in the consolidated statement of income (loss).
 
 
Non-controlling interests
 
Non-controlling interests represent equity interests in subsidiaries owned by outside parties. The share of net assets of subsidiaries attributable to non-controlling interests is presented as a component of equity. Profit or loss and each component of other comprehensive income are attributed to the non-controlling interests where applicable. Changes in the parent company’s ownership interest in subsidiaries that do not result in a loss of control are accounted for as equity transactions.
 
Segment reporting
 
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments and has been identified as the chief executive officer of Minco Gold.
 
 
84
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)

 

3.              Summary of significant accounting policies (continued)
 
Foreign currency translation
 
(i) Functional and presentation currency
 
The financial statements of each entity in the group are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Canadian dollars.
 
The functional currency of Minco Gold is the Canadian dollar.
 
The functional currency of the Company’s Chinese subsidiaries is Renminbi (“RMB”).
 
The financial statements of the Company’s Chinese subsidiaries (“foreign operations”) are translated into the Canadian dollar presentation currency as follows:
 
·  
Assets and liabilities – at the closing rate at the date of the statement of financial position
 
·  
Income and expenses – at the average rate of the period (as this is considered a reasonable approximation to actual rates).
 
All resulting changes are recognized in other comprehensive income as cumulative translation adjustments.
 
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from the item are considered to form part of the net investment in a foreign operation and are recognized in other comprehensive income.
 
When an entity disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in other comprehensive income related to the foreign operation are recognized in profit or loss. If an entity disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount of foreign currency gains or losses accumulated in other comprehensive income related to the subsidiary are reallocated between controlling and non-controlling interests.
 
(ii) Transactions and balances
 
Foreign currency transactions are translated into the functional currency of an entity using the exchange rates prevailing at the dates of the transactions. Generally, foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation’s functional currency are recognized in the statement of income (loss)
 
Financial instruments
 
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.
 
 
85
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 

 

3.             Summary of significant accounting policies (continued)
 
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
 
At initial recognition, the Company classifies its financial instruments in the following categories:
 
(i) Financial assets and liabilities at fair value through profit or loss: A financial asset or liability is classified in this category if acquired principally for the purpose of selling or repurchasing in the short-term. Financial instruments in this category are recognized initially and subsequently at fair value. Transaction costs are expensed in the statement of income. Gains and losses arising from changes in fair value are presented in the statement of income within other gains and losses in the period in which they arise. Financial assets and liabilities at fair value through profit or loss are classified as current except for the portion expected to be realized or paid beyond twelve months of the balance sheet date, which is classified as non-current.
 
(ii) Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Company’s loans and receivables are comprised of cash and cash equivalents, deposits and loan receivable amounts.
 
Loans and receivables are initially recognized at the amount expected to be received less, when material, a discount to reduce the loans and receivables to fair value. Subsequently, loans and receivables are measured at amortized cost using the effective interest method less a provision for impairment, if necessary.
 
Cash and cash equivalents comprise cash at banks and on hand and guaranteed investment certificates with initial maturities of less than three months. Short-term investments comprise of guaranteed investment certificates with initial maturity of greater than three months
 
(iii) Financial liabilities at amortized cost: Financial liabilities at amortized cost include accounts payable.
 
Financial liabilities are classified as current liabilities if payment is due within twelve months. Otherwise, they are presented as non-current liabilities.
 
Impairment of financial assets
 
At each reporting date, the Company assesses whether there is objective evidence that a financial asset is impaired.
 
If such evidence exists, the Company recognizes an impairment loss as follows:
 
Financial assets carried at amortized cost: The loss is the difference between the amortized cost of the loan or receivable and the present value of the estimated future cash flows, discounted using the instrument’s original effective interest rate. The carrying amount of the asset is reduced by this amount either directly or indirectly through the use of an allowance account.
 
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.
 
 
86
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)

 

 
3.             Summary of significant accounting policies (continued)
 
Property, plant and equipment
 
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.  Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably.  Repairs and maintenance costs are charged to the statement of income during the period which they are incurred.
 
The major categories of property, plant and equipment are depreciated on a straight-line basis as follows:
 
  Leasehold Improvements   remaining lease term
  Mining Equipment  5 years
  Motor Vehicles  10 years
  Office Equipment and Furniture  5 years
 
The Company allocates the amount initially recognized in respect of an item of property, plant and equipment to its significant parts and depreciates separately each such part. The carrying amount of a replaced asset is derecognized when replaced.  Residual values, method of amortization and useful lives of the assets are reviewed annually and adjusted if appropriate.
 
Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the asset and are included as part of other gains and losses in the statement of income.
 
Exploration and evaluation costs
 
Exploration and evaluation costs include costs to acquire the rights to explore, geological studies, exploratory drilling and sampling and directly attributable administrative costs.
 
Exploration and evaluation costs relating to non-specific projects or properties or those incurred before the Company has obtained legal rights to explore an area are expensed in the period incurred. In addition, exploration and evaluation costs, other than direct acquisition costs, are expensed before a mineral resource is identified as having economic potential.
 
Exploration and evaluation costs are capitalized as mineral interests when a mineral resource is identified as having economic potential on a property. A mineral resource is considered to have economic potential when it is expected that documented resources can be legally and economically developed considering long-term metal prices. Therefore, prior to capitalizing such costs, management determines that the following conditions have been met:
 
i) There is a probable future benefit that will contribute to future cash inflows;
 
ii) The Company can obtain the benefit and control access to it;
 
iii) The transaction or event giving rise to the benefit has already occurred.
 
 
87
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
3.             Summary of significant accounting policies (continued)
 
Once the technical feasibility and commercial viability of the extraction of resources from a particular mineral property has been determined, mineral interests are reclassified to mine properties within property, plant and equipment and carried at cost until the properties to which they relate are placed into commercial production, sold, abandoned or determined by management to be impaired in value.
 
Costs relating to any producing mineral interests would be amortized on a unit of production basis over the estimated ore reserves. Costs incurred after the property is placed into production that increase production volume or extend the life of a mine are capitalized.
 
Proceeds from the sale of properties or cash proceeds received from option payments are recorded as a reduction of the related mineral interest.
 
Impairment of non-financial assets
 
The recoverability of mineral interests is dependent upon the determination of economically recoverable ore reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability to farm-out its resource properties, the ability to obtain the necessary financing to complete their development and future profitable production or proceeds from the disposition thereof.
 
The Company performs impairment tests on property, plant and equipment and mineral interests when events or circumstances occur which indicate the assets may not be recoverable. Impairment assessments are carried out on project by project basis with each project representing a single cash generating unit.
 
When impairment indicators are identified, an impairment loss is recognized for any amount by which the asset’s carrying value exceeds its recoverable amount.  The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use.
 
The Company evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.
 
Share-based payments
 
The Company grants stock options to directors, officers, employees and service providers. Each tranche in an award is considered a separate award with its own vesting period. The Company applies the fair-value method of accounting for share-based payments and the fair value is calculated using the Black-Scholes option pricing model.
 
Share-based payments for employees and others providing similar services are determined based on the grant date fair value. Share based payments for non-employees is determined based on the fair value of the goods/services received or option granted measured at the date on which the Company obtains such goods/services.
 
Compensation expense is recognized over each tranche’s vesting period, in earnings or capitalized as appropriate, based on the number of awards expected to vest. If stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.
 
 
88
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
3.             Summary of significant accounting policies (continued)
 
Provision for restoration and rehabilitation
 
A provision for restoration and rehabilitation is recognized when there is a present legal or constructive obligation as a result of exploration and development activities undertaken; it is more likely than not that an outflow of economic benefits will be required to settle the obligation and the amount of the provision can be measured reliably. The estimated future obligation includes the cost of removing facilities, abandoning sites and restoring the affected areas.
 
The provision for future restoration costs is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date. The estimated cost is capitalized into the cost of the related asset and amortized on the same basis as the related assets. If the estimated cost does not relate to an asset, it is charged to earnings in the period in which the event giving rise to the liability occurs.
 
As at December 31, 2011 and December 31, 2010, the Company did not have any provision for restoration and rehabilitation.
 
Income tax
 
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss.
 
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
 
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
 
Share capital
 
Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity.
 
Earnings per share
 
Basic earnings per share is computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares using the treasury stock method. If the Company incurs net losses in a fiscal year, basic and diluted loss per share are the same.
 
 
89
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
3.             Summary of significant accounting policies (continued)
 
Accounting standards and amendments issued but not yet adopted
 
Unless otherwise noted, the following revised standards and amendments are effective for annual periods beginning on or after January 1, 2013 with earlier application permitted unless otherwise noted. The Company has not yet assessed the impact of these standards and amendments or determined whether it will early adopt them.
 
(i)  
IFRS 7, Financial Instruments : Disclosures, has been amended to include additional disclosure requirements in the reporting of transfer transactions and risk exposures relating to transfers of financial assets and the effect of those risks on an entity’s financial position, particularly those involving securitization of financial assets. The amendment is applicable for annual periods beginning on or after July 1, 2011, with earlier application permitted.
 
 
(ii)  
IFRS 9, Financial Instruments , was issued in November 2009 and addresses classification and measurement of financial assets. It replaces the multiple category and measurement models in IAS 39 for debt instruments with a new mixed measurement model having only two categories: amortized cost and fair value through profit or loss. IFRS 9 also replaces the models for measuring equity instruments. Such instruments are either recognized at fair value through profit or loss or at fair value through other comprehensive income. Where equity instruments are measured at fair value through other comprehensive  income, dividends are recognized in profit or loss to the extent that they do not clearly represent a return of investment; however, other gains and losses (including impairments) associated with such instruments remain in accumulated comprehensive income indefinitely.
 
Requirements for financial liabilities were added to IFRS 9 in October 2010 and they largely carried forward existing requirements in IAS 39, Financial Instruments – Recognition and Measurement , except that fair value changes due to credit risk for liabilities designated at fair value through profit and loss are generally recorded in other comprehensive income. The provision of IFRS 9 is effective for annual periods beginning on or after January 1, 2015.
 
(iii)  
IFRS 10, Consolidated Financial Statements, requires an entity to consolidate an investee when it has power over the investee, is exposed or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.  Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating of an entity so as to obtain benefits from its activities.  IFRS 10 replaces SIC-12, Consolidation – Special Purpose Entities and parts of IAS 27, Consolidated and Separate Financial Statements.
 
(iv)  
IFRS 11, Joint Arrangements , requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11 supersedes IAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entities—Non-monetary Contributions by Venturers.
 
 
90
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
3.
Summary of significant accounting policies (continued)
 
 
(v)
IFRS 12, Disclosure of Interests in Other Entities, establishes disclosure requirements for interests in other entities, such as subsidiaries, joint arrangements, associates, and unconsolidated structured entities. The standard carries forward existing disclosures and also introduces significant additional disclosure that address the nature of, and risks associated with, an entity’s interests in other entities
 
 
(vi)
IFRS 13, Fair Value Measurement , is a comprehensive standard for fair value measurement and disclosure for use across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and does not always reflect a clear measurement basis or consistent disclosures.
 
There have been amendments to existing standards, including IAS 27, Separate Financial Statements (IAS 27), and IAS 28, Investments in Associates and Joint Ventures (IAS 28). IAS 27 addresses accounting for subsidiaries, jointly controlled entities and associates in non-consolidated financial statements. IAS 28 has been amended to include joint ventures in its scope and to address the changes in IFRS 10 – 13
 
 
(vii)
IAS 1, Presentation of Financial Statements, has been amended to require entities to separate items presented in OCI into two groups, based on whether or not items may be recycled in the future. Entities that choose to present OCI items before tax will be required to show the amount of tax related to the two groups separately. The amendment is effective for annual periods beginning on or after July 1, 2012 with earlier application permitted.
 
 
(viii)
IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, sets out the accounting for overburden waste removal (stripping) costs in the production phase of a mine. Stripping activity may create two types of benefit: i) inventory produced and ii) improved access to ore. Stripping costs associated with the former should be accounted for as a current production cost in accordance with IAS 2, Inventories. The latter should be accounted for as an addition to or enhancement of an existing asset.
 
4.           Critical accounting estimates and judgments
 
The preparation of financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and estimates that the Company has made in the preparation of the financial statements:
 
Equity Investment in Minco Silver
 
The Company reviews its equity investment in Minco Silver when there is any indication that the investment might be impaired. Management has assessed impairment indicators on this equity investment   and has concluded that no impairment indicator existed as of December 31, 2011.
 
 
91
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
5.           Cash and short-term investments
 
As at December 31, 2011 cash and cash equivalents consisted of short-term deposits with a maturity term of seven days and can be renewed automatically. The yield on the short-term deposit was 1.5%.
 
As at December 31, 2011, short-term investments consist of $Nil of cashable guaranteed investment certificates with terms of greater than ninety days but less than one year (December 31, 2010 - $293,770, and January 1, 2010 - $2,475,936).
 
   
December 31,
   
December 31,
   
January 1,
 
   
2011
   
2010
   
2010
 
    $       $       $    
                         
Cash at bank and on hand
    6,696,805       6,003,832       3,505,268  
Short-term bank deposits
    -       293,770       2,475,936  
Cash and cash equivalents
    6,696,805       6,297,602       5,981,204  
 
Included in cash is $4,681,156 held by in Mingzhong to satisfy the remaining amount outstanding for the Changkeng permit (note 8(a)). For further discussion of liquidity refer to note 17.
 
 
92
 
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
6.              Property, plant and equipment
 
   
Leasehold improvements
   
Mining equipment
   
Motor vehicles
   
Office equipment and furniture
   
Total
 
    $       $       $       $       $    
At January 1, 2010
                                       
Cost
    70,304       370,411       341,058       359,229       1,141,002  
Accumulated depreciation
    (60,580 )     (282,023 )     (151,562 )     (322,408 )     (816,573 )
Net book value
    9,724       88,388       189,496       36,821       324,429  
                                         
Year ended December 31, 2010                                        
At January 1, 2010
    9,724       88,388       189,496       36,821       324,429  
Additions
    -       49,074       16,938       5,561       71,573  
Disposals
    -       -       (27,692 )     -       (27,692 )
Depreciation
    (7,738 )     (18,855 )     (26,497 )     (28,281 )     (81,371 )
Exchange differences
    339       826       1,160       1,238       3,563  
At December 31, 2010
    2,325       119,433       153,405       15,339       290,502  
                                         
At December 31, 2010
                                       
Cost
    70,643       420,310       331,464       366,029       1,188,446  
Accumulated depreciation
    (68,318 )     (300,877 )     (178,059 )     (350,690 )     (897,944 )
Net book value
    2,325       119,433       153,405       15,339       290,502  
                                         
Year ended December 31, 2011                                        
At January 1, 2011
    2,325       119,433       153,405       15,339       290,502  
Additions
    -       417       -       15,167       15,584  
Depreciation for the period
    -       (23,364 )     (25,826 )     (22,729 )     (71,919 )
Exchange differences
    136       5,642       7,460       455       13,693  
At December 31, 2011
    2,461       102,128       135,039       8,232       247,860  
                                         
At December 31, 2011
                                       
Cost
    70,779       426,370       338,923       381,651       1,217,723  
Accumulated depreciation
    (68,318 )     (324,242 )     (203,884 )     (373,419 )     (969,863 )
Net book value
    2,461       102,128       135,039       8,232       247,860  
 
 
93
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
7.           Loan receivable
 
During December 2010, Minco China entered into a Joint Venture Agreement  (the “JV Agreement”) with the 208 Exploration Team (the “208 Team”), a subsidiary of China National Nuclear Corporation (the “CNNC”), to acquire a 51% equity interest in the Tugurige Gold Project located in Inner Mongolia, China. Under the terms of the JV Agreement, the 208 Team is obligated to  set up a new entity (the "JV Co") and transfer its 100% interest in the Tugurige Gold Project into the JV Co. Minco China has the right to contribute a total of RMB 250 million (approximately $37 million) (the “Earn-In Amount”) to earn a 51% equity interest in the JV Co, with RMB 180 million (approximately $27 million) to be contributed upon conclusion of the JV agreement. The Earn-In Amount is subject to an independent evaluation of the value of the Tugurige Project.
 
To secure the project, Minco China provided RMB 60 million (approximately $9 million) in the form of a secured short-term loan to the Tugurige Gold Mine as at December 31, 2010. The loan was repaid on March 25, 2011 in full with interest. To finance the loan receivable, the Company borrowed funds from a related party (Note 15(b)).
 
As at December 31, 2011, the 208 Team has not complied with certain of its obligations under the JV agreement, including its obligation to set up a new entity (the “JV Co”) and the transfer of its 100% interest in the Tugurige Gold Project to the JV Co.
 
On March 14, 2012, Minco China engaged an external law firm in China to resolve the dispute with the 208 Team in terms of the JV Agreement compliance. The ultimate outcome is uncertain.
 
8.           Mineral interests
 
a)           Guangdong - Changkeng
 
Minco China is the controlling shareholder in Guangzhou Mingzhong Mining Co., Ltd. (“Mingzhong”) with a 51% interest.
 
Mingzhong signed an exploration permit transfer agreement with No. 757 Exploration Team of Guangdong Geological Bureau (“757 Exploration Team”) and on January 5, 2008 Mingzhong received the Changkeng exploration permit (the “Changkeng Exploration Permit”). This exploration permit was renewed for a two-year period ending on September 10, 2013. To acquire the Changkeng Exploration Permit, Mingzhong was required to pay RMB 48 million (approximately $7.3 million). As at December 31, 2008, the first payment for the Changkeng Exploration Permit to 757 Exploration Team was made in an amount of RMB 19 million (approximately $2.87 million).
 
In order to pay the remaining RMB 29 million ($4.7 million), shareholders of Mingzhong agreed to inject capital of RMB 32 million ($5.1million). As of December 31, 2011, Minco China paid RMB 16.3 million ($2.6 million) and the five minority shareholders paid RMB 15.7 million ($2.5 million). Accordingly, Mingzhong has all of the cash required to settle the remaining payable for the permit.
 

 
94
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
8
Mineral interests (continued)
 
As two of the shareholders, Guangdong Gold Corporation (“GGC”) and Guangdong Geological Exploration and Development Corporation (“GGEDC”), are state-owned companies they need to receive the requisite approval from the Guangdong provinicial government’s Minister of Finance to increase their share of registered capital in Mingzhong. The funds received from the five minority shareholders are classified as a current liability as at December 31, 2011, pending approval of the capital injection.
 
The remaining amount payable for the Changkeng Exploration Permit of $4,681,156 (RMB $29 million) was classified as a current liability as of December 31, 2011.
 
Pursuant to the terms of an agreement with Minco Silver, the Company has assigned its right to earn a 51% interest in the Changkeng Silver Mineralization to Minco Silver.  As a result, Minco Silver is responsible for 51% of the total costs in relation to the Changkeng Silver Mineralization.
 
b)           Gansu - Longnan
 
Minco China holds twelve exploration permits in the Longnan region of south Gansu province in China. The Longnan region is within the southwest Qinling gold field.
 
The Longnan project has been divided into three sub-projects according to their geographic distribution, type and potential of mineralization:
 
i)  
Yangshan: including five exploration permits located in the northeast extension of the Yangshan gold belt and its adjacent area;
 
ii)  
Yejiaba: including four exploration permits adjacent to the Guojiagou exploration permit;
 
iii)  
Xicheng East: including three exploration permits to the east extension of the Xicheng Pb-Zn mineralization belt.
 
The Company has spent a cumulative total of $8.1 million on the Longnan project as of December 31, 2011 (as of December 31, 2010 - $6.2 million) on exploration costs.
 
On September 27, 2010, Minco China entered into an agreement with FengXian Xin Kun Mining Corporation (“FXKM”) in which the Company agreed to sell two exploration permits in the Xicheng East to FXKM for RMB 2.2 million. The process of transfering the titles of the two permits to FXKM was not completed due to the pending approval by Gansu province as at December 31, 2011.
 
On March 1, 2012, Minco China entered into a supplementary agreement with FXKM in which FXKM agreed to pay additional 0.4 million RMB to reimburse Minco China’s maintenance costs incurred for the above two permits since September 27, 2010.
 
On March 10, 2012, Minco China obtained approval from Gansu province for the sale of the two exploration permits. The sale isexpected to complete in the second half year of 2012.
 
 
95
 
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)

 

c)  
Hunan - Gold Bull Mountain
 
Minco China’s wholly owned subsidiary Yuanling Minco owns the Gold Bull Mountain Mining License, which was renewed for a two-year period ending on June 28, 2013.

 

 

 

 

 

 

 

 

 

 

 

 

 

96
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
8             Mineral interests (continued)
 
d)  
Guangdong - Sihui
 
Minco China holds an exploration permit in Guangdong Sihui in China. The permit expires on February 3, 2013.
 
The following is a summary of exploration costs, net of recoveries, incurred by the Company:
 
   
2011
   
2010
   
Cumulative to 
December 31, 2011
 
      $       $         $  
Currently active properties:
                       
Gansu
                       
   - Longnan
    1,870,486       1,330,745       8,104,199  
  Guangdong
                       
   - Changkeng
    66,522       135,727       8,166,070  
  Hunan
                       
   - Gold Bull Mountain
    26,866       1,169       2,189,712  
                         
 Total
    1,963,874       1,467,641       18,459,981  
 
9.
Equity investment in Minco Silver Corporation
 
 
As at December 31, 2011, the Company owns 13,000,000 common shares of Minco Silver (December 31, 2010 - 13,000,000 common shares, January 1, 2010 – 13,000,000 common shares) that were acquired in 2004 in exchange for the transfer of the Fuwan property and the silver interest in the Changkeng property.
 
On March 3, 2011, Minco Silver concluded a share offering of 7,600,000 common shares at $5.95 per share.  The Company did not participate in this offering and as a result, its ownership interest decreased to 22.15% (December 31, 2010 – 26.20%, and January 1, 2010 – 32.01%). As the offering price for the Minco Silver shares significantly exceeded the carrying value of the Company’s investment in Minco Silver, the Company recorded a non-cash dilution gain in the amount of $8,710,000 as at December 31, 2011.
 
The Company’s equity accounts for its investment in Minco Silver.
 
Comprehensive income on the investment in Minco Silver is as follows:

 
97
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
9.
Equity investment in Minco Silver Corporation (continued)
 
       
             
   
2011
   
2010
 
        $         $  
Dilution gain
    8,710,000       2,845,000  
Equity (loss)
    (1,443,391 )     (1,246,150 )
Accumulated translation adjustment
    287,268       (69,906 )
Comprehensive income from investment in Minco Silver
    7,553,877       1,528,944  
 
The carrying value and market value of the Minco Silver shares held by the Company and accounted for using the equity basis, are as follow:
 
   
December 31,
   
December 31,
   
January 1,
 
   
2011
   
2010
   
2010
 
      $       $       $  
Carrying value of investment in Minco Silver
    14,489,016       6,935,139       5,406,195  
                         
Market value of Minco Silver shares
    25,870,000       82,550,000       24,050,000  
 
As at December 31, 2011, Minco Silver had current assets of $71,012,927, non-current assets of $18,562,785 (including $17,811,322 in capitalized mineral interests), current liabilities of $968,600 and shareholders’ equity of $88,607,022. Minco Silver incurred exploration costs of $Nil, administration costs of $6,674,066 and a loss of $5,970,842 during the year ended December 31, 2011
 
As at December 31, 2010, Minco Silver had current assets of $30,029,451, non-current assets of $12,823,775 (including $12,141,851 in capitalized mineral interest costs), current liabilities of $1,360,713 and shareholders’ equity of $41,492,513.  Minco Silver recorded exploration costs of $Nil, administration costs of $5,604,885, and a loss of $4,280,899 during the year ended December 31, 2010.
 
As at January 1, 2010, Minco Silver had current assets of $11,515,900, non-current assets of $17,217,476 (including $8,688,726 in capitalized mineral interest costs), current liabilities of $2,395,047 and shareholders’ equity of $26,338,329.

 
98
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
10.
Discontinued operation
 
 
Inner Mongolia Damo Mining Co. Ltd. (“Damo”)
 
 
On May 24, 2010, the Company entered into a sale agreement to dispose of its interest in Damo. Damo has an interest in the Gobi Gold project located in the Inner Mongolia Autonomous Region.  After completion of all legal requirements and approvals, the Company relinquished all managerial involvement and control to the purchaser on September 30, 2010. Net proceeds on disposal were RMB 10.75 million (approximately $1.67 million) which represents the difference between the gross proceeds of RMB 13.5 million (approximately $2.10 million) and a commission of RMB 2.75 million (approximately $0.43 million) paid to an arm’s length party for consulting services relates to the disposition.
 
 
The net earnings from the discontinued operations of Damo was $1,607,301, and cash flow from the discontinued operations of Damo was $1,649,604 for 2010.
 
11.
Share capital
 
 
a.  
Common shares and contributed surplus
 
 
Authorized
 
  100,000,000 common shares without par value
 
 
b.  
Stock options
 
Minco Gold may grant options to its directors, officers, employees and consultants under its stock option plan (the “Stock Option Plan”). The Company’s board of directors grants such options for periods of up to five years, with vesting periods determined at its sole discretion and at prices equal to or greater than the closing market price on the day preceding the date the options are granted.  These options are equity settled.
 
For the year ended December 31, 2011, the Company granted options to purchase 2,380,000 common shares at a weighted exercise price of $2.18 that vest over an 18-month period from the issue date to its directors and employees.
 
The number of common shares reserved for issuance under the Stock Option Plan is 4,984,000. The maximum number of common shares reserved for issuance is 15% of the issued and outstanding common shares of the Company.
 
Minco Gold recorded $2,264,809 in stock-based compensation expense for the year ended December 31, 2011 (December 31, 2010 - $383,282).

 
99
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
11.
Share capital (continued)
 
A summary of the options outstanding is as follows:
 
    Number outstanding     Weighted average 
exercise price 		 
          $    
January 1, 2010
    5,662,101       0.93  
Granted
    175,000       1.06  
Exercised
    (1,357,100 )     0.77  
Forfeited
    (268,334 )     0.91  
Expired
    (66,667 )     1.08  
                 
Balance, December 31, 2010
    4,145,000       0.99  
                 
Granted
    2,380,000       2.18  
Exercised
    (833,333 )     0.96  
Forfeited
    (447,667 )     2.01  
Expired
    (260,000 )     1.99  
                 
Balance, December 31, 2011
    4,984,000       1.41  
 
The weighted average share price at the day these options were exercised were $2.22 in 2011 (2010 - $1.60)
 
Options outstanding
   
Options exercisable
 
                                 
 
Range of
exercise
prices
   
Number
outstanding
   
Weighted
average
remaining
contractual
life (year)
   
Weighted
average
exercise
price
   
 
 
Number
exercisable
   
Weighted
average
exercise
price
 
$                   $               $  
  0.48 - 0.65       720,000       2.05       0.48       720,000       0.48  
  0.66 - 0.90       1,000,000       0.74       0.79       1,000,000       0.79  
  0.91 - 1.30       801,667       1.71       1.02       768,333       1.03  
  1.31 - 1.80       430,000       0.60       1.53       430,000       1.53  
  1.81 - 2.59       2,032,333       4.04       2.18       726,325       2.18  
          4,984,000       2.42       1.41       3,644,658       1.14  

 
100
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
11.
Share capital (continued)
 
The Company used the Black-Scholes option pricing model to determine the fair value of the options with the following assumptions:
 
   
2011
   
2010
 
Risk-free interest rate
    1.07% - 2.56 %     1.89% - 2.30 %
Volatility
    85% - 94 %     84% - 90 %
Forfeiture rate
    29 %     30 %
Estimated expected lives
 
5 years
   
5 years
 
 
Option pricing models require the use of subjective estimates and assumptions including the expected stock price volatility. The stock price volatility is calculated based on the Company’s historical volatility. Changes in the underlying assumptions can materially affect the fair value estimates and therefore, in management’s opinion, existing models do not necessarily provide a reliable measure of the fair value of the Company’s stock options.
 
12.           Income tax
 
Income tax expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates to loss before income taxes. These differences result from the following items:
 
   
2011
   
2010
 
      $       $  
                 
Loss before discontinued operations
    862,446       (2,058,649 )
                 
      26.5 %     28.5 %
                 
Income tax recovery at statutory rates
    228,548       (586,715 )
Non-deductible expenses
    619,007       110,751  
Difference in foreign tax rates
    64,977       57,357  
Dilution gain at capital gains rate
    (1,112,226 )     (355,625 )
Expiry of non-capital loss carry forward
    156,705       -  
    Deferred income tax asset not recognized
    117,869       251,122  
Other
    (74,880 )     523,110  
                 
Provision for tax expenses
    -       -  

 
101
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
12.             Income tax (continued)
 
Deferred income taxes arise from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The significant components of Deferred income tax assets and liabilities at December 31, 2011 are as follows:
 
   
2011
   
2010
 
      $       $  
                 
Deferred income tax assets not recogized
               
Non-capital loss
    2,562,113       2,207,597  
Resource expenditures
    5,117,301       4,408,184  
Capital assets
    357,259       355,238  
Equity investment in Minco Silver
    (1,263,099 )     (313,990 )
Share issue costs
    1,026       1,539  
Marketable securities
    347       (1,491 )
                 
      (6,774,947 )     (6,657,077 )
 
No deferred income tax asset has been recognized as realization is not considered probable due to the uncertainty of future taxable income.
 
The Company has approximately $8.5 million of operating losses in Canada and and approximately $1.7 million of operating losses in China.. The expiry for Canadian and Chinese non-capital loss carry forwards is as follows:
 
   
Non-capital losses
$
 
2012
    113,465  
2013
    385,940  
2014
    944,519  
2015
    1,183,227  
2016
    250,486  
2026
    1,442,234  
2028
    1,582,716  
2029
    1,270,045  
2030
    1,285,615  
2031
    1,790,204  
         
      10,248,451  
 
 
102
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
13.           Earnings (loss) per share
 
 The table below calculates the basic and diluted earnings and loss per share.
 
   
2011
   
2010
 
      $       $  
                 
Earnings (loss) per share from continuing operations
               
Basic
    0.02       (0.04 )
Diluted
    0.02       (0.04 )
                 
Earnings per share from discontinued operations
               
Basic
    -       0.03  
Diluted
    -       0.03  
                 
Earnings (loss) per share
               
Basic
    0.02       (0.01 )
Diluted
    0.02       (0.01 )
                 
Weighted average number of shares outstanding
               
Basic
    50,228,592       48,582,347  
Diluted
    51,580,329       48,582,347  
 
Stock options are excluded from the computation of diluted earnings per share when the exercise price exceeds the average market value of the common shares or has created an anti-dilutive effect.
 
14.           Commitments
 
 The Company has commitments in respect of office leases requiring minimum payments of $473,293, as follows:
 
      $  
2012
    140,629  
2013
    140,839  
2014
    143,869  
2015
    47,956  
 
    473,293  

 
103
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
15.           Related party transactions
 
 
Shared office expenses
 
 
a)
Minco Silver and Minco Gold  share offices and certain administrative expenses in Beijing and Minco Silver, Minco Base Metals Corporation (“MBM”) and Minco Gold share offices and certain administrative expenses in Vancouver.
 
 
At December 31, 2011, the Company has $429,114 due from Minco Silver (December 31, 2010 - $839,305, January 1, 2010 - $2,109,285) and consisted of the following:
 
 
Amount due from Foshan Minco as at December 31, 2011 of $1,167,282 (December 31, 2010 - $754,066, January 1, 2010 - $703,626), representing the expenditures incurred by Minco China on behalf of Foshan Minco and shared office expenses.
 
 
Amount due to Minco Silver as at December 31, 2011 of $738,168 (December 31, 2010 – amount due from of $85,238, January 1, 2010 – amount due from of $1,395,553) representing funds advanced from Minco Silver to Minco Gold to support its operating activities in Canada.
 
  The amounts due are unsecured, non-interest bearing and payable on demand.
 
 
  The above two amounts will be net settled and accordingly has been presented as a net balance on the consolidated financial statements.
 
 
b)
At December 31, 2011, the Company has $20,774 due from MBM (December 31, 2010 - $77,027, January 1, 2010 - $120,576), in relation to shared office expenses. The Company is related to MBM through one common directors and common management.
 
The amounts due are unsecured, non-interest bearing and payable on demand.
 
 
Loan with Minco Base Metals
 
In connection to Minco China’s loan of RMB 60 million (approximately $9 million) to the Tugurige Gold Mine , Minco Gold and MBM entered a loan agreement whereby Minco Gold borrowed $7,561,779 million (RMB 50 million) in December 2010. On June 16, 2011, the loan was repaid in full to Zhongjia Kailong Technology Development Co. Ltd. (“Zhongjia”), the trustee of MBM.
 
 
Funding of Foshan Minco
 
Minco Silver cannot invest directly in Foshan Minco as Foshan Minco is legally owned by Minco China. All funding supplied by Minco Silver for exploration of the Fuwan Project must first go through Minco China via the Company to comply with the Chinese Law. In the normal course of business Minco Silver uses trust agreements when providing cash, denominated in US dollars, to Minco China via the Company for the purpose of increasing the registered capital of Foshan Minco. Minco China is a registered entity in China however it is classified as being a wholly foreign owned entity and therefore can receive foreign investment.. Foshan Minco is a Chinese company with registered capital denominated in RMB and therefore can only receive domestic investment from Minco China. Increases to the registered capital of Foshan Minco must be denominated in RMB.
 

 
104
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
15.
Related party transactions (continued)
 
 
Funding of Foshan Minco (continued)
 
 
(c)  
On June 9, 2011, Minco Silver advanced US$10 million (December 31, 2011 - $10,199,000) to the Company, the ultimate legal shareholder of Foshan Minco.  During 2011, the Company received  government approvals to increase the registered capital of its wholly owned subsidiary, Minco China.  Minco China has undertaken to exchange the US$10 million into RMB and will then invest the funds, on behalf of Minco Silver, to increase the registered capital of Foshan Minco.
 
 
In August, 2011, the Company, Minco Silver and Minco China entered into a trust agreement in which the Company and Minco China confirmed they have received the US$10 million, and Minco China is required to exchange these US fund into RMB in order to increase Foshan Minco’s registered share capital. Once all the funds are transferred from Minco China to Foshan Minco, the trust agreement is effectively settled and no repayment is expected by Minco Silver from Minco China.
 
 
As at December 31, 2011, Minco China held US$8,110,500 in trust and has undertaken the process to exchange US$1,889,500 into RMB on behalf of Minco Silver.
 
 
(d)  
Prior to executing the above transfer of funds, on April 25, 2011, Minco Silver entered into a loan agreement to advance up to US$22 million to Minco China, the immediate legal shareholder of Foshan Minco. The purpose of this loan was to provide a mechanism to increase the registered capital of Foshan Minco. The loan bore interest at a rate equal to LIBOR plus 3 per cent per annum. Minco Silver advanced US$6 million ($5,860,800) to Minco China under this facility. This loan arrangement was not accepted by the State Administration of Foreign Exchange in China. Accordingly, Minco China repaid  US$6 million back to Minco Silver on August 19, 2011. The interest was waived on the understanding that Minco Silver’s subsidiary, Foshan Minco, was the beneficiary of the loan.
 
 
Key management compensation
 
 
a)
In the year ended December 31, 2011, the following compensation was paid to key management. Key management includes the Company’s directors and senior management.  This compensation is included in exploration costs, development costs and administrative expenses
 
   
December 31, 2011
 
   
Cash remuneration
   
Share-based compensation
   
Total
 
      $       $       $  
Directors
    48,527       391,886       440,413  
Senior management
    398,892       979,274       1,379,166  
Total
    447,419       1,371,160       1,818,579  

 
105
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
15.
Related party transactions (continued)
 
   
December 31, 2010
 
   
Cash remuneration
   
Share-based compensation
   
Total
 
      $       $       $  
Directors
    43,500       16,959       60,459  
Senior management
    392,938       133,052       525,990  
Total
    436,438       150,011       586,449  
 
The above transactions were conducted in the normal course of business.
 
 
16.
Segment reporting
 
The Company’s business is considered as operating in one segment, mineral exploration and development. The geographical division of the Company’s assets and net loss is as follows:
 
Segment profit (loss)
 
   
December 31, 2011
 
                   
   
Canada
   
China
   
Total
 
      $       $       $  
Exploration costs
    (440,179 )     (1,523,695 )     (1,963,874 )
General and administration costs
    (3,939,688 )     (476,627 )     (4,416,315 )
Other income
    7,098,802       143,833       7,242,635  
Segment profit (loss)
    2,718,935       (1,856,489 )     862,446  
 
   
December 31, 2010
 
                   
   
Canada
   
China
   
Total
 
      $       $       $  
Exploration costs
    (762,338 )     (705,303 )     (1,467,641 )
General and administration costs
    (1,820,456 )     (491,454 )     (2,311,910 )
Other income
    1,770,324       1,557,879       3,328,203  
Segment profit (loss)
    (812,470 )     361,122       (451,348 )

 
106
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
 
16.
Segment reporting (continued)
 

Assets and liabilities by segment
                 
               
December 31, 2011
 
                   
   
Canada
   
China
   
Total
 
      $       $       $  
Current assets
    258,199       7,128,571       7,386,770  
Non-current assets
    14,545,540       244,463       14,790,003  
Current liabilities
    220,724       7,494,378       7,715,102  

               
December 31, 2010
 
                   
   
Canada
   
China
   
Total
 
      $       $       $  
Current assets
    809,923       15,600,184       16,410,107  
Non-current assets
    6,999,651       290,502       7,290,153  
Current liabilities
    341,231       13,128,608       13,469,839  
 
               
January 1, 2010
 
                   
   
Canada
   
China
   
Total
 
      $       $       $  
Current assets
    5,199,706       3,508,015       8,707,721  
Non-current assets     5,508,346       317,627       5,825,973  
Current liabilities
    165,494       5,038,350       5,203,844  
 
17.
Financial instruments and fair value
 
As explained in Note 3, financial assets and liabilities have been classified into categories that determine their basis of measurement and, for items measured at fair value, whether changes in fair value are recognized in the statement of income or comprehensive income. Those categories are: fair value through profit or loss; loans and receivables; and other for liabilities.
 
 
107
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
17.
Financial instruments and fair value (continued)
 
The following table summarizes the carrying  value of financial assets and liabilities at December 31, 2011 and 2010 and January 1, 2010.
 
  December 31,    
December 31,
   
January 1,
 
    2011    
2010
   
2010
 
Assets
    $       $       $  
Cash and cash equivalents
    6,696,805       6,003,832       3,505,268  
Short-term investments
    -       293,770       2,475,936  
Receivables
    52,618       57,387       370,767  
                         
Marketable securities
    10,500       25,200       35,700  
Loan receivable
    -       9,074,136       -  
                         
Liabilities
                       
Account payable and accrued liabilities
    5,203,087       5,066,688       5,201,594  
                         
 
The carrying value of the Company’s financial assets and liabilities approximate their fair value.
 
Financial risk factors
 
The Company’s operations consist of the acquisition, exploration and development of properties in China. The Company examines the various financial risks to which it is exposed and assesses the impact and likelihood of occurrence. These risks may include credit risk, liquidity risk, currency risk and interest rate risk. Management reviews these risks on a monthly basis and when material, they are reviewed and monitored by the Board of Directors.
 
It is required that the classification of fair value measurements uses a fair value hierarchy  that reflects the significance of the inputs used in making the measurements, including the following levels:
 
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities,
 
Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is derived from prices), and
 
Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
 
The marketable securities are measured at fair value based on quoted market price (level 1).  
 
 
108
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
17.
Financial instruments and fair value (continued)
 
Credit risk
 
Counterparty credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost if the counterparty defaults on its obligations under the contract.  This includes any cash amounts owed to the Company by these counterparties, less any amounts owed to the counterparty by the Company where a legal right of set-off exists and also includes the fair value contracts with individual counterparties which are recorded in the consolidated financial statements. The Company considers the following financial assets to be exposed to credit risk:
 
i.  
Cash and cash equivalents – In order to manage credit and liquidity risk the Company places its short-term investment funds into government and Canadian bank debt securities with terms of 90 days or less when acquired. At December  31, 2011, the balance of $6.7 million was placed with three institutions.
 
ii.  
Short-term investments – These are guaranteed investment certificates with maturities of greater than ninety days, but less than one year, when acquired. At December 31, 2011, these totalled $Nil.
 
Foreign exchange risk
 
The Company’s functional currency is the Canadian dollar in Canada and RMB in China. The most of the foreign currency risk is related to US dollar funds. Therefore the Company’s net earnings are impacted by fluctuations in the valuation of the US dollar in relation to the Canadian dollar and RMB. The Company did not hold significant amounts of US dollar cash during the year and therefore the impact of the changes in the US dollar foreign exchange rate is insignificant to the Company’s net earnings.
 
Interest rate risk
 
The effective interest rate on financial liabilities (accounts payable) ranged up to 1%. The interest rate risk is the risk that the fair value of future cash flows of a financial instrument fluctuates because of changes in market interest rates. Cash and short-term investments entered into by the Company bear interest at a fixed rate thus exposing it to the risk of changes in fair value arising from interest rate fluctuations. Short term investments are invested in high grade, highly liquid instruments and the Company exposes itself to variable interest rate fluctuations. A 1% increase in the interest rate in Canada will have a net (before tax) income effect of $67,499, assuming the foreign exchange rate remains constant.
 
 
109
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
17.
Financial instruments and fair value (continued)
 
Liquidity risk
 
Liquidity risk includes the risk that the Company cannot meet its financial obligations as they fall due. The Company has in place a planning and budgeting process to help determine the funds required to support the Company’s normal operating requirements and its exploration and development plans. The annual budget is approved by the Board of Directors. As at December 31, 2011, the Company has $6.7 million cash which includes $4.7 million in Mingzhong to be used for the final payment for the acquisition of the Changkeng exploration permit. The remaining cash balance available to fund exploration and general corporate requirements is $2 million, and is held primary in the Company’s Chinese Subsidiaries.  The Company may face delays repatriating funds held in China if at any time the Company needs additional resources to enable it to undertake projects elsewhere in the world.   There are certain restrictions on the repatriation of funds held in China.  Under Chinese law, repatriation of the funds the Company currently holds in China, which were contributed by way of capital injection, would require approval of the relevant government authorities or designated banks in China or both.  The Company plans on meeting any additional short-term cash requirements through funds advanced from Minco Silver.  In addition, the Company may raise funds through the sale of its equity investment in Minco Silver.  The market for these instruments is liquid and the Company does not foresee a loss of capital due to liquidity risk.
 
18.
Capital management
 
The Company’s objectives in the managing of the liquidity and capital are to safeguard the Company’s ability to continue as a going concern and provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of equity attributable to common shareholders, comprising of issued share capital, common share purchase warrants, contributed surplus, accumulated and other comprehensive income and accumulated deficit.
 
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets to facilitate the management of its capital requirements. The Company prepares annual expenditure budgets that are updated as necessary depending upon various factors, including successful capital deployment and general industry conditions. As at December 31, 2011, the Company does not have any long-term debt.
 
The Company plans on meeting any additional short-term cash requirements through funds advanced from Minco Silver.  In addition, the Company could raise funds through the sale of its equity investment in Minco Silver.  The market for these instruments is liquid and the Company does not foresee a loss of capital due to liquidity risk.
 
19.           First-time adoption of IFRS
 
In preparation of these consolidated financial statements, the financial statements for the year ended December 31, 2010 have been adjusted from amounts reported previously in the financial statements prepared in accordance with Canadian GAAP. An explanation of the adjustments for the year ended December 31, 2010 and the statement of financial position as of January 1, 2010 is set out in Note 20 of the consolidated financial statements for the year ended December 31, 2011 and 2010.

 
110
 
 
MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
19. First-time adoption of IFRS (continued)
 
   
December 31, 2010
   
January 1, 2010
 
   
Cdn GAAP
   
Adj
   
IFRS
   
Cdn GAAP
   
Adj
   
IFRS
 
Assets
    $       $       $       $       $       $  
Current assets
                                               
Cash and cash equivalents
    6,003,832       -       6,003,832       3,505,268       -       3,505,268  
Short-term investments
    293,770       -       293,770       2,475,936       -       2,475,936  
Marketable securities
    25,200       -       25,200       35,700       -       35,700  
Receivables
    57,387       -       57,387       370,767       -       370,767  
Due from related parties
    839,305       -       839,305       2,229,861       -       2,229,861  
Loan receivable
    9,074,136       -       9,074,136       -       -       -  
Prepaid expenses and deposits
    116,477       -       116,477       85,572       -       85,572  
Assets of discontinued operation
    -       -       -       4,617       -       4,617  
      16,410,107       -       16,410,107       8,707,721       -       8,707,721  
                                                 
Long-term deposit
    64,512       -       64,512       51,764       -       51,764  
Property, plant and equipment
    260,170       30,332       290,502       297,660       26,769       324,429  
Equity investment in Minco Silver
    7,125,366       (190,227 )     6,935,139       5,494,836       (88,641 )     5,406,195  
Assets of discontinued operation
    -       -       -       43,585       -       43,585  
      23,860,155       (159,895 )     23,700,260       14,595,566       (61,872 )     14,533,694  
Liabilities
                                               
Current liabilities
                                               
Accounts payable and accrued liabilities
    5,066,688       -       5,066,688       5,203,844       -       5,201,594  
Advanced from minority shareholder
    764,345       -       764,345       -       -       -  
Due to related party
    7,638,806       -       7,638,806       -       -       -  
Liabilities of discontinued operation
    -       -       -       -       -       2,250  
      13,469,839       -       13,469,839       5,203,844       -       5,203,844  
Equity
                                               
Share capital
    40,335,033               40,335,033       38,553,755       -       38,553,755  
Contributed surplus
    5,407,352       (51,399 )     5,355,953       5,627,841       94,219       5,722,060  
Accumulated other comprehensive income
    -       (63,252 )     (63,252 )     -       -       -  
Deficit
    (37,796,074 )     (45,244 )     (37,841,318 )     (37,283,301 )     (156,091 )     (37,439,392 )
      7,946,311       (159,895 )     7,786,416       6,898,295       (61,872 )     6,836,423  
Non-controlling interest
    2,444,005       -       2,444,005       2,493,427       -       2,493,427  
      10,390,316       (159,895 )     10,230,421       9,391,722       (61,872 )     9,329,850  
      23,860,155       (159,895 )     23,700,260       14,595,566       (61,872 )     14,533,694  

 
111
 

MINCO GOLD CORPORATION
 
(An exploration stage enterprise)
Notes to the Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(in Canadian dollars)
 
19.
First-time adoption of IFRS (continued)
 
   
December 31, 2010
 
      $  
         
Total comprehensive loss as per reported under Canadian GAAP
    (512,773 )
         
Loss attributable to non-controlling interest
    (49,422 )
Foreign exchange loss
    (3,091 )
Share based compensation
    145,618  
         
Share of loss from equity investment in Minco Silver
    (31,680 )
         
      (451,348 )
Cumulative translation loss
    (63,252 )
         
Total comprehensive loss as per reported under IFRS
    (514,600 )
 
(a)  
Functional currency
 
Under Canadian GAAP, all the Company's subsidiaries were integrated foreign operations. Therefore, monetary items were translated at year-end rates and non-monetary items were translated at historic rates with all foreign currency gains and losses recognized in profit or loss.
 
IFRS requires that the functional currency of each subsidiary of the Company be determined separately. It was determined that, as at the transition date, the functional currency of Minco Gold Corporation is Canadian dollars and the functional currency of the Company’s Chinese subsidiaries is RMB.
 
In accordance with the IFRS 1 optional exemptions, the Company has elected to transfer the currency translation differences recognized as a separate component of shareholders’ equity, to deficit on the transition date.
 
 
112
 
 
19.
First-time adoption of IFRS (continued)
 
(b)  
Share based compensation
 
Under Canadian GAAP, for the purpose of accounting for stock based compensation, an individual was classified as an employee when the individual was consistently represented to be an employee under law. Under IFRS, an individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. This definition of an employee is broader than that previously applied by the Company and resulted in certain contractors and consultants being classified as employees under IFRS.
 
Under Canadian GAAP, forfeitures were recognized as they occurred. Under IFRS, the forfeiture rate is estimated up front and factored into the number of stock options expected to vest.
 
Under Canadian GAAP, the Company recorded stock based compensation on a straight-line basis over the vesting period.  Under IFRS, the Company records share based compensation for each tranche within an award over the vesting period of the corresponding tranche.
 
In accordance with the IFRS 1 optional exemptions, the Company has elected to apply IFRS 2 only to unvested options as of January 1, 2010.
 
 
(c)
Equity Investment in Minco Silver
 
As result of adopting IFRS, Minco Silver Corporation started to record cumulative translation adjustments (“CTA”) in its other comprehensive income as of January 1, 2010.
 
When the Company records it share of changes in Minco Silver’s net asset, it also needs to record its share of Minco Silver’s CTA.
 
 
(d)
Statement of cash flows
 
The transition from Canadian GAAP to IFRS had no significant impact on cash flows generated by the Company.
 
20.
Subsequent event
 
On March 28, 2012, the Company granted stock options to purchase 2,000,000 common shares to various  employees, consultants and directors at an exercise price of $0.67 per common share that vest over an 18-month period from the issue date. The options expire in March 2017.
 
 
113
 

 

 

 

 

 

 

 

 

 

Minco Silver Corporation
(A development stage enterprise)

Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
114
 
 
Management's Responsibility for Financial Reporting

The consolidated financial statements are the responsibility of the Board of Directors and management. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards as issued by International Accounting Standards Board and include certain estimates that reflect management’s best judgments on information currently available. In the opinion of management, the accounting practices utilized are appropriate in the circumstances and the consolidated financial statements fairly reflect the financial position and results of operations of the Company within reasonable limits of materiality.

The Audit Committee of the Board of Directors is composed of three Directors and meets quarterly with management and the independent auditors to review the scope and results of the annual audit and to review the consolidated financial statements and related financial reporting matters prior to submitting the consolidated financial statements to the Board of Directors for approval.

The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, Chartered Accountants, who were appointed by the shareholders. The auditors’ report outlines the scope of their examination and their opinion on the consolidated financial statements.
 
Dr. Ken Cai    Paul Zhang, C.A.
President and CEO   CFO and VP Finance
     
Vancouver, Canada    
March 27, 2012    
 

 

 

 

 

 

 

 
115
 
 
March 29, 2012

Independent Auditor’s Report
 
To the Shareholders of Minco Silver Corporation
 
We have audited the accompanying consolidated financial statements of Minco Silver Corporation and its subsidiaries, which comprise the consolidated statement of financial position as at  December 31, 2011, December 31, 2010 and January 1, 2010 and the consolidated statements of operations and net loss, comprehensive loss, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2011, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.
 
Management’s responsibility for the consolidated financial statements
 
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
 
Auditor’s responsibility
 
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Canadian generally accepted auditing standards require that we comply with ethical requirements.
 
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 auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. We were not engaged to perform an audit of the company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
 
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
 
Opinion
 
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Minco Silver Corporation and its subsidiaries as at December 31, 2011, December 31, 2010 and January 1, 2010 and their financial performance and their cash flows for each of the two years in the period ended December 31, 2011 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
 

 

signed “PricewaterhouseCoopers LLP”
 
Chartered Accountants
 
Vancouver, British Columbia
 

 

 
116
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
Index
 
     
   
Page
     
Consolidated Financial Statements
5 - 9
     
 
Consolidated Statements of Financial Position
5
 
Consolidated Statements of Operations and Net Loss
6
     
 
Consolidated Statements of Comprehensive Loss
7
     
 
Consolidated Statements of Changes in Shareholders’ Equity
8
     
 
Consolidated Statements of Cash Flows
9

Notes to the Consolidated Financial statements
10 - 41
     
1
General information
10
     
2
Basis of preparation and adoption of IFRS
10
     
3
Summary of significant accounting policies
11
     
4
Critical accounting estimates and judgments
18
     
5
Cash and cash equivalents
19
     
6
Short-term investments
20
     
7
Prepaid expenses and deposits
20
     
8
Loan receivable
21
 
 
117
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
9
Mineral interests
21
     
10
Property, plant and equipment
23
     
11
Share capital and contributed surplus
24
     
12
Income taxes
28
     
13
Related party transactions
29
     
14
Geographical information
32
     
15
Commitments
34
     
16
Financial instruments and fair values
34
     
17
Capital management
37
     
18
First-time adoption of IFRS
37
     
19
Subsequent event
41
     

 
118
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)

   
December 31,
   
December 31,
   
January 1,
 
   
2011
   
2010
   
2010
 
Assets
    $       $       $  
                         
Current assets
                       
Cash and cash equivalents (notes 5 and 13(a))
    27,574,152       5,110,554       847,439  
Short-term investments (note 6)
    40,058,042       24,086,725       10,288,326  
Receivables
    674,973       327,755       94,779  
Prepaid expenses and deposits (note 7)
    2,705,760       504,417       285,356  
      71,012,927       30,029,451       11,515,900  
                         
Loan receivable (note 8)
    -       -       8,290,441  
Mineral interests (note 9)
    17,811,322       12,141,851       8,688,726  
Property, plant and equipment (note 10)
    751,463       681,924       238,309  
      89,575,712       42,853,226       28,733,376  
                         
Liabilities
                       
                         
Current liabilities
                       
Accounts payable and accrued liabilities
    539,576       521,409       295,868  
Due to related party (note 13(a))
    429,114       839,304       2,099,179  
      968,690       1,360,713       2,395,047  
Shareholders’ equity
                       
                         
Share capital (note 11(a))
    104,804,411       58,491,460       37,046,993  
Contributed surplus (note 11(b))
    15,026,739       9,185,991       11,005,725  
Accumulated other comprehensive income (loss)
    742,002       (189,650 )     -  
Deficit
    (31,966,130 )     (25,995,288 )     (21,714,389 )
      88,607,022       41,492,513       26,338,329  
                         
Total liabilities and equity
    89,575,712       42,853,226       28,733,376  
 
Commitments (note 15)
Subsequent event (note 7(d) and 19)
 
The accompanying notes are an integral part of these consolidated financial statements.
 
Approved by the Board of Directors
 
(signed) Chan-Seng Lee   Director (signed)                     George                                  Lian                                             Director
 
119
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
       
   
2011
   
2010
 
      $       $  
Administrative expenses
               
  Accounting and audit
    248,318       183,069  
  Amortization
    167,381       57,473  
  Consulting
    350,155       512,300  
  Directors' fees
    59,250       71,000  
  Field office expenses
    395,957       359,826  
  Foreign exchange (gain) loss
    (918,736 )     771,644  
  Investor relations
    557,014       699,209  
  Legal, regulatory and filing
    282,863       119,593  
  Office administration expenses
    104,194       103,272  
  Property investigation
    41,781       40,682  
  Rent
    253,142       136,281  
  Salaries and benefits
    314,114       272,513  
  Share-based compensation (note 11(b))
    4,757,454       2,190,892  
  Travel and transportation
    61,179       87,131  
      6,674,066       5,604,885  
                 
Operating loss
    (6,674,066 )     (5,604,885 )
                 
Gain on loan settlement (note 8)
    -       1,198,417  
                 
Finance and other income
    703,224       125,569  
                 
Net loss for the year
    (5,970,842 )     (4,280,899 )
                 
             
Loss per share – basic and diluted
    (0.11 )     (0.10 )
                 
Weighted average number of common shares
    outstanding – basic and diluted
    56,985,762       43,790,214  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
120
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)

   
2011
   
2010
 
      $       $  
Net loss for the year
    (5,970,842 )     (4,280,899 )
                 
Other comprehensive income (loss)
               
Exchange differences on translation from functional  to  presentation currency
    931,652       (189,650 )
                 
Comprehensive loss for the year
    (5,039,190 )     (4,470,549 )

The accompanying notes are an integral part of these consolidated financial statements.
 
 
121
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
         
Changes in Shareholders’ Equity
       
                     
Accumulated
             
                     
other
             
   
Number of
   
Share
   
Contributed
   
comprehensive
             
   
Shares
   
capital
   
surplus
   
income (loss)
   
Deficit
   
Total
 
            $       $       $       $       $  
                                               
Balance - January 1, 2010
    40,613,669       37,046,993       11,005,725       -       (21,714,389 )     26,338,329  
                                                 
Net loss for the year
    -       -       -       -       (4,280,899 )     (4,280,899 )
                                                 
Exchange differences from translation
                                               
from functional to presentation                                                
currency
    -       -       -       (189,650 )     -       (189,650 )
                                                 
Share-based compensation
    -       (27,222 )     3,077,596       -       -       3,050,374  
Proceeds from private placement
    2,300,000       3,345,412       539,223       -       -       3,884,635  
Proceeds on issuance of shares from
                                               
exercise of options
    2,408,861       5,865,267       (2,412,134 )     -       -       3,453,133  
Proceeds on issuance of shares from
                                               
exercise of warrants
    4,296,089       12,261,010       (3,024,419 )     -       -       9,236,591  
Balance - December 31, 2010
    49,618,619       58,491,460       9,185,991       (189,650 )     (25,995,288 )     41,492,513  
Balance - January 1, 2011
    49,618,619       58,491,460       9,185,991       (189,650 )     (25,995,288 )     41,492,513  
                                                 
Net loss for the year
    -       -       -       -       (5,970,842 )     (5,970,842 )
                                                 
Exchange differences from translation
                                               
from functional to presentation                                                
currency
    -       -       -       931,652       -       931,652  
                                                 
Share-based compensation
    -       -       6,745,591       -       -       6,745,591  
Proceeds on issuance of common                                                
shares in bought deal
    7,600,000       41,393,649       775,103       -       -       42,168,752  
Proceeds on issuance of shares from
                                               
exercise of options
    535,965       2,448,151       (1,233,020 )     -       -       1,215,131  
Proceeds on issuance of shares from
                                               
warrant exercises
    941,500       2,471,151       (446,926 )     -       -       2,024,225  
Balance - December 31, 2011
    58,696,084       104,804,411       15,026,739       742,002       (31,966,130 )     88,607,022  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
122
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)

       
   
2011
   
2010
 
      $       $  
Cash flow from operating activities
               
Net loss for the year
    (5,970,842 )     (4,280,899 )
Adjustments for:
               
        Share-based compensation (note 11(b))
    4,757,454       2,190,892  
        Amortization
    167,381       57,473  
        Foreign exchange (gain) loss
    (751,496 )     -  
        Gain on loan settlement
    -       (1,198,417 )
                 
Changes in items of working capital:
               
        Receivables
    (342,083 )     (223,308 )
        Prepaid expenses and deposits
    (2,163,244 )     (223,786 )
        Accounts payable and accrued liabilities
    9,875       228,158  
        Due to related parties (note 13(b))
    (485,019 )     (1,269,982 )
Net cash used in operating activities
    (4,777,974 )     (4,719,869 )
                 
Cash flow from financing activities
               
Proceeds from stock option and warrant exercises
    3,239,356       12,689,724  
Net proceeds from the issuance of common shares
    42,168,752       3,884,636  
Net cash generated from financing activities
    45,408,108       16,574,360  
                 
Cash flow from investing activities
               
Development costs
    (2,701,146 )     (2,738,282 )
Property, plant and equipment
    (205,561 )     (504,128 )
Proceeds from loan settlement
    -       12,121,340  
Loan receivable
    -       (2,632,482 )
Short-term investments
    (16,110,515 )     (13,849,801 )
Net cash used in investing activities
    (19,017,222 )     (7,603,353 )
                 
Effect of exchange rates on cash
    850,688       11,977  
                 
Increase in cash and cash equivalents
    22,463,598       4,263,115  
Cash and cash equivalents - Beginning of year
    5,110,554       847,439  
Cash and cash equivalents - End of year
    27,574,152       5,110,554  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
123
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 

1.  

General information
 
Minco Silver Corporation (“Minco Silver” or the “Company”) is a development stage enterprise, engaged in exploring, evaluating and developing silver-dominant mineral properties and projects in China. Minco Silver was incorporated on August 20, 2004 under the laws of British Columbia, Canada and its Common Shares are listed on the Toronto Stock Exchange (“TSX”). The Company trades under the symbol “MSV” and its registered office is 2772 – 1055 West Georgia Street, Vancouver, British Columbia, Canada.
 
As at December 31, 2011, Minco Gold Corporation (“Minco Gold”) owned a 22.15% (December 31, 2010 – 26.2%) equity interest in Minco Silver.
 

2.  

Basis of preparation and adoption of IFRS
 
The Company prepares its financial statements in accordance with Canadian generally accepted accounting principles as defined in the Handbook of the Canadian Institute of Chartered Accountants (“CICA Handbook”).  In 2010, the CICA Handbook was revised to incorporate International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and to require publicly accountable enterprises to apply these standards effective for years beginning on or after January 1, 2011.  Accordingly, these are the Company’s first annual consolidated financial statements prepared in accordance with IFRS as issued by the IASB. In these financial statements, the term “Canadian GAAP” refers to Canadian GAAP before the adoption of IFRS.
 
The consolidated financial statements have been prepared in compliance with IFRS as issued by IASB. Subject to certain transition elections and exemptions disclosed in Note 18, the Company has consistently applied the accounting policies used in the preparation of its opening IFRS statement of financial position at January 1, 2010 throughout all periods presented, as if these policies had always been in effect.  Note 18 discloses the impact of the transition to IFRS on the Company’s reported financial position, financial performance and cash flows, including the nature and effect of significant changes in accounting policies from those used in the Company’s consolidated financial statements for the year ended December 31, 2010 prepared under Canadian GAAP.
 
These financial statements were approved by the Audit Committee for issue on March 27, 2012.
 
The significant accounting policies used in the preparation of these consolidated financial statements are described below.

 
124
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
3.
Summary of significant accounting policies
 
Basis of measurement
 
The consolidated financial statements have been prepared under the historical cost convention.
 
Consolidation
 
These consolidated financial statements include the accounts of Minco Silver Corporation and its wholly owned subsidiaries, Minco Silver Ltd., Minco Yinyuan Co. and Minco Silver (US) Corporation. In addition, these consolidated financial statements include the accounts of Foshan Minco Fuwan Mining Co. Ltd. (“Foshan Minco”). Foshan Minco is legally owned by Minco Mining (China) Corporation, (“Minco China”) a subsidiary of Minco Gold, in trust for Minco Silver.  As a result of this structure Minco Silver must advance funds through Minco Gold and Minco China in order to fund the activities of Foshan Minco.  Foshan Minco is subject to a 10% net profit interest held by Guangdong Geological Bureau (“GGB”).
 
Subsidiaries are those entities which the Company controls by having the power to govern the financial and operating policies.  Subsidiaries are fully consolidated from the date on which control is obtained by the Company and are de-consolidated from the date that control ceases.  All intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation.
 
Foreign currency translation
 
(i) Functional and presentation currency
 
The financial statements of each entity in the group are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Canadian dollars.
 
The functional currency of Minco Silver Corporation is Canadian dollars.
 
The functional currency of the Company’s Chinese subsidiaries is Renminbi (“RMB”).
 
The financial statements of the Company’s Chinese subsidiaries (“foreign operations”) are translated into the Canadian dollar presentation currency as follows:
 
·  
Assets and liabilities – at the closing rate at the date of the statement of financial position
 
·  
Income and expenses – at the average rate of the period (as this is considered a reasonable approximation to actual rates).
 
All resulting changes are recognized in other comprehensive income (loss) as cumulative translation adjustments.
 
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from the item are considered to form part of the net investment in a foreign operation and are recognized in other comprehensive income.
 
 
125
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
3.             Summary of significant accounting policies (continued)
 
When an entity disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the foreign currency gains or losses accumulated in other comprehensive income related to the foreign operation are recognized in profit or loss. If an entity disposes of part of an interest in a foreign operation which remains a subsidiary, a proportionate amount of foreign currency gains or losses accumulated in other comprehensive income related to the subsidiary are reallocated between controlling and non-controlling interests.
 
(ii) Transactions and balances
 
Foreign currency transactions are translated into the functional currency of an entity using the exchange rates prevailing at the dates of the transactions. Generally, foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation’s functional currency are recognized in the statement of income.
 
Financial instruments
 
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.  Financial liabilities are derecognized when the obligation specified in the contract is discharged, cancelled or expires.
 
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
 
At initial recognition, the Company classifies its financial instruments in the following categories:
 
(i) Financial assets and liabilities at fair value through profit or loss: A financial asset or liability is classified in this category if acquired principally for the purpose of selling or repurchasing in the short-term.
 
Financial instruments in this category are recognized initially and subsequently at fair value. Transaction costs are expensed in the consolidated statement of income. Gains and losses arising from changes in fair value are presented in the consolidated statement of income within other gains and losses in the period in which they arise. Financial assets and liabilities at fair value through profit or loss are classified as current except for the portion expected to be realized or paid beyond twelve months of the balance sheet date, which is classified as non-current.
 
(ii) Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Company’s loans and receivables are comprised of cash and cash equivalents, short-term investments, receivables, and deposits and the loan receivable.
 
 
126
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
3.             Summary of significant accounting policies (continued)
 
Loans and receivables are initially recognized at the amount expected to be received less, when material, a discount to reduce the loans and receivables to fair value. Subsequently, loans and receivables are measured at amortized cost using the effective interest method less a provision for impairment.
 
Cash and cash equivalents comprise cash at banks and on hand and guaranteed investment certificates with initial maturities of less than three months. Short-term investments comprise guaranteed investment certificates with initial maturity of greater than three months
 
(iii) Financial liabilities at amortized cost: Financial liabilities at amortized cost include accounts payable and accrued liabilities and amounts due to related parties.
 
Financial liabilities are classified as current liabilities if payment is due within twelve months. Otherwise, they are presented as non-current liabilities.
 
Impairment of financial assets
 
At each reporting date, the Company assesses whether there is objective evidence that a financial asset (other than a financial asset classified as fair value through profit or loss) is impaired.
 
The criteria used to determine if objective evidence of an impairment exists include:
 
 
(i)  
significant financial difficulty of the obligor;
 
(ii)  
delinquencies in interest and principal payments; and
 
(iii)  
it becomes probable that the borrower will enter bankruptcy or other financial reorganization.
 
For equity securities, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired
 
Financial assets carried at amortized cost: If evidence of impairment exists, the Company recognizes an impairment loss as the difference between the amortized cost of the loan or receivable and the present value of the estimated future cash flows, discounted using the instrument’s original effective interest rate. The carrying amount of the asset is reduced by this amount either directly or indirectly through the use of an allowance account.
 
Impairment losses on financial assets carried at amortized cost and available-for-sale debt instruments are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.
 
Property, plant and equipment
 
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.  Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost can be measured reliably.  .
 
The carrying amount of a replaced asset is derecognized when replaced.
 
 
127
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
3.             Summary of significant accounting policies (continued)
 
The major categories of property, plant and equipment are depreciated on a straight-line basis as follows:
 
 
Computer, Office Equipment and Furniture
 
5 years
 
Mining Equipment
 
5 years
 
Site Motor Vehicles
 
10 years
 
Leasehold Improvements
 
3 years
 
The Company allocates the amount initially recognized in respect of an item of property, plant and equipment to its significant parts and depreciates separately each such part. Residual values, method of amortization and useful lives of the assets are reviewed annually and adjusted if appropriate.
 
Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the asset and are included as part of other gains and losses in the consolidated statement of income.
 
Impairment losses are included in as part of other gains and losses on the consolidated statement of income.
 
Exploration and evaluation costs
 
Exploration and evaluation costs include costs to acquire the rights to explore, geological studies, exploratory drilling and sampling and directly attributable administrative costs.
 
Exploration and evaluation costs relating to non-specific projects or properties or those incurred before the Company has obtained legal rights to explore an area are expensed in the period incurred. In addition, exploration and evaluation costs other than direct acquisition costs are expensed before a mineral resource is identified as having economic potential.
 
Exploration and evaluation costs are capitalized as mineral interests when a mineral resource is identified as having economic potential on a property. A mineral resource is considered to have economic potential when it is expected that documented resources can be legally and economically developed considering long-term metal prices. Therefore, prior to capitalizing such costs, management determines that the following conditions have been met:
 
i) There is a probable future benefit that will contribute to future cash inflows;
 
ii) The Company can obtain the benefit and control access to it;
 
iii) The transaction or event giving rise to the benefit has already occurred.
 
Once the technical feasibility and commercial viability of the extraction of resources from a particular mineral property has been determined, mineral interests are reclassified to mine properties within property, plant and equipment and carried at cost until the properties to which they relate are placed into commercial production, sold, abandoned or determined by management to be impaired in value.
 
Costs relating to any producing mineral interests would be amortized on a unit –of-production basis over the estimated ore reserves. Costs incurred after the property is placed into production that increase production volume or extend the life of a mine are capitalized.
 
 
128
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
3.              Summary of significant accounting policies (continued)
 
Proceeds from the sale of properties or cash proceeds received from option payments are recorded as a reduction of the related mineral interest.
 
Impairment of non-financial assets
 
The recoverability of mineral interests is dependent upon the determination of economically recoverable ore reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability to option its resource properties, the ability to obtain the necessary financing to complete their development and future profitable production or proceeds from the disposition thereof.
 
The Company performs impairment tests on property, plant and equipment and mineral interests when events or circumstances occur which indicate the assets may not be recoverable. Impairment assessments are carried out on project by project basis with each project representing a single cash generating unit.
 
When impairment indicators are identified, an impairment loss is recognized for any amount by which the asset’s carrying value exceeds its recoverable amount.  The recoverable amount is the higher of the asset’s fair value less costs to sell and its 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.
 
Value in use is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and from its ultimate disposal.
 
The Company evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.
 
Share-based payments
 
The Company grants stock options to directors, officers, employees and service providers. Each tranche in an award is considered a separate award with its own vesting period. The Company applies the fair-value method of accounting for share-based payments and the fair value is calculated using the Black-Scholes option pricing model.
 
Share-based payments for employees and others providing similar services is determined based on the grant date fair value. Share-based payments for non-employees is determined based on the fair value of the goods/services received or option granted measured at the date on which the Company obtains such goods/services.
 
Compensation expense is recognized over each tranche’s vesting period, in earnings or capitalized as appropriate, based on the number of awards expected to vest. If stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.
 
 
129
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
3.             Summary of significant accounting policies (continued)
 
Provision for restoration and rehabilitation
 
A provision for restoration and rehabilitation is recognized when there is a present legal or constructive obligation as a result of exploration and development activities undertaken; it is more likely than not that an outflow of economic benefits will be required to settle the obligation and the amount of the provision can be measured reliably. The estimated future obligation includes the cost of removing facilities, abandoning sites and restoring the affected areas.
 
The provision for future restoration costs is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date. The estimated cost is capitalized into the cost of the related asset and amortized on the same basis as the related assets.
 
If the estimated cost does not relate to an asset, it is charged to earnings in the period in which the event giving rise to the liability occurs.
 
As at December 31, 2011 and 2010, the Company did not have any provision for restoration and rehabilitation.
 
Income tax
 
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss.
 
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
 
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
 
Earnings per share
 
Basic earnings per share is computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares using the treasury stock method. If the Company incurs net losses in a fiscal year, basic and diluted loss per share are the same.
 
Share capital
 
Common shares are classified as equity.  Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity.
 
 
130
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
3.              Summary of significant accounting policies (continued)
 
Accounting standards and amendments issued but not yet adopted
 
Unless otherwise noted, the following revised standards and amendments are effective for annual periods beginning on or after January 1, 2013 with earlier application permitted.  The Company has not yet assessed the impact of these standards and amendments or determined whether it will early adopt them.
 
i.  
IFRS 7, Financial Instruments: Disclosures, has been amended to include additional disclosure requirements in the reporting of transfer transactions and risk exposures relating to transfers of financial assets and the effect of those risks on an entity’s financial position, particularly those involving securitization of financial assets. The amendment is applicable for annual periods beginning on or after July 1, 2011, with earlier application permitted.
 
ii.  
IFRS 9, Financial Instruments, was issued in November 2009 and addresses classification and measurement of financial assets.  It replaces the multiple categories and measurement models in IAS 39, Financial Instruments – Recognition and Measurement, for debt instruments with a new mixed measurement model having only two categories: amortized cost and fair value through profit or loss.  IFRS 9 also replaces the models for measuring equity instruments.  Such instruments are either recognized at fair value through profit or loss or at fair value through other comprehensive income, dividends are recognized in profit or loss to the extent that they do not clearly represent a return of investment; however, other gains and losses (including impairments) associated with such instruments remain in accumulated comprehensive income indefinitely.
 
Requirements for financial liabilities were added to IFRS 9 in October 2010 and they largely carried forward existing requirement in IAS 39, except that fair value changes due to credit risk for liabilities designated at fair value through profit or loss are generally recorded in other comprehensive income. The provisions of IFRS 9 are effective for annual periods beginning on or after January 1, 2015.
 
iii.  
IFRS 10, Consolidated Financial Statements, requires an entity to consolidate an investee when it has power over the investee, is exposed or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.  Under existing IFRS, consolidation is required when an entity has the power to govern the financial and operating of an entity so as to obtain benefits from its activities.  IFRS 10 replaces SIC-12, Consolidation – Special Purpose Entities and parts of IAS 27, Consolidated and Separate Financial Statements.
 
iv.  
IFRS 11, Joint Arrangements, requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11 supersedes IAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entities—Non-monetary Contributions by Venturers.
 
 
131
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
3.             Summary of significant accounting policies (continued)
 
v.  
IFRS 12, Disclosure of Interests in Other Entities, establishes disclosure requirements for interests in other entities, such as subsidiaries, joint arrangements, associates, and unconsolidated structured entities.  The standard carries forward existing disclosures and also introduces significant additional disclosure that address the nature of, and risks associated with, an entity’s interests in other entities.
 
vi.  
IFRS 13, Fair Value Measurement, is a comprehensive standard for fair value measurement and disclosure for use across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and does not always reflect a clear measurement basis or consistent disclosures.
 
There have been amendments to existing standards, including IAS 27 and IAS 28, Investments in Associates and Joint Ventures. IAS 27 addresses accounting for subsidiaries, jointly controlled entities and associates in non-consolidated financial statements. IAS 28 has been amended to include joint ventures in its scope and to address the changes in IFRS 10 – 13.
 
vii.  
IAS 1, Presentation of Financial Statements, has been amended to require entities to separate items presented in other comprehensive income into two groups, based on whether or not items may be recycled in the future. Entities that choose to present OCI items before tax will be required to show the amount of tax related to the two groups separately. The amendment is effective for annual periods beginning on or after July 1, 2012 with earlier application permitted.
 
viii.  
IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, sets out the accounting for overburden waste removal (stripping) costs in the production phase of a mine.  Stripping activity may create two types of benefits: i) inventory produced and ii) improved access to ore.  Stripping costs associated with the former should be accounted for as a current production cost in accordance with IAS 2, Inventories.  The latter should be accounted for as an addition to or enhancement of an existing asset.
 
4.            Critical accounting estimates and judgments
 
The preparation of financial statements requires management to use judgment in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgments are continuously evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and estimates that the company has made in the preparation of the financial statements:
 
 
132
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
4.             Critical accounting estimates and judgments (continued)
 
Impairment
 
In accordance with the Company’s accounting policy, the Company’s mineral interest is evaluated every reporting period to determine whether there are any indications of impairment. If any such indication exists, which is often judgmental, a formal estimate of recoverable amount is performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. The recoverable amount of an asset or cash generating group of assets is measured at the higher of fair value less costs to sell and value in use.
 
The evaluation of asset carrying values for indications of impairment includes consideration of both external and internal sources of information, including such factors as market and economic conditions, silver prices, future plans for the Company’s mineral properties and mineral resources and/or reserve estimates.
 
Management has assessed impairment indicators on the Company’s mineral interest and has concluded that no impairment indicator existed as of December 31, 2011.
 
5.           Cash and cash equivalents
 
   
December 31, 2011
 
   
Amount in original currency
   
Canadian dollar equivalent
 
            $  
Cash denominated in Canadian dollars
    9,665,106       9,665,106  
Cash denominated in US dollars
    15,851,316       16,166,757  
Cash denominated in Chinese RMB
    10,875,368       1,742,289  
              27,574,152  
       
   
December 31, 2011
 
   
Amount in original currency
   
Canadian dollar equivalent
 
            $  
Cash denominated in Canadian dollars
    765,246 765,246  
Cash denominated in US dollars
    177,628 177,664  
Cash denominated in Chinese RMB
    27,557,295 4,167,644  
      5,110,554  
     
   
December 31, 2011
 
   
Amount in original currency
   
Canadian dollar equivalent
 
            $  
Cash denominated in Canadian dollars
    739,085 739,085  
Cash denominated in US dollars
    37,165 39,061  
Cash denominated in Chinese RMB
    451,594 69,293  
      847,439  
 
 

 

133

 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
5.             Cash and cash equivalents (continued)
 
Under Chinese law, cash advanced to the Company’s Chinese subsidiaries as registered share capital are maintained in the subsidiaries’ registered capital bank account. Remittance of these funds back to Canada may require approvals by the relevant government authorities or designated banks in China or both.
 
6 .           Short-term investments
 
As at December 31, 2011, short-term investments consisted of cashable guaranteed investment certificates.  The yields on these investments were between 0.95% to 1.65%.
 
As at December 31, 2010, short-term investments consisted of cashable guaranteed investment certificates ($8.1 million) and discount notes ($16.0 million).  The yields on these investments were between 0.4% to 1.6%.
 
As at January 1, 2010, short-term investments consisted of cashable guaranteed investment certificates ($10.3 million).  The yields on these investments were between 0.65% to 0.8%.
 
7.           Prepaid expenses and deposits
 
In order to increase Minco Silver’s registered share capital in Foshan Minco, Minco Silver entered into a trust agreement with Minco Gold and Minco China and advanced US$10 million to Minco China via Minco Gold (refer to Note 13). These funds are intended to be used for the development of the Fuwan Silver project by Foshan Minco.
 
Minco China is required to exchange the US$10 million into RMB, before the money can be used to increase the registered share capital of Foshan Minco. The exchange of US dollars into RMB requires approval from the State Administration of Foreign Exchange  (“SAFE”).
 
In order to obtain SAFE approval to effect the foreign currency exchange, Minco China, on behalf of Minco Silver entered into the following purchase and sales transactions:
 
 
(a)
In December 2011, Minco China entered into an agreement with China Material Storage and Transportation Company (“CMST”) in which Minco China agreed to purchase 2000 tons of the rolled plate of coil coating at a price of RMB 6,000 per ton. According to a supplemental agreement signed by Minco China and CMST, Minco China had paid RMB 12 million as a prepayment on the purchase as at December 31, 2011.
 
 
(b)
In December 2011, the Company entered into an agreement with Beijing Zhongchujinlian Trade Limited Company (“BZT”) in which Minco China agreed to sell 2000 tons of the rolled plate of Coil Coating at a price of RMB 6,010 per ton in early 2012. Minco China expects to receive payment from BZT by the end of March 31, 2012.
 
 
(c)
In January 2012, Minco China engaged Beijing Guofufengtian Investment Advisory Company Limited (“BGI”) to assist in the completion of the above transaction and BGI will be paid a consultancy fee of 3.5% of the equivalent RMB exchanged.
 
 
(d)
Subsequent to year end, the Company received RMB 9 million from BZT.

 
134
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
8.           Loan receivable
 
Sterling loan settlement
 
As of December 31, 2009, the Company had a loan receivable from Sterling Mining Company (“Sterling”), in the amount of $8,290,441.  On June 4, 2010 the Company received US$11.7 million ($12.1 million) from Sterling for the repayment of all amounts advanced and incurred, with the interest.  The Company recognized a gain in the amount of $1.2 million which represents the difference between the funds received and the amount recorded as loan receivable immediately prior to the receipt of the repayment.
 
 
(a)  
Break fee
 
On March 12, 2009, Minco Silver filed a proof of claim with the U.S. Bankruptcy Court in Idaho to collect a break fee, in the amount of US$2,750,000.  The break fee was agreed upon in the original letter of intent to acquire Sterling.
 
The Company is in the legal process of seeking to recover the break fee and relevant costs.  The ultimate outcome is uncertain.
 
9.           Mineral interests
 
 
(a)  
Fuwan Silver Deposit
 
Minco Silver has a 100% beneficial interest in Foshan Minco, the operating company and permit holder for the Fuwan project, subject to a 10% net profit interest held by GGB. There will be no distributions to or participation by GGB, until such time as Minco Silver’s investment in the project is recovered. GGB is not required to fund any expenditures related to the Fuwan project. The permit for the Fuwan project is the Luoke-Jilinggang exploration permit, which was renewed on August 11, 2011. The new exploration permit granted by the Ministry of Land and Resources of China is for a two-year period ending on July 20, 2013.  
 
Although the Company has taken steps to verify the title to mineral properties in which it has an interest in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements or transfers.
 
 
135
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
9.               Mineral interests (continued)
 
The following is a summary of project development costs capitalized to mineral interests from January 1, 2010 to December 31, 2011.
 
   
2011
   
2010
 
      $       $  
Opening Balance – January 1
    12,141,851       8,688,726  
Consulting fees
    908,480       887,157  
Drilling
    965       39,332  
Salaries and benefits
    358,818       426,919  
Share-based compensation
    1,988,135       859,482  
Mining design costs
    130,783       265,896  
Mining license application
    874,801       458,387  
Environment impact assessment
    20,545       185,233  
Travel
    73,124       213,559  
Other development costs
    194,870       261,050  
Foreign exchange
    1,118,950       (143,890 )
Ending Balance – December 31
    17,811,322       12,141,851  
 
 
(b)  
Fuwan Silver Belt
 
In 2005, the Company acquired three additional silver exploration permits on the Fuwan belt, referred to as the Guanhuatang Property, the Hecun Property and the Guyegang-Sanyatang Property at a cost of $267,427 (RMB 1,500,000). These three permits expire in 2012 and are currently held by Minco China in trust for Minco Silver.
 
During the year ended December 31, 2011, the Company did not conduct any regional exploration activities, except for maintaining the three exploration permits.
 
 
(c)  
Changkeng Silver Mineralization
 
Minco Gold has assigned its right to earn a 51% interest in the Changkeng Silver Mineralization in 2005 to the Company in exchange for common shares of Minco Silver. Minco Gold is responsible for all the costs related to the gold mineralization on the Changkeng Property; Minco Silver is responsible for the costs related to the silver mineralization. Changkeng exploration permit expires on September 10, 2013.
 
During the year ended December 31, 2011, the Company did not conduct any regional exploration activities, except for maintaining the exploration permit.
 
 
136
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
10.           Property, plant and equipment
 
                     
Office
       
   
Leasehold
   
Mining
         
equipment and
       
   
improvements
   
equipment
   
Motor vehicles
   
furniture
   
Total
 
      $       $       $       $       $  
At January 1, 2010:
                                       
Cost
    53,227       3,075       155,820       171,509       383,631  
Accumulated depreciation
    (21,987 )     (1,401 )     (36,645 )     (85,289 )     (145,322 )
Net book value
    31,240       1,674       119,175       86,220       238,309  
                                         
Year ended December 31, 2010
                                       
At January 1, 2010:
    31,240       1,674       119,175       86,220       238,309  
Additions
    140,567       -       277,551       93,185       511,303  
Depreciation
    (7,151 )     (1,334 )     (16,874 )     (32,114 )     (57,473 )
Exchange differences
    (1,271 )     (237 )     (2,999 )     (5,708 )     (10,215 )
At December 31, 2010
    163,385       103       376,853       141,583       681,924  
                                         
At December 31, 2010
                                       
Cost
    192,522       2,838       430,372       258,987       884,719  
Accumulated depreciation
    (29,138 )     (2,735 )     (53,519 )     (117,403 )     (202,794 )
Net book value
    163,384       103       376,853       141,584       681,924  
                                         
Year ended December 31, 2011
                                       
At January 1, 2011
    163,384       103       376,853       141,584       681,924  
Additions
    161,965       -       -       41,748       203,713  
Disposals
    -       -       -       (3,685 )     (3,685 )
Depreciation
    (77,989 )     (1,274 )     (40,455 )     (47,455 )     (167,173 )
Exchange differences
    12,695       1,171       16,034       6,784       36,684  
At December 31, 2011
    260,055       -       352,432       138,976       751,463  
                                         
At December 31, 2011
                                       
Cost
    367,182       4,009       446,406       303,834       1,121,431  
Accumulated depreciation
    (107,127 )     (4,009 )     (93,974 )     (164,858 )     (369,968 )
Net book value
    260,055       -       352,432       138,976       751,463  

 
137
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
11.           Share capital and contributed surplus
 
 
(a)  
      Common Shares and Contributed Surplus
 
Authorized: Unlimited number of common shares without par value.
 
Issued:
 
On March 3, 2011 the Company closed a public offering (the “Offering”) of 7,600,000 common shares at a price of $5.95 per share for gross proceeds of $45,220,000.  The offering was underwritten by a syndicate of underwriters.  In consideration for their services, the underwriters received a cash commission equal to 5.5% of the gross proceeds and an aggregate of 418,000 compensation warrants.  Each compensation warrant allows the underwriters to purchase one common share of the Company at $5.95 for a period of 18 months following the closing of the Offering.
 
 
(b)  
       Stock Options
 
The Company may grant up to 15% of its issued and outstanding shares as options to its directors, officers, employees and consultants under its stock option plan. The Company’s board of directors grants such options for periods of up to five years, with vesting periods determined at its sole discretion and at prices equal to or greater than the closing market price on the day preceding the date the options were granted.  These options are equity settled.
 
On January 14, 2011, the Company granted stock options for 2,803,000 common shares at an exercise price of $5.36 that vest over an 18-month period from the issue date to its employees and directors.
 
The Company recorded $6,745,591 of share-based compensation for the year ended December 31, 2011. A share-based compensation expense of $4,757,454 was recorded in the statement of income and share-based compensation expense of $1,988,137 was capitalized to mineral interest.
 
 
138
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
11.             Share capital and contributed surplus (continued)
 
A summary of the options outstanding is as follows:
 
   
Number outstanding
   
Weighted average 
exercise price
 
          $    
               
January 1, 2010
    4,273,666       1.68  
                 
Granted
    1,662,731       2.90  
Exercised
    (2,408,861 )     1.43  
Forfeited
    (496,700 )     1.26  
Expired
    (90,000 )     1.25  
                 
December 31, 2010
    2,940,836       2.33  
                 
Granted
    2,803,000       5.25  
Exercised
    (535,965 )     2.27  
Forfeited
    (854,667 )     4.17  
                 
December 31, 2011
    4,353,204       3.85  

The weighted average share price the day these options were exercised was $4.36 (2010 - $4.95).
 
 
139
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
11.            Share capital and contributed surplus (continued)
 
                                 
     
Options outstanding
         

Option exercisable

 
         
 
Range of
exercise
prices
   
Number
outstanding
   
Weighted
average
remaining
contractual
Life (year)
   
Weighted
average
exercise
price
   
 
 
Number
exercisable
   
Weighted
average
exercise
price
 
$                   $               $  
  1.05-1.50       777,002       1.92       1.11       550,001       1.12  
  1.51-2.25       319,536       2.83       1.95       232,870       1.98  
  2.26-3.00       345,000       0.72       2.58       305,000       2.61  
  3.01-3.65       516,666       2.52       3.32       483,332       3.30  
  3.66-5.35       625,000       4.52       5.00       -       -  
  5.36-6.45       1,770,000       4.04       5.40       581,659       5.40  
          4,353,204       3.20       3.85       2,152,862       3.07  
 
The Company used the Black-Scholes option pricing model to determine the fair value of the options with the following assumptions:
 
   
2011
   
2010
 
             
Risk-free interest rate
    0.78%-2.56 %     1.31% - 2.68 %
Dividend yield
    0 %     0 %
Volatility
    68%-110 %     87% - 127 %
Forfeiture rate
    25 %     26 %
Estimated expected lives
 
5 years
   
5 years
 
 
Option pricing models require the use of subjective estimates and assumptions including the expected stock price volatility.  The stock price volatility is calculated based on the Company’s historical volatility.  Changes in the underlying assumptions can materially affect the fair value estimates and therefore, in management’s opinion, existing models do not necessarily provide a reliable measure of the fair value of the Company’s stock options.
 
 
140
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
11.             Share capital and contributed surplus (continued)
 
(c)           Warrants
 
A summary of warrants outstanding is as follows:
 
   
Number
outstanding
   
Weighted average exercised price
 
            $  
Balance, January 1, 2010
    4,087,590       2.15  
                 
Warrants issued
    1,150,000       2.15  
Warrants exercised
    (4,296,089 )     2.15  
Warrants expired
    (1 )     2.15  
                 
Balance, December 31, 2010
    941,500       2.15  
                 
Warrants issued
    418,000       5.95  
Warrants exercised
    (941,500 )     2.15  
                 
Balance, December 31, 2011
    418,000       5.95  
 
The Company used the Black-Scholes option pricing model to determine the fair value of the warrants with the following assumptions
 
   
2011
   
2010
 
Risk-free interest rate
    1.87 %     1.40%-1.84 %
Dividend yield
    0 %     0 %
Volatility
    66 %     78%-80 %
Estimated expected lives
 
1.5 years
   
1 year
 
 
As at December 31, 2011, the weighted-average remaining contractual life of the outstanding warrants is 0.68 years.
 
 
141
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
12.           Income taxes
 
The Company has two subsidiaries and one branch in China which are Minco Yinyuan, Foshan Minco and Foshan Minco Beijing Branch. Foshan Minco is legally owned by Minco China, a subsidiary of Minco Gold, in trust for Minco Silver through trust agreements.
 
The operating results of these two subsidiaries and one branch are included in the Company’s tax reporting for Canadian tax purposes.
 
Income tax expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates to earnings before income taxes.  These differences result from the following items:
 
     
2011
$
     
2010
$
 
                 
Loss before income taxes
    (5,970,843 )     (4,280,899 )
Statutory income tax rate
    26.5 %     28.50 %
Expected tax recovery at statutory income tax rate
    (1,582,273 )     (1,220,056 )
Non-deductible expenses and other items
    1,366,125       611,151  
Impact of change in tax rate
    51,534       71,464  
Change in deferred income tax asset not realized
    257,226       465,227  
Foreign exchange
    (92,612 )     72,214  
                 
Income tax expense
    -       -  

Deferred income taxes arise from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The significant components of deferred income tax assets and liabilities at December 31, 2011 and 2010 are as follows:
 
   
2011
   
2010
 
      $       $  
Deferred income tax assets not recognized
               
Non-capital losses
    2,585,605       2,157,873  
Mineral interest
    2,294,477       2,294,477  
Other
    512,698       81,523  
      5,392,780       4,533,873  

 
142
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
12.             Income taxes (continued)
 
The Company has non-capital losses carry-forward for Canadian income tax purposes which expire as follows:
 
 
$
   
2014
52,800
2015
746,632
2026
1,449,119
2027
998,751
2028
1,003,546
2029
1,940,808
2030
1,990,239
2031
2,160,525
   
 
10,342,420

Included in future income tax assets is $22,773,640 of cumulative foreign resource expenses for Canadian income tax purposes which can be carried forward indefinitely and used to reduce future taxable income in Canada. Certain of these non-capital losses and the cumulative foreign resource expenses are related to the Company’s exploration activities in China.
 
13.           Related party transactions
 
Funding of Foshan Minco
 
The Company cannot invest directly in Foshan Minco as Foshan Minco is legally owned by Minco China. All funding supplied by the Company for exploration of the Fuwan Project must first go through Minco China via Minco Gold to comply with Chinese Law. In the normal course of business the Company uses trust agreements when providing cash, denominated in US dollars, to Minco China via Minco Gold for the purpose of increasing the registered capital of Foshan Minco. Minco China is a registered entity in China however it is classified as being a wholly foreign owned entity and therefore can receive foreign investment. Foshan Minco is a Chinese company with registered capital denominated in RMB and therefore can only receive domestic investment from Minco China. Increases to the registered capital of Foshan Minco must be denominated in RMB.
 
 
143
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
13.             Related party transactions (continued)
 
(e)  
On June 9, 2011, the Company advanced US$10 million (December 31, 2011 - $10,199,000) to Minco Gold, the ultimate legal shareholder of the Company’s subsidiary Foshan Minco.  During 2011, Minco Gold received government approvals to increase the registered capital of its wholly owned subsidiary, Minco China.  Minco China has undertaken to exchange the US$10 million into RMB and will then invest the funds, on behalf of Minco Silver, to increase the registered capital of Foshan Minco.
 
 
 
In August, 2011, the Company, Minco Gold and Minco China entered into a trust agreement in which Minco Gold and Minco China confirmed they have received the US$10 million, and Minco China is required to exchange these US fund into RMB in order to increase Foshan Minco’s registered share capital. Once all the funds are transferred from Minco China to Foshan Minco, the trust agreement is effectively settled and no repayment is expected by Minco Silver from Minco China.
 
 
 
As at December 31, 2011, Minco China held US$8,110,500 in trust and has undertaken the process to exchange the US$1,889,500 into RMB. Refer to note 7
 
 
(f)  
 Prior to executing the above transfer of funds, on April 25, 2011, the Company entered into a loan agreement to advance up to US$22 million to Minco China, the immediate legal shareholder of the Company’s subsidiary Foshan Minco. The purpose of this loan was to provide a mechanism to increase the registered capital of Foshan Minco. The loan bore interest at a rate equal to LIBOR plus 3 per cent per annum. The Company advanced US$6 million ($5,860,800) to Minco China under this facility. This loan arrangement was not accepted by SAFE. Accordingly, the Company received repayment of the US$6 million from Minco China on August 19, 2011 and waived the interest on the understanding that the Company’s subsidiary, Foshan Minco, was the beneficiary of the loan.
 
Shared expenses
 
Minco Silver and Minco Gold share offices and certain administrative expenses in Beijing and Vancouver.
 
 
( a)
Amounts due to related parties as at December 31, 2011 are $429,114 (December 31, 2010 – $839,304, January 1, 2010 - $2,099,179) and consisted of the following:
 
 
Amount due to Minco China as at December 31, 2011 of $1,167,282 (December 31, 2010 - $754,066, January 1, 2010 - $703,626) representing expenditures incurred on behalf of Foshan Minco and shared office expenses.
 
 
Amount due from Minco Gold as at December 31, 2011 of $738,168 (December 31, 2010 – amount due to of $85,238, January 1, 2010 – amount due to of $1,395,553) representing funds advanced from Minco Silver to Minco Gold to support its operating activities in Canada.
 
 
The amounts due are unsecured, non-interest bearing and payable on demand.
 
The above two amounts will be net settled and accordingly has been presented as a net balance on the consolidated financial statements.
 
 
144
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
13.             Related party transactions (continued)
 
 
(b)
In the year ended December 31, 2011, the Company paid or accrued $91,210 (December 31, 2010 – $87,309) in respect of rent and $488,229 (December 31, 2010 – $372,692) in respect of shared office expenses and administration costs to Minco Gold.
 
The above transactions are conducted in the normal course of business
 
Key management compensation
 
In the years ended December 31, 2011 and 2010, the following compensation was paid to key management.  Key management includes the Company’s directors and senior management.  This compensation is included in exploration costs, development costs and administrative costs expenses.
 
               
December 31, 2011
 
                   
         
Share-based
       
   
Cash remuneration
   
compensation
   
Total
 
      $       $       $  
Directors
    59,250       1,791,826       1,851,076  
Senior management
    1,016,981       2,857,263       3,874,244  
                         
Total compensation
    1,076,231       4,649,089       5,725,320  
 
               
December 31, 2010
 
                   
         
Share-based
       
   
Cash remuneration
   
compensation
   
Total
 
      $       $       $  
Directors
    71,000       445,671       516,671  
Senior management
    1,169,454       615,293       1,784,747  
                         
Total compensation
    1,240,454       1,060,964       2,301,418  
 
 
145
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
14.           Geographical information
 
The Company’s business is considered as operating in one segment, mineral exploration and development.  The geographical division of the Company’s assets and net loss is as follows:
 
         
Year ended December 31, 2011
 
   
Canada
   
China
   
Total
 
      $       $       $  
                         
General and administration
    (6,077,515 )     (596,551 )     (6,674,066 )
Other income
    703,224       -       703,224  
                         
Segment loss
    (5,374,291 )     (596,551 )     (5,970,842 )
 
           
Year ended December 31, 2010
 
   
Canada
   
China
   
Total
 
      $       $       $  
                         
General and administration
    (5,139,681 )     (465,204 )     (5,604,885 )
Other income
    1,323,986       -       1,323,986  
                         
Segment loss
    (3,815,695 )     (465,204 )     (4,280,899 )
                         

 
146
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
14.           Geographical information (continued)
 
Assets by geography
                 
         
December 31, 2011
 
   
Canada
   
China
   
Total
 
      $       $       $  
                         
Current assets
    58,191,756       12,821,171       71,012,927  
Non-current assets
    10,099       18,552,686       18,562,785  
Total assets
    58,201,855       31,373,857       89,575,712  
 
           
December 31, 2010
 
   
Canada
   
China
   
Total
 
      $       $       $  
                         
Current assets
    25,180,504       4,848,947       30,029,451  
Non-current assets
    35,501       12,788,274       12,823,775  
Total assets
    25,216,005       17,637,221       42,853,226  
 
                   
January 1, 2010
 
   
Canada
   
China
   
Total
 
      $       $       $  
                         
Current assets
    5,940,990       5,574,910       11,515,900  
Non-current assets
    8,351,838       8,865,638       17,217,476  
Total assets
    14,292,828       14,440,548       28,733,376  

 
147
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
15.            Commitments
 
 
(a)  
The Company has commitments in respect of its portion of office leases in China and Canada, requiring minimum payments of $935,020, as follows:
 
    $    
         
2012
    401,149  
2013
    317,950  
2014
    161,403  
2015
    54,518  
      935,020  
 
 
(b)  
The Company has commitments in respect of the Fuwan mine design contract requiring payments of RMB 7.1 million (approximately $1.13 million).  The payments are anticipated to continue through to 2013.
 
 
(c)  
The Company has commitments in respect of the Environmental Impact Assessment of the Fuwan Project and other various reports requiring payments of RMB 1.3 million (approximately $200,000).  The payments are anticipated to be made before the end of 2012.
 
16.           Financial instruments and fair values
 
As explained in Note 3, financial assets and liabilities have been classified into categories that determine their basis of measurement and, for items measure d at fair value, whether changes in fair v alue are recognized in the statement of operations or comprehensive loss. Those categories are: fair value through profit or loss; loans and receivables; and, for liabilities, amortized cost. The following table shows the carrying values of assets and liabilities for each of these categories at December 31, 2011 and 2010 and January 1, 2010.
 
    December 31,    
December 31,
   
January 1,
 
    2011    
2010
   
2010
 
Loans and receivables
    $       $       $  
Fair value through profit or loss
                       
Cash and cash equivalents
    27,574,152       5,110,554       847,439  
Short-term investments
    40,058,042       24,086,725       10,288,326  
Receivables
    674,973       327,755       94,779  
Prepaid expenses and deposits
    2,705,760       504,417       285,356  
Loan receivable
    -       -       8,290,441  
      71,012,927       30,029,451       19,806,341  
 
 
148
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
16.             Financial instruments and fair values (continued)

Other Financial Liabilities
    $       $       $  
Accounts payable and accrued  liabilities
    539,576       521,409       295,868  
Due to related parties
    429,114       839,304       2,099,179  
      968,690       1,360,713       2,395,047  
 
The carrying value of the Company’s financial assets and liabilities approximate their fair value.
 
Fair value measurement
 
Financial assets and liabilities that are recognized on the balance sheet at fair value can be classified in a hierarchy that is based on significance of the inputs used in making the measurements.  The levels in the hierarchy are:
 
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities,
 
Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is derived from prices), and
 
Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
 
The Company has no financial assets or liabilities measured at fair value.
 
Financial risk factors
 
The company’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Risk management is carried out by management under policies approved by the board of directors. Management identifies and evaluates the financial risks. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
 
 
149
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
16.             Financial instruments and fair values (continued)
 
                 Foreign exchange risk
The functional currency of Minco Silver is the Canadian dollar and the functional currency of its Chinese subsidiaries is RMB. Most of the foreign currency risk is related to US dollar funds held by Minco Silver and its Chinese subsidiaries. Therefore the Company’s net earnings are impacted by fluctuations in the valuation of the US dollar in relation to the Canadian dollar and RMB.
 
The Company does not hedge its exposure to currency fluctuations.  The Company has completed a sensitivity analysis to estimate the impact that a change in foreign exchange rates would have on the net loss of the Company, based on the Company’s net US$15.9 million monetary assets at year-end.  This sensitivity analysis shows that a change of +/- 10% in US$ foreign exchange rate would have a +/- US$1.6 million impact on net loss for the year ended December 31, 2011.  
 
Interest rate risk
 
Financial instruments that expose the Company to interest rate risk are the cash and cash equivalents and short-term investments owned by the Company.
 
The Company has completed a sensitivity analysis to estimate the impact that a change in interest rates would have on the net loss of the Company.  This sensitivity analysis shows that a change of +/- 100 basis points in interest rate would have a +/- $1.3 million impact on net loss for the year ended December 31, 2011.  This impact is primarily as a result of the Company holding short-term investments such as guaranteed investment certificates and as a result of the Company having cash invested in interest bearing accounts.  The financial position of the Company may vary at the time that a change in interest rates occurs causing the impact on the Company’s results to differ from that noted above.
 
Liquidity risk
 
Liquidity risk includes the risk that the Company cannot meet its financial obligations as they fall due. The Company has in place a planning and budgeting process to help determine the funds required to support the Company’s normal operating requirements and its exploration and development plans. The annual budget is approved by the Company’s board of directors. The Company ensures that there are sufficient cash balances to meet its short-term business requirements. At December 31, 2011, the Company has a positive working capital of approximately $70 million and therefore has sufficient funds to meet its current operating and exploration and development obligations. However, the Company will require significant additional funds to complete its plans for the construction of the Fuwan project.
 
 
150
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
17.           Capital management
 
The Company’s objectives in the managing of the liquidity and capital are to safeguard the Company’s ability to continue as a going concern and provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of equity attributable to common shareholders, comprising of issued share capital, common share purchase warrants, contributed surplus, accumulated and other comprehensive income and accumulated deficit.
 
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets to facilitate the management of its capital requirements. The Company prepares annual expenditure budgets that are updated as necessary depending upon various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Company’s board of directors. As at December 31, 2011, the Company does not have any long-term debt and has sufficient funds to meet its current operating and exploration and development obligations.  The Company has been offered, through Foshan Minco, conditional approval for a debt facility agreement in the amount of RMB 300 million (approximately $48.1 million) from the Guangdong Branch of the Industrial and Commercial Bank of China. The main condition precedent is the receipt of the Fuwan Silver mining permit. This facility is available to be used for the construction of the Fuwan Silver Project mine.
 
18.           First-time adoption of IFRS
 
In preparation of these annual consolidated financial statements, the financial statements for the year ended December 31, 2010 and the statement of financial position as of January 1, 2010, have been adjusted from amounts reported previously in the financial statements prepared in accordance with Canadian GAAP.  An explanation of these adjustments is set out in the following section.
 
 
151
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
         
December 31, 2010
         
January 1, 2010
 
Assets
 
Cdn GAAP
   
Adj
   
IFRS
   
Cdn GAAP
   
Adj
   
IFRS
 
Current assets
    $       $       $       $       $       $  
Cash and cash equivalents
    5,110,554       -       5,110,554       847,439       -       847,439  
Short-term investments
    24,086,725       -       24,086,725       10,288,326       -       10,288,326  
Receivables
    327,755       -       327,755       94,779       -       94,779  
Loan receivable
    -       -       -       -       -       -  
Prepaid expenses and deposits
    504,417       -       504,417       285,356       -       285,356  
      30,029,451       -       30,029,451       11,515,900       -       11,515,900  
Non-current assets
                                               
Loan receivable
    -       -       -       8,290,441       -       8,290,441  
Mineral interests (Note 19(a), (b) and (c))
    12,960,162       (818,311 )     12,141,851       9,000,902       (312,176 )     8,688,726  
Property, plant and equipment (Note 19 (a))
    656,880       25,044       681,924       203,050       35,259       238,309  
      43,646,493       (793,267 )     42,853,226       29,010,293       (276,917 )     28,733,376  
Liabilities
                                               
Accounts payable and accrued liabilities
    521,407       -       521,407       295,868       -       295,868  
Due to related party
    839,304       -       839,304       2,099,179       -       2,099,179  
      1,360,711       -       1,360,711       2,395,047       -       2,395,047  
Equity
                                               
Share capital (Note 19(b))
    58,595,288       (103,828 )     58,491,460       37,046,993       -       37,046,993  
Contributed surplus (Note 19(b))
    8,808,160       377,831       9,185,991       10,525,938       479,787       11,005,725  
Accumulated other comprehensive income
(Note 19(a) and (c))
    -       (189,650 )     (189,650 )     -       -       -  
Deficit  (Note 19(a), (b) and (c))
    (25,117,666 )     (877,620 )     (25,995,286 )     (20,957,685 )     (756,704 )     (21,714,389 )
      42,285,782       (793,267 )     41,492,515       26,615,246       (276,917 )     26,338,329  
      43,646,493       (793,267 )     42,853,226       29,010,293       (276,917 )     28,733,376  

 
152
 
 
MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
               
Year ended
 
               
December 31, 2010
 
                   
   
Cdn GAAP
   
Adj
   
IFRS
 
      $       $         $  
Administrative expensed
                       
Accounting and audit
    183,069       -       183,069  
Amortization
    57,473       -       57,473  
Consulting
    512,300       -       512,300  
Directors' fees
    71,000       -       71,000  
Field office expenses
    359,826       -       359,826  
Foreign exchange loss (Note 18(a))
    807,189       (35,545 )     771,644  
Investor relations
    699,209       -       699,209  
Legal, regulatory and filing
    119,593       -       119,593  
Office administration expenses
    103,272       -       103,272  
Property investigation
    40,682       -       40,682  
Rent
    136,281       -       136,281  
Salaries and benefits
    272,513       -       272,513  
Share-based compensation (Note 18(b))
    2,339,863       (148,971 )     2,190,892  
Travel and transportation
    87,131       -       87,131  
      5,789,401       (184,516 )     5,604,885  
Operating loss
    (5,789,401 )     184,516       (5,604,885 )
Gain on loan settlement
    1,198,417       -       1,198,417  
Interest and other income
    125,569       -       125,569  
Loss for the year before income taxes
    (4,465,415 )     184,516       (4,280,899 )
                         
Future income tax recovery (Note 18(c))     305,432       (305,432 )     -  
Loss for the year
    (4,159,983 )     (120,916 )     (4,280,899 )
                         
                         
Other comprehensive income (net of tax):
                       
Exchange differences on translation from                        
functional to presentation currency (Note 18(a))
    -       (189,650 )     (189,650 )
Comprehensive loss for the year
    (4,159,983 )     (310,566 )     (4,470,549 )

 
153
 

MINCO SILVER CORPORATION
 
(A development stage enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2011 and 2010
(Expressed in Canadian dollars, unless otherwise stated)
 
18.
First-time adoption of IFRS (continued)
 
 
(c)  
Functional Currency
 
Under Canadian GAAP, all the Company's subsidiaries were integrated foreign operations. Therefore, monetary items were translated at year-end rates and non-monetary items were translated at average rates with all foreign currency gains and losses recognized in profit or loss.
 
IFRS requires that the functional currency of each subsidiary of the Company be determined separately. It was determined that, as at the transition date, the functional currency of Minco Silver Corporation is Canadian dollars and the functional currency of the Company’s Chinese subsidiaries is RMB.
 
In accordance with the IFRS 1 optional exemptions, the Company has elected to transfer the currency translation differences recognized as a separate component of shareholders’ equity, to accumulated loss on the transition date.
 
 
(d)  
Share based compensation
 
Under Canadian GAAP, for the purpose of accounting for stock based compensation, an individual was classified as an employee when the individual was consistently represented to be an employee under law. Under IFRS, an individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. This definition of an employee is broader than that previously applied by the Company and resulted in certain contractors and consultants being classified as employees under IFRS.
 
Under Canadian GAAP, forfeitures were recognized as they occurred. Under IFRS, the forfeiture rate is estimated up front and factored into the number of stock options expected to vest.
 
Under Canadian GAAP, the Company recorded stock based compensation on a straight-line basis over the vesting period.  Under IFRS, the Company records share based compensation for each tranche within an award over the vesting period of the corresponding tranche.
 
In accordance with the IFRS 1 optional exemptions, the Company has elected to apply IFRS 2 only to unvested options outstanding as of January 1, 2010.
 
 
(e)  
Deferred tax on mineral properties
 
Under Canadian GAAP, the Company recorded future tax liabilities on share based payments capitalized in mineral interests, because the share based payments are not deductible for tax purposes. IAS 12 exempts the Company from recognizing deferred tax liability arising from the initial recognition of an asset or liability in a transaction which is not a business acquisition that affects neither accounting profit nor tax profit.  Capitalization of stock based payments falls under this exemption. The Company accordingly reversed the effect of all deferred tax liabilities from mineral interests under IFRS.
 
 
(f)  
Statement of cash flows
 
The transition from Canadian GAAP to IFRS had no significant impact on cash flows generated by the Company.
 
19.
Subsequent event
 
 
On March 27, 2012, the Company granted stock options for 2,390,000 common shares to various employees and directors at an exercise price of $2.35 that vest over an 18-month period from the issue date.  The options expire in March 2017.
 
 
154
 
 
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.
 
Date: April 20, 2012      
    MINCO GOLD CORPORATION  
       
 
 
/s/  Ken Z. Cai  
   
Ken Z. Cai
 
   
Chairman, Chief Executive Officer and President
 
       
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
155
 

Incorporation number: BC 256465  

 
MINCO GOLD CORPORATION
(the "Company")
 
ARTICLES
 
 
    Page  
1.   INTERPRETATION   1  
1.1   Definitions   1  
1.2   Business Corporations Act and Interpretation Act Definitions Applicable   1  
 
2.   SHARES AND SHARE CERTIFICATES   1  
2.1   Authorized Share Structure   1  
2.2   Form of Share Certificate   1  
2.3   Shareholder Entitled to Certificate or Acknowledgment   1  
2.4   Delivery by Mail   1  
2.5   Replacement of Worn Out or Defaced Certificate or Acknowledgement   2  
2.6   Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment   2  
2.7   Splitting Share Certificates   2  
2.8   Certificate Fee   2  
2.9   Recognition of Trusts   2  
 
3.   ISSUE OF SHARES   2  
3.1   Directors Authorized   2  
3.2   Commissions and Discounts   3  
3.3   Brokerage   3  
3.4   Conditions of Issue   3  
3.5   Share Purchase Warrants and Rights   3  
 
4.   SHARE REGISTERS   3  
4.1   Central Securities Register   3  
4.2   Closing Register   4  
 
5.   SHARE TRANSFERS   4  
5.1   Registering Transfers   4  
5.2   Form of Instrument of Transfer   4  
5.3   Transferor Remains Shareholder   4  
5.4   Signing of Instrument of Transfer   4  
5.5   Enquiry as to Title Not Required   4  
5.6   Transfer Fee   5  
 
6.   TRANSMISSION OF SHARES   5  
6.1   Legal Personal Representative Recognized on Death   5  
6.2   Rights of Legal Personal Representative   5  
 
7.   PURCHASE OF SHARES   5  
7.1   Company Authorized to Purchase Shares   5  
7.2   Purchase When Insolvent   5  
7.3   Sale and Voting of Purchased Shares   5  
 
8.   BORROWING POWERS   6  

 


- ii -
 
 
9.   ALTERATIONS   6  
9.1   Alteration of Authorized Share Structure   6  
9.2   Consolidations and "Call-in" Subdivisions   6  
9.3   Special Rights and Restrictions   7  
9.4   Change of Name   7  
9.5   Other Alterations   7  
 
10.   MEETINGS OF SHAREHOLDERS   7  
10.1   Annual General Meetings   7  
10.2   Resolution Instead of Annual General Meeting   7  
10.3   Calling of Meetings of Shareholders   7  
10.4   Notice for Meetings of Shareholders   7  
10.5   Record Date for Notice   8  
10.6   Record Date for Voting   8  
10.7   Failure to Give Notice and Waiver of Notice   8  
10.8   Notice of Special Business at Meetings of Shareholders   8  
 
11.   PROCEEDINGS AT MEETINGS OF SHAREHOLDERS   9  
11.1   Special Business   9  
11.2   Special Majority   9  
11.3   Quorum   9  
11.4   One Shareholder May Constitute Quorum   9  
11.5   Other Persons May Attend   10  
11.6   Requirement of Quorum   10  
11.7   Lack of Quorum   10  
11.8   Lack of Quorum at Succeeding Meeting   10  
11.9   Chair   10  
11.10   Selection of Alternate Chair   10  
11.11   Adjournments   11  
11.12   Notice of Adjourned Meeting   11  
11.13   Decisions by Show of Hands or Poll   11  
11.14   Declaration of Result   11  
11.15   Motion Need Not be Seconded   11  
11.16   Casting Vote   11  
11.17   Manner of Taking Poll   11  
11.18   Demand for Poll on Adjournment   12  
11.19   Chair Must Resolve Dispute   12  
11.20   Casting of Votes   12  
11.21   Demand for Poll   12  
11.22   Demand for Poll Not to Prevent Continuance of Meeting   12  
11.23   Retention of Ballots and Proxies   12  
 
12.   VOTES OF SHAREHOLDERS   12  
12.1   Number of Votes by Shareholder or by Shares   12  
12.2   Votes of Persons in Representative Capacity   12  
12.3   Votes by Joint Holders   13  
12.4   Legal Personal Representatives as Joint Shareholders   13  
12.5   Representative of a Corporate Shareholder   13  
12.6   Proxy Provisions Do Not Apply to All Companies   13  
12.7   Appointment of Proxy Holders   14  
12.8   Alternate Proxy Holders   14  

 


- iii -
12.9   When Proxy Holder Need Not Be Shareholder   14  
12.10   Deposit of Proxy   14  
12.11   Validity of Proxy Vote   14  
12.12   Form of Proxy   15  
12.13   Revocation of Proxy   15  
12.14   Revocation of Proxy Must Be Signed   15  
12.15   Production of Evidence of Authority to Vote   16  
 
13.   DIRECTORS   16  
13.1   First Directors; Number of Directors   16  
13.2   Change in Number of Directors   16  
13.3   Directors' Acts Valid Despite Vacancy   16  
13.4   Qualifications of Directors   16  
13.5   Remuneration of Directors   17  
13.6   Reimbursement of Expenses of Directors   17  
13.7   Special Remuneration for Directors   17  
13.8   Gratuity, Pension or Allowance on Retirement of Director   17  
 
14.   ELECTION AND REMOVAL OF DIRECTORS   17  
14.1   Election at Annual General Meeting   17  
14.2   Consent to be a Director   17  
14.3   Failure to Elect or Appoint Directors   18  
14.4   Places of Retiring Directors Not Filled   18  
14.5   Directors May Fill Casual Vacancies   18  
14.6   Remaining Directors Power to Act   18  
14.7   Shareholders May Fill Vacancies   18  
14.8   Additional Directors   18  
14.9   Ceasing to be a Director   19  
14.10   Removal of Director by Shareholders   19  
14.11   Removal of Director by Directors   19  
 
15.   ALTERNATE DIRECTORS   19  
15.1   Appointment of Alternate Director   19  
15.2   Notice of Meetings   19  
15.3   Alternate for More Than One Director Attending Meetings   20  
15.4   Consent Resolutions   20  
15.5   Alternate Director Not an Agent   20  
15.6   Revocation of Appointment of Alternate Director   20  
15.7   Ceasing to be an Alternate Director   20  
15.8   Remuneration and Expenses of Alternate Director   20  
 
16.   POWERS AND DUTIES OF DIRECTORS   21  
16.1   Powers of Management   21  
16.2   Appointment of Attorney of Company   21  
 
17.   DISCLOSURE OF INTEREST OF DIRECTORS   21  
17.1   Obligation to Account for Profits   21  
17.2   Restrictions on Voting by Reason of Interest   21  
17.3   Interested Director Counted in Quorum   21  
17.4   Disclosure of Conflict of Interest or Property   21  
17.5   Director Holding Other Office in the Company   22  
17.6   No Disqualification   22  
17.7   Professional Services by Director or Officer   22  
17.8   Director or Officer in Other Corporations   22  

 


- iv -
 
18.   PROCEEDINGS OF DIRECTORS   22  
18.1   Meetings of Directors   22  
18.2   Voting at Meetings   22  
18.3   Chair of Meetings   22  
18.4   Meetings by Telephone or Other Communications Medium   23  
18.5   Calling of Meetings   23  
18.6   Notice of Meetings   23  
18.7   When Notice Not Required   23  
18.8   Meeting Valid Despite Failure to Give Notice   23  
18.9   Waiver of Notice of Meetings   23  
18.10   Quorum   24  
18.11   Validity of Acts Where Appointment Defective   24  
18.12   Consent Resolutions in Writing   24  
 
19.   EXECUTIVE AND OTHER COMMITTEES   24  
19.1   Appointment and Powers of Executive Committee   24  
19.2   Appointment and Powers of Other Committees   25  
19.3   Obligations of Committees   25  
19.4   Powers of Board   25  
19.5   Committee Meetings   25  
 
20.   OFFICERS   26  
20.1   Directors May Appoint Officers   26  
20.2   Functions, Duties and Powers of Officers   26  
20.3   Qualifications   26  
20.4   Remuneration and Terms of Appointment   26  
 
21.   INDEMNIFICATION   26  
21.1   Definitions   26  
21.2   Mandatory Indemnification of Directors and Former Directors   27  
21.3   Indemnification of Other Persons   27  
21.4   Non-Compliance with Business Corporations Act   27  
21.5   Company May Purchase Insurance   27  
 
22.   DIVIDENDS   27  
22.1   Payment of Dividends Subject to Special Rights   27  
22.2   Declaration of Dividends   28  
22.3   No Notice Required   28  
22.4   Record Date   28  
22.5   Manner of Paying Dividend   28  
22.6   Settlement of Difficulties   28  
22.7   When Dividend Payable   28  
22.8   Dividends to be Paid in Accordance with Number of Shares   28  
22.9   Receipt by Joint Shareholders   28  
22.10   Dividend Bears No Interest   28  
22.11   Fractional Dividends   29  
22.12   Payment of Dividends   29  
22.13   Capitalization of Surplus   29  
 
23.   ACCOUNTING RECORDS   29  
23.1   Recording of Financial Affairs   29  
23.2   Inspection of Accounting Records  

29  

 


- v -
 
24.   NOTICES   29  
24.1   Method of Giving Notice   29  
24.2   Deemed Receipt of Mailing   30  
24.3   Certificate of Sending   30  
24.4   Notice to Joint Shareholders   30  
24.5   Notice to Trustees   30  
 
25.   SEAL   31  
25.1   Who May Attest Seal   31  
25.2   Sealing Copies   31  
25.3   Mechanical Reproduction of Seal   31  
 
26.   PROHIBITIONS   31  
26.1   Definitions   31  
26.2   Application   32  
26.3   Consent Required for Transfer of Shares or Designated Securities   32  
 
27.   CHANGE OF REGISTERED AND RECORDS OFFICES   32  

 

 

 

 

 

 


1.       INTERPRETATION  
   
1.1       Definitions  

 

In these Articles, unless the context otherwise requires:
(1)       "board of directors", "directors" and "board" mean the directors or sole director of the Company for the time being;
(2)       " Business Corporations 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;
(3)       "legal personal representative" means the personal or other legal representative of the shareholder;
(4)       "registered address" of a shareholder means the shareholder's address as recorded in the central securities register;
(5)       "seal" means the seal of the Company, if any.

1.2 Business Corporations Act and Interpretation Act Definitions Applicable

The definitions in the Business Corporations Act and the definitions and rules of construction in the Interpretation Act , with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were an enactment. If there is a conflict between a definition in the Business Corporations Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition in the Business Corporations Act will prevail in relation to the use of the term in these Articles. If there is a conflict between these Articles and the Business Corporations Act , the Business Corporations Act will prevail.

 
2.       SHARES AND SHARE CERTIFICATES
   
2.1       Authorized Share Structure

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.

2.2 Form of Share Certificate

Each share certificate issued by the Company must comply with, and be signed as required by, the Business Corporations Act .

2.3 Shareholder Entitled to Certificate or Acknowledgment

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.

2.4 Delivery by Mail

Any share certificate or non-transferable written acknowledgment of a shareholder's right to obtain a share certificate 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 or acknowledgement is lost in the mail or stolen.

 

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2.5 Replacement of Worn Out or Defaced Certificate or Acknowledgement

If the directors are satisfied that a share certificate or a non-transferable written acknowledgment of the
shareholder's right to obtain a share certificate is worn out or defaced, they must, on production to them of
the share certificate or acknowledgment, as the case may be, and on such other terms, if any, as they think
fit:

 
(1)       order the share certificate or acknowledgment, as the case may be, to be cancelled; and
(2)       issue a replacement share certificate or acknowledgment, as the case may be.

 

2.6 Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment

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, as the case may be, if
the directors receive:

 
(1)       proof satisfactory to them that the share certificate or acknowledgment is lost, stolen or destroyed; and
(2)       any indemnity the directors consider adequate.

 

2.7 Splitting Share Certificates

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.

2.8 Certificate Fee

There must be paid to the Company, in relation to the issue of any share certificate under Articles 2.5, 2.6 or
2.7, the amount, if any and which must not exceed the amount prescribed under the Business Corporations
Act , determined by the directors.

2.9 Recognition of Trusts

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 by law or statute or these Articles provided 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.

 
3.       ISSUE OF SHARES
   
3.1       Directors Authorized

Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the Company may issue, allot, 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 issue prices (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.

 

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3.2 Commissions and Discounts

The Company may at any time pay a reasonable commission or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person or procuring or agreeing to procure purchasers for shares of the Company.

3.3 Brokerage

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.

3.4 Conditions of Issue

Except as provided for by the Business Corporations Act , no share may be issued until it is fully paid. A share is fully paid when:
(1)       consideration is provided to the Company for the issue of the share by one or more of the
  following:      
  (a)       past services performed for the Company;
  (b)       property;
  (c)       money; and
   
(2)       the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1.

 

3.5 Share Purchase Warrants and Rights

Subject to the Business Corporations 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.

4.       SHARE REGISTERS
   
4.1       Central Securities Register

As required by and subject to the Business Corporations Act , the Company must maintain in British Columbia a central securities register. The directors may, subject to the Business Corporations Act , appoint an agent to maintain the central securities register. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its 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.

 

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4.2 Closing Register

The Company must not at any time close its central securities register.

 

5.       SHARE TRANSFERS
   
5.1       Registering Transfers
    
A transfer of a share of the Company must not be registered unless:
(1)       a duly signed instrument of transfer in respect of the share has been received by the Company;
(2)       if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate has been surrendered to the Company; and
(3)       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 has been surrendered to the Company.

 

5.2       Form of Instrument of Transfer

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 or in any other form that may be approved by the directors from time to time.

5.3 Transferor Remains Shareholder

Except to the extent that the Business Corporations Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company in respect of the transfer.

5.4 Signing of Instrument of Transfer

If a shareholder, or his or her 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:

(1)       in the name of the person named as transferee in that instrument of transfer; or
(2)       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.

5.5 Enquiry as to Title Not Required

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, of any interest in the shares, of any share certificate representing such shares or of any written acknowledgment of a right to obtain a share certificate for such shares.

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5.6 Transfer Fee

There must be paid to the Company, in relation to the registration of any transfer, the amount, if any,
determined by the directors.
6.       TRANSMISSION OF SHARES
     
6.1       Legal Personal Representative Recognized on Death

In case of the death of a shareholder, the legal personal representative, or if the shareholder was a joint holder, 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, the directors may require proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.

6.2 Rights of Legal Personal Representative

The legal personal representative 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 Business Corporations Act and the directors have been deposited with the Company.

 

7.       PURCHASE OF SHARES
   
7.1       Company Authorized to Purchase Shares

Subject to Article 7.2, the special rights and restrictions attached to the shares of any class or series and the Business Corporations Act , the Company may, if authorized by the directors, purchase or otherwise acquire any of its shares at the price and upon the terms specified in such resolution.

7.2 Purchase When Insolvent

The Company must not make a payment or provide any other consideration to purchase or otherwise acquire any of its shares if there are reasonable grounds for believing that:
(1)       the Company is insolvent; or
(2)       making the payment or providing the consideration would render the Company insolvent.

7.3 Sale and Voting of Purchased Shares

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:
(1)       is not entitled to vote the share at a meeting of its shareholders;
(2)       must not pay a dividend in respect of the share; and
(3)       must not make any other distribution in respect of the share.

 

 

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8. B ORROWING P OWERS

The Company, if authorized by the directors, may:
(1)       borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;
(2)       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 they consider appropriate;
(3)       guarantee the repayment of money by any other person or the performance of any obligation of any other person; and
(4)       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.

 

9.       ALTERATIONS
   
9.1       Alteration of Authorized Share Structure

 

Subject to Article 9.3 and the Business Corporations Act , the Company may by resolution of the directors:
   
(1)       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;
      
(2)       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;
      
(3)       if the Company is authorized to issue shares of a class of shares with par value:
  (a)       decrease the par value of those shares; or
  (b)       if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;
(4)       subdivide all or any of its unissued or fully paid issued shares by way of a stock dividend;
(5)       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;
     
(6)       alter the identifying name of any of its shares; or
   
(7)       otherwise alter its shares or authorized share structure when required or permitted to do so by the Business Corporations Act .
       

9.2 Consolidations and "Call-in" Subdivisions

Subject to Article 9.3 and the Business Corporations Act , the Company may by ordinary resolution:
    
(1)       consolidate all or any of its unissued, or fully paid issued, shares.
(2)       subdivide all or any of its unissued or fully paid issued shares, other than by way of a stock dividend.

 

 

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9.3 Special Rights and Restrictions

Subject to the Business Corporations Act , the Company may by special resolution:
   
(1)       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
(2)       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.

 

9.4 Change of Name

The Company may by resolution of the directors authorize an alteration of its Notice of Articles in order to change its name or adopt or change any translation of that name.

9.5 Other Alterations

If the Business Corporations 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.

 
10.       MEETINGS OF SHAREHOLDERS
   
10.1       Annual General Meetings

Unless an annual general meeting is deferred or waived in accordance with the Business Corporations 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.

10.2 Resolution Instead of Annual General Meeting

If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution under the Business Corporations Act 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 Article 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.

10.3 Calling of Meetings of Shareholders

The directors may, whenever they think fit, call a meeting of shareholders.

10.4 Notice for Meetings of Shareholders

The Company must send notice of the date, time and location of any meeting of shareholders, 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:

(1)       if and for so long as the Company is a public company, 21 days;
(2)       otherwise, 10 days.

 

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10.5 Record Date for Notice

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 Business Corporations Act , by more than four months. The record date must not precede the date on which the meeting is held by fewer than:

(1)       if and for so long as the Company is a public company, 21 days;
(2)       otherwise, 10 days.

 

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.

10.6 Record Date for Voting

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 Business Corporations 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.

10.7 Failure to Give Notice and Waiver of Notice

The accidental omission to send notice of any meeting 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 or reduce the period of notice of such meeting.

10.8 Notice of Special Business at Meetings of Shareholders

If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must:
   
(1)       state the general nature of the special business; and
(2)       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:
        (a)   at the Company's records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and
        (b)   during statutory business hours on any one or more specified days before the day set for the holding of the meeting.

 

 

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11.       PROCEEDINGS AT MEETINGS OF SHAREHOLDERS
   
11.1       Special Business

At a meeting of shareholders, the following business is special business:
   
(1)       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;
(2)       at an annual general meeting, all business is special business except for the following:
  (a)       business relating to the conduct of or voting at the meeting;
  (b)       consideration of any financial statements of the Company presented to the meeting;
  (c)       consideration of any reports of the directors or auditor;
  (d)       the setting or changing of the number of directors;
  (e)       the election or appointment of directors;
  (f)       the appointment of an auditor;
  (g)       the setting of the remuneration of an auditor;
  (h)       business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution;
  (i)       any other business which, under these Articles or the Business Corporations Act , may be transacted at a meeting of shareholders without prior 
notice of the business being given to the shareholders.

 

11.2 Special Majority

The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution.

11.3 Quorum

Subject to the special rights and restrictions attached to the shares of any class or series of shares and save as herein otherwise provided, the quorum for the transaction of business at a meeting of shareholders is two shareholders, or one or more proxyholder representing two members, or one member and a proxyholder representing another member.

11.4 One Shareholder May Constitute Quorum

If there is only one shareholder entitled to vote at a meeting of shareholders:
(1)       the quorum is one person who is, or who represents by proxy, that shareholder, and
(2)       that shareholder, present in person or by proxy, may constitute the meeting.

 

 

 

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11.5 Other Persons May Attend

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 and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, 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.

11.6 Requirement of Quorum

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.

11.7 Lack of Quorum

If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:

(1)       in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and
(2)       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.

11.8 Lack of Quorum at Succeeding Meeting

If, at the meeting to which the meeting referred to in Article 11.7(2) 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, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.

11.9 Chair

The following individual is entitled to preside as chair at a meeting of shareholders:
   
(1)       the chair of the board, if any; or
(2)       if the chair of the board is absent or unwilling to act as chair of the meeting, the president, if any.

11.10 Selection of Alternate Chair

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 must choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose or if no director is present, 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.

 

 

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11.11 Adjournments

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.

11.12 Notice of Adjourned Meeting

It is not necessary to give any notice of an adjourned meeting 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.

11.13 Decisions by Show of Hands or Poll

Subject to the Business Corporations 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 at least one shareholder entitled to vote who is present in person or by proxy.

11.14 Declaration of Result

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 Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.

11.15 Motion Need Not be Seconded

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.

11.16 Casting Vote

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.

11.17       Manner of Taking Poll

Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:
(1)       the poll must be taken:
  (a)       at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and
  (b)       in the manner, at the time and at the place that the chair of the meeting directs;
   
(2)       the result of the poll is deemed to be the decision of the meeting at which the poll is demanded;   and
    
(3)       the demand for the poll may be withdrawn by the person who demanded it.

 

 

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11.18       Demand for Poll on Adjournment
A       poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.



11.19 Chair Must Resolve Dispute

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 his or her determination made in good faith is final and conclusive.

11.20 Casting of Votes

On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.

11.21 Demand for Poll

No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.

11.22 Demand for Poll Not to Prevent Continuance of Meeting

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.

11.23 Retention of Ballots and Proxies

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 proxyholder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.
12.       VOTES OF SHAREHOLDERS
   
12.1       Number of Votes by Shareholder or by Shares

Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:
(1)       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
(2)       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.
   
   
12.2       Votes of Persons in Representative Capacity

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.

 

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12.3     Votes by Joint Holders

If there are joint shareholders registered in respect of any share:
   
(1)       any one of the joint shareholders may vote at any meeting, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or
(2)       if more than one of the joint shareholders is present at any meeting, 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.

12.4     Legal Personal Representatives as Joint Shareholders

Two or more legal personal representatives of a shareholder in whose sole name any share is registered are,
for the purposes of Article 12.3, deemed to be joint shareholders.

12.5     Representative of a Corporate Shareholder

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:

(1)       for that purpose, the instrument appointing a representative 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 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

           (b)       be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting;

(2)       if a representative is appointed under this Article 12.5:

            (a)       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

            (b)       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.

12.6     Proxy Provisions Do Not Apply to All Companies

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, Articles 12.7 to 12.15 apply only insofar as they are not inconsistent with any securities legislation in any province or territory of Canada or in the federal jurisdiction of the United States or in any states of the United States that is applicable to the Company and insofar as they are not inconsistent with the regulations and rules made and promulgated under that legislation and all administrative policy statements, blanket orders and rulings, notices and other administrative directions issued by securities commissions or similar authorities appointed under that legislation.

 

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12.7     Appointment of Proxy Holders

Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders of the Company may, by proxy, appoint one or more (but not more than five) proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy.

12.8     Alternate Proxy Holders

A   shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.

12.9     When Proxy Holder Need Not Be Shareholder

A   person must not be appointed as a proxy holder unless the person is a shareholder, although a person who is not a shareholder may be appointed as a proxy holder if:
(1)       the person appointing the proxy holder is a corporation or a representative of a corporation appointed under Article 12.5;
  (2)       the Company has at the time of the meeting for which the proxy holder is to be appointed only one shareholder entitled to vote at the meeting; or
    (3)       the shareholders present in person or by proxy at and entitled to vote at the meeting for which the proxy holder is to be appointed, by a resolution on which the proxy holder is not entitled to vote but in respect of which the proxy holder is to be counted in the quorum, permit the proxy holder to attend and vote at the meeting.

12.10      Deposit of Proxy
A proxy for a meeting of shareholders must:
(1)       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
  (2)       unless the notice provides otherwise, be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting.

A proxy may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

 
12.11       Validity of Proxy Vote
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:
(1)       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 at which the proxy is to be used; or
  (2)       by the chair of the meeting, before the vote is taken.

 

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12.10 Deposit of Proxy

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

 

 

MINCO GOLD CORPORATION
(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 if given in respect of all shares registered in the name of the shareholder):

_______________________________
Signed [month, day, year]

_______________________________
[Signature of shareholder]

_______________________________
[Name of shareholder printed]

12.13 Revocation of Proxy

Subject to Article 12.14, every proxy may be revoked by an instrument in writing that is:
(1)       received 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 at which the proxy is to be used; or
(2)       provided, at the meeting, to the chair of the meeting.

12.14 Revocation of Proxy Must Be Signed

An instrument referred to in Article 12.13 must be signed as follows:
(1)       if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy;
(2)       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 Article 12.5.

 

 

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12.15 Production of Evidence of Authority to Vote

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.

 
13.       DIRECTORS
   
13.1       First Directors; Number of Directors

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 Business Corporations Act . The number of directors, excluding additional directors appointed under Article 14.8, is set at:
(1)       subject to paragraphs (2) and (3), the number of directors that is equal to the number of the Company's first directors;
    
(2)       if the Company is a public company, the greater of three and the most recently set of:
  (a)       the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and
  (b)       the number of directors set under Article 14.4;
   
(3)       if the Company is not a public company, the most recently set of:
  (a)       the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and
  (b)       the number of directors set under Article 14.4.

13.2     Change in Number of Directors

If the number of directors is set under Articles 13.1(2)(a) or 13.1(3)(a):
(1)       the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number;
(2)       if the shareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that number, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

13.3     Directors' Acts Valid Despite Vacancy

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.

13.4     Qualifications of Directors

A   director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the Business Corporations Act to become, act or continue to act as a director.

 

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13.5 Remuneration of Directors

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. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such, who is also a director.

13.6 Reimbursement of Expenses of 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.

13.7 Special Remuneration for Directors

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, or if any director is otherwise specially occupied in or about the Company's business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.

13.8 Gratuity, Pension or Allowance on Retirement of Director

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.

 
14.       ELECTION AND REMOVAL OF DIRECTORS
   
14.1       Election at Annual General Meeting

At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:
(1)       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
(2)       unless otherwise determined by resolution of the board of directors, all the directors cease to hold office immediately before the election or appointment of directors under paragraph (1), but are eligible for re-election or re-appointment.

14.2 Consent to be a Director

No election, appointment or designation of an individual as a director is valid unless:
(1)       that individual consents to be a director in the manner provided for in the Business Corporations Act ;
(2)       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
(3)       with respect to first directors, the designation is otherwise valid under the Business Corporations Act .

 

 

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14.3 Failure to Elect or Appoint Directors

If:
(1)       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 Article 10.2, on or before the date by which the annual general meeting is required to be held under the Business Corporations Act ; or
(2)       the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors; then each director then in office continues to hold office until the earlier of:
(3)       the date on which his or her successor is elected or appointed; and
(4)       the date on which he or she otherwise ceases to hold office under the Business Corporations Act or these Articles.

14.4 Places of Retiring Directors Not Filled

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 until further 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.

14.5 Directors May Fill Casual Vacancies

Any casual vacancy occurring in the board of directors may be filled by the directors.

14.6 Remaining Directors Power to Act

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 summoning a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Business Corporations Act , for any other purpose.

14.7 Shareholders May Fill Vacancies

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.

14.8     Additional Directors

Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 14.8 must not at any time exceed:
(1)       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
(2)       in any other case, one-third of the number of the current directors who were elected or appointed as directors other than under this Article 14.8.

 

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Any director so appointed ceases to hold office immediately before the next election or appointment of directors under Article 14.1(1), but is eligible for re-election or re-appointment.
14.9       Ceasing to be a Director
   
A   director ceases to be a director when:
  (1)       the term of office of the director expires;
  (2)       the director dies;
  (3)       the director resigns as a director by notice in writing provided to the Company or a lawyer for the Company; or
  (4)       the director is removed from office pursuant to Articles 14.10 or 14.11.

14.10     Removal of Director by Shareholders

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.

14.11 Removal of Director by Directors

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.

 
15.       ALTERNATE DIRECTORS
     
15.1       Appointment of Alternate Director

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.

15.2 Notice of Meetings

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.

 

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15.3       Alternate for More Than One Director Attending Meetings
 
A   person may be appointed as an alternate director by more than one director, and an alternate director:

(1)       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;

(2)       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;

(3)       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 director, once more in that capacity;

(4)       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.

 

15.4   Consent Resolutions

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.

15.5   Alternate Director Not an Agent

Every alternate director is deemed not to be the agent of is or her appointor.

15.6   Revocation of Appointment of Alternate Director

An appointor may at any time, by notice in writing received by the Company, revoke the appointment of an
alternate director appointed by him or her.

15.7 Ceasing to be an Alternate Director

The appointment of an alternate director ceases when:
(1)       his or her appointor ceases to be a director and is not promptly re-elected or re-appointed;
(2)       the alternate director dies;
(3)       the alternate director resigns as an alternate director by notice in writing provided to the Company or a lawyer for the Company;
(4)       the alternate director ceases to be qualified to act as a director; or
(5)       his or her appointor revokes the appointment of the alternate director.

 

15.8    Remuneration and Expenses of Alternate Director

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.

 

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16.       POWERS AND DUTIES OF DIRECTORS
   
16.1       Powers of Management

The directors must, subject to the Business Corporations 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 Business Corporations Act or by these Articles, required to be exercised by the shareholders of the Company.

16.2 Appointment of Attorney of Company

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.
17.       DISCLOSURE OF INTEREST OF DIRECTORS
   
17.1       Obligation to Account for Profits
A       director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations 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 Business Corporations Act .

17.2       Restrictions on Voting by Reason of Interest
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.

 

17.3       Interested Director Counted in Quorum
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.

17.4       Disclosure of Conflict of Interest or Property

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 Business Corporations Act .

 

 

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17.5       Director Holding Other Office in the Company

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.

17.6   No Disqualification

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.

17.7    Professional Services by Director or Officer

Subject to the Business Corporations 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.
17.8       Director or Officer in Other Corporations
     

A director or officer may be or become a director, officer or employee of, or otherwise interested in, anyperson in which the Company may be interested as a shareholder or otherwise, and, subject to the Business Corporations 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.
18.       PROCEEDINGS OF DIRECTORS
   
18.1       Meetings of Directors

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.

18.2 Voting at Meetings

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 does not have a second or casting vote.

18.3 Chair of Meetings

The following individual is entitled to preside as chair at a meeting of directors:
(1)       the chair of the board, if any;
(2)       in the absence of the chair of the board, the president, if any, if the president is a director; or
(3)       any other director chosen by the directors if:
  (a)       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;
  (b)       neither the chair of the board nor the president, if a director, is willing to chair the meeting; or
  (c)      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.

 

 

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18.4       Meetings by Telephone or Other Communications Medium
     

A director may participate in a meeting of the directors or of any committee of the directors in person or by telephone 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 may participate in a meeting of the directors or of any committee of the directors by a communications medium other than telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other and if all directors who wish to participate in the meeting agree to such participation. A director who participates in a meeting in a manner contemplated by this Article 18.4 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.
18.5       Calling of Meetings
     

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.

18.6   Notice of Meetings

Other than for meetings held at regular intervals as determined by the directors pursuant to Article 18.1, reasonable notice of each meeting of the directors, specifying the place, day and time of that meeting must be given to each of the directors and the alternate directors by any method set out in Article 24.1 or orally or by telephone.

18.7    When Notice Not Required

It is not necessary to give notice of a meeting of the directors to a director or an alternate director if:
(1)       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
(2)       the director or alternate director, as the case may be, has waived notice of the meeting.

18.8    Meeting Valid Despite Failure to Give Notice

The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director or alternate director, does not invalidate any proceedings at that meeting.

18.9    Waiver of Notice of Meetings

Any director or alternate 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, unless the director otherwise requires by notice in writing to the Company, to his or her alternate 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 or alternate director.

 

 

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18.10 Quorum

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 set at two 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.

18.11 Validity of Acts Where Appointment Defective

Subject to the Business Corporations 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.
18.12       Consent Resolutions in Writing
A       resolution of the directors or of any committee of the directors may be passed without a meeting:
  (1)       in all cases, if each of the directors entitled to vote on the resolution consents to it in writing; or
  (2)       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 are entitled to vote on the resolution consents to it in writing.

A consent in writing under this Article 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 Article 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 Business Corporations Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.
19.       EXECUTIVE AND OTHER COMMITTEES
     
19.1       Appointment and Powers of Executive Committee

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:
(1)       the power to fill vacancies in the board of directors;
(2)       the power to remove a director;
(3)       the power to change the membership of, or fill vacancies in, any committee of the directors; and
(4)       such other powers, if any, as may be set out in the resolution or any subsequent directors' resolution.

 

 

25

19.2   Appointment and Powers of Other Committees

The directors may, by resolution:
(1)       appoint one or more committees (other than the executive committee) consisting of the director   or directors that they consider appropriate;
      
(2)       delegate to a committee appointed under paragraph (1) any 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)       the power to appoint or remove officers appointed by the directors; and
   
(3)       make any delegation referred to in paragraph (2) subject to the conditions set out in the resolution   or any subsequent directors' resolution.
     

19.3    Obligations of Committees

Any committee appointed under Articles 19.1 or 19.2, in the exercise of the powers delegated to it, must:
(1)       conform to any rules that may from time to time be imposed on it by the directors; and
(2)       report every act or thing done in exercise of those powers at such times as the directors may require.

19.4    Powers of Board

The directors may, at any time, with respect to a committee appointed under Articles 19.1 or 19.2:
(1)       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;
(2)       terminate the appointment of, or change the membership of, the committee; and
(3)       fill vacancies in the committee.

 

19.5 C   ommittee Meetings

Subject to Article 19.3(1) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Articles 19.1 or 19.2:
(1)       the committee may meet and adjourn as it thinks proper;
(2)       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;
(3)       a majority of the members of the committee constitutes a quorum of the committee; and
(4)       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.

 

 

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20.       OFFICERS
   
20.1      

 

Directors May Appoint Officers

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.
20.2 Functions, Duties and Powers of Officers

The directors may, for each officer:
(1)       determine the functions and duties of the officer;
(2)       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
(3)       revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.

20.3 Qualifications

No officer may be appointed unless that officer is qualified in accordance with the Business Corporations 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.

20.4 Remuneration and Terms of Appointment

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.

21.   INDEMNIFICATION  
   
21.1   Definitions  

 

In this Article 21:
(1)       "eligible penalty" means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;
       
(2)       "eligible proceeding" means a legal proceeding or investigative action, whether current, threatened,   pending or completed, in which a director, former director or alternate director of the Company (an "eligible party") or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director or alternate   director of the Company:
  (a)       is or may be joined as a party; or
  (b)       is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding;
(3)       "expenses" has the meaning set out in the Business Corporations Act .

 

 

27

21.2 Mandatory Indemnification of Directors and Former Directors

Subject to the Business Corporations Act , the Company must indemnify a director, former director or alternate director of the Company and his or her heirs and legal personal representatives 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 director and alternate director is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 21.2.

21.3 Indemnification of Other Persons

Subject to any restrictions in the Business Corporations Act , the Company may indemnify any person.

21.4 Non-Compliance with Business Corporations Act

The failure of a director, alternate director or officer of the Company to comply with the Business Corporations Act or these Articles does not invalidate any indemnity to which he or she is entitled under this Part.

21.5 Company May Purchase Insurance

The Company may purchase and maintain insurance for the benefit of any person (or his or her heirs or legal personal representatives) who:

(1)       is or was a director, alternate director, officer, employee or agent of the Company;
(2)       is or was a director, alternate director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;
(3)       at the request of the Company, is or was a director, alternate director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity;
(4)       at the request of the Company, 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; against any liability incurred by him or her as such director, alternate director, officer, employee or agent or
person who holds or held such equivalent position.

 

22.       DIVIDENDS
     
22.1       Payment of Dividends Subject to Special Rights

The provisions of this Article 22 are subject to the rights, if any, of shareholders holding shares with special rights as to dividends.

 

 

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22.2 Declaration of Dividends

Subject to the Business Corporations Act , the directors may from time to time declare and authorize payment of such dividends as they may deem advisable. The Board of Directors shall have the right and authority to declare dividends on any class of shares, to the exclusion of and without declaring dividends on any other class of shares, in their sole discretion as they see fit.

22.3 No Notice Required

The directors need not give notice to any shareholder of any declaration under Article 22.2.

22.4 Record Date

The directors may 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. If no record date is set, the record date is 5 p.m. on the date on which the directors pass the resolution declaring the dividend.

22.5       Manner of Paying Dividend
     

A resolution declaring a dividend may direct payment of the dividend wholly or partly by the distribution of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company, or in any
one or more of those ways.

22.6      Settlement of Difficulties

If any difficulty arises in regard to a distribution under Article 22.5, the directors may settle the difficulty as they deem advisable, and, in particular, may:
(1)       set the value for distribution of specific assets;
(2)       determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and
(3)       vest any such specific assets in trustees for the persons entitled to the dividend.

22.7 When Dividend Payable

Any dividend may be made payable on such date as is fixed by the directors.

22.8 Dividends to be Paid in Accordance with Number of Shares

All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.

22.9 Receipt by Joint Shareholders

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.

22.10 Dividend Bears No Interest

No dividend bears interest against the Company.

 

 

 

29

22.11 Fractional Dividends

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.

22.12 Payment of Dividends

Any dividend or other distribution payable in cash 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 address of the shareholder, or in the case of joint shareholders, to the 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.

22.13 Capitalization of Surplus

Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any 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 surplus or any part of the surplus.
23.       ACCOUNTING RECORDS
   
23.1       Recording of Financial Affairs

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 Business Corporations Act .

23.2 Inspection of Accounting Records

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.
24.       NOTICES
   
24.1       Method of Giving Notice

Unless the Business Corporations Act or these Articles provides otherwise, a notice, statement, report or other record required or permitted by the Business Corporations Act or these Articles to be sent by or to a person may be sent by any one of the following methods:

 

(1)   mail addressed to the person at the applicable address for that person as follows:
(a)       for a record mailed to a shareholder, the shareholder’s registered address;
(b)       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;
(c)       in any other case, the mailing address of the intended recipient;

 

30

(2) delivery at the applicable address for that person as follows, addressed to the person:
(a)       for a record delivered to a shareholder, the shareholder's registered address;
(b)       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;
(c)       in any other case, the delivery address of the intended recipient;
(3)   sending the record by fax to the fax number provided by the intended recipient for th esending of that record or records of that class;
(4)   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;
(5)   physical delivery to the intended recipient.

 

24.2       Deemed Receipt of Mailing
     

A record that is mailed to a person by ordinary mail to the applicable address for that person referred to in Article 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.
24.3       Certificate of Sending
    

A   certificate signed by the secretary, if any, or other officer of the Company or of any other corporation acting in that behalf for the Company stating that a notice, statement, report or other record was addressed as required by Article 24.1, prepaid and mailed or otherwise sent as permitted by Article 24.1 is conclusive evidence of that fact.
24.4       Notice to Joint Shareholders
     

A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing the notice to the joint shareholder first named in the central securities register in respect of the share.
24.5       Notice to Trustees
     

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:
     
 
 

 

(1) mailing the record, addressed to them:
(a)       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
(b)       at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or
(2)   if an address referred to in paragraph (1)(b) 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.

 

 

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25.       SEAL
   
25.1       Who May Attest Seal

Except as provided in Articles 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:
(1)       any two directors;
(2)       any officer, together with any director;
(3)       if the Company only has one director, that director; or
(4)       any one or more directors or officers or persons as may be determined by the directors.

25.2 Sealing Copies

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 Article 25.1, the impression of the seal may be attested by the signature of any director or officer.

25.3 Mechanical Reproduction of Seal

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 Business Corporations 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 the chair of the board or any senior officer together with the secretary, treasurer, secretary-treasurer, an assistant secretary, an assistant treasurer or an assistant secretary-treasurer 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.

26.   PROHIBITIONS  
     
26.1   Definitions  

 

In this Article 26:
(1)      
 
 

 

(1)       "designated security" means:
(a)       a voting security of the Company;
(b)     a security of the Company that is not a debt security and that carries a residual right to to participate in the earnings of the Company or, on the liquidation or winding up
of the Company, in its assets; or
(2) "security" has the meaning assigned in the Securities Act (British Columbia);
(3) "voting security" means a security of the Company that:
(a)       is not a debt security, and
(b)       carries a voting right either under all circumstances or under some circumstances that have occurred and are continuing.

 

 

32

 

26.2 Application

Article 26.3 does not apply to the Company if and for so long as it 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.

26.3 Consent Required for Transfer of Shares or Designated Securities

No share or designated security may be sold, transferred or otherwise disposed of without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such sale, transfer or other disposition.

27. CHANGE OF REGISTERED AND RECORDS OFFICES

The Company may appoint or change its registered and records offices, or either of them, and the agent responsible therefor, at any time by resolution of the directors. After the appointment of the first registered or records office agent, such agent may terminate its appointment by written notice to any director or officer of the Company sent to the last known address of such director or officer. The Company will then designate a new registered or records office or offices within ten (10) days of receipt or deemed receipt of such notice, failing which the agent shall be entitled on behalf of the Company (but not obliged) to execute and file a Notice to Change Offices with the Registrar of Companies, changing the registered and records office or offices to the last known address of the President of the Company.

 

 

 

 

 

 

 

 

 

 

[EX12002.GIF]



[EX12004.GIF]



[EX12006.GIF]



THIS ASSIGNMENT AGREEMENT is dated effective as of the 10th day of March, 2010.
 
BETWEEN:

 
MINCO GOLD CORPORATION , a company duly incorporated pursuant to the laws of British Columbia and having an office at Suite 2772 – 1055 West Georgia Street, Vancouver, British Columbia

(hereinafter called the " Minco Gold ”)

 OF THE FIRST PART
 
AND:

 
MINCO MINING (CHINA) CORPORATION , a company duly incorporated pursuant to the laws of the Peoples Republic of China and having an office at Suite 2772 – 1055 West Georgia Street, Vancouver, British Columbia

(hereinafter called the " Minco China ")

 OF THE SECOND PART

 
(Minco Gold and Minco China are hereinafter collectively called the "Assignors")

AND:

 
MINCO SILVER CORPORATION , a company duly incorporated pursuant to the laws of British Columbia and having an office at Suite 2772 – 1055 West Georgia Street, Vancouver, British Columbia

 
(hereinafter called the " Assignee ")

 OF THE THIRD PART

WHEREAS :

(a)
Minco China is a wholly owned Chinese subsidiary of Minco Gold;

(b)
Minco China is the registered holder of a 90% equity interest (the “ Foshan Equity Interest ”);   in Foshan Minco Fuwan Mining Co. Ltd. (“ Foshan Minco ”) , a Chinese corporation;

(c)
Foshan Minco is the holder of all exploration and mining permits relating to the Fuwan silver property located in Guangdong Province in southern China (the “ Fuwan Property ”);

(d)
Beijing Minco Yinyuan Mining Technology Co. Ltd.   is a wholly owned Chinese subsidiary of Minco Silver (“ Minco Yinyuan ”);
 
 
1
 
 
(e)
The Assignors have agreed to assign to the Assignee all their right, title and interest in and to the Foshan Equity Interest;
 
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the Assignee paying to the Assignors the sum of One Dollar ($1.00) and other good and valuable consideration as hereinafter described, the parties hereto covenant and agree each with the other as follows:

1.
Effective as of and from the date hereof, the Assignors hereby grant, assign, transfer and set over onto the Assignee, its successors and assigns, all their respective rights, benefits, titles and interests in and to the Foshan Equity Interest.
 
2.
The Assignors hereby jointly and severally covenant with the Assignee as follows:

 
(a)
Minco China is the lawful owner of all right, title and interest in and to the Foshan Equity Interest and has the right to assign its title and interest in the Foshan Equity Interest to the Assignee;

 
(b)
The Assignors have not done nor permitted any act, matter or thing whereby the Foshan Equity Interest has been assigned, in whole or in part, or encumbered and the Assignors have not done nor permitted any act, matter or thing whereby the Foshan Equity Interest has been assigned, in whole or in part, or encumbered;

 
(c)
there are no disputes of which the Assignors are aware between the Assignors and any third parties in respect to the Foshan Equity Interest; and

 
(d)
upon written request of the Assignee from time to time, the Assignors shall for no additional consideration, forthwith execute and deliver all such assignments and other deeds as may be required to effectively assign all right, title and interest in and to the Foshan Equity Interest to Minco Yinyuan or such other entity as Minco Silver may direct.
 
3.
The Assignors hereby covenant with the Assignee that the Assignors will, at the request of the Assignee, perform and execute every act, matter or thing, instrument, document, writing, agreement or covenant necessary, desirable or useful in connection with the full performance of this Agreement.  All costs associated with the foregoing shall be the responsibility of Minco Silver.

4.
The Assignee covenants and agrees to indemnify and hold the Assignors harmless from any further liabilities, expenses, costs or damages arising from the Foshan Equity Interest but for greater certainty not including any liabilities, expenses, costs or damages arising from or in connection with the Assignor’s ownership of the Foshan Equity Interest prior to the effective date of this Agreement

5.
This Agreement shall enure to the benefit of and be binding upon the successors and assigns of the parties hereto, and shall be governed by and construed in accordance with the laws of the Province of British Columbia, Canada.
 
 
2
 

6.
This Agreement may be signed by facsimile and in counterpart.  Signed counterpart copies, when read together, shall be irrevocably deemed to constitute a single binding Agreement signed by both parties.

IN WITNESS WHEREOF THIS AGREEMENT has been executed by the parties as of the day and year first above written.
 
MINCO GOLD CORPORATION
 
  /s/ Ken Z. Cai  
Per:     
  Authorized Signatory  
 
MINCO MINING (CHINA) CORPORATION
 
  /s/ Ken Z. Cai  
Per:       
  Authorized Signatory  
 
MINCO SILVER CORPORATION
 
  /s/ Ken Z. Cai
Per:    
  Authorized Signatory
 

 

 

 

 
3
 
 
COST SHARING AGREEMENT
THIS AGREEMENT made as of the 10 th day of March, 2010.
 
BETWEEN:
 
MINCO GOLD CORPORATION , a corporation incorporated under the laws of British Columbia and having an address at Suite 2772 - 1055 West Georgia Street Vancouver, British Columbia, V6E 3P3
 
("Minco Silver")
 
AND:
MINCO SILVER CORPORATION , a corporation incorporated under the laws of British Columbia and having an address at Suite 2772 - 1055 West Georgia Street Vancouver, British Columbia, V6E 3P3
 
("Minco Gold")
 
WHEREAS:
 
a)  
Minco Gold is a junior mineral exploration company and the parent company to Minco Mining (China) Corporation who holds a 51% interest in Guangzhou Mingzhong Mining Co. Ltd. ("Mingzhong"), a cooperative joint-venture established to explore and develop the Changkeng gold project (the "Changkeng Property") located in southern China approximately forty five (45) kilometers south west of Guangzhou, the capital city of Guandong Province.
 
b)  
Minco Gold has the right to earn up to a 51% interest in the Changkeng Property with a total capital contribution of RMB$51,000,000.
 
c)  
On August 20, 2004 Minco Gold assigned to Minco Silver a junior mineral resource company that controls 100% of the Fuwan Silver Project adjoining the Changkeng Property the right to earn up to a corresponding 51% interest in the Changkeng Property's silver mineralization (the "Changkeng Silver Mineralization").
 
d)  
In 2007 Mingzhong was granted a business license to explore and develop the Changkeng Property underlying the reconnaissance survey exploration permit #T01120080102000011 (the "Changkeng Permit").
 
e)  
In January 2008 Mingzhong purchased a 100% interest in the Changkeng Permit for the acquisition cost of RMB$48,363,300 of which Minco Gold is responsible for 51% orRMB$24,665,283.
 
f)  
Minco Gold and Minco Silver wishes to share in Minco Gold's costs associated with the acquisition of the Changkeng permit and the costs associated with the exploration and development of the Changkeng Property.
 
                                                                                                                    
 
 
1
 
 
NOW  THEREFORE  THIS  AGREEMENT  WITNESSES   that  in  consideration  of the agreements and payments provided herein, the parties agree as follows:
 
1.   COST SHARING
 
1.1  
Changkeng Permit Acquisition - Minco Silver shall be responsible pay to Minco Gold thirty percent (30%) of Minco Gold's obligation to pay up to a fifty one percent (51%) contribution to Mingzhong's acquisition cost of RMB$48,363,300 to purchase the Changkeng Permit or RMB$7,399,584.90. The parties acknowledge that, as of the date of this Agreement, Minco Silver has paid Minco Gold the sum of C$1,205,298 in full satisfaction of the foregoing obligation.
 
1.2  
Changkeng Silver Mineralization Costs - Minco Silver shall reimburse 100% of Minco Gold's exploration and development costs associated with the Changkeng Silver Mineralization which, for greater certainty, represents a portion of Minco Gold's obligation to make payment to Mingzhong of 51% of the total costs of exploration and development on the Changkeng Silver Mineralization. As at the date of this Agreement, the parties acknowledge that Minco Silver has paid the sum of C$207,710 to Minco Gold for work conducted in 2008 in relation to the Changkeng Silver Mineralization and which represents 51% of the total amount of C$407,275 expended by Mingzhong on the Changkeng Silver Mineralization.
 
2.   GENERAL
 
2.1  
Entire Agreement - This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, between the parties with respect to the subject matter hereof. There are no representations, warranties, covenants or conditions with respect to the subject matter hereof except as contained herein.
 
2.2  
 
2.3  
Successors - This Agreement shall enure to the benefit of and be binding upon each of the parties and their respective heirs and successors.
 
Assignment - this Agreement may not be assigned by either party.
 
2.4  
Governing Law - This Agreement shall be governed by and interpreted in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein and each of parties hereby irrevocably attorns to the exclusive jurisdiction of the courts of the Province of British Columbia.
 
                                                                                                                    

 
2
 
 
  2.5  
Further Assurances - Each party shall, from time to time, and at all times hereafter, at the request of the other of them, but without further consideration, do, or cause to be done, all such other acts and execute and deliver, or cause to be executed and delivered, all such further agreements, transfers, assurances, instruments or documents as shall be reasonably required in order to fully perform and carry out the terms and intent hereof including, without limitation, the Plan of Arrangement.
 

 

 

 

 

 

 

 
3
 

 

 

Project Agreement with 208 team[l]

Translator's Declaration

 

 
I, Ng Bee Ling. Certified Simplified Chinese to English Translator, hereby attest that the Chinese language document called "Project Agreement with 208 teani [l]" and that to the best of my knowledge and belief, these translation in English are true and correct,
 
Signed in Singapore on February 3, 2012

 


 

 

 

 

 

 

 

 

1
 

Cooperation Framework Agreement
 
Party A: 208 Team of China National Nuclear Corporation (CNNC)
 
Party B: Minco Mining (China) Corporation
 
Whereas:
 
1.  
The Inner Mongolia Urat Middle Banner Tugurige Gold Mine (business license registration number: 15282500000186, issuing entity: Inner Mongolia Urat Middle Banner Administration for Industry and Commerce, hereinafter referred to as the "Tugurige Gold Mine") is an enterprise wholly-owned by and subordinate to Party A, and Party A is entitled to full rights and interests in the Tugurige Gold Mine;
 
2.  
In accordance with the requirements of the superiors of Party A, Party A plans to restructure the Tugurige Gold Mine as a limited company;
 
3.  
An affiliated entity of Party A has acquired 20 exploration concessions and 1 mining concession in the Altay region of Xinjiang (hereinafter referred to as the "Xinjiang Project");
 
4.  
Party A also owns multiple exploration concessions and/or mining concessions primarily for non-uranium mining (including but not limited to nonferrous metals and precious metals) in other areas surrounding the Tugurige Gold Mine and other regions in Inner Mongolia (hereinafter referred to as "Other Projects");
 
5.  
Party B is very optimistic about the potential and prospects for the Tugurige Gold Mine project and Xinjiang Project.
 
Through in-depth communications and amicable negotiation, both parties hereby reach the
 
[signature]

 
2
 

following agreement on their long-term strategic cooperation:
 
I.   Consolidation of mining concessions
 
1.  
Multiple exploration concessions and mining concessions (hereinafter referred to as "Mining Concessions in the Mining Zone") are distributed within the Tugurige Gold Mine mining zone (for details, refer to the distribution map for the mining concessions of Tugurige Gold Mine), including the mining concession for "CNNC Inner Mongolia Urat Middle Banner Tugurige Gold Mine" owned by the Tugurige Gold Mine, the exploration concession for "Inner Mongolia Urat Middle Banner Jun Gaxun Region Gold Mine Detailed Exploration" owned by Party A, the exploration concession for "Inner Mongolia Urat Middle Banner Har Tolgoi Region Gold Mine Detailed Exploration" owned by Party A and the exploration concessions and mining concessions owned by other parties.
 
2.  
Party A is responsible for the consolidation of the Mining Concessions in the Mining Zone, so as to convert all existing exploration concessions and mining concessions to come under the name of the Tugurige Gold Mine (or the "Inner Mongolia Urat Middle Banner Tugurige Gold Mine Co., Ltd." after the restructuring, refer to the text below. Same hereunder) as soon as possible, register the vacant areas as exploration concessions for the Tugurige Gold Mine, and ensure that there are no encumbrances on the mining concessions consolidated into the Tugurige Gold Mine, nor are there any defects or disputes involved, and that they are in good condition. The cost for the consolidation is approximately Renminbi Twenty Million Yuan.
 
3.  
Party B shall cooperate with Party A in consolidating the Mining Concessions in the Mining Zone.
 
II. Restructuring of the Tugurige Gold Mine and injection of funds for stock increase
 
  1. 
 Concurrently with or after completing the consolidation of the Mining Concessions in the Mining Zone, Party A shall conduct shareholding system reform on the Tugurige Gold Mine (hereinafter referred to as "Restructuring") in order to convert it from a State-owned enterprise to a wholly-owned subsidiary of Party A, and the name shall be tentatively changed to "Inner Mongolia Urat Middle Banner Tugurige Gold Mine Co., Ltd.". Both parties have established a new joint-venture company in Baotou (tentatively named as "Inner Mongolia Baotou City Tugurige Mining Co., Ltd., hereinafter referred to as "Tugurige Company").
 
[signature]

 
3
 
2.
Both parties shall jointly appoint an appraisal institution to appraise the asset value of the Tugurige Gold Mine. Party A shall invest all assets of the Tugurige Gold Mine or 100% of its rights and interests in "Inner Mongolia Urat Middle Banner Tugurige Gold Mine Co.,  Ltd." into Tugurige Company, and shall own 49% shares of Tugurige Company.
Party A shall warrant that, after the Restructuring is complete, Tugurige Company shall own all assets of the Tugurige Gold Mine or 100% of the rights and interests in "Inner Mongolia Urat Middle Banner Tugurige Gold Mine Co., Ltd.", and Party A and Party B shall jointly be the shareholders of Tugurige Company.
 
3.
Party B shall actively participate in the Restructuring, and shall invest Renminbi Two Hundred and Fifty Million Yuan (RMB 250,000,000.00) into Tugurige Company (Party B's investment amount shall be based on the asset valuation result of the Tugurige Gold Mine, but the valuation result shall not exceed RMB 280,000,000.00) and hold 51% shares of Tugurige Company. This includes Renminbi One Hundred and Eighty Million Yuan (RMB 180,000,000.00) which Party B should provide before February 28, 2011, which will be used for the acquisition of the Xinjiang Project.
 
III.       Xinjiang Project
 
1.  
Tugurige Company shall establish one or multiple wholly-owned subsidiaries in Xinjiang (hereinafter referred to as the "Xinjiang Subsidiary") for the acquisition of the Xinjiang Project.
 
2.  
The Xinjiang Subsidiary shall provide Renminbi One Hundred and Eighty Million Yuan to acquire the Xinjiang Project of Party A's affiliated entity, and a separate Agreement for the Transfer of Mining Concession(s) shall be concluded at the appointed time. The Xinjiang Subsidiary shall be responsible for the expenses of formalities for the transfer of mining concession(s).
 
3.  
The Xinjiang Subsidiary shall provide Renminbi Seventy Million Yuan for the geological exploration work, building of the new selected plant and construction of the mine. Under equal conditions, it is preferred that Party A completes the geological exploration work.
 
IV.         Preferential cooperation rights for Other Projects
 
1.  
Tugurige Company shall be entitled preferential cooperation rights for Other Projects, and is entitled the priority for cooperation under equal conditions.
 
2.  
If Party A owns the exploration concession primarily for uranium-based mining, but which is found through exploration to be primarily non-uranium-based (including but not limited to nonferrous metals and precious metals), the said exploration concession may be considered as another project to which Tugurige Company is entitled the preferential cooperation rights.
 
[signature]

 
4
 
 
V.        Representations and warranties of Party A
 
1.  
After this Agreement comes into force, Party A may not conduct negotiations and collaborations with any third party for the Tugurige Gold Mine, Xinjiang Project and Other Projects, unless where Party B explicitly forgoes the abovementioned in writing.
 
2.  
The Tugurige Gold Mine is a corporate legal person that is established and remains in existence in accordance with laws; there are no records of illegal operations, and it possesses the conditions required for it to serve as a platform for cooperation between both parties after the Restructuring. The Tugurige Gold Mine does not have any existing major debts, lawsuits, claims for compensation and liabilities that have not been disclosed by Party A to Party B. Prior to the date of signing this agreement, there are no existing or outstanding lawsuits, arbitration or administrative procedures, or those that are foreseeable according to existing facts, in connection with the collaboration projects and the Tugurige Gold Mine.
 
3.  
Party A warrants that it legally owns all rights and interests in the Tugurige Gold Mine, and it has full right to dispose of such rights and interests. Such rights and interests have not been subject to the freezing and auction by a people's court, nor has any form of mortgage, pledge or guarantee been placed thereon; there are no defects that may affect Party B's rights and interests, and no lawsuits are involved in any way.
 
4.  
All documents and information provided by Party A are truthful, complete, legitimate and valid, and there is no false representation, concealment or material omission.
 
5.  
Party A has provided Party B with the asset status and financial situation of the Tugurige Gold Mine. Should Party B discover any inconsistency between the asset status and financial situation of the Tugurige Gold Mine and the information provided, especially any undisclosed debts and potential debts of the Tugurige Gold Mine, Party A shall assume all liabilities (including but not limited to assuming such undisclosed debts), and compensate all the corresponding losses thus caused to Party B.
 
[signature]
 
5
 

6.        Party A pledges not to provide and disclose any information in connection with this agreement to any third party.
 
7.        Party A warrants that, with the exception of situations that have been disclosed in this agreement, the assets of the Tugurige Gold Mine (namely the entire assets of the Tugurige Gold Mine, including but not limited to the mining concessions owned by the Tugurige Gold Mine, the ownership and intellectual property rights of all prospecting work results, reports, geological documents, drawings and other prospecting documents related to its mining concessions; relevant excavation pits, drilled holes, rock cores, specimens, roads, buildings, constructions and all other infrastructure formed from the prospecting work, prospecting projects and other assets) and the assets of the Xinjiang Project (namely the assets related to the 21 mining concessions under the Xinjiang Project, including but not limited to the 21 mining concessions under the Xinjiang Project, the ownership and intellectual property rights of all the prospecting work results, reports, geological documents, drawings and other prospecting documents related thereto, the relevant excavation pits, drilled holes, rock cores, specimens, roads, buildings, constructions and all other infrastructure formed from the prospecting work, prospecting projects and other assets, hereinafter referred to as the "Assets of the Xinjiang Project") are not involved in any ownership disputes. The assets of the Tugurige Gold Mine and the Assets of the Xinjiang Project are not encumbered by any form of mortgage, pledge or other guarantee of rights and interests, nor are they subject to any other third-party rights and restriction of rights; the respective certificates and licenses are complete and in place, and they have all been obtained legally and are complete and valid. Should there be any undisclosed dispute, encumbrance, flawed rights and restriction of rights on the assets of the Tugurige Gold Mine and the Assets of the Xinjiang Project, Party A shall assume the relevant liabilities and compensate Party B for the corresponding losses thus incurred.
 
 
 
[signature]
 

 
6
 

8.        After this agreement comes into force and prior to the completion of the Restructuring with Party B officially becoming a shareholder of Tugurige Company with 51% shares (subject to the completion of the industrial and commercial registration), Party A shall not dispose of all of its rights and interests in the Tugurige Gold Mine through transfer, gift, mortgage, pledge and any other methods that may affect Party B's rights and interests, and shall maintain the Tugurige Gold Mine in its current condition; it also may not revise the articles of association of the Tugurige Gold Mine, nor distribute stock dividends after the base date for asset valuation (Party A's modification of the shareholding system of the Tugurige Gold Mine shall not be deemed as a breach of the aforementioned commitment).
 
9.        With effect from the day on which this agreement is signed, Party A warrants that the assets of the Tugurige Gold Mine and the Assets of the Xinjiang Project shall not be transferred, moved or leased to any third party through any means without the written consent of Party B. No mortgage, pledge or other guarantee of rights and interests, or other third-party rights and restriction of rights shall be imposed on the assets of the Tugurige Gold Mine and the Assets of the Xinjiang Project.

 
10.       After this agreement comes into force and prior to the completion of the Restructuring with Party B officially becoming a shareholder of Tugurige Company with 51% shares (subject to the completion of the industrial and commercial registration), Party A shall ensure proper safekeeping of the assets of the Tugurige Gold Mine, seals and accounting books, documents and other materials that are under its possession and management; it warrants that it shall not conclude any contract that will have a major impact on the operations and development of the Tugurige Gold Mine without authorization; that it shall not transfer, privately move, conceal or siphon off the assets of the Tugurige Gold Mine without compensation or at low prices; and that it shall not carry out any transaction at prices that are clearly unreasonable. The Tugurige Gold Mine shall not provide additional guarantee for existing debts, nor shall it repay the debts in advance; as for the existing creditor's rights, the Tugurige Gold Mine shall not forgo same without authorization.
 
VI.        Operations and management of the Tugurige Company
 
1.        The board of shareholders forms the highest decision-making body of Tugurige Company. The board of directors established by Tugurige Company consists of 5 directors, 2 of whom appointed by Party A and the other 3 appointed by Party B. The chairman of the board of directors shall be a director appointed by Party B. The board of supervisors established by Tugurige Company consists of 3 supervisors, 1 of whom appointed by Party A, 1 appointed by Party B, and the third supervisor elected by the employees. The board of supervisors shall be presided over by the supervisor appointed by Party A. Under the reporting system implemented by Tugurige Company, the general manager shall report to the board of directors.
 
[signature]

 
7
 

2.  
After the establishment of Tugurige Company, and under the premise that the current normal production and operations of the Tugurige Gold Mine is being maintained, a period of two years shall be used to transform the mining and ore processing system, in order to achieve daily mining capacity of 1500 tons and daily ore processing capacity of 1200 tons.
 
3.  
After the establishment of Tugurige Company, more exploration funds will be invested and the intensity of work will be increased for the Tugurige Gold Mine, Xinjiang Project and Other Projects, so as to maximize the increase in resources and reserves in the shortest possible time.
 
4.  
Enterprise management will be enhanced, costs will be lowered, wastage will be reduced, and gains will be raised.
 
VII.         Termination of agreement
 
This agreement may be terminated under the following circumstances:
 
1.
 
2.  
Upon a consensus reached by both parties through negotiation;
 
Gross breach of contract by one party, rendering it impossible to perform this agreement or unnecessary to continue performing this agreement;
 
3.
 
4.  
Party B discovers that the actual status of the Tugurige Gold Mine or Xinjiang Project is grossly inconsistent with the information provided by Party A, and both parties are unable to resolve same through negotiation;
 
Other circumstances stipulated by laws and regulations or agreed upon in this agreement.
 
VIII.    Liabilities for breach of contract
 
Both parties shall strictly perform this agreement. In the event of a breach by either party, that party shall assume the corresponding liabilities for breach of contract.
 
IX.      Resolution of disputes
 
In the event of a dispute arising between both parties due to the conclusion and performance of this agreement, the matter shall be resolved through negotiation. Should negotiation fail, both parties have the right to file for legal proceedings with the people's court.
 
 
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X.     Others
 
1.  
This agreement is executed in quadruplicate with both parties holding two (2) copies each. Upon the signing and affixing of seals by both parties, the approval of the respective superior units and the board of directors shall be obtained as soon as possible, after which this agreement shall come into force.
 
2.  
When necessary, Party B may transfer its rights and obligations under this agreement to its affiliated company or designated company.
 
3.  
This agreement is a framework agreement. When necessary, both parties may sign other agreements for certain specific tasks on the basis of this agreement.
 
4.  
After the conclusion of this agreement, Party A and the Tugurige Gold Mine may conclude a "Short-term Loan and Surety Bond Contract" with Party B to agree on the loan of Renminbi Sixty Million Yuan (RMB 60,000,000.00) from Party B to the Tugurige Gold Mine, and Party A's provision of a surety bond for the said loan. Party B has the right to convert the said loan into the first installment of Party B's investment.
 
[No Body Text Hereunder]

 
9
 

[This is the Signature Page]
 
This agreement was signed by the following two parties in Baotou City on December 16, 2010.
 
Party A: 208 Team of China National Nuclear Corporation Authorized representative: [signature: illegible]
 
Party B: Minco Mining (China) Corporation Authorized representative: [signature: illegible]
 

 

 

 

 

 

 

 

 


 
10
 

 

 

 

Project Agreeent with 208 team - supplement [1]

Translator's Declaration
 

 

 

I, Ng Bee Ling, Certified Simplified Chinese to English Translator, hereby attest that the Chinese language document called "Project Agreeent with 208 team - supplement [1]" and that to the best of my knowledge and belief, these translation in English are true and correct.
 
Signed in Singapore on February 3, 2012
Ng Bee Ling
 

 

 

 

 

 
1
 

Supplementary Agreement to the "Cooperation Framework Agreement"
 
Party A: 208 Team of China National Nuclear Corporation (CNNC) Party B: Minco Mining (China) Corporation
 
Both Party A and Party B have signed the "Cooperation Framework Agreement" on December 16, 2010, and agreed on the cooperation for the Tugurige Gold Mine, Xinjiang Project and Other Projects. In order to ensure the smooth execution of the said agreement, both parties hereby reach this supplementary agreement with the following provisions through in-depth communications and amicable negotiation:
 
1.  
Both parties confirm that they have individually obtained the relevant approval(s) of the respective superior units and board of directors required for the "Cooperation Framework Agreement" to come into force, and agree that the "Cooperation Framework Agreement" shall come into force on the effective date of this supplementary agreement.
 
2.  
Party A warrants that the current phase gold industrial reserve for the Toli County Qiqiu III Gold Mine in the Xinjiang Project and Tugurige Gold Mine is no lower than 10 tons. Should there be a material discrepancy between the quantity of reserves upon verification and the data provided by Party A, Party B shall have the right to withdraw from the cooperation; under this circumstance, Party A shall be deemed to have grossly breached the agreement.
 
3.  
In order to ensure that Party B provides the first installment of investment worth [RMB] 180 million Yuan on schedule, under active cooperation from Party B, Party A is responsible for completing the following relevant tasks before March 31, 2011:
 
  1) 
The exploration concession for "Inner Mongolia Urat Middle Banner Jun Gaxun Region Gold Mine Detailed Exploration" and the exploration concession for "Inner Mongolia Urat Middle Banner Har Tolgoi Region Gold Mine Detailed Exploration", which are held by Party A, are to be transferred at no charge to come under the name of Tugurige Gold Mine (or after restructuring, the "Inner Mongolia Urat Middle Banner Tugurige Gold Mine Co., Ltd.");

 
2
 
 
2)  
Both parties are to jointly select an appraisal institution to appraise the asset value of the Tugurige Gold Mine, and acknowledge the valuation results accordingly;
 
3)  
Party B is to obtain the approval of the superior units for the cooperation between both parties, or the proof of filing;
 
4)  
Party A is to register and establish its wholly-owned subsidiary, "Inner Mongolia Baotou City Tugurige Mining Co., Ltd." (tentative name, official name to be confirmed separately), the Tugurige Gold Mine is to be restructured as "Inner Mongolia Urat Middle Banner Tugurige Gold Mine Co., Ltd.", which is a wholly-owned subsidiary of "Inner Mongolia Baotou City Tugurige Mining Co., Ltd.";
 
5)  
Both Party A and Party B are to sign the contract for injection of funds for stock increase and the articles of association (after injection of funds with Party B holding 51% shares) for "Inner Mongolia Baotou City Tugurige Mining Co., Ltd." (tentative name), and other documents required for the industrial and commercial registration, and the condition(s) for Party B's payment of the first installment of registered capital worth RMB 180 million Yuan must be fulfilled;
 
6)  
After fulfilling the condition(s), Party B is to pay the first installment of registered capital worth RMB 180 million Yuan.
 
In the event of a delay of the aforementioned tasks, the date of Party B's payment for the first installment of registered capital worth RMB 180 million Yuan shall be postponed accordingly.
 
4.  
Article II, Paragraph 3 of the "Cooperation Framework Agreement" shall be revised as: Party B shall actively participate in the Restructuring, and shall invest Renminbi Two Hundred and Fifty Million Yuan (RMB 250,000,000.00) into Tugurige Company (Party B's investment amount shall be based on the asset valuation result of the Tugurige Gold Mine, but the valuation result shall not exceed RMB 280,000,000.00) and hold 51% shares of Tugurige Company. This includes Renminbi One Hundred and Eighty Million Yuan (RMB 180,000,000.00) which Party B should provide before March 31, 2011 after receiving the repayment sum of [Renminbi] Sixty Million [Yuan], which will be used for the acquisition of the Xinjiang Project.
 
5.  
Both parties shall strictly perform the "Cooperation Framework Agreement" and this supplementary agreement. Should either party dissolve, terminate or fail to perform the "Cooperation Framework Agreement" and this supplementary agreement without any justification, or conduct itself in gross violation of the agreement in any other way, that party shall compensate the other party RMB 20,000,000.00 Yuan as liquidated damages in accordance with the provisions in Article VIII of the "Cooperation Framework Agreement".

 
3
 
 
6. 
This supplementary agreement is a part of the "Cooperative Framework Agreement", and shall prevail for any conflicts in content.
   
7. 
The following are the appendices of this supplementary agreement (attached hereafter):
   
 
1) 
Business license of Tugurige Gold Mine
     
 
2) 
2008, 2009 and 2010 (January-November) balance sheet and profit/loss statement of Tugurige Gold Mine
     
 
3) 
Mining permit of "CNNC Inner Mongolia Urat Middle Banner Tugurige Gold Mine"
     
 
4) 
Certificates of exploration concessions of "Inner Mongolia Urat Middle Banner Jun Gaxun Region Gold Mine Detailed Exploration" and "Inner Mongolia Urat Middle Banner Har Tolgoi Region Gold Mine Detailed Exploration"
     
 
5) 
Distribution map of mining concessions within the Tugurige Gold Mine mining zone
     
 
6) 
Detailed statement on the Xinjiang Project
     
 
7) 
"Inner Mongolia Autonomous Region Urat Middle Banner Tugurige Mining Areas Rock Gold Mine Production and Detailed Exploration Report" and "Appendix List Book of Inner Mongolia Urat Middle Banner Tugurige Mining Areas Detailed Exploration Report"
     
8. 
This agreement is executed in quadruplicate with both parties holding two (2) copies each, and it shall take effect upon signing and affixing of seals by both parties.
 
[No Body Text Hereunder]

 
4
 

[This is the Signature Page]
 
This agreement was signed by the following two parties in Beijing on December 24, 2010.
 
Party A: 208 Team of China National Nuclear Corporation Authorized representative: [signature: Wang Nenghua]
 
Party B: Minco Mining (China) Corporation Authorized representative: [signature: illegible]

 

 

 

 

 

 

 

 
5
 

TRUST AGREEMENT

THIS AGREEMENT made as of the 9th day of June, 2011.

BETWEEN:

MINCO GOLD CORPORATION , a corporation incorporated under the laws of British Columbia and having an address at Suite 2772 – 1055 West Georgia Street Vancouver, British Columbia, V6E 3P3
 
(“ Minco Gold ”)

AND:
 
MINCO SILVER CORPORATION , a corporation incorporated under the laws of British Columbia and having an address at Suite 2772 - 1055 West Georgia Street Vancouver, British Columbia, V6E 3P3
 
(“ Minco Silver ”)
 
AND:
 
MINCO MINING (CHINA) CORPORATION , a company duly incorporated pursuant to the laws of the Peoples Republic of China and having an office at Suite 1706, Tower C, Global Trade Centre, 36 East Beisanhuan Road, Dongcheng District, Beijing,  China, 00083
 
(“ Minco China ”)
 
WHEREAS:
 
a)  
Minco China is a wholly-owned subsidiary of Minco Gold;

b)  
Minco China is the holder of a 90% equity interest in Foshan Minco Mining Co. Ltd. (“ Foshan Minco ”) which in turn holds the permits and licenses pertaining to the Fuwan silver project (the “ Fuwan Silver Project ”);

c)  
The interests in Foshan Minco are held by Minco China in trust for Minco Silver;

d)  
Minco Silver has advanced the sum of US$10 million (the “ Funds ”) to Minco Gold for the purposes of investment in Foshan Minco to increase Foshan Minco’s registered capital; and

e)  
Any interest accrued on the Funds shall be for the sole benefit of Minco Silver.
 
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the agreements and payments provided herein, the parties agree as follows:
 
 
1
 
 
1.  
Minco Gold and Minco China hereby confirm that they have received the Funds in trust for, and on behalf of Minco Silver for the express purpose of advancing the Funds to Foshan Minco on behalf of Minco Silver as an additional contribution to the registered capital of Foshan Minco.  Minco Gold and Minco China shall have no beneficial interest in the Funds and shall only deal with the Funds in accordance with the written direction of Minco Silver from time to time.
 
2.  
Upon the written demand of Minco Silver at any time Minco Gold and Minco China shall forthwith transfer the Funds to such entity or entities as may be designated by Minco Silver and each of Minco Gold and Minco China will perform and execute every other act, matter or thing, instrument, document, writing, agreement or covenant necessary, desirable or useful in connection therewith.
 
3.  
Minco Gold and Minco China shall not be entitled to receive any remuneration or compensation of any kind for the services provided to Minco Silver hereunder, and any interest accrued on the Funds shall be for the sole benefit of Minco Silver.
 
4.  
This agreement has a term commencing as of the effective date hereof and terminating at such time as Minco Gold and Minco China no longer holds any Funds in trust for, and on behalf of, Minco Silver. This agreement may be amended or terminated only with the written consent of each of Minco Silver, Minco Gold and Minco China.
 
5.  
This Agreement shall enure to the benefit of and be binding upon the successors and assigns of the parties hereto, and shall be governed by and construed in accordance with the laws of the Province of British Columbia, Canada.
 
6.  
This Agreement may be signed by facsimile and in counterpart.  Signed counterpart copies, when read together, shall be irrevocably deemed to constitute a single binding Agreement signed by both parties.

TO EVIDENCE THEIR AGREEMENT each of the parties has executed this Agreement on the 12th day of August, 2011 but with effect as of the date first above written.
 
MINCO GOLD CORPORATION  
  /s/ Paul W. Zhang  
Per:     
  Authorized Signatory  
 
MINCO SILVER CORPORATION  
  /s/ Ken Z. Cai  
Per:    
   Authorized Signatory  
 
MINCO MINING (CHINA) CORPORATION  
  /s/ Ken Z. Cai  
Per:    
  Authorized Signatory  
 

 

 

 
2
 

MINCO GOLD CORPORATION

INCENTIVE STOCK OPTION PLAN

Article 1 - Purpose

1.1
Purpose . The purpose of this Incentive Stock Option Plan ("Plan") of Minco Gold Corporation ("Corporation") is to advance the interests of the Corporation and its subsidiaries by encouraging the Directors, Employees and Consultants to acquire Shares in the Corporation thereby increasing their proprietary interest in the Corporation, encouraging them to remain associated with the Corporation, rewarding them on significant performance achievements and furnishing them with additional incentive in their efforts on behalf of the Corporation and its subsidiaries.

1.2
Plan Replaces Prior Plans . This Plan replaces and supersedes all other stock option plans of the Corporation, except in relation to any options outstanding under such stock option plan ("Old Plan") if the terms of the Old Plan conflict with the terms of the Plan, and in such case, the terms of the Plan shall prevail.
Article 2 - Defined Terms

2.1            Definitions . The following terms used herein shall have the following meanings:

 
(a)
"Affiliate" means an affiliated entity to the Corporation as determined under the Securities Act (British Columbia) as amended from time to time;
 
(b)
"Board" means the board of directors of the Corporation or, if established and duly authorized to act in respect of the Plan, a committee of the board of directors of the Corporation;
 
(c)
"Consultant" means an individual or Consultant Company, other than an Employee or a Director of the Corporation that:
 
(i)
is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Corporation or an Affiliate, other than services provided in relation to a distribution of securities;
 
(ii)
provides the services under a written contract between the Corporation or the Affiliate and the individual or the Consultant Company;
 
(iii)
in the reasonable opinion of the Corporation, spends or will spend, a significant amount of time and attention on the affairs and business of the Corporation or an Affiliate; and
(iv)           has a relationship with the Corporation or an Affiliate that enables the individual to be
knowledgeable about the business and affairs of the Corporation.
 
(d)
"Consultant Company" means for an individual consultant, a company or partnership of which the individual is an employee, shareholder or partner;
 
(e)
"Corporation" means Minco Gold Corporation, a company incorporated under the laws of Canada, and any successor corporation;
 
(f)
"Director" means a director of the Corporation or its subsidiaries or Affiliates to whom stock options can be issued in reliance on a prospectus exemption under applicable securities legislation;
 
(g)
"Disinterested Shareholder Approval" means disinterested shareholder approval as defined in the policies of the Exchange;
 
(h)
"Eligible Person" means any Director, Employee or Consultant of the Corporation or any Affiliate, or any other person or entity engaged to provide ongoing services to the Corporation or any Affiliate, determined by the Board as eligible for participation in the Plan;
 
(i)
"Employee" means:

 
1
 


 
(i)
an individual who is considered an employee of the Corporation or any of its subsidiaries under the Income Tax Act (Canada);
 
(ii)
an individual who works full-time for the Corporation or any of its subsidiaries providing services normally provided by an employee and who is subject to the same control and direction by the Corporation over the details and methods of work as an employee of the Corporation, but for whom income tax deductions are not made at source; or
 
(iii)
an individual who works for the Corporation or any of its subsidiaries on a continuing and regular basis for the minimum amount of time per week specified by the Board, providing services normally provided by an employee and who is subject to the same control and direction by the Corporation over the details and methods of work as an employee of the Corporation, but for whom income tax deductions are not made at source;
 
(j)
"Exchange" means the Toronto Stock Exchange or, if the Shares are not then listed and posted for trading on the Toronto Stock Exchange, on such stock exchange in Canada on which such Shares are listed and posted for trading as may be selected for such purpose by the Board;
 
(k)
"Insider" means an insider of the Corporation, as such term is defined in the policies of the Exchange;
 
(l)
"Management Company Employee" means an individual employed by a person providing management services to the Corporation, which are required for the ongoing successful operation of the business enterprise of the Corporation, but excluding a person engaged in investor relations activities;
 
(m)
"Market Price" means at any date in respect of Shares, the closing price of such Shares on the Exchange on the last business day preceding the date on which the Option is approved by the Board.  In the event that such Shares did not trade on such day, the Market Price shall be the average of the bid and ask prices in respect of such Shares at the close of trading on such date. In the event that such Shares are not listed and posted for trading on any stock exchange, the Market Price in respect thereof shall be the fair market value of such Shares as determined by the Board in its sole discretion;
 
(n)
"Option" means an option granted under the terms of the Plan;
 
(o)
"Optionee" means an Eligible Person to whom an Option has been granted under the terms of the Plan;
 
(p)
"Option Price" means the price per share at which Shares may be purchased under an Option;
 
(q)
"Plan" means this incentive stock option plan;
 
(r)
"Shares" means the shares of the Corporation or, in the event of an adjustment as contemplated by Article 7, such other shares or securities to which an Optionee may be entitled upon the exercise of an Option;
 
(s)
“TSX” means the Toronto Stock Exchange.

Article 3 - Administration of Plan

3.1
General . The Plan shall be administered by the Board which shall have the power, subject to the specific provisions of the Plan:

 
(a)
to establish policies and to adopt rules and regulations for carrying out the purposes, provisions and administration of the Plan;
 
(b)
to interpret and construe the Plan and determine all questions arising out of the Plan and any Option granted pursuant to the Plan and any such interpretation, construction or determination made by the Board shall be final, binding and conclusive for all purposes;
 
(c)
to determine to which Eligible Persons Options are granted and to grant Options;
 
(d)
to determine the number of Shares covered by each Option;
 
(e)
to determine the Option Prices

 
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(f)
to determine the time or times when Options will be granted and exercisable;
 
(g)
to determine if the Shares that are subject to an Option will be subject to any restrictions upon the exercise of such Option; and
 
(h)
to prescribe the form of the instruments relating to the grant, exercise and other terms of Options.

3.2
Stock Option Agreement . Each Optionee shall execute a stock option agreement, the terms of which shall conform to and be governed by this Plan. In the event of any inconsistency between the terms of any option agreement and this Plan, the terms of this Plan shall govern.

Article 4 - Shares Subject to the Plan

4.1
Evergreen Plan . Subject to adjustment as provided in Article 7, the shares to be offered under the Plan shall consist of shares of the Corporation's authorized but unissued common shares. The aggregate number of Shares to be delivered upon the exercise of all Options granted under the Plan shall not exceed the greater of:

 
(a)
fifteen percent (15%) of the issued and outstanding Shares of the Corporation at the time of granting of options (on a non-diluted basis) or such other number as may be approved by the Exchange from time to time commencing on June 29, 2010.

4.2
Options That Expire or Terminate . If any Option granted hereunder shall expire or terminate for any reason without having been exercised in full, the unpurchased Shares subject thereto shall again be available after thirty (30) days for the purpose of the Plan.

Article 5 - Eligibility, Grant and Terms of Options

5.1            Eligible Persons . Options may only be granted to Eligible Persons.

5.2            Date of Grants . Occurs when the Board authorizes the options to be granted.

5.3
Terms of Options . Subject to this Article, the number of Shares subject to each Option, the Option Price, the expiration date of each Option, the extent to which each Option is exercisable from time to time during the term of the Option and other terms and conditions relating to each such Option shall be determined by the Board; provided, however, if no specific determination is made by the Board with respect to any of the following matters, each Option shall, subject to any other specific provisions of the Plan, contain the following terms and conditions:

 
(a)
the term of the Option shall be five (5) years from the date the Option is granted to the Optionee subject to extension pursuant to Section 5.6;
 
(b)
the Option Price shall be the Market Price; and
 
(c)
the Option granted shall vest and become exercisable in accordance with the following schedule, subject to the requirements and conditions of any escrow agreement to which an Optionee is party, applicable securities law and any applicable hold period:

 
3
 
 
  Period from Grant Date Vesting
       
  6 months 1/3
  12 months   1/3
  18 Months   1/3

5.4
Restriction on Option Price . The Option Price of Shares that are subject to any Option shall in no circumstances be lower than the price permitted by any stock exchange on which the Shares are listed or the price permitted by any other regulatory body having jurisdiction.

5.5
Legend . Options issued under this Plan and any Shares issued on the exercise of such Options shall bear such restrictive legend as may be required by applicable securities legislation and the Exchange.

5.6
Extension of Term During Trading Black Out.   In the event the expiry date of an Option shall fall on a date during a trading black out period that has been self imposed by the Corporation, the expiry date of the Option shall be extended to the 5 th business day following the date that the self imposed trading black out period is lifted by the Corporation.  For greater certainty, the expiry date of an Option shall not be extended in the event a cease trade order is issued by a securities regulatory authority against the Corporation or the holder of an Option.

5.7
Restrictions on Option Grants . The total number of Shares to be optioned to Optionees under this Plan, together with Shares that may be issued under any other security based compensation arrangements of the Corporation, shall be subject to the following restrictions:

(a)  
no more than ten percent (10%) of the issued Shares of the Corporation may be issued to Insiders of the Corporation as a group under the Plan and under any other security based compensation arrangements of the Corporation, in any 12 month period; and
(b)  
the aggregate number of Shares issuable to Insiders under the Plan and any other security based compensation arrangements of the Corporation shall not exceed ten percent (10%) of the issued and outstanding Shares of the Corporation at time of granting of options(on a non-diluted basis).

5.8
Non-Assignable . An Option is personal to the Optionee and is non-assignable and non-transferable.  Wherein an option is granted to a corporation wholly owned by an Optionee, the corporate entity must agree, at the time of the grant, not to effect or permit any transfer of ownership of Options or shares of such corporation, nor issue any additional shares to any individual or entity for so long as Options remain outstanding to the credit of that corporation, except with the prior written consent of the Exchange.

5.9
Disinterested Shareholder Approval Required . Disinterested Shareholder Approval must be obtained:

 
(a)
for any reduction in the Option Price of an Option if the Optionee is an Insider of the Corporation at the time of the proposed amendment; and
 
(b)
in all other circumstances where disinterested shareholder approval is required by any stock exchange on which the Shares are listed or by any regulatory authority having jurisdiction over the Corporation.
 
 
4
 

5.10
Representation by Optionee . For Options granted to Employees or Consultants, the Corporation may be required to give a representation to the Exchange (and the Optionee must give a representation to the Corporation as a condition of any grant of Options) that the Optionee is a bona fide Employee or Consultant, as the case may be.

5.11
Non-Residents of Canada . No non-resident of Canada may participate in the Plan unless such participation can be accomplished pursuant to or in accordance with and without violating any securities or other legislation of the jurisdiction of residence of such person, and the Corporation may require, as a condition of the grant of Options, that the potential Optionee provide a written acknowledgement that the grant of the Options does not violate any such laws.

Article 6 - Termination of Employment or Death

6.1
General . Subject to Section 6.2 or any express resolution passed by the Board or the terms of any option agreement with the Optionee, an Option, and all rights to purchase Shares pursuant thereto, granted to a Director, Employee or Consultant or Management Company Employee ("Employee Optionees") shall expire thirty (30) days after the Optionee ceases to be in at least one of these categories.

6.2
Termination of Employment . If, before the expiry of an Option in accordance with the terms thereof, the employment of an Employee Optionee by the Corporation or any Affiliate shall terminate for any reason whatsoever other than termination by the Corporation for cause, but including termination by reason of death of the Employee Optionee, such Option may, subject to the terms thereof and any other terms of the Plan, be exercised:

 
(a)
if the Employee Optionee is deceased, by the heirs of the deceased or by legal personal representative(s) of the estate of the Employee Optionee during the first twelve (12) months following the death of the Employee Optionee; or
 
(b)
if he is alive, by the Employee Optionee at the earlier of any time within thirty (30) days of the date of termination of the employment of the Employee Optionee or upon expiry of the Option.

Article 7 - Certain Adjustments

7.1
Offer for Shares . If a bona fide offer ("Offer") for Shares is made to the Optionee or to shareholders generally or to a class of shareholders which includes the Optionee, which Offer, if accepted in whole or in part, would result in the offeror exercising control over the Corporation within the meaning of subsection 1(3) of the Securities Act (British Columbia) (as amended from time to time), then the Corporation shall, immediately upon receipt of notice of the Offer, notify each Optionee currently holding an Option of the Offer, with full particulars thereof, whereupon, notwithstanding the terms of the Option, such Option may be exercised in whole or in part by the Optionee so as to permit the Optionee to tender the Shares received upon such exercise (the "Optioned Shares") pursuant to the Offer. If:

         
 
(a)
the Offer is not completed within the time specified therein; or
 
(b)
the Optionee does not tender the Optioned Shares pursuant to the Offer; or
 
(c)
any of the Optioned Shares tendered by the Optionee pursuant to the Offer are not taken up and paid for by the offeror in respect thereof,

then the Optioned Shares or, in the case of paragraphs (a) and (b) above, the Optioned Shares that are not taken up and paid for, shall be returned by the Optionee to the Corporation and reinstated as authorized but unissued Shares and the terms of the Option applicable prior to the Offer shall again apply to the Option.

 
5
 

If any Optioned Shares are returned to the Corporation under this Section, the Corporation shall refund the exercise price to the Optionee for such Optioned Shares. In no event shall the Optionee be entitled to sell the Optioned Shares otherwise than pursuant to the Offer.

7.2
Amalgamation or Merger . If the Corporation amalgamates or merges with or into another company, any Shares receivable on the exercise of an Option shall be converted into the securities, property or cash which the Optionee would have received upon such amalgamation or merger if the Optionee had exercised his Option immediately prior to the record date applicable to such amalgamation or merger, and the Option Price shall be adjusted appropriately by the Board and such adjustment shall be binding for all purposes of the Plan.

7.3
Changes in Shares . If there is any change in the Shares through the declaration of stock dividends of Shares or consolidations, subdivisions or reclassification of Shares, or otherwise, the number of Shares available under the Plan, the Shares subject to any Option, and the Option Price shall be adjusted appropriately by the Board and such adjustment shall be effective and binding for all purposes of the Plan.

7.4
No Fractional Shares . The Corporation shall not be obligated to issue fractional shares in satisfaction of any of its obligations hereunder.

Article 8 - Stock Appreciation Rights

8.1
General . Any Option granted under the Plan may include a stock appreciation right, either at the time of grant or by amendment adding it to an existing Option subject, however, to the grant of such stock appreciation right being in compliance with the applicable regulations and policies of any stock exchange or exchange upon which any securities of the Corporation may from time to time be listed. The provisions of the Plan respecting the exercise of Options and the adjustments to Options arising from certain corporate actions shall apply mutatis mutandis to all stock appreciation rights granted hereunder.

8.2
Limitations on Exercise . Stock appreciation rights granted hereunder are exercisable to the extent, and only to the extent, the Option to which it is included is exercisable. To the extent a stock appreciation right included in or attached to an Option granted hereunder is exercised, the Option to which it is included or attached shall be deemed to have been exercised to a similar extent.

8.3
Election by Optionee . A stock appreciation right granted hereunder shall entitle the Optionee to elect to surrender to the Corporation an unexercised Option in which it is included and to receive from the Corporation in exchange for that number of shares, having an aggregate value equal to the excess of the market value of one share over the purchase price of one share specified in such Option, multiplied by the number of shares called for by the option, which is so surrendered. (Number of Options x increased amount of share price value = amount payable to Optionee).  The value of a share shall be determined for these purposes by the weighted average sale price per share on the stock exchange or other publicly quoted market system having the greatest volume of trading of the shares of the corporation subject to the option for the five trading days preceding the date the notice provided for in paragraph 8.4 hereof is received by the Corporation.


8.4
Exercise of Right . Subject to the provisions of the Plan, a stock appreciation right granted hereunder may be exercised from time to time by delivering to the Corporation at its head office a written notice of exercise, which notice shall specify the number of stock appreciation rights to be exercised and Options to be forfeited and the number of shares the Optionee elects to receive thereby. Such notice shall contain the Optionee's undertaking to comply, to the satisfaction of the Corporation and its counsel, with all applicable requirements of any stock exchange or exchanges upon which any securities of the Corporation are listed for trading and any other applicable regulatory authority.
 
 
6
 
 
Article 9 - Exercise of Options

9.1
General . Subject to the provisions of the Plan, an Option may be exercised from time to time by delivery to the Corporation at its principal office of a written notice of exercise addressed to the Corporate Secretary of the Corporation specifying the number of Shares with respect to which the Option is being exercised and accompanied by payment in full of the Option Price for the Shares to be purchased. Certificates for such Shares shall be issued and delivered to the Optionee within a reasonable time following the receipt of such notice and payment.

9.2
Restrictions on Exercise . Notwithstanding any of the provisions contained in the Plan or any Option, the Corporation's obligation to issue Shares to an Optionee pursuant to the exercise of an Option shall be subject to:

 
(a)
completion of such registration or other qualification of such Shares or obtaining shareholder approval or approval of such stock exchange or regulatory authority as the Corporation shall  determine to be necessary or advisable in connection with the authorization, issuance or sale thereof;
 
(b)
the admission of Shares to listing on any stock exchange on which the Shares may then be listed; and
 
(c)
the receipt from the Optionee of such representations, agreements and undertakings, including as to future dealings in such Shares as the Corporation or its counsel determines to be necessary or advisable in order to safeguard against the violation of the securities laws of any jurisdiction.

If any Shares cannot be issued to any Optionee for any reason including, without limitation, the failure to obtain necessary shareholder, regulatory or stock exchange approval, then the obligation of the Corporation to issue such Shares shall terminate and any Optionee's contribution or Option Price paid to the Corporation shall be returned to the Optionee.

Article 10 - Commencement, Amendment and Discontinuance of Plan

10.1
Approvals Required . The Plan shall become effective upon the later of the date of acceptance for the filing of this Plan by the Exchange and the approval of this Plan by the shareholders of the corporation; provided, however, that Options may be granted under this Plan prior to shareholder approval and Exchange acceptance but the Options may not be exercised.

10.2
Amendments . The Board of Directors may, subject to prior Exchange approval and without prior shareholder approval, amend from time to time the expiry date, the vesting conditions and/or exercise price of Options granted to Eligible Persons (other than Insiders). Any amendments to Options granted to Insiders shall be subject to the provisions of section 5.9 herein.  All other amendments to this Plan or to options granted pursuant to this Plan shall not become effective until Exchange and shareholder approval as is required by the policies of the Exchange Policy and applicable securities legislation has been received.

Article 11 - General

11.1
No Rights as Shareholder . The holder of an Option shall not have any rights as a shareholder of the Corporation with respect to any Shares covered by such Option until such holder shall have exercised such Option in accordance with the terms of the Plan (including tender of payment in full of the Option Price of the Shares in respect of which the Option is being exercised) and the Corporation shall issue such Shares to the Optionee in accordance with the terms of the Plan in those circumstances.

 
7
 

11.2
No Rights Regarding Employment . Nothing contained in the Plan or any Option shall confer upon any Optionee any right with respect to employment or continuance of employment with the Corporation or any Affiliate, or interfere in any way with the right of the Corporation or any Affiliate to terminate the Optionee's employment at any time.

11.3
No Rights to Provide Services . Nothing contained in the Plan or any Option shall confer on any Optionee who is not an Employee Optionee any right to continue providing ongoing services to the Corporation or any Affiliate or affect in any way the right of the Corporation or any Affiliate to determine to terminate his, her or its contract at any time.

11.4
No Representation . The Corporation makes no representation or warranty as to the future market value of any Shares issued in accordance with the provisions of the Plan.

11.5
Governing Law . The Plan will be governed by and construed in accordance with the laws of British Columbia.

11.6
Severance . If any provision of the Plan or any agreement entered into pursuant to the Plan contravenes any law or any order, policy, by-law or regulation of any regulatory body or stock exchange having authority over the Corporation or the Plan then such provision shall be deemed to be amended to the extent required to bring such provision into compliance therewith.
 

 

 

 

 
8
 

EXHIBIT 8.1



MINCO GOLD CORPORATION


LIST OF SIGNIFICANT SUBSIDIARIES AS AT APRIL 20, 2012


 

Jurisdiction of Incorporation

Beneficial Interest (1)

 

 

 

Minco Mining (China) Co. Ltd.

China

100%

Minco Silver Corporation

British Columbia

22%

Guangzhou Mingzhong Mining Co. Ltd.

China

51%

_________________

Notes:

(1)

Percentages rounded to nearest whole number





 

EXHIBIT 12.1

CERTIFICATION

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Ken Z. Cai, certify that:

I Ken Z. Cai, certify that:

 

 

 

 

 

1.

  

I have reviewed this annual report on Form 20-F of Minco Gold  Corporation ;

 

2.

  

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;

 

3.

  

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 company as of, and for, the periods presented in this report;

 

4.

  

The company’s other certifying officer(s) 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 control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

(a)

  

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 company, 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;

(b)

  

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;

(c)

  

Evaluated the effectiveness of the company’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

(d)

  

Disclosed in this report any change in the company’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 company’s internal control over financial reporting; and

  

5.

  

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): 

(a)

  

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 company’s ability to record, process, summarize and report financial information; and

(b)

  

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.


Date:  April 20, 2012

/s/ Ken Z. Cai    

Ken Z. Cai, President


 

EXHIBIT 12.2

CERTIFICATION

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Ken Z. Cai, certify that:

I Ellen Wei, certify that:

 

 

 

 

 

1.

  

I have reviewed this annual report on Form 20-F of Minco Gold  Corporation ;

 

2.

  

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;

 

3.

  

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 company as of, and for, the periods presented in this report; 

 

4.

  

The company’s other certifying officer(s) 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 control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)

  

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 company, 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;

(b)

  

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;

(c)

  

Evaluated the effectiveness of the company’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

(d)

  

Disclosed in this report any change in the company’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 company’s internal control over financial reporting; and

 

5.

  

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)

  

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 company’s ability to record, process, summarize and report financial information; and

(b)

  

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.


Date:  April 20, 2012

/s/ Ellen Wei

Ellen Wei, Interim Chief Financial Officer


Exhibit 13.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Annual Report on Form 20-F of Minco Gold Corporation for the year ended December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

 

1.

The Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.

The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

 

Date:  April 20, 2012

 

/s/ Ken Z. Cai

Ken Z. Cai, President

 

 

 

Exhibit 13.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report on Form 20-F of Minco Gold Corporation for the year ended December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


 

 

1.

The Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.

The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the registrant.




Date:

April 20, 2012



/s/ Ellen Wei

Ellen Wei, Interim Chief Financial Officer








  2 County Court Blvd., Suite 202, Brampton, Ontario, L6W 3W8
  Ph: 905-595-0575   Fax: 905-595-0578
 
CONSENT OF P&E MINING CONSULTANTS INC.
 
We consent to the reference to our firm under the caption "Experts" and to the use of our updated Technical Report titled “Technical Report and Updated Resource Estimate on the Changkeng Gold Property, Guangdong Province, China for Minco Gold Corporation” dated May 8, 2009, and the use of our previous Technical Report titled “Technical Report and Resource Estimate on the Changkeng Gold Property, Guangdong Province, China for Minco Gold Corporation” dated April 24, 2008 (the “Reports”) both prepared in compliance with National Instrument 43-101 and Form 43-101F1 in the Annual Registration Statement (Form 20-F) of Minco Gold Corporation (the “Company”).

We the undersigned have read the Annual Registration Statement (Form 20-F), the National Instrument 43-101 (the "Instrument"), the Companion Policy 43-101CP, and Form 43-101F1 (the "Form 43-101F1"), and confirm that:

(a)   we have no reason to believe that there are any misrepresentations in the information contained in the Annual Registration Statement (Form 20-F) derived from “The Reports” or that is within our knowledge as a result of the investigations and enquiries made by us in connection with the preparation of the Reports;

(b)   the Reports comply with the requirements of the Instrument and Form 43-101F1.

Further, we hereby confirm our consent to the Company's use of the Annual Registration Statement (Form 20-F) for its regulatory filing purposes and its disclosure to the public.    
 
 
     
Eugene Puritch, P.Eng    Tracy Armstrong, P.Geo
President        Sr. Associate Geologist
P&E Mining Consultants Inc.     P&E Mining Consultants Inc.
 
 
Antoine Yassa, P.Geo.
 
Sr. Associate Geologist  
P&E Mining Consultants Inc.  
 
Brampton, Ontario, Canada
April 20, 2012

 
 
 
CONSENT OF PETER FOLK
 Professional Engineer
 
I consent to the reference of myself under the caption "Experts" and to the use of my Technical Report entitled “Report on the Jinniushan Gold Project Yuanling County, Hunan Province People’s Republic of China”, dated December 28, 2006 (the “Report”) for Minco Mining & Metals Corporation prepared in compliance with National Instrument 43-101 and Form 43-101F1 in the Annual Registration Statement (Form 20-F) of Minco Gold Corporation (the “Company”).

I have read the Annual Registration Statement (Form 20-F), the National Instrument 43-101 (the "Instrument"), the Companion Policy 43-101CP, and Form 43-101F1 (the "Form 43-101F1"), and confirm that:

(a)  
we have no reason to believe that there are any misrepresentations in the information contained in the Annual Registration Statement (Form 20-F) derived from “The Report” or that is within our knowledge as a result of the investigations and enquiries made by us in connection with the preparation of the Report;

(b)  
the Report complies with the requirements of the Instrument and Form 43-101F1.

Further, we hereby confirm our consent to the Company's use of the Annual Registration Statement (Form 20-F) for its regulatory filing purposes and its disclosure to the public.              
 
 
   
Peter Folk, P.Eng    
 
Mayne Island, British Columbia, Canada
April 20, 2012