TIDMGSL
Annual Financial Report
Annual Consolidated Financial Statements
Years Ended December 31, 2010 and 2009
(In Canadian Dollars, unless otherwise noted)
KPMG LLP Telephone (604) 691-3000
Chartered Accountants Fax (604) 691-3031
PO Box 10426 777 Dunsmuir Street Internet www.kpmg.ca
Vancouver BC V7Y 1K3
Canada
INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the accompanying consolidated financial statements of Greystar Resources Ltd., which comprise the
consolidated balance sheets as at December 31, 2010 and 2009, the consolidated statements of operations,
comprehensive loss and deficit, shareholders' equity and cash flows for the years then ended, and notes,
comprising 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 Canadian generally accepted accounting principles, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the
risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of
the consolidated financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Greystar Resources Ltd. as at December 31, 2010 and 2009, and the results of its operations and its
cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.
Chartered Accountants
Vancouver, Canada
March 23, 2011
GREYSTAR RESOURCES LTD.
Consolidated Balance Sheets
(Expressed in Canadian Dollars)
As at December 31, 2010 and 2009
2010 2009
ASSETS
Current Assets:
Cash and cash equivalents (note 9) $ 98,343,227 $ 81,583,304
Accounts receivable and prepaid expenses 773,073 585,340
99,116,300 82,168,644
Equipment (note 4) 1,118,743 1,033,517
Mineral properties (note 5) 20,903,746 18,590,951
$ 121,138,789 $ 101,793,112
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 6,308,617 $ 2,764,557
Amounts payable on mineral property acquisition (note 5) 1,099,339 568,346
Asset retirement obligation (note 6) 933,777 713,666
8,341,733 4,046,569
Amounts payable on mineral property acquisition (note 5) - 445,640
Asset retirement obligation (note 6) 229,446 629,189
8,571,179 5,121,398
Shareholders' equity:
Common shares (notes 7(a) and (b)) 266,686,662 207,735,611
Warrants (notes 7(b) and (e)) 4,260,090 15,277,614
Contributed surplus (notes 7(c) and (d)) 14,785,150 10,880,978
Deficit (173,164,292) (137,222,489)
112,567,610 96,671,714
Nature of operations (note 1)
Commitments (notes 5 and 14)
Subsequent events (notes 1 and 5)
$ 121,138,789 $ 101,793,112
See accompanying notes to consolidated financial statements.
Approved on behalf of the Board:
Signed: "David B. Rovig" Director
Signed: "Brian E. Bayley" Director
GREYSTAR RESOURCES LTD.
Consolidated Statements of Operations, Comprehensive Loss and Deficit
(Expressed in Canadian Dollars)
For the years ended December 31, 2010 and 2009
2010 2009
Exploration expenditures (note 5(b)):
Feasibility and pre-feasibility studies $ 10,138,124 $ 8,582,734
Other exploration expenditures 16,125,388 10,607,757
26,263,512 19,190,491
General and administrative expenses:
Amortization 338,294 266,142
Audit, legal and other professional fees 542,163 699,278
Investor relations 172,993 126,084
Management and consulting fees (note 8) 2,092,182 498,848
Office and administration (note 8) 460,448 234,450
Salaries and benefits 2,014,443 472,353
Stock-based compensation (note 7(d)) 4,515,330 2,305,684
Transfer agent, listing and filing fees 181,761 136,781
Travel 607,965 206,960
10,925,579 4,946,580
Loss before other items 37,189,091 24,137,071
Other items:
Interest income (1,164,205) (337,782)
Foreign exchange (gain) loss (83,083) 226,539
(1,247,288) (111,243)
Loss and comprehensive loss for the year 35,941,803 24,025,828
Deficit, beginning of year 137,222,489 113,196,661
Deficit, end of year $ 173,164,292 $ 137,222,489
Basic and diluted loss per common share $ 0.43 $ 0.43
Weighted-average number of common shares
outstanding 83,784,134 56,089,860
See accompanying notes to consolidated financial statements.
GREYSTAR RESOURCES LTD.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
For the years ended December 31, 2010 and 2009
2010 2009
Cash provided by (used in):
Operating activities:
Loss for the year $ (35,941,803) $ (24,025,828)
Asset retirement obligation expenditures (324,752) (455,683)
Items not involving cash:
Amortization 338,294 266,142
Accretion expense on asset retirement obligation 160,214 -
(Decrease) increase in asset retirement obligation expense (39,069) 1,294,262
Interest accretion on amounts payable on mineral property acquisition 73,470 64,092
Stock-based compensation 4,515,330 2,305,684
Unrealized foreign exchange loss (168,569) (145,227)
Changes in non-cash working capital:
Amounts receivable and prepaid expenses (187,733) (136,250)
Accounts payable and accrued liabilities 4,355,099 842,156
(27,219,519) (19,990,652)
Investing activities:
Mineral property acquisition costs (2,039,571) (1,538,491)
Purchase of equipment (415,473) (173,182)
(2,455,044) (1,711,673)
Financing activities:
Common shares and warrants issued on public offering - 63,250,000
Common shares and warrants issued on private placement - 12,039,865
Issue costs related to equity issuance - (3,991,393)
Common shares issued on exercise of stock options 371,763 827,622
Common shares issued on exercise of warrants 46,062,723 3,703,124
Allotment to be issued pursuant to exercise of warrants - 194,265
46,434,486 76,023,483
Increase in cash and cash equivalents 16,759,923 54,321,158
Cash and cash equivalents, beginning of year 81,583,304 27,262,146
Cash and cash equivalents, end of year $ 98,343,227 $ 81,583,304
Supplementary cash flow information (note 9)
See accompanying notes to consolidated financial statements.
GREYSTAR RESOURCES LTD.
Consolidated Statements of Shareholders' Equity
(Expressed in Canadian Dollars)
For the years ended December 31, 2010 and 2009
Share Capital Contributed
Shares Amount Warrants Surplus Deficit Total
Balance, December 31, 2008 46,063,798 $143,434,989 $384,800 $10,772,031 $(113,196,661) $41,395,159
Private placement 6,579,161 7,874,898 4,164,967 - - 12,039,865
Public offering 18,071,429 53,013,442 10,236,558 - - 63,250,000
Public offering agents'
compensation - - 2,005,548 - - 2,005,548
Issue costs - (4,439,833) (911,525) - - (5,351,358)
Warrants issued for purchase of
land - - 973,215 - - 973,215
Expired warrants - - (23,120) 23,120 - -
Shares issued upon
exercise of options 509,912 3,047,479 - (2,219,857) - 827,622
Shares issued upon
exercise of warrants 1,136,464 5,156,471 (1,552,829) - - 3,603,642
Share subscriptions receivable - (546,100) - - - (546,100)
Allotment to be issued pursuant
to exercise of warrants - 194,265 - - - 194,265
Stock-based compensation - - - 2,305,684 - 2,305,684
Net loss and comprehensive loss - - - - (24,025,828) (24,025,828)
Balance, December 31, 2009 72,360,764 207,735,611 15,277,614 10,880,978 (137,222,489) 96,671,714
Expired warrants (note 7(e)) - - (22,383) 22,383 - -
Public offering agents'
Compensation (note 7(b)) - - 86,357 - - 86,357
Shares issued upon
exercise of options (note 7(b)) 161,962 1,005,304 - (633,541) - 371,763
Shares issued upon
exercise of warrants (note 7(b)) 11,700,261 57,945,747 (11,969,381) - - 45,976,366
Stock-based compensation - - - 4,515,330 - 4,515,330
Warrants issued for purchase
of land - - 887,883 - - 887,883
Net loss and comprehensive loss - - - - (35,941,803) (35,941,803)
Balance, December 31, 2010 84,222,987 $266,686,662 $4,260,090 $14,785,150 $(173,164,292) $112,567,610
See accompanying notes to consolidated financial statements.
GREYSTAR RESOURCES LTD.
Notes to Consolidated Financial Statements
(Expressed in Canadian dollars)
For the year ended December 31, 2010
1. Nature of operations
Greystar Resources Ltd. (the "Company") is a publicly listed company incorporated in Canada under the legislation
of the Province of British Columbia. The Company's shares are listed on the Toronto Stock Exchange and the
Alternative Investment Market ("AIM") of the London Stock Exchange. The Company's principal business activities
include the acquisition, exploration and development of mineral properties.
The Company is in the process of exploring its mineral properties and has not yet determined whether they contain
reserves that are economically recoverable. Management anticipates that the Company will continue to raise
adequate funding through equity or debt financings, although there is no assurance that the Company will be able
to obtain adequate funding on favorable terms. The recoverability of amounts shown for mineral properties and
equipment is dependent upon, among other things, the discovery of economically recoverable reserves, the ability
of the Company to obtain the necessary financing to complete exploration and development, confirmation of the
Company's interest in the underlying concessions and licenses, the ability of the Company to obtain the necessary
mining and environmental permits, and future profitable production or proceeds from the disposition of the mineral
properties.
At December 31, 2010, the Company had working capital of $90,774,567 but had not yet achieved profitable
operations and expects to incur further losses in the development of its business. For the year ended December
31, 2010, the Company reported a net loss of $35,941,803 and as at December 31, 2010, had an accumulated deficit
of $173,164,292. The ability of the Company to continue as a going concern is dependent upon the Company's ability
to arrange additional funds to complete the development of its property, including obtaining the necessary permits
and other regulatory approvals, and upon future profitable operations.
In December 2009, the Company filed its Environmental Impact Assessment ("EIA") with the Colombian Ministry of
Environment, Housing and Territorial Development ("MAVDT") in respect to the development of an open pit gold-
silver mine at the Company's Angostura project in Colombia. On April 20, 2010, the MAVDT requested a new EIA to be
filed that conforms to a new regulation which calls for an adjustment of the occupied area outside of 'Paramo.'
MAVDT's request would have required the Angostura project to be completely redesigned and would have severely
impacted the project schedule and may have had a material effect on its economic viability. On April 29, 2010, the
Company filed an appeal of the notification from MAVDT. On May 28, 2010, the Company received a letter from MAVDT
that reinstated the Company's EIA as filed. MAVDT will move forward with a review of the Company's EIA as
originally filed. On July 15, 2010, MAVDT issued a notice to the Company that, at the request of third parties,
Information Meetings for local communities that were being planned by the Company are to be incorporated into a
public hearing process. The Company held two Informational Hearings on November 3 and 4, 2010, and the Public
Hearing on November 21, 2010, to hear the views and opinions of certain interested parties on the environmental
impact of the Angostura project. These Information and Public Hearings are steps in the process relating to the
decision from MAVDT on issuing an environmental permit for the Angostura project. In December 2010, MAVDT notified
the Company that a new Information Meeting and Public Hearing for the environmental permit are to be held in
Bucaramanga. This decision was based on the fact that certain participants opposing the project, who had
registered to address the general public during the first hearing, were in the petitioner's view, unable to
participate on account of alleged restrictions in the road heading to California, Santander. This exceptional
request was intended to better allow inhabitants of the city of Bucaramanga to express their views on the project.
The Information Meeting was held on February 17, 2011, and the Public Hearing held on March 4, 2011, but was
terminated early and cancelled by MAVDT after 28 of the inscribed 470 statements had been heard.
On March 18, 2011, the Company made an announcement clarifying certain comments made by the Ministry of Mines and
Energy of Colombia, which could be incorrectly interpreted to mean that the Company is fully withdrawing from the
Angostura Project. The Company confirmed that that it does not intend to withdraw from the Angostura Project and
it intends simply to "desist" (which in this context, means to cease the Company's intention of further pursuing a
formal petition or request for the administrative procedure for an environmental license at this time with a
Colombian governmental entity, but without prejudice of the right and opportunity to file a new petition or
request for administrative procedure for a mining project environmental license in the future) from ongoing
environmental licensing to allow for future re-filing on terms that reflects concerns. On the March 23, 2011, the
Company filed a request to desist from the administrative procedure of the environmental licensing before MAVDT.
The Company is committed to developing the Angostura Project, but recognizes that there is a need to reconfigure
it. As a result, the Company has decided it will not proceed with finalization of the feasibility study on the
open pit project at this time. The Company intends to continue with studies into the feasibility of alternatives,
including an underground option, whilst the uncertainty surrounding the definition of Paramo and the exclusion of
mining from Paramo affects the permitting of its open pit/heap leach part of the project. The Company also will
continue to proceed with evaluating the entire project while working jointly with the MAVDT as well as with the
Ministry of Mines and Energy of Colombia in resolving any outstanding issues, including how the open pit project
can be modified to meet concerns and to proceed with an underground project. The Company has completed a
Preliminary Economic Evaluation ("PEE") of an underground operation at the Angostura Project that targets the high
grade resource at Angostura. The Company proposes to work rapidly to advance the next phase of study and drilling
with an objective to increase and improve the categorization of high grade underground resources, and
investigating the potential to extend the resource at length and depth.
2. Significant accounting policies
(a) Basis of presentation and consolidation
These consolidated financial statements have been prepared in accordance with Canadian generally accepted
accounting principles. They include the accounts of the Company, its controlled subsidiaries and branch operations
in Colombia. All significant intercompany transactions and balances have been eliminated.
2. Significant accounting policies (continued)
(b) Comparative figures
Comparative figures have been adjusted to conform to changes in presentation in these consolidated financial
statements where required.
(c) Cash and cash equivalents
Cash and cash equivalents are comprised of cash on deposit with banks and highly liquid investments having
original terms to maturity of one year or less when acquired.
(d) Equipment
Equipment is recorded at cost less accumulated depreciation. Depreciation is recognized in profit or loss on a
straight-line basis over the estimated useful lives of equipment. The estimated useful lives are as follows:
- Buildings 20 years
- Field equipment 3 to 5 years
- Office equipment 3 years
- Transport 5 years
(e) Mineral properties
Exploration and development expenditures incurred prior to the determination of the feasibility of mining
operations and a decision to proceed with development are charged to operations as incurred. Mineral property
acquisition costs and development expenditures incurred subsequent to a development decision, and to increase or
to extend the life of existing production, are capitalized and will be amortized on the unit-of-production method
based upon estimated proven and probable reserves. When there is little prospect of further work on a property
being carried out by the Company, the remaining deferred costs associated with that property are charged to
operations during the period such determination is made.
The amounts shown for mineral properties represent acquisition costs incurred to date, less recoveries and write-
offs, and do not reflect fair value.
(f) Impairment assessment
The Company performs impairment tests on its mineral properties when events or changes in circumstances indicate
that the carrying values of these assets may not be recoverable. As of December 31, 2010, management determined
there is no impairment or write-down of the carrying value of mineral properties.
(g) Asset retirement obligations
The Company recognizes statutory, contractual or other legal obligations related to the retirement of tangible
long-lived assets when such obligations are incurred, if a reasonable estimate of fair value can be made. These
obligations are measured initially at fair value and the resulting costs capitalized to the carrying value of the
related asset. To the extent that the asset retirement obligation was created due to exploration activities, the
amount capitalized is reduced immediately by a charge to exploration expenses for the same amount. To the extent
that the asset retirement obligation was created due to development activities, the amount capitalized is
amortized to operations over the life of the asset. In subsequent periods, the liability is adjusted for any
changes in the amount or timing and for the discounting of the underlying future cash flows. The asset retirement
obligation is classified as current and long-term, based on expectation of settlement.
(h) Share capital
The Company records proceeds from share issuances net of issue costs. Shares issued for consideration other than
cash are valued at the quoted market price on the date the agreement to issue the shares was reached and announced
for business combinations and at the date of issuance for other non-monetary transactions. For proceeds received
from the issuance of compound equity instruments, the Company uses the relative fair value method to allocate
proceeds received between the common share and warrant units upon initial recognition.
(i) Stock-based compensation and other stock-based payments
The Company has a stock option plan that is described in note 7(c). The Company records all stock-based payments
using the fair value method. Under the fair value method, stock based payments for employees are measured at fair
value at the date of grant and stock- based payments to non-employees are measured at the fair value of the
consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable
and are amortized over the vesting period. The offset to the recorded cost is to contributed surplus.
Consideration received on the exercise of stock options is recorded as share capital and the related contributed
surplus is transferred to share capital.
(j) Income taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method of tax
allocation, future income tax assets and liabilities are determined based on differences between the financial
statement carrying values of existing assets and liabilities and their respective income tax bases (temporary
differences), and losses carried forward. Future income tax assets and liabilities are measured using the tax
rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income
tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is
enacted or substantively enacted. The amount of future income tax assets recognized is limited to the amount of
the benefit that is more likely than not to be realized.
(k) Loss per share
Basic loss per share is calculated using the weighted average number of common shares issued and outstanding
during the period. Diluted loss per share is calculated using the treasury stock method. Under the treasury stock
method, the weighted average number of common shares outstanding for the calculation of diluted loss per share
assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to
repurchase common shares at the average market price during the period. In the Company's case, diluted loss per
share is the same as basic loss per share, as the effect of outstanding options (note 7(d)) and warrants (note
7(e)) on loss per share would be anti-dilutive.
(l) Foreign currency translation
Transactions and account balances originally stated in currencies other than Canadian dollars have been translated
into Canadian dollars using the temporal method of foreign currency translation as follows:
- Revenue and expense items at average exchange rates.
- Non-monetary assets and liabilities at historical exchange rates, unless such items are carried at market value,
in which case they are translated at the exchange rate in effect on the balance sheet date.
- Monetary assets and liabilities at the exchange rate in effect at the balance sheet date.
Exchange gains and losses are recorded in the statement of operations in the period in which they occur.
(m) Financial instruments
All financial instruments are classified into one of five categories: held-for-trading, held-to- maturity
investments, loans and receivables, available-for-sale financial assets or other financial liabilities. All
financial instruments and derivatives are measured in the balance sheet at fair value except for loans and
receivables, held-to-maturity investments and other financial liabilities which are measured at amortized cost.
Subsequent measurement and changes in fair value will depend on their initial classification as follows: (1) held-
for-trading financial assets are measured at fair value and changes in fair value are recognized in the statement
of operations; (2) available-for-sale financial instruments are measured at fair value with changes in fair value
recorded in other comprehensive income until the instrument is derecognized or impaired; and (3) all derivative
instruments, including embedded derivatives, are recorded in the balance sheet at fair value unless they qualify
for the normal sale normal purchase exemption and changes in their fair value are recorded in income unless cash
flow hedge accounting is used, in which case changes in fair value are recorded in other comprehensive income.
The Company has classified its cash and cash equivalents as held-for-trading and thus, measured at fair value.
Accounts receivables are classified as loans and receivables and thus, measured at amortized cost. Accounts
payable and accrued liabilities and amounts payable on mineral property acquisition are classified as other
financial liabilities and thus, measured at amortized cost. The Company measures derivatives and embedded
derivatives at fair value and the Company has maintained its policy not to use hedge accounting.
Transaction costs incurred upon the issuance of debt instruments or modification of a financial liability are
deducted from the financial liability and are amortized using the effective interest method over the expected life
of the related liability.
(n) Use of estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the reporting period. Significant
areas requiring the use of management estimates relate to the determination of impairment of mineral properties,
determination of asset retirement and remediation obligations, the assumptions used in determining fair value of
stock-based compensation and valuation allowances for future income tax assets. Actual results could differ from
these estimates.
3. New accounting pronouncements
(a) Business Combinations
In October 2008, the CICA issued Handbook Section 1582, "Business Combinations", which establishes new standards
for accounting for business combinations. This is effective for business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011.
Should the Company engage in a future business combination, it would consider early adoption to coincide with the
adoption of International Financial Reporting Standards.
(b) Non-controlling Interests
Also in October 2008, the CICA issued Handbook Section 1602, "Non-controlling Interests", to provide guidance on
accounting for non-controlling interests subsequent to a business combination. This is effective for fiscal years
beginning on or after January 1, 2011.
(c) International Financial Reporting Standards (IFRS)
In February 2008, the Accounting Standards Board ("AcSB") confirmed that 2011 is the changeover date for publicly-
listed companies to use IFRS. The date is for interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2011. The changeover date of January 1, 2011, will require the 2010 comparatives
to be presented according to IFRS.
Key dates:
- January 1, 2010 (transition date): An opening statement of financial position according to IFRS will be prepared
as at this date to facilitate the changeover to IFRS in 2011. The Company will continue to report its fiscal 2010
and comparative 2009 results according to Canadian GAAP.
- January 1, 2011 (changeover date): The date after which the Company will prepare and report interim and annual
2011 financial statements with 2010 comparatives according to IFRS.
The Company has identified the following impacted areas:
(i) Functional currency
Under Canadian GAAP -- Companies apply criteria to determine whether a foreign subsidiary's operation is
integrated or self-sustaining, in which case the temporal and current methods of translation, respectively, are
then applied to the subsidiary's financial statement balances and results of operations. The Company uses the
temporal method to translate foreign currency transactions into Canadian dollars.
Under IFRS -- The concepts of integrated and self-sustaining foreign operations do not exist under International
Accounting Standards ("IAS") 21, The Effects of Changes in Foreign Exchange Rates. Under IAS 21, a reporting
entity and each of its foreign operations must identify its "functional currency", defined as "the currency of the
primary economic environment in which the entity operates." Management has determined that the functional currency
of Greystar Resources Ltd., its Colombian branch and subsidiaries is the U.S. dollar as this is the currency of
the primary economic environment in which the Company operates.
(ii) Share-based payments
Under Canadian GAAP -- The fair value of stock-based awards with different vesting dates are calculated as one
grant and the resulting fair value is recognized on a straight-line basis over the vesting period. Forfeitures of
awards are recognized as they occur. Under IFRS - Each tranche of an award with different vesting dates is
considered a separate grant for the calculation of fair value, and the resulting fair value is amortized over the
estimated lives of the respective tranches. Forfeiture estimates are recognized in the period they are estimated,
and are revised for actual forfeitures in subsequent periods.
(iii) Share purchase warrants
Under Canadian GAAP - The Company's share purchase warrants are measured at fair value at initial recognition
using the Black-Scholes option pricing model, and recorded in equity reserve with no subsequent re-measurement.
Under IFRS - The exercise prices of the Company's share purchase warrants are denominated in Canadian dollars.
Because the functional currency of the Company is the U.S. dollar under IFRS, the share purchase warrants meet the
definition of derivatives and will be measured as financial liabilities at fair value through profit or loss
("FVTPL") at date of the grant and the end of each reporting period. The fair value of the share purchase warrants
is determined using the Black Scholes option pricing model.
(iv) Compound financial instruments
Under Canadian GAAP - The Company raised equity by issuing units that consisted of common shares and share
purchase warrants. The gross proceeds were allocated to common shares and warrants using the relative fair value
method.
Under IFRS - IAS 32 requires an entity to split a compound financial instrument at inception into separate
liability and equity components. As the share purchase warrants will be classified as warrant liabilities, the
residual method will be used to allocate the gross proceeds to common shares and warrant liability as required by
IAS 32.
(v) Environment rehabilitation provision
Under Canadian GAAP - The Company uses the best estimate that a third party would charge for the remediation work
to measure the reclamation and closure cost obligations. The Company uses the credit-adjusted pre-tax risk-free
interest rate as a discount rate to measure the net present value of undiscounted estimated future cash flows.
Under IFRS - Under IAS 37, reclamation and closure cost obligations are measured based on management's best
estimate of the expenditures required to settle the obligations as at the balance sheet date. In the case that
management intends to perform the reclamation and closure activities internally at a lower cost than if they were
performed externally, the lower costs are used to represent management's best estimate. The discount rate used to
determine the present value of reclamation and closure cost obligations is the pre-tax rate that does not reflect
risks for which future cash flow estimates have been adjusted.
(vi) Amounts payable on exploration and evaluation asset acquisition
Under Canadian GAAP - The Company acquired surface rights for which some payments are due in the future. This
obligation has been recorded as amounts payable on exploration and evaluation asset acquisition and have been
discounted to reflect its non-interest bearing feature. The Company used credit-adjusted pre-tax risk-free
interest rate to discount this obligation and record the value of the mineral interest.
Under IFRS - The discount rate used to determine the present value of this obligation is the pre-tax rate that
does not reflect risks for which future cash flow estimates have been adjusted.
(vii) Change in presentation currency
The Company currently presents its financial statements in Canadian dollars. The Company expects to present its
financial statements in US dollars under IFRS. This change in presentation currency will result in a cumulative
translation adjustment and under IFRS 1, the Company will elect to eliminate the cumulative translation adjustment
on the IFRS transition date.
The Company is in the process of determining the effect of these items noted above for presentation in the first
quarter interim financial statements for 2011.
4. Equipment
Accumulated Net book
2010 Cost amortization value
Buildings $ 748,942 $ 168,436 $ 580,506
Field Equipment 1,011,512 748,595 262,917
Office equipment 588,798 462,491 126,307
Transport 358,922 209,909 149,013
$ 2,708,174 $ 1,589,431 $ 1,118,743
Accumulated Net book
2009 Cost amortization value
Buildings $ 556,021 $ 142,331 $ 413,690
Field Equipment 884,975 659,301 225,674
Office equipment 533,932 302,608 231,324
Transport 309,727 146,898 162,829
$ 2,284,655 $ 1,251,138 $ 1,033,517
5. Mineral properties
The Company's mineral properties comprise surface rights, mining titles, exploration licenses, exploitation
permits and concession contracts that provide for gold, silver and other precious metals exploitation in an area
located in the Municipality of California, Santander, Colombia, collectively known as the Angostura Project. The
licenses, permits and contracts expire at various dates ranging from 2020 to 2038 and generally can be renewed for
an additional 10, 20 or 30 years depending on the applicable mining code. Certain portions of the Angostura
project are subject to royalties ranging from 5% to 10% of net profits after certain additional deductions. In
addition, pursuant to the laws of Colombia, the Government of Colombia currently receives royalties on gold and
silver production equal to 4% of 80% of the production value, which is calculated using the average gold and
silver prices published by the London Metal Exchange.
In order to maintain the Company's mineral properties in good standing, the Company is required to make certain
annual fee payments based on the number of hectares and a Colombian wage factor that fluctuates on an annual
basis. As at December 31, 2010, the required annual fee payments related to the Company's mineral properties
totaled approximately $620,000 (2009 - $611,000).
(a) Acquisition costs
2010 2009
Acquisition costs, beginning of year $ 18,590,951 $ 14,418,247
Additions during the year 2,312,795 4,172,704
Acquisition costs, end of year $ 20,903,746 $ 18,590,951
Additions to mineral properties during the year ended December 31, 2010, relate to a combination of $2,066,512
cash consideration and 95,000 share purchase warrants issued. The warrants issued to purchase the Company's common
shares have a term of 4 years with exercise prices ranging from $3.65 to $4.17 and maturity dates ranging from
July 28, 2014 through October 21, 2014. The value of the share purchase warrants issued was estimated to be
$246,283 using the Black--Scholes valuation model applying risk free rates ranging from 1.79% to 2.42%, expected
lives based on the full term of the warrants, expected dividends of nil, and volatility rates ranging from 74.8%
to 83.7%.
Additions to mineral properties during the year ended December 31, 2009, relate to a combination of $2,557,889
cash consideration and 628,500 share purchase warrants issued. The warrants issued to purchase the Company's
common shares have a term of 4 years with exercise prices ranging from $2.05 to $6.75 and maturity dates ranging
from January 11, 2012 through June 29, 2013. The value of the share purchase warrants issued was estimated to be
$1,614,815 using the Black--Scholes valuation model applying risk free rates ranging from 1.39% to 3.45%, expected
lives based on the full term of the warrants, expected dividends of nil, and volatility rates ranging from 48.4%
to 80.3%.
In June 2009, the Company acquired the "Las Puentes" land parcel for $2,037,318 (COP4,010,000,000). A cash payment
of $1,017,920 (COP 1,860,000,000) was made on the acquisition date, with further payments of approximately
$595,700 (COP1,150,000,000) payable in April 2010 and $518,000 (COP1,000,000,000) payable in April 2011.
Pursuant to the agreement, the Company was required to make a progress payment of approximately $595,700
(COP1,150,000,000) in April 2010 for the Las Puentes land parcel. However, certain of the original Las Puentes
vendors are currently in a title dispute with another unrelated group. The Company believes that its title is not
at risk, and has decided not to make the $595,700 payment until the title dispute amongst the vendors and the
unrelated group is resolved.
The future obligations have been recorded as amounts payable on mineral property acquisition on the consolidated
balance sheet and have been discounted to reflect the non-interest bearing feature of this obligation. The
discounted value of the future payments recognized on the date of acquisition was $1,019,398 and is being accreted
to earnings at a rate of 12%. The discounted amount of $1,099,339 includes accretion at 12% and the effects of
exchange rate differences as at December 31, 2010.
In November 2009, the Company entered into a binding purchase agreement with a private Colombian company for an
exclusive option to acquire a 100% working interest in the 78 hectares La Plata property ("La Plata"). The terms
of the purchase agreement include staged payments totaling US$1,900,000 and the issuance of 160,000 share purchase
warrants to acquire a 100% working interest in the property. During the year ended December 31, 2010, the Company
made $1,345,959 (US$1,300,000) (2009 - $302,636 (US$300,000)) of the required staged payments and issued the share
purchase warrants. Subsequent to year end, the Company made the final $297,332 (US$300,000) staged payment and has
therefore, fully acquired the 100% working interest. The Company is required to incur minimum annual exploration
expenditures aggregating approximately $745,950 (US$750,000) and to drill an aggregate of 4,000 meters on the
property over a four year period starting in November 2009. In addition, if the Company develops an economically
viable ore body at La Plata, the Company will pay a one-time payment of US$7 per ounce of gold and US$0.10 per
ounce of silver for extractable reserves up to a maximum of 750,000 ounces.
(b) Exploration expenditures
The details of exploration expenditures expensed during the years ended December 31, 2010 and 2009 on mineral
properties are as follows:
2010 2009
Exploration expenditures:
General and administrative cost (Angostura project in Colombia) $ 6,126,343 $ 3,847,524
Assay and metallurgy 1,554,773 1,231,195
Consulting and geology 372,078 259,093
Drilling and field costs 6,426,498 2,737,147
Environmental 184,017 1,294,262
Equipment rentals, repairs, maintenance and supplies 462,812 88,102
Feasibility and pre-feasibility studies 10,138,124 8,582,734
Taxes and surface rights 998,867 1,150,434
26,263,512 19,190,491
Cumulative exploration expenditures,
beginning of year 106,571,989 87,381,498
Cumulative exploration expenditures,
end of year $ 132,835,501 $ 106,571,989
6. Asset retirement obligation
As at December 31, 2010, the Company had an asset retirement obligation of $1,163,223 (2009 - $1,342,855) relating
to the remediation of environmental disturbances on the Angostura project. The obligation is based on $1,524,556
of undiscounted estimated cash flows required to settle the obligation in the future. Assumptions used by
management to determine the carrying amount of the asset retirement obligation were a 12% credit-adjusted risk-
free rate, a 15 - 25% mark-up in costs to reflect anticipated third party contractor costs and a 3.38 - 3.75% rate
of inflation over the expected years to settlement, which is estimated to be in 2013.
The following table shows the changes in the carrying amount of the Company's asset retirement obligation
associated with the Angostura Project:
2010 2009
Beginning of year, current and long-term $ 1,342,855 $ 580,000
Decrease in liability due to change in estimate (78,483) -
Remediation work performed (324,752) (455,683)
Liabilities incurred during the year 39,414 1,294,262
Accretion during the year 160,214 -
Effect of translation on foreign currencies 23,976 (75,724)
End of year, current and long-term 1,163,223 1,342,855
Less current portion 933,777 713,666
$ 229,446 $ 629,189
7. Share capital
(a) Authorized
Unlimited common shares without par value.
(b) Issued and outstanding
As of December 31, 2010, the Company had 84,222,987 common shares issued and outstanding (2009 -- 72,360,764).
During the year ended December 31, 2010, a total of 11,700,261 shares of the Company were issued upon the exercise
of warrants at prices between $2.47 and $4.30 per share for total proceeds of $46,062,723 of which $86,357 relates
to the exercise of agents' warrants. As a result of these exercises, $11,969,381 previously recorded as warrants
in shareholders' equity was transferred to share capital. For the year ended December 31, 2010, a total of 161,962
shares of the Company were issued upon the exercise of options at prices between $0.85 and $4.71 per share for
total proceeds of $371,763. As a result of these exercises, $633,541 was transferred from contributed surplus to
share capital.
On March 20, 2009, the Company completed a private placement of 6,579,161 units at a price of $1.83 per unit for
gross proceeds of $12,039,865. Each unit consisted of one common share and three-quarters of a transferable common
share purchase warrant. A total of 6,579,161 common shares and 4,934,371 warrants were issued on closing. The
Company allocated $7,874,898 of gross proceeds to share capital and allocated $4,164,967 to warrants using the
relative fair value method. The Company incurred $191,627 of issue costs with $125,338 allocated to common shares
and $66,289 allocated to warrants. Each whole warrant entitles the holder to purchase one common share at a price
of $2.47 per share during the five-year period ending March 20, 2014. If at any time following six months from
March 20, 2009, the closing price of the Company's common shares on the Toronto Stock Exchange (TSX) is above
$3.70 for 30 or more consecutive trading days, the Company can give notice to accelerate the expiry date of up to
2,467,185 warrants to 60 days following the date of such notice. During 2010, this condition was met and the
Company accelerated the expiry date resulting in 2,467,185 warrants being exercised. Additionally, if at any time
following two months from the completion and delivery of a bankable feasibility study with respect to the
Company's Angostura gold-silver project, the closing price of the Company's common shares on the TSX is above
$3.70 for 30 or more consecutive trading days, the Company can give notice to accelerate the expiry of the
remaining 2,467,186 warrants (or less) to 60 days following the date of such notice. The value of the warrants
issued as part of this private offering was estimated using the Black-Scholes valuation model with the following
assumptions:
Risk-free interest rate 1.85%
Expected life 5 years
Volatility 72%
Expected dividends Nil
On September 29, 2009, the Company closed a public offering of 18,071,429 units at a price of $3.50 per unit for
gross proceeds of $63,250,000. Each unit consisted of one common share and one-half of a transferable common share
purchase warrant. A total of 18,071,429 common shares and 9,939,285 warrants were issued on closing, including
903,571 warrants issued as compensation to the agents assisting with the offering. The Company allocated the gross
proceeds of $53,013,442 to share capital and $10,236,558 to warrants using the relative fair value method. The
Company incurred $5,147,610 of issue costs with $4,314,495 allocated to common shares and $833,115 allocated to
warrants. The 9,035,714 warrants subscribed to in this offering entitle the holder to purchase one common share at
a price of $4.30 per share during the one-year period ending September 29, 2010. If at any time, the closing price
of the Company's common shares on the TSX is greater than $5.00 for 20 or more consecutive trading days, the
Company can give notice to accelerate the expiry date of the warrants to 20 days following the date of such
notice. During 2010, this condition was met and the Company accelerated the expiry date resulting in 9,233,076
being exercised and 21,529 warrants expiring. Of these warrants, the Company received $194,265 due to the
allotment to be issued pursuant to the exercise of 45,178 warrants. The Company also issued 127,000 common shares
in 2009 and received cash proceeds of $546,100 subsequent to December 31, 2009. The 903,571 agents' warrants
entitle the holder to purchase one unit at a price of $3.50 per unit during the one-year period ending September
29, 2010, with each unit comprised of one common share and one-half of a transferable common share purchase
warrant and having the same terms as the units subscribed to as part of the September 29, 2009 public offering.
The value of the agents' warrants was estimated to be $1,359,965 using the Black-Scholes valuation model and has
been recorded as an issue cost of this transaction. The valuation of the warrants issued as part of this public
offering was estimated using the Black-Scholes valuation model with the following assumptions:
Risk-free interest rate 1.20%
Expected life 1 year
Volatility 119%
Expected dividends Nil
(c) Share purchase options
The Company has an incentive share option plan (the Plan) that allows it to grant options to its employees,
officers, directors and consultants to acquire common shares. The number of shares issuable pursuant to the Plan
is a fixed maximum percentage of 10% of the common shares issued.
Under the terms of the Plan, the exercise price of each option equals the closing market price for the common
shares on the TSX on the trading day prior to the date of the grant. Options have a maximum term of ten years and
terminate sixty days following the termination of the optionee's employment or term of engagement, except in the
case of retirement, or death, termination for cause, resignation at the request of the Board, removal or
disqualification. Vesting of options is made at the discretion of the Board of Directors at the time the options
are granted. All stock options will automatically vest in the event of a change in control as defined in the Plan.
The share option plan also provides for a cashless exercise option provision which is in substance a stock
appreciation right which calls for settlement by the issuance of equity instruments. Stock-based employee awards
that include stock appreciation rights are accounted under the fair value based method. During the year ended
December 31, 2010, the Company granted to directors, officers, employees and consultants a total of 3,095,750
options with vesting periods ranging from immediate vesting to vesting one third on each one year anniversary from
the date of grant. The options are exercisable for up to five years from date of grant. The estimated fair value
of the 2010 stock options granted at the date of option grant is $8,321,512 of which $3,309,518 has been recorded
in stock-based compensation during the year ended December 31, 2010.
During the year ended December 31, 2009, the Company granted a total of 1,510,000 options with vesting periods
ranging from immediate vesting to vesting one third on each one year anniversary from the date of grant. The
options are exercisable for up to five years from date of grant. The estimated fair value of the stock options
granted at the date of option grant was $3,241,456.
The Company recorded total stock based compensation expense of $4,515,330 for the year ended December 31, 2010
(2009 - $2,305,684), and will record additional expenses of $5,974,623 as the remaining options become vested.
The weighted average assumptions used to estimate the fair value of options granted were:
2010 2009
Risk-free interest rate 2.42% 1.75%
Expected life 5 years 5 years
Volatility 77.5% 72.6%
Expected dividends Nil Nil
The continuity of share purchase options for 2010 is as follows:
Balance, Balance,
Exercise December 31, Expired/ December 31,
Expiry date price 2009 Granted Exercised(1) cancelled 2010
April 29, 2010 $4.10 99,450 - (93,000) (6,450) -
July 25, 2010 $5.90 2,750 - - (2,750) -
August 22, 2010 $6.00 14,000 - - (14,000) -
September 6, 2010 $7.10 608,600 - - (608,600) -
January 20, 2011 $8.01 471,000 - - (125,000) 346,000
March 1, 2011 $6.60 50,000 - - (50,000) -
March 31, 2011 $11.00 9,500 - - - 9,500
May 26, 2011 $10.20 13,400 - - - 13,400
October 2, 2011 $10.30 406,500 - - (34,500) 372,000
September 20, 2012 $6.60 642,250 - - (59,000) 583,250
May 15, 2013 $4.71 617,535 - (63,196) (3,169) 551,170
June 23, 2013 $4.46 100,000 - (20,000) (80,000) -
December 5, 2013 $0.85 17,800 - (5,700) - 12,100
May 18, 2014 $3.60 1,256,500 - (116,738) (26,002) 1,113,760
July 16, 2014 $3.26 75,000 - (25,000) (50,000) -
August 11, 2014 $4.00 25,000 - - - 25,000
August 17, 2014 $4.05 30,000 - - - 30,000
September 14, 2014 $3.61 25,000 - - (25,000) -
November 23, 2014 $6.22 35,000 - - - 35,000
January 1, 2015 $5.84 - 150,000 - - 150,000
February 22, 2015 $5.52 - 750,000 - - 750,000
May 17, 2015 $3.90 - 1,350,750 - (163,375) 1,187,375
August 3, 2015 $3.98 - 400,000 - - 400,000
September 1, 2015 $3.98 - 240,000 - - 240,000
September 21, 2015 $3.92 - 140,000 - - 140,000
November 1, 2015 $4.31 - 15,000 - - 15,000
June 13, 2015 $5.05 - 50,000 - - 50,000
4,499,285 3,095,750 (323,634) (1,247,846) 6,023,555
Weighted average
exercise price $5.83 $4.42 $3.94 $6.31 $5.11
(1) There were 225,000 options exercised on a cashless basis resulting in the issuance of 63,326 common shares.
The continuity of share purchase options for 2009 is as follows:
Balance, Balance,
Exercise December 31, Expired/ December 31,
Expiry date price 2008 Granted Exercised(1) cancelled 2009
June 7, 2009 $2.10 195,000 - (195,000) - -
October 13, 2009 $2.55 4,400 - (4,400) - -
November 23, 2009 $4.00 699,000 - (699,000) - -
April 29, 2010 $4.10 99,450 - - - 99,450
July 25, 2010 $5.90 2,750 - - - 2,750
August 22, 2010 $6.00 14,000 - - - 14,000
September 6, 2010 $7.10 608,600 - - - 608,600
January 20, 2011 $8.01 471,000 - - - 471,000
March 1, 2011 $6.60 50,000 - - - 50,000
March 31, 2011 $11.00 9,500 - - - 9,500
May 26, 2011 $10.20 13,400 - - - 13,400
October 2, 2011 $10.30 406,500 - - - 406,500
October 20, 2011 $0.88 10,000 - (10,000) - -
September 20, 2012 $6.60 642,250 - - - 642,250
May 15, 2013 $4.71 629,750 - (12,215) - 617,535
June 23, 2013 $4.46 150,000 - (50,000) - 50,000
November 17, 2013 $0.98 50,000 - - (50,000) -
December 5, 2013 $0.85 20,000 - (2,200) - 17,800
May 18, 2014 $3.60 - 1,285,000 (28,500) - 1,256,500
July 16, 2014 $3.26 - 75,000 - - 75,000
August 6, 2014 $4.10 - 35,000 - (35,000) -
August 11, 2014 $4.00 - 25,000 - - 25,000
August 17, 2014 $4.05 - 30,000 - - 30,000
September 14, 2014 $3.61 - 25,000 - - 25,000
November 23, 2014 $6.22 - 35,000 - - 35,000
4,075,600 1,510,000 (1,001,315) (85,000) 4,499,285
Weighted average
exercise price $6.02 $3.67 $3.61 $2.26 $5.83
(1) There were 776,500 options exercised on a cashless basis resulting in the issuance of 285,097 common shares.
(e) Share purchase warrants
The continuity of share purchase warrants for the year ended December 31, 2010, is as follows:
Balance Balance
Exercise December 31, December 31,
Expiry date price 2009 Issued Exercised Expired 2010
January 11, 2012 $7.10 40,000 - - - 40,000
January 10, 2013 $6.30 100,000 - - - 100,000
September 29, 2010 $3.50 106,607 - (106,607) - -
September 29, 2010 $4.30 9,094,695 53,303 (9,126,469) (21,529) -
January 14, 2012 $6.75 3,700 - - - 3,700
February 18, 2012 $5.65 19,800 - - - 19,800
January 22, 2013 $2.05 30,000 - - - 30,000
June 20, 2013 $2.30 300,000 - - - 300,000
June 29, 2013 $4.89 100,000 - - - 100,000
November 13, 2013 $6.22 - 160,000 - - 160,000
November 13, 2013 $6.10 - 15,000 - - 15,000
March 20, 2014 $2.47 4,934,371 - (2,467,185) - 2,467,186
July 28, 2014 $4.16 - 15,000 - - 15,000
July 29, 2014 $3.65 - 35,000 - - 35,000
October 21, 2014 $4.14 - 10,000 - 10,000
October 21, 2014 $4.17 - 35,000 - 35,000
14,729,173 323,303 (11,700,261) (21,529) 3,330,686
The continuity of share purchase warrants for the year ended December 31, 2009, is as follows:
Balance Balance
Exercise December 31, December 31,
Expiry date price 2008 Issued Exercised Expired 2009
October 3, 2009 $10.10 9,178 - - (9,178) -
January 11, 2012 $7.10 40,000 - - - 40,000
January 10, 2013 $6.30 100,000 - - - 100,000
September 29, 2010 $3.50 - 903,571 (796,964) - 106,607
September 29, 2010 (1) $4.30 - 9,434,195 (339,500) - 9,094,695
January 14, 2012 $6.75 - 3,700 - - 3,700
February 18, 2012 $5.65 - 19,800 - - 19,800
January 22, 2013 $2.05 - 30,000 - - 30,000
June 20, 2013 $2.30 - 300,000 - - 300,000
June 29, 2013 $4.89 - 100,000 - - 100,000
March 20, 2014 $2.47 - 4,934,371 - - 4,934,371
149,178 15,725,637 (1,136,464) (9,178) 14,729,173
(1) There were 9,035,714 share purchase warrants issued related to the September 29, 2009, public offering. The
remaining 398,481 share purchase warrants relate to the exercise of 796,964 agents' warrants, which entitle them
to an additional one-half of one transferable share purchase warrant as disclosed in note 7(b). The fair value of
these additional warrants was estimated to be $645,580 and is based on a proportion that is equal to the relative
fair value allocation of the gross proceeds described in note 7(b) applied to the original warrant value and
exercise price.
(f) Shareholder rights plan
During 2003, the Company received regulatory and shareholder approval for a shareholder rights plan (the Rights
Plan). Under the terms of the Rights Plan, one right was issued and attached to each outstanding common share of
the Company at the close of the business on November 19, 2003, and one right will attach automatically to each
common share issued thereafter.
The rights will trigger and become exercisable ten trading days after the occurrence of certain events including
the acquisition or announcement of an intention to acquire by a person, including any persons related to or acting
jointly or in concert with such person, of 20% or more of the Company's outstanding common shares, other than by
an acquisition that complies with the permitted bid provisions of the Rights Plan or by an acquisition in respect
of which the board of directors has waived the application of the Rights Plan. The initial exercise price of the
rights is $25.00, subject to adjustments set forth in the Rights Plan. The expiry date for the rights plan has
been extended from December 20, 2007 to December 20, 2013.
8. Related party transactions
During the year ended December 31, 2010, the Company was charged a total of $582,614 (2009 - $382,398) for office
and administration fees, management and consulting fees and reimbursement of expenses, by directors and by
companies with common directors.
Included in the accounts payable and accrued liabilities balance is a total of $7,062 (2009 -$29,702) owing to
companies with common directors.
These related party transactions are in the normal course of operations and are measured at the exchange amount,
which is the amount of consideration established and agreed to by the related parties.
9. Supplementary cash flow information
2010 2009
Cash amount of payments received:
Interest received $ 1,164,205 $ 337,782
Non-cash investing and financing activities:
Agents' warrants issued from the public - 1,359,968
Fair value of additional warrants granted
upon exercise of agents' warrants 86,357 645,580
Share subscription receivable for common shares
issued on exercise of warrants - 546,100
Fair value of stock options transferred to
share capital from contributed surplus
on exercise of options 633,541 2,219,857
Fair value of warrants transferred to
share capital on exercise of warrants 11,969,381 1,552,829
Fair value of share purchase warrants
issued on mineral property acquisition 246,283 973,215
Amounts payable on mineral property
acquisition 16,768 1,013,986
Cash and cash equivalents are comprised of:
Cash $ 4,602,740 $ 11,966,396
Bank short-term deposits 93,740,487 69,616,908
$ 98,343,227 $ 81,583,304
10. Income taxes
Income tax expense (recovery) differs from the amounts computed by applying the combined federal and provincial
income tax rate of 28.5% (2009 - 30%) to pre-tax income (loss) as follows:
2010 2009
Loss before income taxes $ (35,941,803) $ (24,025,828)
Income tax recovery at statutory rates $ (10,243,414) $ (7,207,748)
Difference in foreign tax rates - 228,116
Stock based compensation and other permanent differences 1,718,770 691,705
Future tax rate differences 1,271,597 7,797,114
(7,253,047) 1,509,187
Valuation allowance 7,253,047 (1,509,187)
Income tax recovery $ - $ -
The significant components of the Company's future income tax assets and liabilities at December 31, 2010 and 2009
are as follows:
2010 2009
Future income tax assets
Capital assets and resource properties 34,671,969 28,493,527
Asset retirement obligation 290,806 335,714
Losses carried forward 4,314,330 2,800,630
Share issuance costs 929,325 1,051,520
Total future income tax assets 40,206,430 32,681,391
Valuation Allowance (40,206,430) (32,681,391)
Future income tax assets, net of valuation allowance $ - $ -
At December 31, 2010, the Company has capital losses of approximately $2,132,938 (2009 -$2,157,000) that are
without expiry and Canadian operating losses with expiry dates as follows:
Operating loss for years ending Amount Expiry Dates
December 31, 2004 $ 2,005,328 2014
December 31, 2005 610,310 2015
December 31, 2006 443,270 2026
December 31, 2007 450,760 2027
December 31, 2008 1,817,438 2028
December 31, 2009 4,381,630 2029
December 31, 2010 6,482,116 2030
$16,190,852
11. Segment disclosures
The Company operates in a single segment, being resource exploration and development. Capital expenditures made
during 2010 and 2009 are disclosed in notes 4 and 5. Other geographic information is as follows:
Canada Colombia Total
December 31, 2010:
Loss for the year $18,415,385 $17,526,418 $ 35,941,803
Interest Income 1,125,276 38,929 1,164,205
Total assets 106,834,761 14,304,028 121,138,789
December 31, 2009:
Loss for the year $10,838,962 $13,186,866 $ 24,025,828
Interest Income 323,549 14,233 337,782
Total assets 89,313,842 12,479,270 101,793,112
12. Management of financial risk
The Company's financial instruments are exposed to certain financial risks, including currency risk, credit risk,
liquidity risk, interest risk and price risk.
(a) Currency risk
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company
operates in Canada and Colombia and a large portion of its expenses are incurred in Colombian pesos and U.S.
dollars. A significant change in the currency exchange rates between the Canadian dollar relative to the Colombian
peso and U.S. dollar could have an effect on the Company's results of operations, financial position or cash
flows.
The Company has not hedged its exposure to currency fluctuations. The Company's cash and cash equivalents held in
Canadian dollars at December 31, 2010 was $92,426,285 (2009 - $78,615,797).
The Company's exposure to the Colombian peso, expressed in Canadian dollars and Colombian pesos, on financial
instruments is as follows:
2010 2009
CDN$ Colombian peso CDN$ Colombian peso
Cash and cash equivalents $ 93,227 179,975,804 $ 598,289 1,170,819,961
Accounts receivable and prepaid expenses 524,882 1,013,284,852 337,783 661,023,483
Accounts payable and accrued liabilities 2,400,242 4,633,672,085 1,761,310 3,446,790,607
$ 3,018,351 5,826,932,741 $ 2,697,382 5,278,634,051
As at December 31, 2010, with other variables unchanged, a 10% depreciation or appreciation of the Canadian dollar
against the Colombian peso would change the values of the Colombian peso denominated financial instruments and
would affect the consolidated statement of operations and comprehensive loss by approximately $301,800.
The Company's exposure to the Colombia peso on annual exploration expenditures throughout the year ended December
31, 2010 was $17,718,266. A 10% depreciation of the Canadian dollar against the Colombian peso would affect the
consolidated statement of operations and comprehensive loss by approximately $1,771,827.
The Company's exposure to the U.S. dollar, expressed in Canadian dollars and U.S. dollars, on financial
instruments is as follows:
/T/
2010 2009
CDN$ US$ CDN$ US$
Cash and cash equivalents $1,746,735 $1,754,234 $ 44,494 $ 42,513
Accounts payable and accrued liabilities 1,151,856 1,158,110 225,631 215,585
$2,898,591 $2,912,344 $ 270,125 $ 258,097
/T/
As at December 31, 2010, with other variables unchanged, a 10% depreciation or appreciation of the Canadian dollar
against the U.S. dollar would change the values of the U.S. dollar denominated financial instruments and would
affect the consolidated statement of operations and comprehensive loss by approximately $289,859.
The Company's exposure to the U.S. dollar on annual exploration expenditures throughout the year ended December
31, 2010 was $5,943,565. A 10% depreciation of the Canadian dollar against the U.S. dollar would affect the
consolidated statement of operations and comprehensive loss by approximately $594,357.
(b) Credit risk
Credit risk is the risk of an unexpected loss if a third party to a financial instrument fails to meet its
contractual obligations. The Company manages its credit risk through its counterparty ratings and credit limits.
The Company's cash and cash equivalents and short term investments are held through large Canadian financial
institutions. Short-term investments are composed of financial instruments issued by Canadian banks and companies
with high investment-grade ratings.
These instruments mature and are cashable at various dates over the current operating period. Amounts receivable
primarily consists of Harmonized Sales Tax receivable with expected payment from the Canadian government.
The total cash and cash equivalents and accounts receivable represent the maximum credit exposure. The Company
limits its credit risk exposure by holding bank accounts and any short term investments with reputable banks with
high credit ratings.
(c) Liquidity risk
The Company manages liquidity risk by maintaining adequate cash balances in order to meet short and long term
business requirements. The Company believes that these sources will be sufficient to cover its cash requirements
for the upcoming year. The Company's cash is invested in liquid investments with quality financial institutions
and is available on demand for the Company's programs and is not invested in any asset backed commercial paper.
Contractual commitments that the Company is obligated to pay in future years are disclosed in note 14.
As at December 31, 2010, the Company's liabilities have contractual maturities as summarized below:
Less than
Total 1 year
Accounts payable and accrued liabilities $ 6,308,617 $ 6,308,617
Accounts payable on mineral properties 1,113,700 1,113,700
$ 7,422,317 $ 7,422,317
(d) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Company's cash in bank accounts and investments earn interest
income at variable rates. The Company's future interest income is exposed to changes in short-term rates. Assuming
cash remains constant, an increase or decrease in the annual interest rate of 1% would result in a corresponding
increase or decrease of annual interest income by $983,000.
(e) Fair value of financial instruments
The fair values of amounts receivable and accounts payable and accrued liabilities approximate their carrying
values due to the short-term nature of these instruments. The fair value of the amounts payable on mineral
property acquisitions approximates their carrying value as there was no material change to the discount rate used
to calculate the fair value since initial recognition.
There are three levels of the fair value hierarchy that prioritize the inputs to valuation techniques used to
measure fair value, with Level 1 inputs having the highest priority. The levels and the valuation techniques used
to value financial assets and liabilities are described below:
(i) Level 1 - Quoted Prices in Active Markets for Identical Assets
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted
assets or liabilities.
Cash equivalents, including demand deposits and money market instruments, are valued using quoted market prices.
Marketable equity securities are valued using quoted market prices in active markets, obtained from securities
exchanges. Accordingly, these items are included in Level 1 of the fair value hierarchy.
(ii) Level 2 - Significant Other Observable Inputs
Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets,
or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or
liability.
(iii) Level 3 - Significant Unobservable Inputs
Unobservable (supported by little or no market activity) prices.
The following table illustrates the classification of the Company's financial instruments recorded at fair value
within the fair value hierarchy as at December 31, 2010.
Financial assets at fair value
Level 1 Level 2 Level 3 December 31, December 31,
2010 2009
Cash and cash equivalents $ 98,343,227 $ - $ - $98,343,227 $81,583,304
Held for trading 98,343,227 - - 98,343,227 81,583,304
Accounts receivable 154,736 - - 154,736 507,514
Financial assets 154,736 - - 154,736 507,514
Total financial asset at fair value $ 98,497,963 $ - $ - $98,497,963 $82,090,818
Financial inputs liabilities at fair value
Level 1 Level 2 Level 3 December 31, December 31,
2010 2009
Accounts payable and accrued
liabilities $ 6,308,617 $ - $ - $ 6,308,617 $ 2,764,557
Amounts payable on mineral
property acquisition - 1,099,339 - 1,099,339 1,013,986
Total financial asset at fair value $ 6,308,617 $ 1,099,339 $ - $ 7,407,956 $ 3,778,543
13. Capital management
The Company's objective when managing capital is to maintain adequate levels of funding in order to support
exploration and development of its projects in Colombia and to maintain corporate and administrative functions.
The Company considers shareholders' equity as capital.
The Company is not subject to externally imposed capital requirements and the Company's overall strategy with
respect to capital risk management remains unchanged from the prior year (see note 1 for additional information).
14. Commitments
The following is a schedule of the Company's commitments as at December 31, 2010:
2016 and
Total 2011 2012 2013 2014 2015 Thereafter
Consulting & contract services (a) $ 2,191,267 $ 2,181,448 $ 9,819 $ - $ - $ - $ -
Operating leases (b) 393,500 189,008 152,558 24,856 14,128 12,950 -
$ 2,584,767 $ 2,370,456 $ 162,377 $ 24,856 $ 14,128 $ 12,950 $ -
(a) Relates to various professional services and outsourced services.
(b) Primarily relates to operating leases for office premises
The Company has commitments related to the acquisition of mineral properties as described in note 5.
The Company is from time to time involved in various claims, legal proceedings and complaints arising in the
ordinary course of business. The Company does not believe that adverse decisions in any pending or threatened
proceedings related to any matter, or any amount which it may be required to pay by reason thereof, will have a
material effect on the financial condition or future results of operations of the Company.
GREYSTAR RESOURCES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2010
INTRODUCTION
The following information of Greystar Resources Ltd. (the "Company" or "Greystar"), prepared as of March 23, 2011,
should be read in conjunction with the Company's audited annual consolidated financial statements for the years
ended December 31, 2010 and 2009, and the related notes attached thereto. These financial statements have been
prepared in accordance with Canadian generally accepted accounting principles. All amounts in this management's
discussion and analysis ("MD&A") are expressed in Canadian dollars unless otherwise indicated.
Additional information relevant to the Company's activities, including the Company's Annual Information Form, is
available on SEDAR at www.sedar.com. The Company is a development stage company and is also engaged in the
acquisition and exploration of resource properties. The Company's primary activity is the exploration and
development of the Angostura Gold-Silver Project (the "Angostura Project") in Colombia. The Company's head office
is located in Vancouver, British Columbia, Canada and its exploration and administrative office in Colombia is
located in the city of Bucaramanga. The Angostura mineral property is located approximately 55 kilometres north-
east of Bucaramanga. The Company is a reporting issuer in British Columbia, Alberta, Ontario and Nova Scotia and
trades on the Toronto Stock Exchange ("TSX") and on the AIM Market of the London Stock Exchange (the "AIM
Market"), under the symbol GSL.
The following discussion, analysis and financial review is comprised of the following sections:
1. HIGHLIGHTS
2. SELECTED FINANCIAL INFORMATION FOR PAST THREE YEARS
3. ANGOSTURA GOLD-SILVER PROJECT UPDATE, COLOMBIA
4. RESULTS OF OPERATIONS
5. QUARTERLY INFORMATION
6. LIQUIDITY AND CAPITAL RESOURCES
7. FINANCIAL INSTRUMENTS
8. TRANSACTIONS WITH RELATED PARTIES
9. CRITICAL ACCOUNTING ESTIMATES
10. NEW ACCOUNTING POLICIES
11. OFF-BALANCE SHEET ARRANGEMENTS
12. OUTSTANDING SHARE DATA
13. RISKS AND UNCERTAINTIES
14. INTERNAL CONTROL OVER FINANCIAL REPORTING
15. FORWARD-LOOKING STATEMENTS
16. QUALIFIED PERSONS
1. HIGHLIGHTS
Results of Operations
The net loss for the year ended December 31, 2010, was $35.9 million compared to $24.0 million for the comparative
period in 2009. Loss per share for the years ended December 31, 2010 and 2009 was $0.43.
In December 2009, the Company filed its Environmental Impact Assessment ("EIA") with the Colombian Ministry of
Environment, Housing and Territorial Development ("MAVDT") in respect to the development of an open pit gold-
silver mine at the Company's Angostura Project in Colombia. On April 20, 2010, MAVDT requested a new EIA that
conforms to new regulation Law 1382 of 2010 (Modified Mining Code) which requires that mining and exploration
activity must be excluded from the "Paramo" ecosystem. On April 29, 2010, the Company filed an appeal of the
notification from MAVDT regarding the EIA. On May 28, 2010, the Company received a letter from MAVDT that
reinstated its review of the Company's EIA as originally filed. On July 15, 2010, MAVDT issued a notice to the
Company that, at the request of third parties, Information Meetings for local communities planned by the Company
needed be incorporated into a public hearing process. The Company held two Informational Hearings on November 3
and 4, 2010, and the Public Hearing on November 21, 2010, to hear the views and opinions of certain interested
parties on the environmental impact of the Angostura Project. These Information and Public Hearings are steps in
the process relating to the decision from MAVDT on issuing an environmental permit for the Angostura Project.
In December 2010, MAVDT notified the Company of a requirement of another Information Meeting and Public Hearing
for the environmental permitting process to be held in the city of Bucaramanga. This decision was based on the
fact that certain participants opposing the Angostura Project, who had registered to address the general public
during the first hearing process, were in the petitioner's view, unable to participate on account of alleged
restrictions in the road heading to California, Santander, the location of the first hearing. This exceptional
request was intended to better allow inhabitants of Bucaramanga to express their views on the Angostura Project
and for MAVDT to obtain public testimony or comments on the Angostura Project's EIA. The Information Meeting was
held on February 17, 2011, and the Public Hearing held on March 4, 2011. Unfortunately, confrontations during the
Public Hearing resulted in the representatives of MAVDT cancelling the Public Hearing after 28 of the inscribed
470 statements had been heard.
On March 18, 2011, the Company made an announcement clarifying certain comments made by the Ministry of Mines and
Energy of Colombia, which could be incorrectly interpreted to mean that the Company is fully withdrawing from the
Angostura Project. The Company confirmed that that it does not intend to withdraw from the Angostura Project and
it intends simply to "desist" (which in this context, means to cease the Company's intention of further pursuing a
formal petition or request for the administrative procedure for an environmental license at this time with a
Colombian governmental entity, but without prejudice of the right and opportunity to file a new petition or
request for administrative procedure for a mining project environmental license in the future) from ongoing
environmental licensing to allow for future re-filing on terms that reflects concerns. On the March 23, 2011, the
Company filed a request to desist from the administrative procedure of the environmental licensing before MAVDT.
The Company is committed to developing the Angostura Project, but recognizes that there is a need to reconfigure
it. As a result, the Company has decided it will not proceed with finalization of the feasibility study on the
open pit project at this time. The Company intends to continue with studies into the feasibility of alternatives,
including an underground option, whilst the uncertainty surrounding the definition of Paramo and the exclusion of
mining from Paramo affects the permitting of its open pit/heap leach part of the project. The Company also will
continue to proceed with evaluating the entire project while working jointly with the MAVDT as well as with the
Ministry of Mines and Energy of Colombia in resolving any outstanding issues, including how the open pit project
can be modified to meet concerns and to proceed with an underground project. The Company has completed a
Preliminary Economic Evaluation ("PEE") of an underground operation at the Angostura Project that targets the high
grade resource at Angostura. The Company proposes to work rapidly to advance the next phase of study and drilling
with an objective to increase and improve the categorization of high grade underground resources, and
investigating the potential to extend the resource at length and depth.
The PEE indicates that over a 14 year initial project life, gold production is estimated at 2 million ounces of
gold and 8 million ounces of silver. Production costs are estimated at US$395 per ounce of gold after silver
credits. The initial capital cost is estimated at US$352 million. At a long term gold price of US$1,015 per ounce
of gold, US$15.85 per ounce of silver and a discount rate of 5%, the pre-tax net present value ("NPV") is US$412
million and the internal rate of return ("IRR') is 20%. Mineral resources that are not mineral reserves do not
have a demonstrated economic viability. The Company will file a National Instrument 43-101 compliant Technical
Report within 45 days from March 18, 2011.
The Company will complete all necessary steps to ensure that the Angostura Project will not affect the water
supply or its quality to the city of Bucaramanga, the surrounding metropolitan area, or the North Soto Province.
The Company will continue to inform citizens fully about its proposed Angostura Project and to encourage an
understanding that responsible mining can bring considerable economic and social benefits, not only to the region,
but to Colombia as a whole.
International Cyanide Management Code
In September 2010, the Company announced that The International Cyanide Management Institute ("ICMI") has accepted
the Company as a signatory to the International Cyanide Management Code for the Manufacture, Transport and Use of
Cyanide in the Production of Gold ("Code"). The Code is a voluntary industry program for companies involved in the
production of gold using cyanide and companies manufacturing and transporting this cyanide.
By becoming a signatory, the Company commits to follow the Code's Principles and implement its Standards of
Practice and to have verification audits of the Angostura Project conducted by independent third-party auditors
during its pre-operational phase, within one year of its first receipt of cyanide, and every three years
thereafter.
Management Changes
In February 2010, the Company announced the appointment of Mr. Steve Kesler to the position of President and CEO
following receipt of a Canadian work permit. Mr. Kesler assumed the role of President and Chief Executive Officer
in May 2010 following the retirement of Mr. David Rovig who was appointed as non-executive Chair of the Board. In
April 2010, Tim Lallas resigned as Vice-President Finance, Administration and Chief Financial Officer. Rick Low,
the Company's Director Finance, acted as interim Chief Financial Officer until the appointment of David Newbold as
Chief Financial Officer in August 2010. In June 2010, Geoff Chater stepped down as Vice President Corporate
Development, but continued to provide investor relations consulting services until October 2010. In September
2010, the Company announced the appointment of Victoria Vargas as Vice President Investor Relations and Corporate
Communications. David Heugh was appointed to the position of Chief Operating Officer in March 2011.
2. SELECTED ANNUAL FINANCIAL INFORMATION FOR PAST THREE YEARS
Fiscal Years Ended
December 31
2010 2009 2008
$ $ $
Balance Sheet:
Total assets 121,138,789 101,793,112 43,255,960
Total long-term liabilities 229,446 1,074,829 190,000
Operations:
Exploration expenditures 26,263,512 19,190,491 20,430,742
Administrative costs
General 6,410,249 2,640,896 1,518,049
Stock-based compensation 4,515,330 2,305,684 1,402,085
Interest income (1,164,205) (337,782) (1,406,784)
Other items (83,083) 226,539 1,053
Net loss for the year 35,941,803 24,025,828 21,945,145
Basic and diluted loss per share $ 0.43 $ 0.43 $ 0.48
Dividends per share - - -
The variation in total assets over the three year term is mainly due to fluctuations in levels of cash. As the
Company has no operating revenue, it relies primarily on equity financing to fund its activities. Proceeds from
equity financing, including exercise of stock options and warrants, were $46 million, $76 million and $294,000 in
2010, 2009 and 2008, respectively. Interest income increased in 2010 due to the higher level of cash balance
compared to 2009. Interest rates on investments for 2008 were higher resulting in higher interest income compared
to subsequent years. Funds raised have been used primarily for exploration activities and mineral property
acquisitions at the Angostura Project. Over the three year period, exploration costs have trended up from a
monthly average of $1.7 million in 2008 to $2.2 million in 2010, due to costs incurred for the preparation of the
prefeasibility and feasibility studies. Administrative costs have increased in step with the level of exploration
activity, additional administrative personnel and professional fees as the Company transitions from exploration to
development. At December 31, 2010, cash and cash equivalents represented approximately $98.3 million out of the
$121.1 million of total assets.
Stock-based compensation costs, primarily stock options granted to directors and employees of the Company, were
the largest single component of administrative expenses during 2010 and 2009. Stock based compensation costs are a
non-cash expense and represent an estimate of the fair value of stock options granted to directors, employees and
consultants of the Company.
3. ANGOSTURA GOLD¡SILVER PROJECT UPDATE, COLOMBIA
Historical information on the Angostura Project follows the current and latest developments, which are discussed
immediately below.
Current Developments
The Company's permitting process for the Angostura Project is described under "Permitting" below. This process
involved the filing of an EIA in 2009 and a series of Information and Public Hearings in 2010 and 2011.
On March 18, 2011, the Company made an announcement clarifying certain comments made by the Ministry of Mines and
Energy of Colombia, which could be incorrectly interpreted to mean that the Company is fully withdrawing from the
Angostura Project. The Company confirmed that that it does not intend to withdraw from the Angostura Project and
it intends simply to desist from ongoing environmental licensing to allow for future re-filing on terms that
reflects concerns. On the March 23, 2011, the Company filed a request to desist from the administrative procedure
of the environmental licensing before MAVDT. As a result, the Company has decided it will not proceed with
finalization of the feasibility study on the open pit project at this time. The Company is committed to developing
the Angostura Project, but recognizes that there is a need to reconfigure it. The Company intends to continue with
studies into the feasibility of alternatives, including an underground option, whilst the uncertainty surrounding
the definition of Paramo and the exclusion of mining from Paramo affects the permitting of its open pit/heap leach
part of the project. The Company also will continue to proceed with evaluating the entire project while working
jointly with the MAVDT as well as with the Ministry of Mines and Energy of Colombia in resolving any outstanding
issues, including how the open pit project can be modified to meet concerns and to proceed with an underground
project. The Company has completed a Preliminary Economic Evaluation of an underground operation at the Angostura
Project that targets the high grade resource at Angostura. The Company proposes to work rapidly to advance the
next phase of study and drilling with an objective to increase and improve the categorization of high grade
underground resources, and investigating the potential to extend the resource at length and depth.
The PEE indicates that most of these resources are contained within the shell of the open pit. Mineable resources
were estimated at 14 million tonnes at 5.34 grams per tonne ("g/t") gold and 29.6 g/t silver. A mining rate of
4,000 tonnes per day ("tpd") and flotation plant operation of 3,300 tpd are envisaged, which after a ramp up of
one year, would produce approximately 200,000 ounces of gold per year over the first seven years before production
declines owing to resource constraints. The PEE indicates that over a 14 year initial project life, gold
production is estimated at 2 million ounces of gold and 8 million ounces of silver. Production costs are estimated
at US$395 per ounce of gold after silver credits. The initial capital cost is estimated at US$352 million. At a
long term gold price of US$1,015 per ounce of gold, US$15.85 per ounce of silver and a discount rate of 5%, the
NPV is US$412 million and the IRR is 20%. Mineral resources that are not mineral reserves do not have a
demonstrated economic viability.
The Company is committed to the reclamation of all areas affected by the Angostura Project and to develop a
biodiversity offset program. The Company believes that the oxide resource can be developed with open pit mining
whilst preserving biodiversity and water quality. The Company wants to ensure that the future re-filing reflects
the many concerns that have been presented and that this will allow it to have a social license to operate
sustainably. The Company will complete all necessary steps to ensure that the Angostura Project will not affect
the water supply or its quality to the city of Bucaramanga, the surrounding metropolitan area, or the North Soto
Province. The Company will continue to inform citizens fully about its proposed Angostura Project and to encourage
an understanding that responsible mining can bring considerable economic and social benefits, not only to the
region, but to Colombia as a whole.
Historical Development of Resources
On March 18, 2011 the Company announced its commitment to developing the Angostura Project, but recognized that
there is a need to reconfigure it. The definition of resources prior to this date is set out below for reference.
On July 15, 2010, Greystar announced an updated resource estimate for the Angostura Project. The resource study
was based on updated three dimensional geological and mineral models It included all of the technical data
available as of January 2010, including 179,813 core assays from 938 drill holes representing 302,834 meters, and
1,768 muck samples from the exploration tunnels. The resource study was developed by Greystar under the overall
supervision of consulting company NCL Ingenierfa y Construccion S.A. ("NCL") from Santiago, Chile.
Additional drilling carried out in 2008 and the rigorous evaluation of the resource by Greystar's geological staff
working closely with NCL had provided a robust resource model. Greystar had initiated the evaluation of
underground resources that lie beyond the pit boundary but within a proximity to allow exploitation utilizing the
pit infrastructure either during or after completing the open pit operation. As the cut-off date for the data
employed in this resource study was January 2010, drilling data from the Los Laches, Cristo Rey and Silencio
properties received after that date was not included.
Resource Highlights:
This resource statement was made using a gold price of US$850/oz and a silver price of US$12/oz. In developing
this resource, a more conservative view was taken on higher grade material, which included grade capping and
reduced search area to make the resource more robust and to enhance the overall economic evaluation of the
viability of the Angostura Project. An operational pit was designed by NCL using available mining, metallurgical
and geotechnical parameters. Details of the operational pit and underground resources are provided in the tables
below:
Operational Pit Resource
Category
Total
Measured Indicated (Meas. + Ind.) Inferred
OXIDES
Kt 79,160 26,597 105,757 6,306
Au (g/t) 0.39 0.45 0.41 0.44
Ag (g/t) 3 3 3 3
Au (koz) 998 389 1,387 88
Ag (koz) 8,521 2,787 11,308 555
TRANSITION
Kt 104,003 20,758 124,761 5,523
Au (g/t) 0.61 0.89 0.66 0.84
Ag (g/t) 6 6 6 6
Au (koz) 2,039 594 2,633 149
Ag (koz) 19,373 4,163 23,536 1,111
SULPHIDES
Kt 94,505 33,540 128,045 14,519
Au (g/t) 1.00 1.75 1.20 1.43
Ag (g/t) 5 8 6 6
Au (koz) 3,036 1,885 4,921 666
Ag (koz) 16,118 8,635 24,753 2,996
TOTAL RESOURCES IN OPERATIONAL PIT
Kt 277,668 80,895 358,563 26,348
Au (g/t) 0.68 1.10 0.78 1.07
Ag (g/t) 5 6 5 6
Au (koz) 6,074 2,868 8,942 903
Ag (koz) 44,012 15,585 59,597 4,662
Underground Resource
The PEE referred to in the March 18, 2011 update addresses a different resource that would be accessed by
underground methods rather than open pit. Such minable resources were estimated at 14 million tonnes at 5.34 g/t
gold and 29.6 g/t silver.
The following discusses the smaller underground resource as contained in the July 15, 2010 updated resource
estimate for the open pit Angostura Project.
The portions of the block model beneath the operational pits were examined to determine the zones which might
support the necessary capital for underground development. The portions that were too isolated from the pit
infrastructure or with insufficient grade or tonnage for underground mining were categorized as waste.
Category
Total
Measured Indicated (Meas. + Ind.) Inferred
SULPHIDES
Kt 1,283 4,761 6,044 3,762
Au (g/t) 3.95 4.36 4.28 3.61
Ag (g/t) 17 20 19 16
Au (koz) 163 668 831 437
Ag (koz) 718 3,067 3,785 1,992
On July 15, 2010, Greystar announced an updated metallurgical recovery model ("Recovery Model") and process flow
for the Angostura Project. The updated Recovery Model replaces the metallurgical model used in the May 2009
Preliminary Feasibility Study ("PFS Recovery Model").
The results of the metallurgical testing have the following average gold recoveries by ore type.
Average Metallurgical
Average Metallurgical Test Results(6)
Test Results - PFS(1) 19 mm(2) 38 mm(3)
Process Ore Type
Oxide 90% 91% 91%
Heap Leach Transitional 73% 74% 70%
Low Grade Sulphide 39% 33% 30%
Flotation/BIOX(R)/ High Grade Sulphide 94%(4) 86%(5)
CIP/Heap Leach
FlotationTails
1. Heap Leach average metallurgical results in the PFS Recovery Model based on 18 Column Leach Test ("CLT") at 19
mm.
2. Heap Leach average metallurgical results in the Recovery Model based on 77 CLT at 19 mm (includes all the
samples tested at 38 mm).
3. Heap Leach average metallurgical results in the Recovery Model based on 11 CLT at 38 mm.
4. High grade ore circuit average metallurgical results in the PFS Recovery Model were based on the sale of
concentrates with 90% flotation gold recovery, 98.5% Smelter Recovery, and 54% heap leaching recovery of flotation
tails agglomerates.
5. High grade ore circuit average metallurgical results in the Recovery Model based on 91% flotation gold
recovery, 90% BIOX([R]) /CIP recovery, and 50% heap leaching recovery of flotation tails agglomerates.
6. Heap leach feed size sensitivity (38mm vs. 19mm) employed for the Recovery Model was determined considering
only samples tested at both feed sizes, rather than average results as presented in the table shown above.
Updates to the Recovery Model included:
- A coarsening of the planned heap leach feed size to 38mm.
- A new geo-metallurgical model to project heap leach recoveries.
- A revision to the high grade recovery circuit to include stirred tank bio-oxidation and carbon-in-pulp
cyanidation of the flotation concentrate.
The metallurgical processing routes for the Angostura ore would have been driven by the Recovery Model with:
- Oxide, transitional and low-grade sulphide ore being processed by conventional cyanide heap leach and
agglomerated flotation tailings heap leach, and
- High grade sulphide mineralization being treated by milling, flotation, stirred tank bio- oxidation, carbon in
pulp cyanidation of bio-oxidized residue and pulp agglomeration heap leaching of flotation tailings.
Permitting
Date: Event:
October, 2009 The Company submitted an application for a Work and Investment Plan
(PTO) based on the preliminary feasibility study ('PFS"). The PTO was
submitted to the Ingeominas, a division in the Ministry of Mines and
Energy, on October 23, 2009. The PTO is the operating plan for
Angostura which must be approved by Ingeominas in a parallel process to
the environmental permitting. Both the EIA and the PTO must be
approved in order to begin the construction phase of the Mining
Concession Contract.
December, 2009 The Company filed the EIA with MAVDT to initiate the environmental
permitting process for the development of an open pit gold and silver mine
at the Angostura Project in Colombia. The EIA, which is based on the PFS,
covers all environmental and social aspects of the proposed mine
development including baseline data and end of mine life mitigation plans.
April, 2010 MAVDT requested a new EIA to be filed. MAVDT requested that the new
EIA conform to new regulation Law 1382 of 2010 (Modified Mining
Code) which requires that mining and exploration activity must be
excluded from the "Paramo" ecosystem.
May, 2010 After the Company's appeal in April 2010, the Company received a writ
from MAVDT that reversed its April 20th writ and reinstated the
December 22, 2009 EIA as filed. MAVDT advised it would move forward
with a review of the EIA.
November 2010 After MAVDT's notice in July 2010, stating that the Information Meetings
for local communities that were being planned by the Company are to be
incorporated into a public hearing process, the Company held two
Informational Hearings on November 3 and 4, 2010 and the Public Hearing
on November 21, 2010. The Informational Hearing was held in the towns
of California and Vetas Santander, Colombia and the Public Hearing held
only in the town of California.
March 2011 In December 2010, MAVDT notified the Company of a requirement of
another Information Meeting and Public Hearing for the environmental
permitting process to be held in the city of Bucaramanga. This decision
was based on the fact that certain participants opposing the Angostura
Project, who had registered to address the general public during the first
hearing process, were in the petitioner's view, unable to participate on
account of alleged restrictions in the road heading to California, Santander,
the location of the first hearing. This exceptional request was intended to
better allow inhabitants of Bucaramanga to express their views on the
Angostura Project and for MAVDT to obtain public testimony or
comments on the Angostura Project's EIA. These Information and Public
Hearings are steps in the process relating to the decision from MAVDT on
issuing an environmental permit for the Angostura Project. The
Information Meeting was held on February 17, 2011 and the Public
Hearing held on March 4, 2011. Unfortunately, confrontations during the
Public Hearing resulted in the representatives of MAVDT cancelling the
Public Hearing after 28 of the inscribed 470 statements had been heard. On
the March 23, 2011, the Company filed a request to desist from the
administrative procedure of environmental licensing before MAVDT, as
well as the administrative procedure of evaluation and approval of the
PTO before Ingeominas.
Exploration
In December 2009, the Company initiated an exploration drill program to investigate the mineral potential of the
La Plata mineral property, over which the Company has completed its 100% working interest acquisition, in the La
Baja Valley, located southwest of the Angostura deposit. The Company continued with its program of exploring the
potential of high grade mineralization at the Angostura gold-silver deposit. Evaluation continued at the near
surface oxide gold and deeper sulphide mineralization discovered in 2008 at the Mongora prospect located 3 km
south of the main Angostura deposit.
Los Laches Drill Program
The Company announced additional assay results from the targeted drill program at the Los Laches area of the
Angostura gold-silver deposit. The new drill results from the Los Laches Area, whose geology is structurally
complex, continue to provide positive results showing the potential of high grade mineralization at depth below
the envisioned Preliminary Feasibility Study open pit.
Mongora Drill Program
The Mongora prospect is defined by a large, 500 meter by 300 meter gold-in-soil anomaly. The Company started 57
drill holes on the Mongora target, accumulating 19,459 meters to December 2010. Similar to the Angostura deposit,
the Mongora prospect hosts higher-grade gold mineralization including 116 grams of gold per tonne over 2.0 meters,
22.2 grams of gold per tonne over 2.0 meters and 12.35 grams of gold per tonne over 1.6 meters within broader
zones of lower-grade gold mineralization. The mineralization contained in the oxidized and transitional rock at
the Mongora area could be very important for the Angostura Project.
La Plata
La Plata is located in the California mining district of Colombia. La Plata comprises 78 hectares of mineral
rights contiguous on the majority of its borders with existing Greystar holdings.
The La Plata property lies within a mineralized belt related to the northeast-southwest trending La Baja Fault,
which has given rise to a number of mineralized occurrences where gold and silver mineralization is associated
with flexures along the main fault. This mineralization, which has traditionally been mined by local artisanal
miners, is now the focus of more modern exploration methods.
Exploration carried out by the Company since 2009 identified vein and stock work mineralization associated with
strong alteration hosted in a dacite-porphyry system. Drilling, comprising 17 drill holes (6,651 meters) has
intersected anomalous gold and silver grades and additional work is in process to define the geometry of the
mineralization. Rock samples from mine tunnels on site returned gold assays ranging from no significant gold up to
9.66 grams per ton gold and silver assays ranging from no significant silver up to 94.3 grams per tonne silver.
Cristo Rey
3,778 meters of core has been drilled at Cristo Rey in 2010 to test higher grade mineralized structures at depth
and along strike. The latest results from diamond drilling in the Cristo Rey area, which marks the current
northern limit of the Angostura deposit, included 189.5 g/t gold and 701 g/t silver over 1.5 meters in hole CR10-
05, 6.89 g/t gold and 85.4 g/t silver over 1.6 meters in hole CR10-04 and 12.45 g/t gold and 96.7 g/t silver over
1 meter in hole CR10-02. These significant intercepts confirm the presence of mineralization along strike and down
dip in the northern limit of proposed Angostura pit. Mineralization in the Cristo Rey area is similar in style to
the Veta de Barro area immediately to the south where higher grade structures have considerable strike extent and,
although relatively narrow, the structures have very interesting high gold grade contents.
New Areas of Exploration outside of the Angostura Project Area
Greystar has applied for mineral property rights over 35,000 hectares in other jurisdictions around Colombia, in
the departments of Nari±o, Cauca, Tolima, Caldas, Santander, Norte de Santander and Cesar with only one having
been granted by Ingeominas to date. Ingeominas is evaluating the other applications to define the free areas to be
granted. Prospecting activities are being carried out to identify other mineral potential in Colombia.
Besides the exploration for gold, a study of potential for limestone as a source of lime feed for a lime plant was
completed on April 2009 in the Issuer's concessions in the areas of Charta and Vetas. Three potential areas as
sources of limestone for a future plant were defined.
The information under the heading "Exploration" has been reviewed and approved by Mr. Frederick Felder, P.Geo., a
"qualified person" as that term is defined in National Instrument 43-101 and Guidance Note for Mining, Oil and Gas
Companies issued by the London Stock Exchange in respect of AIM companies, which outline standards of disclosure
for mineral projects.
Resource information under the heading "Feasibility Study - Resource Highlights" has been reviewed and approved
by Mr. Rodrigo Mello, Senior Geologist with NCL Ingenierfa y Construccion S.A., Santiago, Chile a "qualified
person" as that term is defined in National Instrument 43-101 and Guidance Note for Mining, Oil and Gas Companies
issued by the London Stock Exchange in respect of AIM companies, which outline standards of disclosure for mineral
projects.
4. RESULTS OF OPERATIONS
The following table sets forth selected financial data for the periods indicated:
Three Months Ended Years Ended
December 31, December 31,
2010 2009 2010 2009
Exploration expenditures:
Feasibility and pre-feasibility costs:
Feasibility and pre-feasibility studies $ 3,955,876 $ 1,784,605 $10,138,124 $ 8,582,734
Other exploration expenditures 5,599,620 3,626,777 16,125,388 10,607,757
9,555,496 5,411,382 26,263,512 19,190,491
General and administrative expenses:
Amortization 91,412 72,921 338,294 266,142
Administrative expenditures 1,496,659 752,716 6,071,955 2,374,754
Stock-based compensation 761,311 388,428 4,515,330 2,305,684
2,349,382 1,214,065 10,925,579 4,946,580
Interest income (333,080) (192,331) (1,164,205) (337,782)
Foreign exchange (gain) loss (253,118) 70,471 (83,083) 226,539
Loss for the period $ 11,318,680 $ 6,503,586 $35,941,803 $ 24,025,828
Loss per share $ 0.13 $ 0.09 $ 0.43 $ 0.43
Three months ended December 31, 2010
Total exploration expenditures were $9.6 million for the three months ended December 31, 2010, compared to $5.4
million for the three months ended December 31, 2009. The change was the result of the following:
- Costs related to feasibility study were $4.0 million for the three months ended December 31, 2010, compared to
$1.8 million for the comparative period in 2009. The higher cost in 2010 was due to increased expenses in the
process of finalizing the feasibility study.
- Exploration costs were higher for the three months ended December 31, 2010, due to the drill programs at Los
Laches, Mongora and La Plata properties. These drilling expenditures totalled $2.0 million in the three months
ended December 31, 2010, compared to costs of $0.8 million in the comparative period of 2009.
- General and administrative expense for the Angostura Project in Colombia was $2.4 million for the three months
ended 2010 compared to costs of $1.1 million for the comparative period in 2009 due to increases in personnel,
consultants and activities relating to public hearing.
General and administrative expenses at the corporate office increased by approximately $1.3 million for the three
months ended December 31, 2010, compared to the three months ended December 31, 2009. The increase was a result of
the following:
- Management and consulting fees were up $0.3 million in 2010 compared to 2009, due primarily to the engagement of
consultants for finance advisory services, and corporate reorganization consulting services.
- Salaries and benefits were up $0.3 million in 2010 compared to 2009, due primarily to the hiring of additional
senior corporate staff during first half of 2010.
- Stock-based compensation increased by $0.4 million in 2010 compared to 2009, due to higher amortization
resulting from the higher number and fair values for stock options granted during the first half of 2010, and to
higher amortization of the cost of prior period awards that vested during the period.
- Travel costs were up by $0.1 million in 2010 compared to 2009, due primarily to increase travel by corporate
staff resulting from increased activities in the hearing process, financing, recruitment and project site visits.
- There has been a general trend for increased general and administrative costs on a quarterly basis attributable
to increased activities and staffing as the Company anticipates moving into development.
Interest income for the three months ended December 31, 2010, increased by $0.1 million from the comparative
period in 2009, primarily due to the increased cash balances.
The Company had a foreign exchange gain of $253,000 for the three months ended December 31, 2010, compared to a
$70,000 loss for the three months ended December 31, 2009, primarily due to the conversion of Colombian peso
denominated transactions and balances to Canadian dollars.
Year ended December 31, 2010
Total exploration expenditures were $26.3 million for the year ended December 31, 2010, compared to $19.2 million
for the year ended December 31, 2009. The change was the result of the following:
- Costs related to the feasibility study were $10.1 million for the year ended December 31, 2010, compared to $8.6
million for the comparative period in 2009. The higher cost in 2010 was due to the increased expenses in the
process of finalizing of the feasibility study.
- Exploration costs were higher for the year ended December 31, 2010, due to the drill programs at Los Laches,
Mongora and La Plata properties. These drilling expenditures totalled $6.4 million in 2010, compared to costs of
$2.7 million in the comparative period of 2009.
- General and administrative expense for the Angostura Project in Colombia increased by $2.3 million for the year
ended December 31, 2010 compared to the comparative period of 2009 due to increases in personnel, consultants and
activities relating to public hearing.
General and administrative expenses at the corporate office have increased by approximately $6.0 million for the
year ended December 31, 2010, compared to the year ended December 31, 2009. The following explains the increase in
the comparative periods:
- Management and consulting fees were up $1.6 million in 2010 compared to 2009, due primarily to the engagement of
consultants to recruit senior executives, finance advisory services, and corporate reorganization consulting
services.
- Salaries and benefits were up $1.5 million in 2010 compared to 2009, due primarily to the hiring of additional
senior corporate staff during 2010 and bonuses awarded to senior management during the first quarter of 2010 as
compared to no bonuses in the comparative quarter of 2009.
- Stock-based compensation increased by $2.2 million in 2010 compared to 2009, due to higher amortization
resulting from the higher number and fair values for stock options granted during 2010, and to higher amortization
of the cost of prior period awards that vested during the period.
- Travel costs were up by $0.4 million in 2010 compared to 2009, due primarily to increase travel by corporate
staff resulting from increased activities in the hearing process, financing, recruitment and project site visits.
Interest income for the year ended December 31, 2010, increased by $0.8 million from the comparative period in
2009, primarily due to the increased cash balances.
The Company had a foreign exchange gain of $83,000 for the year ended December 31, 2010 compared to a $0.2 million
loss for the year ended December 31, 2009. Gains recorded in the current year period can primarily be attributed
to the conversion of Colombian peso transactions into Canadian dollars as the Colombian peso weakened against the
Canadian dollar during the year.
5. QUARTERLY INFORMATION
Basic and
Administrative Expenses Diluted
Exploration General and Stock-based Interest Net Loss
Expenditures Amortization Compensation Income Loss per Share
Q4 -- December 31, 2010 $9,555,496 $1,588,071 $761,311 ($333,080) $11,318,681 $0.13
Q3 -- September 30, 2010 $7,529,153 $1,644,379 $854,935 ($278,490) $9,809,472 $0.12
Q2 -- June 30, 2010 $5,830,474 $1,535,938 $1,860,025 ($284,896) $8,934,045 $0.11
Q1 -- March 31, 2010 $3,348,389 $1,641,860 $1,039,059 ($267,739) $5,879,605 $0.07
Q4 -- December 31, 2009 $5,411,382 $825,637 $388,428 ($192,331) $6,503,587 $0.09
Q3 -- September 30, 2009 $6,348,885 $740,692 $407,883 ($37,511) $7,828,273 $0.15
Q2 -- June 30, 2009 $4,320,471 $605,644 $1,311,757 ($28,104) $6,049,978 $0.11
Q1 -- March 31, 2009 $3,109,753 $468,924 $197,616 ($76,836) $3,643,991 $0.08
Notes and Factors Affecting Comparability of Quarters:
1. The Company is a mineral exploration and development company and has no operating revenue. Interest is from
funds invested. The amount of interest earned is a function of the amount of funds invested and interest rates.
Interest rates on term deposits dropped significantly in 2009 and remained low during 2010. This, however, was
offset by the significantly increased levels of cash, which contributed to increasing level of quarterly interest
income in 2010 compared to 2009.
2. Stock-based compensation costs are a non-cash expense and represent the amortization of the estimated fair
value of stock options granted determined using the Black-Scholes option pricing model.
3. Exploration and other project-related activities in Colombia shut down each year for a Christmas break which
extends into January. As a result of this shut-down, exploration and project-related expenditures for the December
31 quarter and the March 31 quarter tend to be lower than the preceding September 30 quarter. For the quarters
ended March 31, 2009 and June 30, 2009, the reduction of costs can be attributed to the time lag between the
completion of the PFS and the start of the FS in late June 2009. For the second half of 2009, costs increased
significantly due to efforts being placed on the FS. Engineering costs for the feasibility study decreased during
the first quarter of 2010 but increased for the remainder of the year.
4. There has been a general trend for increased general and administrative costs on a quarterly basis attributable
to increased activities and staffing as the Company anticipates moving into development.
6. LIQUIDITY AND CAPITAL RESOURCES
Statement of Cash Flow Information
At December 31, 2010, cash and cash equivalents were $98.3 million, up from $81.6 million at December 31, 2009.
The increase in cash and cash equivalents is primarily attributed to the receipt of gross proceeds of $46.1
million received from the exercise of warrants in the first quarter of 2010.
The Company's cash resources are invested in short term financial instruments issued by major Canadian chartered
banks. These instruments mature at various dates over the current operating period. The Company does not invest in
asset-backed commercial paper. Cash used in operations including changes in non-cash working capital was $27.2
million for the year ended December 31, 2010, compared to $20.0 million for the comparative period in 2009. For
the year ended December 31, 2010, exploration-related expenditures, including feasibility study costs, were $26.3
million and represent the major use of funds for the period.
At December 31, 2010, the Company had working capital of $90.8 million, but had not yet achieved profitable
operations and expects to incur further losses in the development of its business. For the year ended December 31,
2010, the Company reported a net loss of $35.9 million and as at December 31, 2010, had an accumulated deficit of
$173.2 million. The ability of the Company to continue as a going concern is dependent upon the Company's ability
to arrange additional funds to complete the development of its property and upon future profitable operations.
There is no material variance between the use of proceeds as stated in the Company's September 22, 2009 short form
prospectus relating to its public offering and the actual application of those funds. Management of the Company
believes that the current level of funds is expected to be sufficient to pay for committed project and
administrative costs to the end of 2011. Financial advisors have been appointed to assist the Company in
developing a financing plan for development of the Angostura Project. However, the current economic uncertainty
and financial market volatility make it difficult to predict success. Risk factors potentially influencing the
Company's ability to raise equity or debt financing include: the outcome of the Company's application for an
environmental permit with the MAVDT, mineral prices, the results and recommendations of the FS, the political risk
of operating in a foreign country, and the buoyancy of the credit and equity markets. For a more detailed list of
risk factors, refer to the Company's Annual Information Form for the year ended December 31, 2010, which is filed
on SEDAR. Management intends to continue discussions with potential debt and equity investors.
Due to the current low interest rate environment, interest income is not expected to be a significant source of
income or cash flow. Management intends to monitor spending and assess results on an ongoing basis and will make
appropriate changes as required.
Commitments
The Company's commitments related to its mineral property acquisitions are discussed below.
(a) Mineral Property Commitments
The Company's mineral properties comprise surface rights, mining titles, exploration licenses, exploitation
permits and concession contracts that provide for gold, silver and other precious metals exploitation in an area
located in the Municipality of California, Santander, Colombia, collectively known as the Angostura Project. The
licenses, permits and contracts expire at various dates ranging from 2020 to 2038 and generally can be renewed for
an additional 10, 20 or 30 years depending on the applicable mining code.
Certain portions of the Angostura Project are subject to royalties ranging from 5% to 10% of net profits after
certain additional deductions. In addition, pursuant to the laws of Colombia, the Government of Colombia currently
receives royalties on gold and silver production equal to 4% of 80% of the production value, which is calculated
using the average gold and silver prices published by the London Metal Exchange.
In order to maintain the Company's mineral properties in good standing, the Company is required to make certain
annual fee payments based on the number of hectares and a Colombian wage factor that fluctuates on an annual
basis. As at December 31, 2010, the required annual fee payments related to the Company's mineral properties
totaled approximately $620,000 (2009 - $611,000).
(b) Other Commitments
The following is a schedule of the Company's other commitments as at December 31, 2010:
2016 and
Total 2011 2012 2013 2014 2015 Thereafter
Consulting & contract
Services (a) $ 2,191,267 $ 2,181,448 $ 9,819 $ - $ - $ - $ -
Office operating leases (b) 393,500 189,008 152,558 24,856 14,128 12,950 -
$ 2,584,767 $ 2,370,456 $ 162,377 $24,856 $ 14,128 $ 12,950 $ -
(a) Relates to various professional services and outsourced.
(b) Primarily relates to operating leases for office premises
The Company is from time to time involved in various claims, legal proceedings and complaints arising in the
ordinary course of business. The Company does not believe that adverse decisions in any pending or threatened
proceedings related to any matter, or any amount which it may be required to pay by reason thereof, will have a
material effect on the financial condition or future results of operations of the Company.
7. FINANCIAL INSTRUMENTS
The Company's financial instruments are exposed to certain financial risks, including currency risk, credit risk,
liquidity risk, interest risk and price risk.
(a) Currency risk
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company
operates in Canada and Colombia and a large portion of its expenses are incurred in Colombian pesos and U.S.
dollars. A significant change in the currency exchange rates between the Canadian dollar relative to the
Colombian peso and U.S. dollar could have an effect on the Company's results of operations, financial position or
cash flows. The Company has not hedged its exposure to currency fluctuations.
The Company's exposure to the Colombian peso, expressed in Canadian dollars and Colombian pesos, on financial
instruments is as follows:
2010 2009
CDN$ Colombian peso CDN$ Colombian peso
Cash and cash equivalents $ 93,227 179,975,804 $ 598,289 1,170,819,961
Accounts receivable and prepaid expenses 524,882 1,013,284,852 337,783 661,023,483
Accounts payable and accrued liabilities 2,400,242 4,633,672,085 1,761,310 3,446,790,607
$3,018,351 5,826,932,741 $ 2,697,382 5,278,634,051
As at December 31, 2010, with other variables unchanged, a 10% depreciation or appreciation of the Canadian dollar
against the Colombian peso would change the values of the Colombian peso denominated financial instruments and
would affect the consolidated statement of operations and comprehensive loss by approximately $301,800. The
Company's exposure to the Colombia peso on annual exploration expenditures throughout the year ended December 31,
2010 was $17,718,266. A 10% depreciation of the Canadian dollar against the Colombian peso would affect the
consolidated statement of operations and comprehensive loss by approximately $1,771,827.
The Company's exposure to the U.S. dollar, expressed in Canadian dollars and U.S. dollars, on financial
instruments is as follows:
2010 2009
CDN$ US$ CDN$ US$
Cash and cash equivalents $1,746,735 $1,754,234 $ 44,494 $ 42,513
Accounts payable and accrued liabilities 1,151,856 1,158,110 225,631 215,585
$2,898,591 $2,912,344 $ 270,125 $ 258,097
As at December 31, 2010, with other variables unchanged, a 10% depreciation or appreciation of the Canadian dollar
against the U.S. dollar would change the values of the U.S. dollar denominated financial instruments and would
affect the consolidated statement of operations and comprehensive loss by approximately $289,859.
The Company's exposure to the U.S. dollar on annual exploration expenditures throughout the year ended December
31, 2010 was $5,943,565. A 10% depreciation of the Canadian dollar against the U.S. dollar would affect the
consolidated statement of operations and comprehensive loss by approximately $594,357.
(b) Credit risk
Credit risk is the risk of an unexpected loss if a third party to a financial instrument fails to meet its
contractual obligations. The Company manages its credit risk through its counterparty ratings and credit limits.
The Company's cash and cash equivalents and short term investments are held through large Canadian financial
institutions. Short-term investments are composed of financial instruments issued by Canadian banks and companies
with high investment-grade ratings. These instruments mature and are cashable at various dates over the current
operating period. Amounts receivable primarily consists of Harmonized Sales Tax receivable with expected payment
from the Canadian government.
The total cash and cash equivalents and accounts receivable represent the maximum credit exposure. The Company
limits its credit risk exposure by holding bank accounts and any short term investments with reputable banks with
high credit ratings.
(c) Liquidity risk
The Company manages liquidity risk by maintaining adequate cash balances in order to meet short and long term
business requirements. The Company believes that these sources will be sufficient to cover its cash requirements
for the upcoming year. The Company's cash is invested in liquid investments with quality financial institutions
and is available on demand for the Company's programs and is not invested in any asset backed commercial paper.
Contractual commitments that the Company is obligated to pay in future years are disclosed in note 14.
As at December 31, 2010, the Company's liabilities have contractual maturities as summarized below:
Less than
Total 1 year
Accounts payable and accrued liabilities $ 6,308,617 $ 6,308,617
Accounts payable on mineral properties 1,113,700 1,113,700
$7, 422,317 $7, 422,317
(d) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Company's cash in bank accounts and investments earn interest
income at variable rates. The Company's future interest income is exposed to changes in short-term rates. Assuming
cash remains constant, an increase or decrease in the annual interest rate of 1% would result in a corresponding
increase or decrease of annual interest income by $983,000.
(e) Fair value of financial instruments
The fair values of amounts receivable and accounts payable and accrued liabilities approximate their carrying
values due to the short-term nature of these instruments. The fair value of the amounts payable on mineral
property acquisitions approximates their carrying value as there was no material change to the discount rate used
to calculate the fair value since initial recognition.
There are three levels of the fair value hierarchy that prioritize the inputs to valuation techniques used to
measure fair value, with Level 1 inputs having the highest priority. The levels and the valuation techniques used
to value our financial assets and liabilities are described below:
(iv) Level 1 - Quoted Prices in Active Markets for Identical Assets
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted
assets or liabilities.
Cash equivalents, including demand deposits and money market instruments, are valued using quoted market prices.
Marketable equity securities are valued using quoted market prices in active markets, obtained from securities
exchanges. Accordingly, these items are included in Level 1 of the fair value hierarchy.
(v) Level 2 - Significant Other Observable Inputs
Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets,
or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or
liability.
(vi) Level 3 - Significant Unobservable Inputs
Unobservable (supported by little or no market activity) prices.
The following table illustrates the classification of the Company's financial instruments recorded at fair value
within the fair value hierarchy as at December 31, 2010.
Financial assets at fair value
Level 1 Level 2 Level 3 December 31, December 31,
2010 2009
Cash and cash equivalents $ 98,343,227 $ - $ - $98,343,227 $81,583,304
Held for trading 98,343,227 - - 98,343,227 81,583,304
Accounts receivable 154,736 - - 154,736 507,514
Financial assets 154,736 - - 154,736 507,514
Total financial asset at fair value $ 98,497,963 $ - $ - $98,497,963 $82,090,818
Financial inputs liabilities at fair value
Level 1 Level 2 Level 3 December 31, December 31,
2010 2009
Accounts payable and accrued
liabilities $ 6,308,617 $ - $ - $ 6,308,617 $ 2,764,557
Amounts payable on mineral
property acquisition - 1,099,339 - 1,099,339 1,013,986
Total financial asset at fair value $ 6,308,617 $ 1,099,339 $ - $ 7,407,956 $ 3,778,543
8. TRANSACTIONS WITH RELATED PARTIES
Pursuant to a service agreement, the Company pays Rovig Minerals, Inc., a company owned by the Company's Chairman
for services provided in relation to this role. Amounts paid include reimbursement for certain personal insurance
expenses and costs for office facilities in Billings, Montana. The service agreement will expire on May 15, 2011.
The Company pays Ionic Management Corp. ("Ionic"), a company related by virtue of a director and one officer in
common, for corporate and administrative services in Vancouver, BC. These services are provided on a month-to-
month basis and may be cancelled by either party on one month's notice. Pursuant to a service agreement, the
Company paid Mr. Steve Kesler, a director of the Company, for consulting services. The service agreement
terminated on May 16, 2010, after which Mr. Steve Kesler assumed the role of President and CEO of the Company.
Transactions with related parties were in the normal course of operations and are measured at an exchange amount
established and agreed to by the related parties.
In addition to the above, the Company reimburses Rovig Minerals, Inc., Ionic, and Mr. Steve Kesler for out-of-
pocket direct costs incurred on behalf of the Company. Such costs include travel, postage, courier charges,
printing and telephone charges.
In 2009, the Company paid Namron Advisors, a company owned by a former director of the Company, for investor
relations advisory services. This was an interim arrangement that concluded when this former director assumed the
role of Vice President, Corporate Development with the Company in early October 2009.
Related party expenditures recorded for the following periods were:
Three Months Ended Years Ended
December 31, December 31,
2010 2009 2010 2009
Rovig Minerals Inc. $ 56,638 $ 61,049 $408,033 $251,831
Ionic Management Corp.
- administration 16,500 16,500 66,000 66,000
- consulting - - - 50,400
Namron Advisors - - - 14,167
Steve Kesler - - 108,581 -
9. CRITICAL ACCOUNTING ESTIMATES
Mineral Property and Land Costs
It is the Company's accounting policy that exploration and development expenditures incurred prior to the
determination of the feasibility of mining operations are charged to operations as incurred. The Company's mineral
property account on the balance sheet reflects actual costs incurred by it on acquisition costs of its properties.
The realization of the Company's investment in these exploration projects is dependent upon various factors,
including the discovery of economically recoverable reserves of minerals, the ability to obtain necessary
financing to develop the project's potential, approval of permits and licenses from the Colombian government,
upon future profitable operations, or alternatively upon the disposal of interests on an advantageous basis. The
Company reviews the carrying values of its projects on a quarterly basis and if required, makes an adjustment to
reflect the project's realizable value. Capitalized costs will be amortized over the estimated useful life of the
properties following the commencement of production. As at December 31, 2010, amounts capitalized to mineral
properties total $20.9 million.
Amounts Payable on Mineral Property Acquisition
Included in the Company's balance sheet is the fair value of the amounts payable on mineral property acquisition.
The fair value of the amounts payable on mineral property acquisition was determined by discounting the stream of
future cash payments at the estimated prevailing market rate for a debt instrument of comparable maturity and
credit quality. Changes in assumptions can materially affect the fair value estimate, and therefore, the existing
models do not necessarily provide a reliable single measure of the fair value.
Asset Retirement Obligation
The asset retirement obligation has been estimated based on the Company's interpretation of current regulatory
requirements and have been measured at fair value. Fair value is determined based on the net present value of
expected future cash expenditures upon reclamation and closure. Environmental rehabilitation costs are charged to
exploration costs. Because the fair value measurement requires the input of subjective assumptions, including the
environmental rehabilitation costs and discount rate used, changes in subjective input assumptions can materially
affect the fair value estimate.
Income taxes
Future income tax assets and liabilities are computed based on differences between the carrying amounts of assets
and liabilities on the balance sheet and their corresponding tax values using substantively enacted income tax
rates at each balance sheet date. Future income tax assets also result from unused loss carry-forwards and other
deductions. The valuation of future income tax assets is reviewed quarterly and adjusted, if necessary, by use of
a valuation allowance to reflect the estimated realizable amount.
Fair value of stock-based compensation and warrants issued
The fair value of stock-based compensation and warrants issued are subject to the limitation of the Black-Scholes
option pricing model that incorporates market data and involves uncertainty in estimates used by management in the
assumptions. Because the Black-Scholes option pricing model requires the input of highly subjective assumptions,
including the volatility of share price, changes in subjective input assumptions can materially affect the fair
value estimate.
10. NEW ACCOUNTING POLICIES
(a) Business Combinations
In October 2008, the CICA issued CICA Handbook Section 1582, "Business Combinations", which establishes new
standards recognition, measurement, presentation and disclosure of business acquisitions. This standard is
substantially aligned with International Financial Reporting Standards. This is effective for business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after January 1, 2011. Should the Company engage in a future business combination, it would
consider early adoption to coincide with the adoption of International Financial Reporting Standards. The Company
is currently assessing the impact of this accounting standard on the Company's financial position and results from
operations.
(b) Non-controlling Interests
In October 2008, the CICA issued CICA Handbook Sections 1601, "Consolidated Financial Statements" and 1602, "Non-
controlling Interests", which provide revised guidance on the presentation of consolidated financial statements
and accounting for non-controlling interests subsequent to a business combination. This guidance is effective for
fiscal years beginning on or after January 1, 2011. The Company is currently assessing the impact of this
accounting standard on the Company's financial position and results from operations.
(c) International Financial Reporting Standards ("IFRS")
In February 2008, the Accounting Standards Board ("AcSB") confirmed that 2011 is the changeover date for publicly-
listed companies to use IFRS. The date is for interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2011. The changeover date of January 1, 2011, will require the 2010 comparatives
to be presented according to IFRS.
Key dates:
While the Company continues to perform detailed assessments of the impact of adopting IFRS, the Company has
estimated the impact of IFRS to its opening financial position under IFRS as of January 1, 2010. In estimating the
opening financial position, the Company has applied the following IFRS exemptions on first-time adoption.
(i) Business combinations
The Company has elected to not apply IFRS 3 to business combinations that occurred before the date of transition
to IFRS, which is an election permitted on first-time adoption of IFRS.
(ii) Cumulative translation differences
As permitted by the IFRS 1 election for cumulative translation differences, the Company has deemed cumulative
translation differences for foreign operations to be zero at the date of transition. Any gains and losses on
subsequent disposal of foreign operations will not be impacted by translation differences that arose prior to the
date of transition.
(iii) Share-based payments
The Company has elected to apply IFRS 2 to awards unvested at the date of transition. IFRS has not been applied to
awards that vested prior to January 1, 2010.
(iv) Compound financial instruments
The Company has elected to apply the exemption related to compound financial instruments. IAS 32 requires an
entity to split a compound financial instrument at inception into separate liability and equity components. If the
liability component is no longer outstanding, retrospective application of IAS 32 involves separating two portions
of equity. However, in accordance with this IFRS, a first-time adopter need not separate these two portions if the
liability component is no longer outstanding at the date of transition to IFRS.
(v) Decommissioning liabilities
The Company has elected to apply the exemption related to decommissioning liabilities. This exemption allows a
first-time adopter to apply the requirements of IFRIC 1, dealing with changes in decommissioning liabilities, on a
prospective basis from the date of transition.
(vi) Leases
The Company has elected to apply the transitional provisions of IFRIC Interpretation 4, "Determining Whether an
Arrangement Contains a Lease". This election allows the Company to determine whether an arrangement existing at
the date of transition to IFRS contains a lease on the basis of facts and circumstances existing at that date.
(vii) Borrowing costs
In accordance with IFRS 1, the Company has elected to prospectively apply IAS 23 effective January 1, 2010.
(viii) Estimates
IFRS 1 requires that an entity's estimates under IFRS at the date of transition to IFRS must be consistent with
estimates made for the same date under the entity's previous GAAP, unless there is objective evidence that those
estimates were in error. The Company's IFRS estimates as of January 1, 2010 are consistent with its Canadian GAAP
estimates for the same date.
The Company's estimated IFRS opening financial position as of January 1, 2010, together with estimated differences
between IFRS and Canadian GAAP is presented below. The accompanying explanatory notes provide a description of the
differences between Canadian GAAP and IFRS affecting the Company. The estimated financial position and differences
have not been audited by the Company's auditors and are subject to change as the Company continues to perform
detailed assessments of the impact of adopting IFRS.
Unaudited and Estimated Financial Position as at January 1, 2010
Effect of
Change in functional
Effect of presentation currency
Canadian IFRS currency adjustment
GAAP adjustment (vii) (i) IFRS
CDN$ CDN$ US$ US$ US$
(137,222,489) (37,222,489) (37,222,489) (37,222,489) (137,222,489)
ASSETS
Current assets:
Cash and cash equivalents $ 81,583,304 $ - $(3,632,507) $ - $ 77,950,797
Trade and other receivables 585,340 - (26,063) - 559,277
82,168,644 - (3,658,570) - 78,510,074
Property, plant and equipment 1,033,517 - (46,017) (139,708) 847,792
Exploration and evaluation assets (vi) 18,590,951 (8,612) (827,381) (2,471,858) 15,283,100
$101,793,112 $ (8,612) $(4,531,968) $(2,611,567) $ 94,640,966
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade and other payables $ 2,764,557 $ - $ (123,092) $ - $ 2,641,465
Amounts payable on exploration and
evaluation asset acquisition (vi) 568,346 8,244 (25,727) - 550,863
Environmental rehabilitation
provision (v) 713,666 (91,103) (27,720) (58) 594,785
Warrant liabilities (iii) and (iv) - 34,387,573 (1,531,111) - 32,856,462
4,046,569 34,304,714 (1,707,650) (58) 36,643,575
Amounts payable on exploration and
evaluation asset acquisition 445,640 26,272 (21,056) - 450,856
Environmental rehabilitation provision (v) 629,189 (42,096) (26,140) (55) 560,898
5,121,398 34,288,889 (1,754,846) (113) 37,655,329
Shareholders' equity:
Share capital (i) 207,735,611 (9,159,992) (28,695,413) - 169,880,206
Warrants (iii) and (iv) 15,277,614 (15,277,614) - - -
Equity reserve (i) 10,880,978 1,171,573 (2,021,436) - 10,031,115
Deficit (137,222,489) (11,031,469) 25,328,273 - (122,925,685)
Cumulative translation adjustment - - 2,611,454 (2,611,454) -
Equity attributable to equity holder
of the Company 96,671,714 (34,297,501) (2,777,122) (2,611,454) 56,985,637
$101,793,112 $ (8,612) $(4,531,968) $(2,611,567) $ 94,640,966
Explanatory notes
(a) Functional currency
Under Canadian GAAP - Companies apply criteria to determine whether a foreign subsidiary's operation is integrated
or self-sustaining, in which case the temporal and current methods of translation, respectively, are then applied
to the subsidiary's financial statement balances and results of operations. The Company uses the temporal method
to translate foreign currency transactions into Canadian dollars.
Under IFRS - The concepts of integrated and self-sustaining foreign operations do not exist under IAS 21 "The
Effects of Changes in Foreign Exchange Rates;" rather, a reporting entity and each of its foreign operations must
identify its "functional currency", defined as "the currency of the primary economic environment in which the
entity operates." Management has determined that the functional currencies of Greystar Resources Ltd., its
Columbian branch and subsidiaries are the U.S. dollar as this is the currency of the primary economic environment
in which the Company operates. The Company has converted transactions and balances denominated in foreign
currencies into U.S. dollars in accordance with IFRS.
(b) Share-based payments
Under Canadian GAAP - The fair value of stock-based awards with graded vesting are calculated as one grant and the
resulting fair value is recognized on a straight-line basis over the vesting period. Forfeitures of awards are
recognized as they occur.
Under IFRS - Each tranche of an award with different vesting dates is considered a separate grant for the
calculation of fair value, and the resulting fair value is amortized over the estimated lives of the respective
tranches. Forfeiture estimates are recognized in the period they are estimated, and are revised for actual
forfeitures in subsequent periods.
(c) Share purchase warrants
Under Canadian GAAP - The Company's share purchase warrants are measured at fair value at initial recognition
using the Black-Scholes option pricing model, and recorded in equity reserve with no subsequent re-measurement.
Under IFRS - The exercise prices of the Company's share purchase warrants are denominated in Canadian dollars,
which is not the Company's functional currency, being the U.S. dollar. As a result, the share purchase warrants
meet the definition of derivatives and are measured as financial liabilities at fair value through profit and loss
('FVTPL") at grant date and the end of each reporting period. The fair value of the share purchase warrants is
determined using the Black Scholes option pricing model.
(d) Compound financial instruments
Under Canadian GAAP - The Company raised equity by issuing units that consisted of common shares and share
purchase warrants. The gross proceeds were allocated to common shares and warrants using the relative fair value
method.
Under IFRS - IAS 32 requires an entity to split a compound financial instrument at inception into separate
liability and equity components. As the share purchase warrants are classified as liabilities, the Company
allocated the gross proceeds to common shares and warrant liability using the residual method as required by IAS
32.
(e) Environment rehabilitation provision
Under Canadian GAAP - The Company uses the best estimate that a third party would charge for the remediation work
to measure the reclamation and closure cost obligations. In addition, the Company uses the credit-adjusted pre-tax
risk-free interest rate as a discount rate to measure the net present value of undiscounted estimated future cash
flows.
Under IFRS - Under IAS 37, reclamation and closure cost obligations are measured based on management's best
estimate of the expenditures required to settle the obligations as at the balance sheet date. In the case that
management intends to perform the reclamation and closure activities internally at a lower cost than if they were
performed externally, the lower costs are used to represent management's best estimate. In addition, the discount
rate used to determine the present value of reclamation and closure cost obligations is the pre-tax rate that does
not reflect risks for which future cash flow estimates have been adjusted.
(f) Amounts payable on exploration and evaluation asset acquisition
Under Canadian GAAP - The Company acquired surface rights for which some payments are due in the future. This
obligation has been recorded as amounts payable on exploration and evaluation asset acquisition and have been
discounted to reflect its non-interest bearing feature. The Company used credit-adjusted pre-tax risk-free
interest rate to discount this obligation and record the value of the mineral interest.
Under IFRS - The discount rate to be used to determine the present value of this obligation is the pre-tax rate
that does not reflect risks for which future cash flow estimates have been adjusted.
(g) Change in presentation currency
The Company previously presented its financial statements in Canadian dollars. Under IFRS, the Company's financial
statements are presented in US dollars, the same as its functional currency. The change in presentation currency
results in a cumulative translation adjustment and under IFRS 1, the Company has elected to eliminate the
cumulative translation adjustment on the IFRS transition date.
11. OFF BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
12. OUTSTANDING SHARE DATA
The Company has only one class of share capital, common shares without par value. The number of shares authorized
is unlimited. The Company has issued warrants for the purchase of common shares and also has a stock option plan.
/T/
The following are outstanding at March 23, 2011:
Common shares 84,222,987
Shares issuable on the exercise of warrants 3,330,686
Shares issuable on the exercise of outstanding stock options 6,023,555
The Company competes with other mining companies, some of which have greater financial resources and technical
facilities, for the acquisition of mineral concessions, claims and other interests, as well as for the recruitment
and retention of qualified employees.
The Company is in compliance in all material respects with regulations applicable to its exploration activities.
Existing and possible future environmental legislation, regulations and actions could cause additional expense,
capital expenditures, restrictions and delays in the activities of the Company, the extent of which cannot be
predicted. In particular, the development of the Angostura gold-silver project may be materially affected by the
outcome of the Company's application for an environmental permit with MAVDT. Before production can commence on any
properties, the Company must obtain regulatory and environmental approvals. There is no assurance that such
approvals can be obtained on a timely basis or at all. The cost of compliance with changes in governmental
regulations has the potential to reduce the profitability of operations.
The Company's mineral property is located in Colombia. The Company is subject to certain risks, including currency
fluctuations and possible political or economic instability which may result in the impairment or loss of mining
title or other mineral rights, and mineral exploration and mining activities may be affected in varying degrees by
political stability and governmental regulations relating to the mining industry. The acquisition of mining title
in Colombia is a very detailed and time-consuming process. In addition, title to mining rights may be disputed.
The Company has incurred losses since its inception and will not achieve profitability until such time as the
Angostura Project can be developed into a profitable operation.
For additional information on risk factors, refer to the Risk Factors section of the Company's Annual Information
Form for the year ended December 31, 2010, which can be found on SEDAR at www.sedar.com.
14. INTERNAL CONTROL OVER FINANCIAL REPORTING
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be
disclosed by the Company under Canadian Securities laws is recorded, processed, summarized and reported within the
time periods specified under those laws and include controls and procedures designed to ensure such information is
accumulated and communicated to management, including the Chief Executive Officer ("CEO") and the Chief Financial
Officer ("CFO"), to allow timely decisions regarding required disclosure.
Management, with the participation of the Chief Executive Officer and the Chief Financial Officer has evaluated
the design and effectiveness of the Company's disclosure controls and procedures as of December 31, 2010, and
based upon this evaluation, the CEO and the CFO have concluded that these disclosure controls and procedures, as
defined by National Instrument 52-109, Certification of Disclosure in Issuers' Annual and Interim Filings, are
effective for the purposes set out above.
Internal Controls over Financial Reporting
Management is responsible for the establishment, maintenance and testing of adequate internal controls over
financial reporting ("ICFR") to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with Canadian GAAP.
The Company's management and the Board of Directors do not expect that its disclosure controls and procedures or
internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no
matter how well designed and operated, can provide only reasonable (not absolute) assurance that the control
system's objectives will be met.
Further, the design, maintenance and testing of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control gaps and instances of fraud have been detected. These inherent limitations include the
reality that judgment in decision-making can be faulty, and that simple errors or mistakes can occur. Controls can
also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management
override of the controls. The design, maintenance and testing of any system of controls is based in part upon
certain assumptions about the likelihood of future events, and any control system may not succeed in achieving its
stated goals under all potential future conditions.
Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has conducted
an evaluation of the design and the effectiveness of the Company's internal control over financial reporting as of
December 31, 2010 based on Internal Control --Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that evaluation, management concluded that the Company's
internal control over financial reporting, as defined by National Instrument 52-109, Certification of Disclosure
in Issuers' Annual and Interim Filings, is effective to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance with Canadian GAAP.
There has been no change in the Company's internal control over financial reporting during the year ended December
31, 2010, that has materially affected, or is reasonably likely to materially affect, the Company's internal
controls over financial reporting.
15. FORWARD LOOKING STATEMENTS
Certain statements included or incorporated by reference in this MD&A, including information as to the future
financial or operating performance of the Company, and its projects, constitute forward-looking statements. The
words "believe", "expect", "anticipate", "contemplate", "target", "plan", "intends", "continue", "budget",
"estimate", "may", "will", "schedule" and similar expressions identify forward-looking statements. Forward-looking
statements include, among other things, statements regarding the estimation of mineral resources, success of
exploration activities, currency fluctuation, the future price of gold and silver, governmental regulation of
mining operations, and estimated gold recoveries. Forward-looking statements are based upon a number of estimates
and assumptions made by the Company in light of its experience and perception of historical trends, current
conditions and expected future developments, as well as other factors that Greystar believes are appropriate in
the circumstances. While these estimates and assumptions are considered reasonable by the Company, they are
inherently subject to significant business, economic, competitive, political and social uncertainties and
contingencies. Many factors could cause the Company's actual results to differ materially from those expressed or
implied in any forward-looking statements made by, or on behalf of, the Company. Such factors include, among other
things, the outcome of the Company's application for an environmental permit with the MAVDT, risks relating to the
Company's ability to obtain adequate financing for the development of the Angostura Project, conclusions of
economic evaluations; changes in project parameters as plans continue to be refined; future prices of gold and
silver, possible variations in ore reserves, grade or recovery rates; risks related to fluctuations in the
currency market, risks related to the business being subject to environmental laws and regulations which may
increase costs of doing business and restrict the Company's operations; risks relating to title disputes; risks
relating to all the Company's properties being located in Colombia, including political, economic and regulatory
instability, accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental
approvals or financing or in the completion of development or construction activities. These factors and others
that could affect Greystar's forward-looking statements are discussed in greater detail in the section headed
"Risk Factors" in the Company's Annual Information Form for the year ended December 31, 2010, which can be found
on SEDAR at www.sedar.com. Investors are cautioned that forward-looking statements are not guarantees of future
performance and, accordingly, investors are cautioned not to put undue reliance on forward-looking statements due
to the inherent uncertainty therein. Forward-looking statements are made as of the date of this MD&A, or in the
case of documents incorporated by reference herein, as of the date of such document, and the Company disclaims any
intent or obligation to update publicly such forward-looking statements, whether as a result of new information,
future events or results or otherwise, other than as required by applicable securities laws.
16. QUALIFIED PERSONS
All technical information, except for the PEE, about the Company's mineral properties contained in this
Management's Discussion and Analysis has been prepared under the supervision of Frederick Felder, P. Geo, an
officer of the Company, who is a "qualified person" within the meaning of National Instrument 43-101 and Guidance
Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies, which
outline standards of disclosure of mineral projects.
The information in the PEE has been reviewed and approved by Mr. Rodrigo Mello, Senior Geologist, a "qualified
person" as that term is defined in National Instrument 43-101 and Guidance Note for Mining, Oil and Gas Companies
issued by the London Stock Exchange in respect of AIM companies, which outline standards of disclosure of mineral
projects. Mr. Mellow is a geologist with more than 25 years of industry experience and is a member in good
standing with the Australian Institute of Mining and Metallurgy.
March 23, 2011.
Greystar Resources Ltd.
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