SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November,
2014
Claude Resources Inc.
(Translation of registrant’s name into
English)
#200 -219 Robin
Crescent, Saskatoon, SK, S7L 6M8
(Address of principal executive offices)
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Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: |
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Form 20-F S |
Form 40-F £
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Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. |
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Yes £ |
No S |
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If " Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ______ |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant, Claude Resources Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: |
November 3, 2014 |
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Claude Resources Inc. |
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(Registrant) |
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By: |
/s/ Rick Johnson |
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Rick Johnson |
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Chief Financial Officer |
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EXHIBIT INDEX
Exhibit |
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Description |
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99.1 |
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Q3 FINANCIAL STATEMENTS FOR THE PERIOD ENDING SEPTEMBER
30, 2014 |
99.2 |
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Q3 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE
PERIOD ENDING SEPTEMBER 30, 2014 |
Exhibit 99.1
NOTICE OF AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS |
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Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. |
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The Management of Claude Resources Inc. is responsible for the preparation of the accompanying unaudited interim consolidated financial statements. The unaudited interim consolidated financial statements are considered by Management to present fairly the financial position, operating results and cash flows of the Company. |
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The Company's independent auditor has not performed a review of these financial statements, in accordance with standards established by the Canadian Institute of Chartered Accountants. These unaudited interim consolidated financial statements include all adjustments, consisting of normal and recurring items that Management considers necessary for a fair presentation of the consolidated financial position, results of operations and cash flows. |
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Mike Sylvestre, P.Eng., ICD.D |
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Rick Johnson, CA |
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Interim Chief Executive Officer |
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Chief Financial Officer |
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Date: October 30, 2014
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Condensed Consolidated Interim Statements of Financial Position |
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(In Thousands of Canadian Dollars - Unaudited) |
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SEPTEMBER 30 |
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DECEMBER 31 |
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2014 |
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2013 |
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Note |
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Assets |
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|
|
|
|
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Cash and cash equivalents |
|
$ |
10,586 |
|
$ |
- |
Short-term investments |
5 |
|
1,483 |
|
|
1,643 |
Accounts receivable |
|
|
1,111 |
|
|
2,873 |
Inventories |
6 |
|
27,030 |
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|
20,565 |
Prepaid expenses and deposits |
|
|
121 |
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|
390 |
Assets held for sale |
7 |
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- |
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13,423 |
Current assets |
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40,331 |
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38,894 |
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Mineral properties |
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126,804 |
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140,544 |
Deposits for reclamation costs |
9 |
|
1,829 |
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2,237 |
Non-current assets |
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128,633 |
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|
142,781 |
Total assets |
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$ |
168,964 |
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$ |
181,675 |
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Liabilities |
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Bank indebtedness |
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$ |
- |
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$ |
8,623 |
Accounts payable and accrued liabilities |
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7,872 |
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|
6,997 |
Loans and borrowings |
11 |
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3,600 |
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|
31,869 |
Net royalty obligation |
10 |
|
1,105 |
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|
1,001 |
Liabilities related to assets held for sale |
7 |
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- |
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|
2,316 |
Current liabilities |
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|
12,577 |
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50,806 |
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Loans and borrowings |
11 |
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18,799 |
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- |
Net royalty obligation |
10 |
|
889 |
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|
1,826 |
Decommissioning and reclamation |
9 |
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6,681 |
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6,447 |
Non-current liabilities |
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26,369 |
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8,273 |
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Shareholders' equity |
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Share capital |
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198,489 |
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|
195,245 |
Contributed surplus |
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6,918 |
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8,223 |
Accumulated deficit |
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(75,857) |
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(80,925) |
Accumulated other comprehensive income |
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468 |
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53 |
Total shareholders' equity |
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130,018 |
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122,596 |
Total liabilities and shareholders' equity |
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$ |
168,964 |
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$ |
181,675 |
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See accompanying notes to condensed consolidated interim financial statements. |
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On behalf of the Board: |
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Mike Sylvestre, P.Eng., ICD.D |
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Ronald J. Hicks, CA |
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Chairman |
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Chairman, Audit Committee |
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Date: October 30, 2014
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Condensed Consolidated Interim Statements of Income |
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(In Thousands of Canadian Dollars, except per share amounts - Unaudited) |
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Three Months Ended |
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Nine Months Ended |
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SEPTEMBER 30 |
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SEPTEMBER 30 |
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2014 |
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2013 |
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2014 |
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2013 |
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Note |
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Revenue |
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$ |
24,323 |
$ |
14,976 |
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$ |
64,665 |
$ |
46,324 |
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Mine Operating: |
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Production costs |
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12,021 |
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9,909 |
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35,243 |
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31,581 |
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Production royalty |
8 |
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902 |
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- |
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1,694 |
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- |
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Depreciation and depletion |
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4,604 |
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5,360 |
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16,841 |
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15,703 |
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17,527 |
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15,269 |
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53,778 |
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47,284 |
Gross profit (loss) |
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6,796 |
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(293) |
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10,887 |
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(960) |
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General and administrative |
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1,258 |
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1,249 |
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5,201 |
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5,076 |
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Finance expense |
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|
800 |
|
924 |
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4,022 |
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2,259 |
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Finance and other income |
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(1,067) |
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(1,251) |
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(2,729) |
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(1,495) |
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Impairment charge |
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- |
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45,187 |
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- |
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56,034 |
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Loss on sale of assets |
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- |
|
- |
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|
642 |
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- |
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(Gain) loss on investments |
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(1,047) |
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- |
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|
(1,317) |
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262 |
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(56) |
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46,109 |
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5,819 |
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62,136 |
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Profit (loss) before income tax |
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6,852 |
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(46,402) |
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5,068 |
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(63,096) |
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Deferred income tax recovery |
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- |
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(12,531) |
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- |
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(16,773) |
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Net profit (loss) |
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$ |
6,852 |
$ |
(33,871) |
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$ |
5,068 |
$ |
(46,323) |
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Net earnings (loss) per share |
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Basic and diluted |
13 |
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Net earnings (loss) |
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$ |
0.04 |
$ |
(0.19) |
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$ |
0.03 |
$ |
(0.26) |
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Basic |
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188,156 |
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175,811 |
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|
186,136 |
|
175,478 |
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Diluted |
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|
188,459 |
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175,811 |
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|
186,313 |
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175,478 |
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See accompanying notes to condensed consolidated interim financial statements. |
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Condensed Consolidated Interim Statements of Comprehensive Income |
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(In Thousands of Canadian Dollars - Unaudited) |
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Three Months Ended |
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Nine Months Ended |
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SEPTEMBER 30 |
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SEPTEMBER 30 |
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2014 |
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2013 |
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2014 |
|
2013 |
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Net profit (loss) |
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$ |
6,852 |
$ |
(33,871) |
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$ |
5,068 |
$ |
(46,323) |
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|
|
|
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|
|
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Other comprehensive loss |
|
|
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|
|
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|
|
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(Gain) loss on available-for-sale securities transferred to profit |
(1,047) |
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- |
|
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(1,317) |
|
262 |
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Unrealized gain (loss) on available-for-sale securities |
191 |
|
22 |
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|
1,732 |
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(260) |
Other comprehensive gain (loss) |
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|
(856) |
|
22 |
|
|
415 |
|
2 |
Total comprehensive income (loss) |
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$ |
5,996 |
$ |
(33,849) |
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$ |
5,483 |
$ |
(46,321) |
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See accompanying notes to condensed consolidated interim financial statements. |
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Condensed Consolidated Interim Statements of Shareholders' Equity |
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(In Thousands of Canadian Dollars - Unaudited) |
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|
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|
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|
Three Months Ended |
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Nine Months Ended |
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|
SEPTEMBER 30 |
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SEPTEMBER 30 |
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|
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|
2014 |
|
2013 |
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|
2014 |
|
2013 |
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|
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Share Capital |
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|
|
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Balance, beginning of period |
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$ |
198,489 |
$ |
194,868 |
|
$ |
195,245 |
$ |
193,189 |
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Common shares and warrants issued |
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|
- |
|
- |
|
|
1,501 |
|
1,679 |
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Transfers from contributed surplus |
|
|
- |
|
- |
|
|
1,743 |
|
- |
|
Balance, end of period |
|
$ |
198,489 |
$ |
194,868 |
|
$ |
198,489 |
$ |
194,868 |
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|
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|
|
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Contributed Surplus |
|
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|
|
|
|
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Balance, beginning of period |
|
$ |
6,765 |
$ |
7,213 |
|
$ |
8,223 |
$ |
6,652 |
|
Stock-based compensation |
|
|
153 |
|
307 |
|
|
438 |
|
937 |
|
Transfers to share capital |
|
|
- |
|
- |
|
|
(1,743) |
|
- |
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Other |
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|
- |
|
- |
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|
- |
|
(69) |
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Balance, end of period |
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$ |
6,918 |
$ |
7,520 |
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$ |
6,918 |
$ |
7,520 |
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|
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|
|
|
|
|
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Accumulated Deficit |
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|
|
|
|
|
|
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|
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Balance, beginning of period |
|
$ |
(82,709) |
$ |
(19,954) |
|
$ |
(80,925) |
$ |
(7,502) |
|
Net profit (loss) |
|
|
6,852 |
|
(33,871) |
|
|
5,068 |
|
(46,323) |
|
Balance, end of period |
|
$ |
(75,857) |
$ |
(53,825) |
|
$ |
(75,857) |
$ |
(53,825) |
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|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss) |
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|
|
|
|
|
|
|
|
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Balance, beginning of period |
|
$ |
1,324 |
$ |
5 |
|
$ |
53 |
$ |
25 |
|
Other comprehensive income (loss) |
|
(856) |
|
22 |
|
|
415 |
|
2 |
|
Balance, end of period |
|
$ |
468 |
$ |
27 |
|
$ |
468 |
$ |
27 |
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|
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|
|
|
|
|
|
|
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|
Shareholders' equity, end of period |
|
$ |
130,018 |
$ |
148,590 |
|
$ |
130,018 |
$ |
148,590 |
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|
See accompanying notes to condensed consolidated interim financial statements. |
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Condensed Consolidated Interim Statements of Cash Flows |
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(In Thousands of Canadian Dollars - Unaudited) |
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|
|
|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
Three Months Ended |
|
|
Nine Months Ended |
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|
|
|
|
|
SEPTEMBER 30 |
|
|
|
|
SEPTEMBER 30 |
|
|
|
|
|
|
2014 |
|
2013 |
|
|
2014 |
|
2013 |
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Cash flows from (used in) operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) |
|
$ |
6,852 |
$ |
(33,871) |
|
$ |
5,068 |
$ |
(46,323) |
|
Adjustments for non-cash items: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion |
|
|
4,604 |
|
5,360 |
|
|
16,841 |
|
15,703 |
|
|
Finance expense |
|
|
126 |
|
136 |
|
|
1,176 |
|
381 |
|
|
Finance and other income |
|
|
(320) |
|
(316) |
|
|
(833) |
|
(913) |
|
|
Impairment charge |
|
|
- |
|
45,187 |
|
|
- |
|
56,034 |
|
|
Loss on sale of assets |
|
|
- |
|
- |
|
|
642 |
|
- |
|
|
(Gain) loss on investments |
|
|
(1,047) |
|
- |
|
|
(1,317) |
|
262 |
|
|
Stock-based compensation |
|
|
153 |
|
307 |
|
|
438 |
|
937 |
|
|
Deferred income tax recovery |
|
|
- |
|
(12,531) |
|
|
- |
|
(16,773) |
|
|
|
|
|
10,368 |
|
4,272 |
|
|
22,015 |
|
9,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net changes in non-cash operating working capital: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
6,255 |
|
2,063 |
|
|
1,762 |
|
3,088 |
|
|
Inventories |
|
|
2,576 |
|
1,867 |
|
|
(6,276) |
|
(6,311) |
|
|
Prepaid expenses and deposits |
|
|
427 |
|
(10) |
|
|
269 |
|
134 |
|
|
Accounts payable and accrued liabilities |
|
|
1,152 |
|
(2,846) |
|
|
875 |
|
82 |
Cash provided by operating activities |
|
|
20,778 |
|
5,346 |
|
|
18,645 |
|
6,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
Additions to mineral properties |
|
|
(4,418) |
|
(5,756) |
|
|
(16,142) |
|
(25,201) |
|
Proceeds from NSR agreement |
|
|
- |
|
- |
|
|
12,822 |
|
- |
|
Proceeds from sale of assets |
|
|
- |
|
- |
|
|
8,259 |
|
- |
|
Decrease in reclamation deposits |
|
|
- |
|
- |
|
|
408 |
|
- |
|
Decrease (increase) in investments |
|
|
2,479 |
|
3,500 |
|
|
4,335 |
|
(1,500) |
Cash provided by (used in) investing activities |
|
|
(1,939) |
|
(2,256) |
|
|
9,682 |
|
(26,701) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issue of common shares, net of issue costs |
|
- |
|
- |
|
|
711 |
|
725 |
|
Debenture redemption |
|
|
- |
|
- |
|
|
- |
|
(9,751) |
|
Term loan |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds, net of issues costs |
|
|
- |
|
(48) |
|
|
- |
|
24,328 |
|
|
Repayments |
|
|
(900) |
|
- |
|
|
(1,500) |
|
- |
|
Demand loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds |
|
|
- |
|
- |
|
|
- |
|
5,000 |
|
|
Repayments |
|
|
(1,715) |
|
(599) |
|
|
(7,950) |
|
(1,780) |
|
Obligations under finance lease: |
|
|
|
|
|
|
|
|
|
|
|
|
Repayments |
|
|
- |
|
(352) |
|
|
(291) |
|
(1,138) |
Cash from (used in) financing activities |
|
|
(2,615) |
|
(999) |
|
|
(9,030) |
|
17,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
16,224 |
|
2,091 |
|
|
19,297 |
|
(3,016) |
Decrease in cash and cash equivalents related to assets held for sale |
|
- |
|
(263) |
|
|
(88) |
|
(1,405) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (bank indebtedness), beginning of period |
|
(5,638) |
|
(9,780) |
|
|
(8,623) |
|
(3,531) |
Cash and cash equivalents (bank indebtedness), end of period |
$ |
10,586 |
$ |
(7,952) |
|
$ |
10,586 |
$ |
(7,952) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated interim financial statements. |
|
|
|
|
|
|
|
|
|
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
Claude Resources Inc. (“Claude”
or the “Company”) is a company domiciled in Canada. The address of the Company’s registered office is at 1500,
410 – 22nd Street East, Saskatoon, Saskatchewan, S7K 5T6. Its principal office is located at 200, 219 Robin Crescent,
Saskatoon, Saskatchewan, S7L 6M8.
Claude Resources Inc. is a gold producer whose
shares are listed on both the Toronto Stock Exchange (TSX-CRJ) and the OTCQB (OTCQB: CLGRF). The Company is also engaged in the
exploration and development of gold mineral reserves and mineral resources. The Company’s entire asset base is located in
Canada. Its revenue generating asset is the 100 percent owned Seabee Gold Operation, located in northern Saskatchewan. Claude also
owns 100 percent of the Amisk Gold Project in northeastern Saskatchewan.
STATEMENT OF COMPLIANCE
These unaudited condensed consolidated interim
financial statements for the period ended September 30, 2014 have been prepared in accordance with International Accounting Standard
34 (“IAS 34”), Interim Financial Reporting. These unaudited condensed consolidated interim financial statements
do not include all of the information required for full annual financial statements and should be read in conjunction with the
Company’s 2013 annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”),
as issued by the International Accounting Standards Board (“IASB”).
These unaudited condensed consolidated interim
financial statements have been prepared following the same accounting policies and methods as those used in preparing the most
recent audited consolidated financial statements for the year ended December 31, 2013.
These unaudited condensed consolidated interim
financial statements were authorized for issue by the Company’s Board of Directors on October 30, 2014.
Details of the Company’s accounting policies,
including changes during the year, are included in Notes 3 and 4.
BASIS OF MEASUREMENT
These unaudited condensed consolidated interim
financial statements have been prepared on the historical cost basis except for available-for-sale financial assets and liabilities
for cash-settled share-based payment arrangements, which are measured at fair value.
FUNCTIONAL CURRENCY
These unaudited condensed consolidated interim
financial statements are presented in Canadian dollars, which is the Company’s functional currency. All financial information
presented in Canadian dollars has been rounded to the nearest thousand, except share data or as otherwise noted.
USE OF JUDGMENTS AND ESTIMATES
The preparation of the Company’s consolidated
financial statements in conformity with IFRS requires Management to make judgments, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements. Significant judgments, estimates and assumptions are related
to the useful lives and recoverability of mineral properties and deferred income tax assets or liabilities, valuation of inventory,
provisions for decommissioning and reclamation and financial instruments.
Although these estimates are based on Management’s
best knowledge of the amount, events or actions, actual results ultimately may differ from those estimates.
Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any
future periods affected.
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
Critical Judgments in Applying Accounting
Policies
Critical judgments that the Company’s
management has made in the process of applying the Company’s accounting policies, apart from those involving estimates, that
have the most significant effect on the amounts recognized in the Company’s consolidated financial statements are as follows:
Production Start Date
The Company assesses the stage of each mine
under construction to determine when a mine moves into commercial production. The criteria used to assess the start date of commercial
production are based on the unique nature of each mine construction project, such as the complexity of the geology and its location.
The Company considers various relevant criteria to assess when the mine construction phase is substantially complete and the mine
is ready for its intended use. At this point, deferred costs are reclassified from “Mines under construction” to “Producing
mines” and “Property, plant and equipment”. Some of the criteria will include, but are not limited, to the following:
| · | Completion of a reasonable period of testing of the mine plant and
equipment; |
| · | Ability to produce precious metal in saleable form; |
| · | Ability to sustain certain levels of ongoing production of precious
metals; and |
| · | Production attaining a reasonable percentage of Mine Plan for a specified
period of time. |
When a mine enters the production stage, the
capitalization of certain construction costs ceases and costs are either regarded as inventory or operating expense, except for
new capital costs which are capitalized. Depreciation and depletion commences at this time.
Exploration and Evaluation Expenditures
The application of the Company’s accounting
policy for exploration and evaluation expenditures requires judgment in determining whether future economic benefits are likely
either from future extraction or sale or where activities have not reached a stage which permits a reasonable assessment of the
existence of mineral reserves. The determination of a mineral resource is itself an estimation process that involves varying degrees
of uncertainty depending on sub-classification and these estimates directly impact the decision to continue the deferral of exploration
and evaluation expenditures. The accounting policy requires management to make certain estimates and assumptions about future events
or circumstances, in particular whether an economically viable extraction operation can be established. Estimates and assumptions
made may change if new information becomes available. If, after an expenditure is capitalized, information becomes available suggesting
that the recovery of this expenditure is unlikely, the amount capitalized is written off in the statement of comprehensive income
in the period when the new information becomes available.
Business Combinations
Determination of whether a set of assets acquired
and liabilities assumed constitute a business may require the Company to make certain judgments, taking into account all facts
and circumstances. Upon acquisition of a set of assets and liabilities, the Company examines the criteria set forth in IFRS 3,
Business Combinations (“IFRS 3”). If a transaction does not meet the definition of a business, as defined in
IFRS 3, it is accounted for as an asset acquisition.
Critical Estimates and Assumptions in Applying
Accounting Policies
Significant assumptions about the future and
other major sources of estimation uncertainty as at the end of the reporting period that have a significant risk of resulting in
a material adjustment to the carrying amounts of the Company’s assets and liabilities are as follows:
Impairment
At the end of each reporting period, the Company
assesses whether any indication of impairment exist. Where an indicator of impairment exists, an estimate of the recoverable amount
is made. Determining the recoverable amount requires the use of estimates and assumptions such as long-term commodity prices, discount
rates, future capital requirements, exploration potential and operating performance. Changes in circumstances may affect these
estimates and the recoverable amount.
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
Fair value for mineral properties is generally
determined as the present value of estimated future cash flows arising from the continued use of the assets, which includes estimates
such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant would
take into account. Cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
Inventories
Net realizable value tests are performed at
each reporting date and represent the estimated future sales price of the product the Company expects to realize when the product
is processed and sold, less estimated costs to complete production and bring the product to sale.
Stockpiles are measured by estimating the number
of tonnes added and removed from the stockpile, the number of contained gold ounces is based on assay data, and the estimated recovery
percentage is based on the expected processing method.
Stockpile tonnages are verified by periodic
surveys.
Mine Operating Costs
When determining mine operating costs recognized
in the Consolidated Statements of Income, the Company makes estimates of quantities of ore within stockpiles and of quantities
in-circuit and the recoverable gold in this material to determine the average costs of finished goods sold during the period. Changes
in these estimates can result in a change in mine operating costs of future periods and carrying amounts of inventories.
Ore Reserve and Resource Estimates
Ore reserves are estimates of the amount of
ore that can be economically extracted from the Company’s mining properties. Estimating the quantities and grades of the
reserves and resources requires the size, shape and depth of the ore bodies to be determined by analyzing geological data such
as the logging and assaying of drill samples. This process may require complex and difficult geological judgments and calculations
to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates,
commodity prices, future capital requirements and production costs along with geological assumptions and judgments made in estimating
the size and grade of the ore body.
Because the economic assumptions used to estimate
the gold mineral reserves and resources change from year to year, and because additional geological data is generated during the
course of operations, estimates of the mineral reserves and resources may change from year to year. Changes in the reserve or resource
estimates may impact upon the carrying value of exploration and evaluation assets, mine properties, property, plant and equipment,
decommissioning and reclamation, recognition of deferred tax balances and depreciation and amortization charges.
At the end of each financial year, the Company
updates its estimate of proven and probable gold mineral reserves and resources. Depreciation of the Company’s mining assets,
included within the Mineral properties line item on the Statement of Financial Position, is prospectively adjusted, based on these
changes. The Company also monitors the accuracy of the estimate during the periods between annual updates for significant changes
to economic assumptions and geological data that could require an interim update to the estimate.
Fair value measurement
The Company measures financial instruments,
such as derivatives, at fair value each balance sheet date. The fair values of financial instruments measured at amortized cost
are disclosed in Note 14. Also, from time to time, the fair values of non-financial assets and liabilities are required to be determined,
e.g., when the entity acquires a business, or where an entity measures the recoverable amount of an asset or cash-generating unit
(CGU) at fair value less costs of disposal.
Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value of an asset or a liability is
measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants
act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's
ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant
that would use the asset in its highest and best use.
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
The Company uses valuation techniques that are
appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs. Changes in estimates and assumptions about these inputs could
affect the reported fair value.
Taxation
Estimation of deferred taxes includes judgments
based on expected performance of the Company. Various factors are considered to assess taxes, including past operating results,
operational plans, expiration of tax losses and tax pools carried forward and tax planning strategies.
Decommissioning and Reclamation
The Company’s mining and exploration activities
are subject to various environmental laws and regulations. The Company estimates environmental obligations based on the current
legal and constructive requirements. The Company provides for the closure, reclamation and decommissioning of its operating and
development sites based on the estimated future costs using information available at the reporting date. Provision is made, based
on net present values, for decommissioning and land restoration costs as soon as the obligation arises.
Additional Accounting Judgments, Estimates
and Assumptions
In addition to the above disclosure on estimates
and judgments, the Company has disclosed additional information relating to significant estimates and judgments recognized in the
consolidated financial statements throughout the following notes:
|
Note 5 |
Short-term Investments |
|
Note 9 |
Decommissioning and Reclamation |
|
Note 10 |
Net Royalty Obligation |
|
Note 12 |
Share-based Compensation |
|
Note 14 |
Financial Instruments |
| 3. | Significant Accounting Policies: |
These unaudited condensed consolidated interim
financial statements are prepared using accounting policies consistent with the Company’s annual consolidated financial statements
and notes thereto for the year ended December 31, 2013. The accounting policies utilized by Management for the Company and its
wholly-owned subsidiaries have been applied consistently to all periods presented in these unaudited condensed consolidated interim
financial statements, unless otherwise indicated.
Future Changes in Accounting Policies
These are the changes that the Company reasonably
expects will have an impact on its disclosures, financial position or performance when applied at a future date. The Company intends
to adopt this standard, if applicable, when it becomes effective.
Financial Instruments
IFRS 9, Financial Instruments (“IFRS
9”), was issued by the IASB on November 12, 2009 and will replace IAS 39, Financial Instruments: Recognition and Measurement
(“IAS 39”). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost
or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments
in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also
requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual
periods beginning on or after January 1, 2018 (tentative). The Company is currently evaluating the impact of IFRS 9 on its financial
statements, if any.
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
| 5. | Short-term Investments: |
|
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Short-term Investments |
(a) |
$ |
- |
|
$ |
1,500 |
Available-for-sale securities |
(b) |
|
1,483 |
|
|
143 |
|
|
$ |
1,483 |
|
$ |
1,643 |
(a) Short-term Investments
Short-term investments are denominated in Canadian
dollars, are comprised of instruments with terms to maturity between three and 12 months. During the first half of 2014, the Company’s
short-term investments were redeemed and utilized for reduction of debt. Short-term investments are classified as loans and receivables
for financial instrument purposes (Note 14).
(b) Available-for-sale Investments
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
Available-for-sale securities, beginning of period |
$ |
143 |
|
$ |
378 |
Acquisition of available-for-sale securities |
|
2,444 |
|
|
|
Disposition of available-for-sale securities |
|
(1,567) |
|
|
- |
Write-down of available-for-sale securities |
|
- |
|
|
(284) |
Unrealized gain on available-for-sale securities |
|
463 |
|
|
49 |
Available-for-sale securities, end of period |
$ |
1,483 |
|
$ |
143 |
During the third quarter of 2014, the Company
disposed of 5.7 million of its 9.8 million shares in Pure Gold Mining Inc. (“Pure Gold”, formerly Laurentian Goldfields)
received pursuant to the sale of the Madsen Gold Project.
At September 30, 2014, the Company reviewed
its portfolio of available-for-sale securities in order to assess whether there was objective evidence of impairment. Factors considered
in the Company’s assessment included the length of time and extent to which fair value was below cost and current conditions
specific to the investment. Utilizing these factors, the Company determined that the Company’s available-for-sale securities
were not impaired in value.
By holding these available-for-sale securities,
the Company is exposed to various risk factors including market price risk and liquidity risk (Note 14).
Details of the Company’s inventories are as follows:
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
Gold bullion and in-circuit (1) (2) |
$ |
5,465 |
|
$ |
2,522 |
Stockpiled ore (1) (2) |
|
1,762 |
|
|
1,838 |
Materials and supplies (3) |
|
19,803 |
|
|
16,205 |
Inventories |
$ |
27,030 |
|
$ |
20,565 |
| (1) | For the period ended September 30, 2014, depreciation and depletion
of $1.9 million is included in the above noted balances (December 31, 2013 - $1.7 million). |
| (2) | For the period ended September 30, 2014, there was no write-down of
gold inventory to net realizable value (December 31, 2013 – $1.8 million). |
| (3) | There was no material write-down or reversal of write-down of materials
and supplies inventory for the period ended September 30, 2014 or for the year ended December 31, 2013. |
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
Write-downs and reversals, if any, are included in production costs.
On March 4, 2014, the Company completed the
sale of its 100 percent interest in the Madsen Gold Project in Red Lake, Ontario, Canada to Pure Gold Mining Inc. (“Pure
Gold”), formerly Laurentian Goldfields Ltd., for CDN $6.25 million cash and 9,776,885 shares of Pure Gold. In accordance
with the terms of the sale agreement, an additional and final payment of CDN $2.5 million of cash was received during the third
quarter of 2014.
| 8. | Net Smelter Return Royalty: |
During the first quarter of 2014, the Company
completed a Net Smelter Return (“NSR”) royalty agreement on the Seabee Gold Operation. Pursuant to this transaction,
proceeds of U.S. $12.0 million were received by the Company in exchange for a three (3) percent NSR. On the Company’s Statement
of Financial Position, proceeds received from the completion of the NSR royalty agreement were booked to Cash with a corresponding
credit to Mineral Properties. Under the terms of the NSR, the Company has the right to purchase half or 1.5 percent of the three
percent NSR for U.S. $12.0 million, expiring on December 31, 2016. The NSR payments will be paid quarterly in cash or in physical
gold at the average price of gold in each calendar month. Year to date, NSR costs were $1.7 million (YTD 2013 – nil).
| 9. | Decommissioning and Reclamation: |
The Company’s decommissioning and reclamation
costs consists of reclamation and closure costs. Mineral property obligations were determined using discount rates ranging from
1.76 to 2.77 percent. Expected undiscounted payments of future obligations are $7.4 million over the next 5 to 11 years. During
2014, an accretion expense of $0.1 million has been charged (September 30, 2013 - $0.1 million), augmented by revisions made to
the decommissioning and reclamation costs, resulting in an increase in the overall carrying amount of the provision. Changes to
the provision during the period ended September 30, 2014 are as follows:
|
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Decommissioning and reclamation provision, beginning of year |
|
$ |
6,447 |
|
$ |
9,163 |
Accretion |
|
|
114 |
|
|
182 |
Revisions due to change in estimates and discount rate |
|
|
120 |
|
|
(673) |
|
|
|
6,681 |
|
|
8,672 |
Amount re-classified to Liabilities related to assets held for sale |
|
|
- |
|
|
(2,225) |
Decommissioning and reclamation provision, end of period |
|
$ |
6,681 |
|
$ |
6,447 |
As required by regulatory authorities, the Company
has provided letters of credit as security for reclamation related to its properties in the amount of $1.8 million (December 31,
2013 - $2.2 million). As security for these letters of credit, the Company has provided investment certificates in the amount of
$1.8 million (December 31, 2013 - $2.2 million).
As filed with the Government of Saskatchewan’s
Ministry of Environment, the Company estimated in its 2013 Mine Closure Plan the closure costs at the cessation of mining at its
Seabee Mine at $6.1 million. Actual costs of completing the reclamation of the mine site may be higher than those estimated. The
Company has issued letters of credit in favor of the Ministry of Environment in the amount of $1.8 million in support of its obligations.
The letters of credit are secured by investment certificates. The Company has received approval to incrementally fund its remaining
closure cost obligations over the next five years as follows: 2014 - $0.5 million; 2015 - $0.5 million; 2016 - $1.0 million; 2017
- $1.0 million; and 2018 - $1.5 million. At September 30, 2014, $0.25 million of the scheduled 2014 payment requirement has been
made; a $0.25 million payment is scheduled to be made during the fourth quarter of 2014.
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
| 10. | Net Royalty Obligation: |
(a) Royalty Agreements
During each of 2004, 2005, 2006 and 2007, the
Company entered into separate Royalty Agreements (“Agreements”) whereby it sold a basic royalty on a portion of the
gold production at its Seabee Gold Operation. The Company received cash consideration consisting of royalty income, indemnity fee
income and interest income.
Under the terms of the Agreements, the Company
is required to make royalty payments at fixed amounts per ounce of gold produced; these amounts vary over the term of the respective
Agreements. A portion of the cash received at the inception of the respective agreements was placed with a financial institution;
in return, the Company received a restricted promissory note. The Company utilizes interest earned from the restricted promissory
notes and, if necessary, a portion of the principal to fund the basic royalty payments pursuant to each agreement. Over the life
of the royalty agreements, it is expected that interest earned and principal from the restricted promissory notes will be sufficient
to fund the expected basic royalty payments.
The Company has the legal right of offset and
the intention to settle on a net basis. As such, the Company has presented these transactions on a net basis on the Statements
of Financial Position.
|
Note |
2004
Agreement |
2005
Agreement |
2006
Agreement |
2007
Agreement |
Total |
|
|
|
|
|
|
|
Restricted Promissory Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Balance (1) |
(b) |
6,763 |
14,082 |
36,099 |
26,305 |
83,249 |
|
Interest receivable (1) |
|
203 |
525 |
1,572 |
1,145 |
3,445 |
|
Interest Rate |
|
6 percent |
6 percent |
7 percent |
7 percent |
|
|
Maturity |
|
DEC 10, 2014 |
FEB 15, 2015 |
FEB 15, 2016 |
FEB 15, 2017 |
|
|
|
|
|
|
|
|
Royalty Payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty Rate per ounce of gold produced (2) |
|
$13.29 to $24.53 |
$26.72 to $112.45 |
$69.69 to $198.95 |
$40.56 to $147.05 |
|
|
Royalty payable (current) (1) |
(b) |
227 |
463 |
1,562 |
1,129 |
3,381 |
|
Royalty obligation payable (long-term) (1) |
(b) |
6,858 |
14,179 |
36,129 |
26,398 |
83,564 |
|
|
|
|
|
|
|
Net Profit Interest |
(c) |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
Applicable years |
|
2010-2014 |
2011-2015 |
2012-2016 |
2013-2017 |
|
|
Percent |
|
2.50, 3.00 or 4.00 |
1.00, 2.00 or 3.00 |
3.75, 4.00 or 4.25 |
3.50, 3.70 or 3.90 |
|
|
Price of gold thresholds |
|
$800, $900 or $1,200 |
$875, $1,075 or $1,275 |
$975, $1,175 or $1,375 |
$1,250, $1,500 or $1,675 |
|
| | |
| (1) | At September 30, 2014. |
| (2) | Over the remaining life of the respective agreements. |
(b) Net Royalty Obligation
The following schedule outlines the different
components of the transaction that are presented net on the Company’s consolidated Statements of Financial Position:
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
Current portion |
|
|
|
|
|
Assets |
|
|
|
|
|
Interest receivable on Restricted promissory notes |
$ |
3,445 |
|
$ |
4,991 |
Restricted promissory note (2004 agreement) |
|
6,763 |
|
|
6,776 |
Restricted promissory note (2005 agreement) |
|
14,082 |
|
|
- |
|
|
24,290 |
|
|
11,767 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current portion of deferred revenue |
|
977 |
|
|
1,075 |
Interest payable on royalty obligations |
|
3,381 |
|
|
4,782 |
Royalty obligation (2004 agreement) |
|
6,858 |
|
|
6,911 |
Royalty obligation (2005 agreement) |
|
14,179 |
|
|
- |
|
|
25,395 |
|
|
12,768 |
|
|
|
|
|
|
Net royalty obligation (current) |
$ |
(1,105) |
|
$ |
(1,001) |
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
Long-term portion |
|
|
|
|
|
Assets |
|
|
|
|
|
Restricted promissory notes |
$ |
62,404 |
|
$ |
76,978 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Deferred revenue |
|
766 |
|
|
1,473 |
Royalty obligation |
|
62,527 |
|
|
77,331 |
|
|
63,293 |
|
|
78,804 |
|
|
|
|
|
|
Net royalty obligation (long-term) |
$ |
(889) |
|
$ |
(1,826) |
|
|
|
|
|
|
Total net royalty obligation |
$ |
(1,994) |
|
$ |
(2,827) |
The interest income and the indemnity fees received
by the Company are being amortized into income over the prepayment period and the life of the respective agreements. The interest
income and the indemnity fees are netted against interest expense and are reflected in “Financing expense” on the consolidated
statement of income.
(c) NPI Payment
In addition to the royalty, the Company granted
a net profit interest (“NPI”) of varying percentages, payable only if gold prices exceed a pre-determined threshold.
Prior to any NPI payment, the Company is entitled to first recover the NPI expenditures (including capital expenditures), working
capital, operating losses, interest charges and asset retirement obligations relating to the production of ore at the Seabee Operation.
These expenditures are calculated on a cumulative basis from the commencement of the individual agreements. At September 30, 2014,
the cumulative carry forward amounts remained in a deficiency position under each of the agreements and no payments are expected
during 2014 or 2015.
(d) Call and Put
Under certain circumstances, a 100 percent owned
subsidiary of Claude will have the right to purchase (“Call”) the equity of the holder of the royalties or right to
receive the royalties at an amount no greater than the fair market value thereof at the time of the Call. The Call price will be
paid from the balance owing to the Company under the promissory notes. Under certain circumstances, the purchaser of the royalties
will have the right to sell (“Put”) their interest in the royalty to the Company at an amount no greater than the fair
market value thereof at the time of the Put. However, such right is subject to the subsidiary of Claude’s pre-emptive right
to exercise the Call in advance of any Put being exercised and completed.
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
This
note provides information about the contractual terms of the Company’s interest-bearing loans and borrowings, which are measured
at amortized cost. For more information about the Company’s exposure to interest rate and liquidity risk, see Note 14.
|
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Demand loans |
(a) |
$ |
- |
|
$ |
2,950 |
Current portion of finance lease liabilities |
(b) |
|
- |
|
|
291 |
Current portion of term loan |
(c) |
|
3,600 |
|
|
23,628 |
Revolving loan |
(e) |
|
- |
|
|
5,000 |
|
|
$ |
3,600 |
|
$ |
31,869 |
|
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
Term loan |
(c) |
$ |
22,399 |
|
$ |
23,628 |
Less current portion |
(c) |
|
(3,600) |
|
|
(23,628) |
|
|
$ |
18,799 |
|
$ |
- |
At December
31, 2013, the Company was not in compliance with a certain financial covenant requirement of the Term Loan. As such, the amortized
cost of this facility was reclassified to a current liability. During the first quarter of 2014, the Company obtained a waiver
from the lender and entered into a Waiver and Credit Amendment Agreement (“Amending Agreement”) to make certain
amendments to the original Credit Agreement. As such, the long-term portion of this Term Loan
was reclassified back to non-current liabilities in the first quarter of 2014.
(a) Demand Loans
The Company’s obligations under demand
loans were retired during the third quarter of 2014.
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
$ |
- |
|
$ |
2,950 |
|
$ |
- |
|
$ |
2,950 |
(b) Finance Lease Liabilities
The Company’s obligations under finance
leases were retired during the first quarter of 2014.
|
|
Present Value of |
|
|
Interest |
|
|
Future Value of |
|
|
Minimum Lease |
|
|
|
|
|
Minimum Lease |
|
|
Payments |
|
|
|
|
|
Payments |
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
DEC 31 |
|
|
2014 |
|
|
2014 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
Less than one year |
$ |
- |
|
$ |
- |
|
$ |
- |
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
|
|
Present Value of |
|
|
Interest |
|
|
Future Value of |
|
|
Minimum Lease |
|
|
|
|
|
Minimum Lease |
|
|
Payments |
|
|
|
|
|
Payments |
|
|
DEC 31 |
|
|
DEC 31 |
|
|
DEC 31 |
|
|
2013 |
|
|
2013 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
Less than one year |
$ |
291 |
|
$ |
2 |
|
$ |
293 |
(c) Term Loan
Terms
Interest on the Company’s term loan (the
“Term Loan”) with Crown Capital Partnership Inc. (“CCP”) is fixed at 10 percent, compounds monthly and
is payable monthly. Monthly principal payments of $0.3 million began in May 2014. The maturity date of the Term Loan is 60 months
from closing (April 2018), at which time a $10.9 million principal payment will be due.
Closing Costs
The
Company incurred $1.6 million of closing costs associated with the completion of this Term Loan. These costs reduce the carrying
value of the Term Loan on the Statement of Financial Position and will be amortized using the effective interest rate method at
an effect rate of approximately 12 percent over the five year period of the Term Loan.
|
|
|
SEPT 30 |
|
|
DEC 31 |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Term loan |
|
$ |
25,000 |
|
$ |
25,000 |
Adjustments: |
|
|
|
|
|
|
Closing costs |
|
|
(1,627) |
|
|
(1,627) |
Amortization of closing costs |
|
|
526 |
|
|
255 |
Principal repayments |
|
|
(1,500) |
|
|
- |
Current portion |
|
|
(3,600) |
|
|
(23,628) |
|
|
$ |
18,799 |
|
$ |
- |
Repayment Schedule
The tables below outline remaining scheduled
repayments of the Term Loan until maturity.
|
|
Term Loan |
|
|
|
|
|
Future Value of |
|
|
Principal |
|
|
|
|
|
Term Loan |
|
|
Payments |
|
|
Interest |
|
|
Payments |
|
|
SEPT 30 |
|
|
SEPT 30 |
|
|
SEPT 30 |
|
|
2014 |
|
|
2014 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
Less than one year |
$ |
3,600 |
|
$ |
2,185 |
|
$ |
5,785 |
Between one and five years |
|
19,900 |
|
|
3,987 |
|
|
23,887 |
|
$ |
23,500 |
|
$ |
6,172 |
|
$ |
29,672 |
The Term Loan is subordinate to all of the Company’s
other short-term and long-term Loans and borrowings and contains early retraction and redemption provisions. The Company has the
right to prepay the Term Loan subject to a prepayment fee (calculated on the amount being prepaid) of:
Months Following Closing * |
Prepayment Fee |
Months 13 – 24 |
2% |
Months 25 – 36 |
1% |
Months 37 – 60 |
0% |
*
The Term Loan with CCP closed in April 2013.
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
(e) Revolving Loan
The Company’s $5.0 million revolving loan
was repaid during the first quarter of 2014.
(f) Line of Credit
The Company has access up to an $8.5 million
operating line of credit which bears interest at prime plus 1.625 percent; the prime rate at September 30, 2014 was 3 percent.
At September 30, 2014, this operating line of credit was undrawn. These funds are available for general corporate purposes. At
September 30, 2014, the Company was bound by and met all covenants on this credit facility.
Equity Issue:
| (a) | Credit Agreement Waiver |
During the first quarter of 2014, the Company
completed a private placement of 4,545,454 common shares to CCP as payment for a waiver being granted by CCP in connection with
the Credit Agreement dated April 5, 2013. At September 30, 2014, there were 188,155,978 common shares of Claude outstanding.
The Company has the following equity-settled plans:
| (b) | Employee Share Purchase Plan (“ESPP”) |
The ESPP
was established to encourage employees to purchase the Company’s common shares. Under the plan, eligible employees may contribute
up to five percent of their basic annual salary and the Company shall contribute common shares in an amount equal to 50 percent
of the employee’s contribution. Shares of the Company are issued to employees based on a weighted average market price over
a specific period.
During the first quarter of 2014, the Company
issued 7,799,148 common shares (2013 – 2,065,812) pursuant to 2013 participation in this plan. The
maximum number of common shares of the Company available for issue under this ESPP is five percent of the Company’s common
shares outstanding. Distribution of common shares pursuant to the Company’s ESPP occurs annually, subsequent
to the year of participation.
During
the period ended September 30, 2014, compensation expense recognized in respect of
the ESPP was $0.1 million (September 30, 2013 - $0.1 million). Year to date, the compensation
expense recognized in respect of the ESPP was $0.3 million (YTD 2013 - $0.4 million). This
compensation expense has been included in General and administrative expense in the Consolidated Statements of Income.
The
Company has established a stock option plan under which common share purchase options may be granted to directors, officers and
key employees. The maximum number of common shares available for option under the stock option plan is nine percent of the Company’s
common shares outstanding. Options granted have an exercise price of the Company’s prior day’s closing price quoted
on the TSX for the common shares of Claude. All options are settled by physical delivery of shares. Vesting periods of options
granted under the Company’s stock option plan vary on a grant by grant basis, at the discretion of the Company’s Board
of Directors. Grants to Employees have a term to expiry of 7 to 10 years and typically have a vesting term of 3 to 5 years. Grants
to Directors have a term to expiry of 7 to 10 years and vest immediately.
Options outstanding under this plan at September
30, 2014 and December 31, 2013 and their weighted average exercise prices are as follows:
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
SEPT 30 |
|
|
Average |
|
|
DEC 31 |
|
|
Average |
|
|
2014 |
|
|
Exercise |
|
|
2013 |
|
|
Exercise |
|
|
Options |
|
|
Price |
|
|
Options |
|
|
Price |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
7,936,361 |
|
$ |
1.19 |
|
|
6,948,527 |
|
$ |
1.43 |
Options granted |
|
811,576 |
|
|
0.17 |
|
|
1,937,268 |
|
|
0.43 |
Options exercised |
|
- |
|
|
- |
|
|
- |
|
|
- |
Options forfeited |
|
(675,778) |
|
|
1.00 |
|
|
(934,434) |
|
|
1.35 |
Options expired |
|
(60,000) |
|
|
1.57 |
|
|
(15,000) |
|
|
1.79 |
End of year |
|
8,012,159 |
|
$ |
1.10 |
|
|
7,936,361 |
|
$ |
1.19 |
There were no stock options exercised during
the third quarter of 2014 or 2013.
For
director and employee options outstanding at September 30, 2014, the range of exercise prices, the weighted average exercise price
and the weighted average remaining contractual life are as follows:
|
Options Outstanding |
Options Exercisable (Vested) |
Option Price Per Share |
Quantity |
Weighted Average Remaining Life |
Weighted Average Exercise Price |
Quantity |
Weighted Average Remaining Life |
Weighted Average Exercise Price |
$0.17 - $0.50 |
2,447,563 |
5.90 |
$0.35 |
556,255 |
5.44 |
$0.47 |
$0.51 - $1.00 |
973,178 |
4.42 |
0.75 |
923,178 |
4.38 |
0.75 |
$1.01 - $1.50 |
2,339,673 |
4.08 |
1.20 |
2,339,673 |
4.08 |
1.20 |
$1.51 - $2.00 |
1,775,000 |
5.32 |
1.87 |
1,538,000 |
5.11 |
1.86 |
$2.01 - $2.38 |
476,745 |
6.44 |
2.32 |
405,396 |
6.43 |
2.31 |
|
8,012,159 |
5.09 |
$1.10 |
5,762,502 |
4.70 |
$1.31 |
The foregoing options have expiry dates ranging
from January 5, 2015 to November 9, 2021.
The weighted average fair value of stock options
granted during the nine months ended September 30, 2014 was $0.12 and was estimated using the Black-Scholes option pricing model
with assumptions of a 5.9 year weighted average expected option life, a 6.5 percent expected forfeiture rate, 76.6 percent volatility
and an interest rate of 1.8 percent. The weighted average fair value of stock options granted during the nine months ended September
30, 2013 was $0.30 and was estimated using the Black-Scholes option pricing model with assumptions of a 6.0 year weighted average
expected option life, a 4.8 percent expected forfeiture rate, 73.6 percent volatility and an interest rate of 1.4 percent.
For the quarter ended September 30, 2014, the
compensation expense recognized in respect of stock options was $0.1 million (Q3 2013 - $0.2 million). Year to date, compensation
expense recognized in respect of stock options was $0.2 million (YTD 2013 - $0.5 million). This compensation expense has been included
in General and administrative expenses in the Consolidated Statements of Income (loss).
The expected volatility used in the Black-Scholes
option pricing model is based on the historical volatility of the Company’s shares over the weighted average expected option
life.
The Company has the following cash-settled plans:
| (d) | Deferred Share Unit Plan |
The Company offers a Deferred Share Unit (“DSU”)
plan to non-employee Directors. A DSU is a notional unit that reflects the market value of a single common share of Claude. A portion
of each Director’s annual retainer is paid in DSUs. Each DSU fully vests upon award and are redeemable for cash upon a director
leaving the Company’s Board of Directors. The redemption amount will be based upon the weighted average of the closing prices
of the common shares of Claude on the TSX for the last 20 trading days prior to the redemption date multiplied by the number of
DSUs held by the Director.
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
During 2014, the Company granted 3,043,481 DSUs
to participating Directors. At September 30, 2014, total DSUs held by participating Directors was 3,302,985 (December 31, 2013
– 1,580,086). During the third quarter of 2014, the Company settled 1,320,582 DSUs in conjunction with the retirement of
two Directors.
Year to date, compensation expense recognized
in respect of DSUs during 2014 was $0.8 million (YTD 2013 - $0.3 million). This compensation expense has been included in General
and administrative expenses in the Consolidated Statements of Income.
| (e) | Restricted Share Unit Plan |
In 2014, the Company established a Restricted
Share Unit (“RSU”) plan whereby it may provide each plan participant an annual grant of RSUs in an amount determined
by the Company’s Board of Directors. An RSU is a notional unit that reflects the market value of a single common share of
Claude that entitles the participant to a cash payment for all fully vested units. RSUs vest annually over a three-year period.
The final value of the RSUs will be based upon the weighted average of the closing prices of the common shares of Claude on the
TSX for the last 20 trading days prior to the redemption date multiplied by the number of RSUs held by participants.
For RSUs, the Company records compensation expense
with an offsetting credit to accounts payable to reflect the estimated fair value of RSUs granted to participants. During the second
quarter of 2014, a total of 1,058,696 RSUs were granted to participants in the Company’s RSU plan. At September 30, 2014,
total RSUs held by plan participants was 778,261.
Year to date, compensation expense recognized
in respect of RSUs during 2014 was $0.1 million (YTD 2013 - nil). This compensation expense has been included in General and administrative
expenses in the Consolidated Statements of Income.
Other:
| (f) | Schedule of Warrants Outstanding |
Each common share purchase warrant entitles
the holder to acquire one common share of the Company at prices determined at the time of issue.
|
|
|
Number |
|
|
|
|
Number |
|
Exercise |
|
Outstanding at |
|
|
|
|
Outstanding at |
|
Price |
Expiry Date * |
DEC 31, 2013 |
|
Granted |
Cancelled |
|
SEPT 30, 2014 |
$ |
0.70 |
April 5, 2018 |
5,750,000 |
|
- |
5,750,000 |
|
- |
* At September 30, 2014, there were no common
share purchase warrants outstanding. This compares to 5.8 million common share purchase warrants outstanding at December 31, 2013.
During the first quarter of 2014, the 5,750,000 warrants held by CCP were cancelled in conjunction with an Amending Agreement pursuant
to a long term debt arrangement between Claude and CCP.
The range of exercise prices and dates of expiration of the common
share purchase warrants outstanding at December 31, 2013 were as follows:
|
|
|
Number |
|
|
|
|
Number |
|
Exercise |
|
Outstanding at |
|
|
|
|
Outstanding at |
|
Price |
Expiry Date |
DEC 31, 2012 |
|
Granted |
Expired |
|
DEC 31, 2013 |
$ |
1.60 |
May 22, 2013 |
1,693,200 |
|
- |
1,693,200 |
|
- |
$ |
0.70 |
April 5, 2018 |
- |
|
5,750,000 |
- |
|
5,750,000 |
|
|
|
1,693,200 |
|
5,750,000 |
1,693,200 |
|
5,750,000 |
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
| 13. | Earnings (Loss) Per Share: |
Basic:
The
calculation of basic earnings per share has been based on the following profit (loss) attributable to ordinary shareholders and
weighted-average number of ordinary shares outstanding.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
SEPT 30 |
|
|
SEPT 30 |
|
|
SEPT 30 |
|
|
SEPT 30 |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) attributable to common Shareholders |
$ |
6,852 |
|
$ |
(33,871) |
|
$ |
5,068 |
|
$ |
(46,323) |
Weighted average number of common shares outstanding (basic) |
|
188,156 |
|
|
175,811 |
|
|
186,136 |
|
|
175,478 |
Basic net profit (loss) per share |
$ |
0.04 |
|
$ |
(0.19) |
|
$ |
0.03 |
|
$ |
(0.26) |
Diluted:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
SEPT 30 |
|
|
SEPT 30 |
|
|
SEPT 30 |
|
|
SEPT 30 |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) attributable to common Shareholders |
$ |
6,852 |
|
$ |
(33,871) |
|
$ |
5,068 |
|
$ |
(46,323) |
Weighted average number of common shares outstanding |
|
188,156 |
|
|
175,811 |
|
|
186,136 |
|
|
175,478 |
Dilutive effect of stock options |
|
303 |
|
|
- |
|
|
176 |
|
|
- |
Dilutive effect of warrants |
|
- |
|
|
- |
|
|
- |
|
|
- |
Weighted average number of common Shares outstanding (diluted) |
|
188,459 |
|
|
175,811 |
|
|
186,312 |
|
|
175,478 |
Diluted net earnings per share |
$ |
0.04 |
|
$ |
(0.19) |
|
$ |
0.03 |
|
$ |
(0.26) |
Excluded
from the computation of diluted earnings per share for the three months ended September 30, 2014 were options outstanding on 7,025,583
common shares with an average exercise price greater than the average market price of the Company’s common shares. Excluded
from the computation of diluted earnings per share for the nine months ended September 30, 2014 were options outstanding on 7,200,583
common shares with an average exercise price greater than the average market price of the Company’s common shares.
For
the three months ended September 30, 2013 and year to date September 30, 2013, there was no effect of applying the treasury-stock
method to the weighted average number of shares outstanding as all of the options and warrants were anti-dilutive.
| 14. | Financial Instruments: |
The Company is exposed in varying degrees to
a variety of financial instrument related risks by virtue of its activities. The overall financial risk management program focuses
on preservation of capital and protecting current and future Company assets and cash flows by reducing exposure to risks posed
by the uncertainties and volatilities of financial markets.
The Company’s Board of Directors has responsibility
to ensure that an adequate financial risk management policy is established and to approve the policy.
The Company’s Audit Committee oversees
Management’s compliance with the Company’s financial risk management policy, approves financial risk management programs,
and receives and reviews reports on management compliance with the policy.
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
The types of risk exposures and the way in
which such exposures are managed are as follows:
Credit Risk – The Company’s
credit risk is primarily attributable to its liquid financial assets including cash and cash equivalents, receivables, and commodity
and currency instruments. The Company limits exposure to credit risk on liquid financial assets through maintaining its cash and
cash equivalents and reclamation deposits with high-credit quality financial institutions. Sales of precious metals are to entities
considered to be credit worthy, as evaluated through the Company’s risk management program, which includes an evaluation
of new and existing customers and quarterly monitoring.
Liquidity Risk – The Company
ensures that there is sufficient capital in order to meet short term business requirements, after taking into account cash flows
from operations and the Company’s holdings of cash and cash equivalents. The Company believes operating cash flows will be
sufficient to fund the ongoing capital improvements at the Seabee properties for the next twelve months. The Company’s cash
is invested in business accounts with quality financial institutions and is available on demand.
Market Risk – Market risk
is the potential for loss from adverse changes in the market value of financial instruments. The level of market risk that the
Company is exposed to varies depending on the composition of its derivative instrument portfolio, as well as current and expected
market conditions. The significant market risk exposures to which the Company is exposed are Foreign exchange risk, Commodity price
and Interest rate risk. These are discussed further below:
Foreign exchange risk –
The results of the Company’s operations are subject to currency risks. The Company’s revenues from the production and
sale of gold are denominated in U.S. dollars. However, the Company’s operating expenses are primarily incurred in Canadian
dollars and its liabilities are primarily denominated in Canadian dollars. The Company is not exposed to material foreign exchange
risk on its financial instruments.
For a $0.01 movement in the US$/CDN$ exchange
rate, based on assumptions comparable to third quarter 2014 actuals, earnings and cash flow will have a corresponding movement
of $0.9 million, or $0.00 per share.
Interest rate risk – In
respect to the Company’s financial assets, the interest rate risk mainly arises from the interest rate impact on our cash
and cash equivalents, reclamation deposits and debt. In respect to financial liabilities, one of the Company’s demand loans
carries a floating interest rate with the balance of Company debt at fixed interest rates. When possible, the Company will fix
its interest costs to avoid variations in cash flows. Due to the greater proportion of fixed rate debt, a one percent change in
interest rates would not materially impact earnings or cash flows.
Commodity price risk – The
value of the Company’s mineral resources is related to the price of gold and the outlook for this mineral. Gold and precious
metal prices historically have fluctuated widely and are affected by numerous factors outside of the Company’s control, including,
but not limited to, industrial and retail demand, central bank lending, forward sales by producers and speculators, levels of worldwide
production, short-term changes in supply and demand because of speculative hedging activities and certain other factors related
specifically to gold. The profitability of the Company’s operations is highly correlated to the market price of gold. If
the gold price declines below the cost of production at the Company’s operations, for a prolonged period of time, it may
not be economically feasible to continue production. The Company is not exposed to material commodity price risk on its financial
instruments.
For a U.S. $10 movement in gold price per ounce,
based on assumptions comparable to third quarter 2014 actuals, earnings and cash flow will have a corresponding movement of CDN
$0.7 million, or $0.00 per share.
At September 30, 2014, the Company had derivative
instruments outstanding in the form of forward sales contracts relating to 2014 production totaling 12,500 ounces. The market
value gain inherent in these contracts at September 30, 2014 was $0.9 million. The Company did not have any derivative instruments
outstanding at September 30, 2013.
Fair Value - The Company
has various financial instruments comprised of cash and cash equivalents, receivables, short and long-term investments, restricted
promissory notes, reclamation deposits, demand loans, accounts payable and accrued liabilities, long-term debt, and royalty obligations.
Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
For disclosure purposes, all financial instruments measured at fair value are categorized into one of three hierarchy levels, described
below. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value.
Each level is based on the transparency of the inputs used to measure the fair values of assets and liabilities:
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
Level 1 – Values based
on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2 – Values based
on quoted prices in markets that are not active or model inputs that are observable either directly (for example, interest rate
and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts
and volatility measurement used to value option contracts) or indirectly for substantially the full term of the asset or liability.
Level 3 – Values based
on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
The fair values of financial assets and liabilities,
together with the carrying amounts shown in the Statement of Financial Position, are as follows:
|
SEPT 30 |
DEC 31 |
|
2014 |
2013 |
|
Carrying
Value |
Estimated Fair Value |
Carrying
Value |
Estimated
Fair Value |
|
|
|
|
|
Loans and receivables |
|
|
|
|
Cash and cash equivalents (1) |
$10,586 |
$10,586 |
- |
- |
Short-term investments (1) |
- |
- |
$1,500 |
$1,500 |
Accounts receivable (2) |
252 |
252 |
2,873 |
2,873 |
Available-for-sale financial assets |
|
|
|
|
Investments (1) |
1,483 |
1,483 |
143 |
143 |
Held-to-maturity |
|
|
|
|
Deposits for reclamation costs |
1,829 |
1,829 |
2,237 |
2,237 |
Derivative instruments (3) |
859 |
859 |
- |
- |
Other financial assets |
|
|
|
|
Assets held for sale |
- |
- |
13,423 |
13,423 |
Other financial liabilities |
|
|
|
|
Bank indebtedness |
- |
- |
8,623 |
8,623 |
Demand and revolving loans |
- |
- |
7,950 |
7,950 |
Accounts payable |
7,872 |
7,872 |
6,997 |
6,997 |
Liabilities related to assets held for sale |
- |
- |
2,316 |
2,316 |
Net royalty obligations |
1,994 |
1,994 |
2,827 |
2,827 |
Term loan |
22,399 |
23,500 |
23,628 |
25,000 |
| (1) | Based on quoted market prices – Level
1. |
| (2) | At September 30, 2014, there were no receivables
that were past due or considered impaired. |
| (3) | Based on models with observable inputs –
Level 2. |
Valuation Techniques:
Investments
The fair value of Investments is determined based on the closing
bid price of each security at the balance sheet date. The closing bid price is a quoted market price obtained from the exchange
that is the principal active market for the particular security, and therefore Investments are classified within Level 1 of the
fair value hierarchy.
Term Loan
The Company’s Term Loan is recorded at amortized cost. The
fair value is the principal outstanding on the Term Loan, as the fixed interest rate approximates rates for similar instruments.
Claude Resources Inc. Notes to the Condensed Consolidated Interim Financial Statements For the nine months ended September 30, 2014 and 2013 Expressed in Thousands of Canadian Dollars, except share data or as otherwise noted |
The Company’s objective when managing
its capital is to safeguard its ability to continue as a going concern so that it can provide adequate returns to shareholders
and benefits to other stakeholders. The Company defines capital that it manages as the aggregate of its equity attributable to
owners of the Company, which is comprised of issued capital, contributed surplus, accumulated deficit and accumulated other comprehensive
income (loss).
The Company manages the capital structure and
makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets and the
Company’s working capital requirements. In order to maintain or adjust the capital structure, the Company (upon approval
from its Board of Directors, as required) may issue new shares through private placements, sell assets or incur debt. The Board
of Directors reviews and approves any material transaction out of the ordinary course of business, including proposals on acquisitions,
major investments, as well as annual capital and operating budgets. The Company believes that this approach, given the relative
size of the Company, is reasonable. There were no changes in the Company’s approach to capital management during the period
ended September 30, 2014. The Company is not subject to externally imposed capital requirements.
The Company utilizes a combination of short-term
and long-term debt and equity to finance its operations and exploration.
|
|
|
|
SEPT 30 |
|
DEC 31 |
|
Interest |
Maturity |
|
2014 |
|
2013 |
|
|
|
|
|
|
|
Demand loans |
|
|
$ |
- |
$ |
2,950 |
Revolving loan |
|
|
|
- |
|
5,000 |
Finance lease liabilities |
|
|
|
- |
|
291 |
Term loan * |
10.00% |
Apr/2018 |
|
22,399 |
|
23,628 |
Total debt |
|
|
$ |
22,399 |
$ |
31,869 |
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
130,018 |
|
122,596 |
|
|
|
|
|
|
|
Debt to equity |
|
|
|
17.2% |
|
26.0 % |
* Closing costs
associated with the Company’s long-term debt are netted against the principal balance owing, thereby reducing the carrying
value of the Company’s debt on the Statement of Financial Position. Amounts presented in the above table are the amortized
cost of the balances owing (Note 11).
At September 30, 2014, the Company is bound
by and has met all covenants on its credit facilities.
Exhibit 99.2
Management’s
Discussion and Analysis
The following Management’s Discussion
and Analysis (“MD&A”) of the consolidated operating and financial performance of Claude Resources Inc. (“Claude”
or the “Company”) for the three and nine months ended September 30, 2014 with the corresponding period of 2013 is prepared
as of October 30, 2014. This discussion is the responsibility of Management and has been prepared using International Financial
Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board. This discussion should be
read in conjunction with the Company’s September 30, 2014 condensed consolidated interim financial statements and notes thereto
and the Company’s 2013 annual MD&A and 2013 audited consolidated financial statements and notes thereto. The Board of
Directors has approved the disclosure presented herein. All amounts referred to in this discussion are expressed in Canadian dollars,
except where otherwise indicated.
Overview
Claude Resources Inc., incorporated pursuant
to the Canada Business Corporations Act, is a gold producer with shares listed on both the Toronto Stock Exchange (TSX-CRJ) and
OTCQB (OTCQB - CLGRF). The Company is also engaged in the exploration and development of gold Mineral Reserves and Mineral Resources.
The Company’s entire asset base is located in Canada.
The Company’s revenue generating asset
is the 100 percent owned Seabee Gold Operation, located in northern Saskatchewan, which includes 42,500 acres (17,200 hectares)
and is comprised of six mineral leases and extensive surface infrastructure. Claude also owns 100 percent of the Amisk Gold Project
in northeastern Saskatchewan. The Amisk Gold Project is located 20 kilometres southwest of Flin Flon, Manitoba and hosts the Amisk
Gold Deposit and a large number of gold occurrences and prospects. At 99,800 acres (40,400 hectares), this gold and silver exploration
property is one of the largest land positions in the Flin Flon mineral district.
The Company’s Seabee and Amisk properties
contain large, long life Mineral Resources in the politically safe jurisdiction of Canada. These properties, and their related
deposits, each contain over one million ounces of gold in the ground inventory and have significant leverage to the price of gold
and provide valuable opportunities for the Company and its shareholders. Management intends to monitor the attractiveness of these
projects and evaluate alternatives to optimize value.
Production, Financial and Exploration
Highlights
Seabee Gold Operation Production
| • | Production: Record production of 20,614 ounces produced during the third quarter of 2014
(surpassing the former quarterly production record of 18,742 ounces of gold produced during the second quarter of 2014) was nearly
double period over period (Q3 2013 - 10,541 ounces produced). This increase was attributable to increased tonnes and grade period
over period. Year to date, 50,700 ounces produced (YTD 2013: 31,061 ounces produced). For fiscal 2014, the Company’s forecast
gold production at the Seabee Gold Operation is estimated to range from 61,000 to 64,000 ounces of gold (previously 50,000 to 54,000
ounces of gold). Over the last eight quarters, gold production at the Seabee Gold Operation was 107,100 ounces (including 63,400
ounces of gold production over the last four quarters). |
| • | Tonnes Milled: Mill throughput was 74,930 tonnes at 8.88 grams per tonne with a recovery
of 96.4 percent during the third quarter of 2014 (Q3 2013 - 64,642 tonnes at 5.30 grams per tonne with a recovery of 95.8 percent).
Year to date, mill throughput was 219,046 tonnes at 7.53 grams per tonne with a recovery of 95.6 percent (YTD 2013: 205,596 tonnes
at 4.94 grams per tonne with a recovery of 95.2 percent). |
| • | Santoy Gap: Achieved initial development ore during the first half of 2014 with long-hole
production (originally expected to begin in the fourth quarter of 2014) initiated ahead of schedule during the third quarter. The
Santoy Gap deposit (part of the Santoy Mine Complex) represents an opportunity for the Company to grow production due to Santoy
Gap’s proximity to permitted mine infrastructure, low development cost and near-term production potential. |
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 2 |
Santoy Gap
| • | Year to date, the Santoy Gap deposit has produced over 28,000 tonnes at approximately 8.60
grams of gold per tonne. Thus far, the average grade has been 34 percent higher than the Santoy Gap Mineral Reserve grade of
6.40 grams of gold per tonne. Year to date, the Santoy Gap has had a positive impact on production from the Santoy Mine
Complex with overall grades improving to 6.75 grams of gold per tonne in the third quarter versus the 4.66 grams of gold per
tonne during the first half of this year. |
| • | Production ramp up at the Santoy Gap is ahead of schedule and will become the main contributor
of tonnes and ounces mined from the Santoy Mine Complex during the remainder of 2014. During the fourth quarter of 2014, production
tonnage from Santoy Gap is expected to average 250 to 350 tonnes per day. The increase in tonnage and grade from Santoy Gap will
drive unit cost improvements going forward. |
| • | During the third quarter, the Company engaged an engineering firm to update sections of the Santoy
Gap mine plan with a focus on mine design, ventilation and future power requirements. Once completed, the Company will move forward
with development to achieve a full production rate of 500 to 700 tonnes per day. Capital expenditures required to achieve the future
production ramp up are expected to be minimal and the Company expects to fund its organic growth through internal cash flows. |
| • | The Company is conducting a 27,000 metre infill drilling program to better define and expand the
current Mineral Reserves and Mineral Resources at the Santoy Gap and to optimize mine design. To date, the results have been very
positive and include an intersection of 26.77 grams of gold per tonne over 8.7 metres true width (Please see Claude news release
“Claude Resources Drills 26.77 G/T Gold over 8.7 M & Initiates Long-Hole Production at Santoy Gap” dated September
10, 2014). |
| • | The Santoy Gap deposit is unique within the Seabee Gold Operation in that it contains approximately
2,000 ounces per vertical metre, whereas the Company has historically mined approximately 1,000 ounces per vertical metre at the
Seabee Mine. As such, it is expected that operations will be able to mine more ounces with less capital development and at lower
costs. This not only provides the opportunity to increase production but also increase margins and cash flow. |
| • | Exploration results at the Santoy Mine Complex demonstrate that this system has the potential to
be much larger than it is today. During the first quarter of 2013, two out of three drill holes returned significant assay results
of 330.35 grams per tonne over 1.55 metres and 18.80 grams per tonne over 13.86 metres. These holes are located outside the Company’s
current Mineral Resource and demonstrate that the system continues at depth and along strike of the ore body. Claude expects that
the Santoy Gap deposit will play a significant role at the Seabee Gold Operation for many years to come. |
Seabee Mine Alimak Mining Method
| • | During 2014, the Company has been utilizing the Alimak mining method on the L62 deposit within
the Seabee Mine. |
| • | The Alimak mining method is a proven method utilized at operations similar to the Seabee Gold Operation.
One of the benefits of the Alimak mining method is that it requires significantly less development which then decreases overall
costs and time to produce. As an example, the Company now has the ability to mine a 100 metre high stope in nine months utilizing
the Alimak mining method versus 16 to 18 months needed for traditional Long Hole mining. The Alimak method has been a key driver
in the Seabee Mine achieving year to date production of 480 tonnes per day at an average grade of 8.93 grams of gold per tonne. |
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 3 |
Financial
| • | Revenue: For the three months ended September 30, 2014, sales of 17,578 ounces (Q3 2013
- 10,781 ounces) at an average price of CDN $1,384 (U.S. $1,270) generated revenue of $24.3 million, compared to Q3 2013 revenue
of $15.0 million at an average price of $1,389 (U.S. $1,338), reflecting a 63 percent increase in ounces sold and consistent average
realized price period over period. Year to date, sales of 46,133 ounces (YTD 2013 - 31,614 ounces) at an average price of $1,402
(U.S. $1,281) generated revenue of $64.7 million, a 40 percent increase over the comparable period of 2013. |
| • | Net (loss) profit: Net profit of $6.9 million, or $0.04 per share (Q3 2013 - net loss of
$33.9 million, or $0.19 per share, after an impairment charge of $45.2 million which was partially offset by a $12.5 million deferred
income tax recovery). Year to date, net profit of $5.1 million, or $0.03 per share (YTD 2013 - net loss of $46.3 million, or $0.26
per share, after $56.0 million in impairment charges which were partially offset by a $16.8 million deferred income tax recovery). |
| • | Adjusted Net profit (loss) (1): After adjusting for deferred income tax (recovery)
expense and non-recurring items such as impairment charges and gain (loss) on sale of assets and investments, the Company’s
adjusted net profit was $5.8 million, or $0.03 per share (Q3 2013 - adjusted net loss of $1.2 million, or $0.01 per share). Year
to date, adjusted net profit of $4.4 million, or $0.02 per share (YTD 2013 - adjusted net loss of $6.8 million, or $0.04 per share). |
| • | All in sustaining costs (1): $18.7 million, or CDN $1,063 (U.S. $976) per ounce
(Q3 2013 - $17.0 million, or CDN $1,574 (U.S. $1,516) per ounce). Year to date, $58.4 million, or CDN $1,265 (U.S $1,156) per ounce
(YTD 2013 - $61.9 million, or CDN $1,957 (U.S. $1,912) per ounce). |
| • | Cash cost per ounce of gold (1): CDN $735 (U.S. $675) per ounce for the three
months ended September 30, 2014 was 20 percent lower than the CDN $919 (U.S. $885) per ounce for the third quarter of 2013. Year
to date, cash cost per ounce of gold was CDN $801 (U.S. $732) per ounce, a 20 percent decrease from the cash cost per ounce of
CDN $999 (U.S. $976) reported during the first nine months of 2013. |
| • | Cash flow from operations before net changes in non-cash operating working capital (2):
$10.4 million, or $0.06 per share (Q3 2013 - $4.3 million, or $0.02 per share). Year to date, $22.0 million, or $0.12 per share
(YTD 2013 - $9.3 million, or $0.05 per share). |
| • | Working capital: $27.8 million (December 31, 2013 - working capital deficiency of $11.9
million). |
| • | The Company received the final payment of $2.5 million cash during Q3 2014, pursuant to the Madsen
Gold Project sale to Pure Gold Mining Inc.(“PGM”), formerly Laurentian Goldfields. |
| • | During the third quarter, the Company sold 5.7 million of its shares of PGM for gross proceeds
of $2.5 million. At September 30, 2014, the Company still held 4.1 million shares of PGM. |
| • | Debt reduction totaled $9.7 million during the first nine months of 2014. |
| • | Cash and cash equivalents of $10.6 million at September 30, 2014. |
Exploration
Seabee Gold Operation:
| • | During the first nine months of 2014, exploration expenditures at the Seabee Gold Operation focused
on review and compilation of existing data to support the development and evaluation of several near-mine targets. |
| • | Drilling at the Seabee Gold Operation is anticipated to be approximately 55,000 metres; 41,000
metres have been completed as at the end of September. Focus will continue to be on low cost per ounce targets, proximal to infrastructure
with the potential to materially impact near-term production, drive resource growth and to positively impact the Company’s
Mineral Reserves and Mineral Resources. |
Mineral Reserves and Mineral Resources:
| • | The Seabee Gold Operation’s Proven and Probable Mineral Reserves at November 15, 2013 were
422,900 ounces of gold. Measured and Indicated (“M&I”) Mineral Resources at November 15, 2013 were 175,200 ounces
of gold. Inferred Mineral Resources at November 15, 2013 were 582,900 ounces of gold. |
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 4 |
| • | The Santoy Gap deposit, part of the Santoy Mine Complex, represents an opportunity for the Company
to grow production due to Santoy Gap’s proximity to permitted mine infrastructure, low development cost and near-term production
potential. The Santoy Gap deposit hosts Proven and Probable Mineral Reserves of 266,100 ounces of gold at 5.68 grams per tonne,
Measured and Indicated Mineral Resources of 83,900 ounces of gold at 8.44 grams per tonne and Inferred Mineral Resources of 270,800
ounces of gold at 6.96 grams per tonne. |
| • | An updated NI 43-101 Mineral Reserve and Mineral Resource compliant statement for the Seabee Gold
Operation is anticipated to be completed during the first quarter of 2014. |
Amisk Gold Project:
| • | During 2014, no exploration expenditures are planned for the Amisk Gold Project. |
Outlook
Corporate Outlook
In the future, Claude will continue to:
| i) | Pursue best practices in the areas of safety, health and the environment in our operations; |
| ii) | Reduce capital and operating expenditures and improve unit operating costs at the Seabee Gold Operation
by continuing to focus on the Company’s cash flow optimization plan designed to maximize cash flow while developing lower
cost and higher grade satellite deposits including the Santoy Gap deposit; and |
| iii) | Sustain or increase reserves and resources at the Seabee Gold Operation through targeted exploration
and development. |
Operating and Financial Outlook
Gold production during 2014 at the Seabee Gold
Operation is estimated to range from 61,000 to 64,000 ounces of gold (previously 50,000 to 54,000 ounces of gold). Unit cash costs
for 2014 are expected to be approximately 20 percent lower than 2013’s unit cash costs of $983 CDN per ounce. Quarterly operating
results are expected to fluctuate throughout 2014; as such, they will not necessarily be reflective of the full year average.
At current gold prices and forecast production,
Management believes that operating cash flows, proceeds from the sale of Madsen and proceeds from the sale of NSR royalty on the
Seabee Gold Operation will be sufficient to fund the 2015 Winter Ice Road resupply requirements and further development opportunities
at the Seabee Gold Operation.
Forecast and Capital Outlook
During 2014, capital expenditures at the Seabee
Gold Operation are expected to include continued investment and upgrades that are estimated to total approximately $21.3 million,
funded from a combination of operating cash flow, the sale of the Madsen Gold Project and the sale of the NSR royalty on the Seabee
Gold Operation. This 30 percent reduction from 2013 expenditures of $30.6 million is due to the completion of several major projects,
including the shaft extension.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 5 |
Table 1: Capital Expenditures (CDN$ million) |
|
|
2014
Estimate |
|
2014
9 months
Actual |
|
2013
9 months
Actual |
|
2013
Full Year
Actual |
Capital |
|
|
|
|
|
|
|
|
Development |
$ |
16.3 |
$ |
12.5 |
$ |
17.5 |
$ |
23.0 |
Property, Plant and Equipment |
|
5.0 |
|
3.3 |
|
6.5 |
|
7.6 |
Total |
$ |
21.3 |
$ |
15.8 |
$ |
24.0 |
$ |
30.6 |
Development expenditures are expected to be
prioritized at Santoy Gap. Property, plant and equipment costs include expenditures on equipment replacement and tailings management
facilities.
Exploration Outlook
Exploration spending during 2014 is forecast
to be approximately $0.2 million (2013 - $1.6 million).
At the Seabee Gold Operation, exploration expenditures
will focus on low cost per ounce targets, proximal to infrastructure with the potential to materially impact near-term production,
drive resource growth and to positively impact the Company’s Mineral Reserves and Mineral Resources. Drilling at Seabee is
anticipated to consist of approximately 55,000 metres.
Strategic Review
The Company has engaged a strategic and
financial advisor to explore alternatives with the objective to maximize value for all shareholders. Work on this initiative has
been ongoing since March of 2014. In addition, the Company is continuing to investigate various external debt restructuring options.
Mining
Operations Results
Seabee Gold Operation
At the Seabee Gold Operation, Claude is focused
on improving profit margins and executing its mine plan. Profit margins will be increased by targeting higher grades and margin
deposits (L62, Santoy Gap), with continued focus on cost control for materials and supplies as well as controlling labour costs.
The Company is also continuing with its review
of operating processes and procedures to identify and implement efficiencies designed to increase production and lower operating
costs.
During the third quarter of 2014, the Company
milled 74,930 tonnes at a grade of 8.88 grams of gold per tonne (Q3 2013 - 64,642 tonnes at a grade of 5.30 grams of gold per tonne)
for total production of 20,614 ounces of gold (Q3 2013 - production of 10,541 ounces of gold). The 96 percent increase in ounces
produced was attributable to a 68 percent increase in grade and a 16 percent increase in tonnes milled period over period.
Year to date, the Company milled 219,046 tonnes
at a grade of 7.53 grams of gold per tonne (YTD 2013 - 205,596 tonnes at a grade of 4.94 grams of gold per tonne). Year to date,
produced ounces were 50,700 (YTD 2013 - 31,061 ounces); with mill recoveries relatively unchanged period over period, the increase
in ounces produced is attributable to a 52 percent increase in grade and a seven percent increase in tonnes milled.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 6 |
Table 2: Seabee Gold Operation Quarterly Production Statistics |
|
Three Months Ended |
Nine Months Ended |
|
Sept 30 |
Sept 30 |
|
Sept 30 |
Sept 30 |
|
|
2014 |
2013 |
Change |
2014 |
2013 |
Change |
|
|
|
|
|
|
|
Operating Data |
|
|
|
|
|
|
Tonnes Milled |
74,930 |
64,642 |
16% |
219,046 |
205,596 |
7% |
Tonnes per Day |
814 |
703 |
16% |
802 |
753 |
7% |
Head Grade (grams per tonne) |
8.88 |
5.30 |
68% |
7.53 |
4.94 |
52% |
Recovery (%) |
96.4% |
95.8% |
1% |
95.6% |
95.2% |
- |
Gold Ounces |
|
|
|
|
|
|
Produced |
20,614 |
10,541 |
96% |
50,700 |
31,061 |
63% |
Poured |
20,948 |
10,778 |
94% |
49,495 |
31,708 |
56% |
Sold |
17,578 |
10,781 |
63% |
46,133 |
31,614 |
46% |
Seabee Mine
During the third quarter of 2014, the Seabee
Mine produced 13,657 ounces of gold (Q3 2013 - 6,594 ounces). This increase was attributable to a 25 percent increase in tonnes
milled (due to the completion of the shaft extension during 2013 and the commencement of the Alimak mining method on the L62 deposit
during 2014) and a 65 percent increase in grade attributable to differences in mine sequencing period over period. The key drivers
of the increase in grade have been increased contribution from the L62 and scheduled grades reconciling above reserve grades.
Year to date, the Seabee Mine produced 35,942
ounces (YTD 2013 - 18,036 ounces). This increase was attributable to a 24 percent increase in tonnes milled and a 61 percent increase
in grade.
Table 3: Seabee Mine Quarterly Production Statistics |
|
Three Months Ended |
Nine Months Ended |
|
Sept 30 |
Sept 30 |
|
Sept 30 |
Sept 30 |
|
|
2014 |
2013 |
Change |
2014 |
2013 |
Change |
|
|
|
|
|
|
|
Tonnes Milled |
41,709 |
33,456 |
25% |
131,041 |
106,010 |
24% |
Tonnes per Day |
453 |
364 |
24% |
480 |
388 |
24% |
Head Grade (grams per tonne) |
10.57 |
6.40 |
65% |
8.93 |
5.56 |
61% |
Gold Produced (ounces) |
13,657 |
6,594 |
107% |
35,942 |
18,036 |
99% |
Santoy Mine Complex
During the third quarter of 2014, the Santoy
Mine Complex produced 6,957 ounces of gold (Q3 2013 - 3,947 ounces) from the Santoy Gap and Santoy 8 deposits. Period over period,
this result is attributable to a 64 percent increase in grade and a seven percent increase in tonnes (due to increased contribution
from the Santoy Gap Deposit).
Year to date, the Santoy Mine Complex produced
14,758 ounces (YTD 2013 - 13,025 ounces). This increase was attributable to a 28 percent increase in grade offset by a 12 percent
decrease in tonnes. During the third quarter, tonnage from the Santoy Gap deposit surpassed tonnage from Santoy 8.
Table 4: Santoy Mine Complex Quarterly Production Statistics |
|
Three Months Ended |
Nine Months Ended |
|
Sept 30 |
Sept 30 |
|
Sept 30 |
Sept 30 |
|
|
2014 |
2013 |
Change |
2014 |
2013 |
Change |
|
|
|
|
|
|
|
Tonnes Milled |
33,221 |
31,186 |
7% |
88,005 |
99,586 |
(12%) |
Tonnes per Day |
361 |
339 |
6% |
322 |
365 |
(12%) |
Head Grade (grams per tonne) |
6.75 |
4.11 |
64% |
5.45 |
4.27 |
28% |
Gold Produced (ounces) |
6,957 |
3,947 |
76% |
14,758 |
13,025 |
13% |
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 7 |
Capital Projects
Tailings Facility
During 2014, the Company continued with upgrades
to its tailings facilities to ensure adequate storage capacity and treatment of Mill effluent; work on this project is expected
to carry over to 2015. When completed, this facility will be permitted up to 460 metre elevation which will support a minimum of
four years of operations.
Santoy Gap
The Company has completed the ramp from Santoy
8 to the Santoy Gap deposit as well as three drill chambers for infill and definition drilling. During June 2014, the 290 metre
vent raise broke through to surface. Work continued on the vent raise during the third quarter, including surface preparation for
additional power and ventilation infrastructure. Completion of the vent relieves a shortage of power and ventilation at Santoy
Gap and will help to expedite development. Mining crews have exposed the eastern portion of the ore body on the 24, 26, 28 and
30 levels as well as on the western portion of the 26 level. The 28 and 30 levels were the first to be developed and began long-hole
production ahead of schedule during the third quarter.
Financial
Results of Operations
Highlights
Table 5: Highlights of Financial Results of Operations |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
Sept 30 |
|
Sept 30 |
|
Sept 30 |
|
Sept 30 |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
24,323 |
$ |
14,976 |
$ |
64,665 |
$ |
46,324 |
Production costs |
$ |
12,021 |
$ |
9,909 |
$ |
35,243 |
$ |
31,581 |
Impairment charges |
$ |
- |
$ |
45,187 |
$ |
- |
$ |
56,034 |
Gross profit (loss) |
$ |
6,796 |
$ |
(293) |
$ |
10,887 |
$ |
(960) |
Net profit (loss) |
$ |
6,852 |
$ |
(33,871) |
$ |
5,068 |
$ |
(46,323) |
Earnings (loss) per share (basic and diluted) |
$ |
0.04 |
$ |
(0.19) |
$ |
0.03 |
$ |
(0.26) |
|
|
|
|
|
|
|
|
|
Average realized price per ounce (CDN$) |
$ |
1,384 |
$ |
1,389 |
$ |
1,402 |
$ |
1,465 |
Average realized price per ounce (U.S.$) |
$ |
1,270 |
$ |
1,338 |
$ |
1,281 |
$ |
1,432 |
All-In Sustaining Cost per ounce (CDN$)(1) |
$ |
1,063 |
$ |
1,574 |
$ |
1,265 |
$ |
1,957 |
All-In Sustaining Costs (U.S.$/oz) (1) |
$ |
976 |
$ |
1,516 |
$ |
1,156 |
$ |
1,912 |
Cash Cost per ounce (CDN$/oz) (1) |
$ |
735 |
$ |
919 |
$ |
801 |
$ |
999 |
Cash Cost per ounce (U.S.$/oz) (1) |
$ |
675 |
$ |
885 |
$ |
732 |
$ |
976 |
The Company anticipates
that the increasing contribution of the Santoy Gap deposit and continued contribution of ore from the L62 deposit will be positive
catalysts in lowering overall unit operating costs at the Seabee Gold Operation during 2014 and beyond.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 8 |
Net Profit (Loss)
For the three months ended September 30, 2014,
the Company recorded net profit of $6.9 million, or $0.04 per share. This compares to a net loss of $33.9 million, or $0.19 per
share, after a $45.2 million impairment charge which was partially offset by a $12.5 million deferred income tax recovery, for
the three months ended September 30, 2013.
Year to date, the Company recorded net profit
of $5.1 million, or $0.03 per share (YTD 2013 - net loss of $46.3 million, or $0.26 per share, after $56.0 million of impairment
charges which were partially offset by $16.8 million of deferred income tax recovery).
Revenue
Gold revenue from the Company’s Seabee
Gold Operation for the three months ended September 30, 2014 increased 62 percent to $24.3 million from the $15.0 million reported
for the comparable period of 2013. The increase in gold revenue period over period was attributable to higher gold sales volume
(Q3 2014 - 17,578; Q3 2013 - 10,781 ounces) and consistent Canadian dollar gold prices realized (Q3 2014 $1,384 (U.S. $1,270);
Q3 2013 - $1,389 (U.S. $1,338)).
Year to date, gold revenue increased 40 percent
to $64.7 million from the $46.3 million reported in the first nine months of 2013. This increase was attributable to a sales volume
increase of 46 percent (YTD 2014 - 46,133 ounces; YTD 2013 - 31,614 ounces) period over period offset by a four percent decrease
in Canadian dollar gold prices realized (YTD 2014 - $1,402 (U.S. $1,281); YTD 2013 - $1,465 (U.S. $1,432)).
Production Costs
For the three months ended September 30, 2014,
mine production costs of $12.0 million (Q3 2013 - $9.9 million) were 21 percent higher period over period. Year to date, mine production
costs were $35.2 million (YTD 2013 - $31.6 million), an increase of 11 percent. All in sustaining costs (1) during the
third quarter were $18.7 million, or CDN $1,063 (U.S. $976) per ounce (Q3 2013 - $17.0 million, or CDN $1,574 (U.S. $1,516) per
ounce). Year to date, All in sustaining costs were $58.4 million, or CDN $1,265 (U.S $1,156) per ounce (YTD 2013 - $61.9 million,
or CDN $1,957 (U.S. $1,912) per ounce). For the third quarter of 2014, total cash cost per ounce of gold (1) of CDN
$735 (U.S. $675) per ounce decreased from CDN $919 (U.S. $885) during the third quarter of 2013. Year to date, total cash cost
per ounce of CDN $801 (U.S. $732) per ounce was 20 percent lower than the cash cost per ounce of CDN $999 (U.S. $976) reported
during the first nine months of 2013. These results are attributable to 63 percent and 46 percent more ounces sold (period over
period and year to date, respectively), a reflection of higher grade and increased tonnes milled.
Production Royalty
During the first quarter of 2014, the Company
completed a Net Smelter Return (“NSR”) royalty agreement with Orion Mine Finance Fund on the Seabee Gold Operation
(Please see Claude news release “Claude Enters into Royalty Transaction with Orion Mine Finance” dated March 20, 2014).
For the three months ended September 30, 2014, the three percent NSR royalty on production from the Seabee Gold Operation was $0.9
million (Q3 2013 - $nil). Year to date, the NSR royalty was $1.7 million (YTD 2013 - $nil).
Depreciation and Depletion
For the three months ended September 30, 2014,
depreciation and depletion was $4.6 million (Q3 2013 - $5.4 million), down 15 percent period over period. These results are attributable
to an increase in tonnes mined and milled and an increase in the Seabee Gold Operation’s asset base more than offset by an
increase in the Seabee Gold Operation’s reserves. Year to date, depreciation and depletion was $16.8 million, a seven percent
increase over the $15.7 million reported for the first nine months of 2013. This result is attributable to an increase in tonnes
mined and milled and an increase in the Seabee Gold Operation’s asset base, somewhat offset by an increase in the Seabee
Gold Operation’s reserves. Beginning in Q3 2014, the Company brought its Santoy Gap asset base and reserves into the calculation
of depletion.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 9 |
General and Administrative Expense
General and administrative expense of $1.3
million for the three months ended September 30, 2014 was relatively unchanged from the comparable period of 2013. For the first
nine months of 2014, general and administrative costs of $5.2 million were relatively unchanged from those reported for the comparable
period of 2013.
Table 6: Corporate General and Administrative Expense |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
Sept
30 |
|
Sept 30 |
|
Sept
30 |
|
Sept 30 |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
|
|
|
|
|
|
Direct administration |
$ |
980 |
$ |
958 |
$ |
3,858 |
$ |
3,867 |
Stock-based compensation |
|
153 |
|
307 |
|
438 |
|
936 |
Deferred share units |
|
99 |
|
(16) |
|
803 |
|
273 |
Restricted share units |
|
26 |
|
- |
|
102 |
|
- |
Total General and Administrative |
$ |
1,258 |
$ |
1,249 |
$ |
5,201 |
$ |
5,076 |
Finance Expense
Finance expense includes interest expense,
accretion expense and derivative losses. For the three months ended September 30, 2014, Finance expense was $0.8 million (Q3 2013
- $0.9 million). Year to date, finance expense was $4.0 million (YTD 2013 - $2.3 million). Year to date, the variance is attributable
to derivative losses, increased interest expense associated with the Company’s term loan and expenses related to the Company’s
private placement completed during the first quarter of 2014.
Finance and Other Income
Finance and other income consists of interest
income, production royalties pursuant to the Red Mile transactions, derivative gains and other miscellaneous income. For the three
months ended September 30, 2014, finance and other income was $1.1 million (Q3 2013 - $1.3 million). Year to date, Finance and
other income was $2.7 million (YTD 2013 - $1.5 million), attributable to an increase in derivative gains and miscellaneous revenue.
Impairment Charge
For the period ended September 30, 2014 and
year to date 2014, no impairment charges were recorded. For the three months ended September 30, 2013, an impairment charge of
$45.2 million was recorded ($7.9 of which related to the Company’s Seabee Gold Operation and $37.3 million of which related
to the Company’s Madsen Project, which was classified as held for sale during the third quarter of 2013 (and subsequently
sold in the first quarter of 2014) and reflected the re-measurement (required by this classification) of this asset at the lower
of its carrying amount and fair value less costs to sell). Year to date in 2013, impairment charges were $56.0 million ($18.7 million
of these chargers were attributable to the Seabee Gold Operation with the remainder attributable to the Madsen Project).
Loss on Sale of Assets
Loss on sale of assets of $nil for the three
months ended September 30, 2014 was unchanged from the comparable period of 2013. For the first nine months of 2014, Loss on sale
of assets of $0.6 million relates to the sale of the Madsen Project completed in the first quarter of 2014.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 10 |
(Gain) Loss on investments
The Company has an equity portfolio of
publicly listed companies that are classified as available-for-sale on the Statement of Financial Position. For the three
months ended September 30, 2014, gain on investments was $1.0 million (Q3 2013 - $nil). Year to date, gain on investments was
$1.3 million (YTD 2013 - $0.3 million loss). Period over period and year to date, the increase noted is attributable to the
Company disposing of 5.7 million of the 9.8 million shares in Pure Gold Mining Inc. it received pursuant to the sale of the
Madsen Gold Project.
Deferred Income Tax (Recovery) Expense
For the three months ended September 30, 2014,
the Company had a deferred income tax recovery of $nil (Q3 2013 - deferred tax recovery of $12.5 million). Year to date,
the Company had a deferred income tax recovery of $nil (YTD 2013 - $16.8 million). Management is not recognizing any deferred tax
assets in excess of its deferred tax liabilities and does not expect to recognize any significant deferred tax assets or liabilities
in the foreseeable future from its current operations.
Liquidity, Financial Resources and Capital Structure
The Company monitors its spending plans,
repayment obligations and cash resources on a continuous basis with the objective of ensuring that there is sufficient capital
within the Company to meet business requirements, after taking into account cash flows from operations and the Company’s
holdings of cash and cash equivalents and short-term investments. The Company’s typical cash requirement over the first and
second quarters of each year is significant because of the Seabee Gold Operation’s winter ice road resupply, which includes
restocking diesel, propane and other large consumables as well as the continued investment in maintenance and growth capital relating
to the mining fleet and mine infrastructure.
The Company’s objective when managing
capital is to safeguard its ability to continue as a going concern so that it can continue to provide adequate returns to shareholders
and benefits to other stakeholders. The Company manages the capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure,
the Company may issue new shares, sell assets or incur debt. The Company is not subject to externally imposed capital requirements.
The Company’s capital structure is comprised
of a combination of short-term and long-term debt and shareholders’ equity.
The capital structure of the Company is as
follows:
Table 7: Schedule of Capital Structure of the Company |
|
|
|
|
September 30 |
|
December 31 |
|
|
|
|
2014 |
|
2013 |
|
Interest |
Maturity |
|
|
|
|
Demand loans |
|
|
$ |
- |
$ |
2,950 |
Revolving loan |
|
|
|
- |
|
5,000 |
Finance lease liabilities |
|
|
|
- |
|
291 |
Term loan* |
10.00% |
April/2018 |
|
22,399 |
|
23,628 |
Total debt * |
|
|
$ |
22,399 |
$ |
31,869 |
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
130,018 |
|
122,596 |
|
|
|
|
|
|
|
Debt * to equity |
|
|
|
17% |
|
26% |
* For accounting purposes, closing
costs associated with the Company’s Term loan were netted against the principal balance owing, thereby reducing the carrying
value of the Company’s debt on the Statement of Financial Position. The amount presented in the above table is the amortized
cost of the balance owing. At September 30, 2014, the principal balance owing on the Company’s Term loan was $23.5 million.
A reconciliation between the principal balance owing and the amortized cost (carrying amount) presented on the Company’s
Statement of Financial Position is included in the “Other Financial Measures and Reconciliations” section of this MD&A.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 11 |
Cash, Cash Equivalents and Cash Flow
The Company had cash and cash equivalents
of $10.6 million at September 30, 2014 (December 31, 2013 - bank indebtedness of $8.6 million). Short-term investments at September
30, 2014 decreased to $1.5 million (December 31, 2013 - $1.6 million), reflecting the sale of a portion of the Company’s
shares in Pure Gold Mining Inc. (formerly Laurentian Goldfields Ltd.), which were received in the first quarter of 2014 pursuant
to the closing of the Madsen sale.
Operating
Activities
Operating cash flow is the Company’s
primary source of liquidity. As required, the Company may enhance its liquidity and supplement operating cash flow through a combination
of equity issuances, securing debt financing and sale of non-core assets. The principal use of operating cash flow is to fund the
Company’s: operating and capital expenditures at the Seabee Gold Operation; general and administrative costs; and principal
and interest payments.
During the first nine months of 2014, the Company’s
cash flow from operations before net changes in non-cash operating working capital (2) was $22.0 million, or $0.12 per
share (YTD 2013 - $9.3 million, or $0.05 per share).
During the first nine months of 2014,
cash provided by operating activities was $18.6 million, a $12.3 million increase compared to the first nine months of 2013; this
result is due largely to improved net earnings. Whether favorable or unfavorable, future changes in the Canadian dollar price of
gold will continue to have a material impact on the cash flow and liquidity of the Company.
At September 30, 2014, the Company had working
capital of $27.8 million (December 31, 2013 - working capital deficiency of $11.9 million).
Table 8: Working Capital and Current Ratio |
|
|
Sept 30 |
|
|
December 31 |
|
|
|
|
2014 |
|
|
2013 |
|
Change |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
10,586 |
|
$ |
- |
|
- |
Short-term investments |
|
1,483 |
|
|
1,643 |
|
(10%) |
Accounts receivable |
|
1,111 |
|
|
2,873 |
|
(61%) |
Inventories |
|
|
|
|
|
|
|
Gold bullion and in-circuit |
|
5,465 |
|
|
2,522 |
|
117% |
Stockpiled ore |
|
1,762 |
|
|
1,838 |
|
(4%) |
Materials and supplies |
|
19,803 |
|
|
16,205 |
|
22% |
Other current assets |
|
121 |
|
|
390 |
|
(69%) |
Assets held for sale |
|
- |
|
|
13,423 |
|
- |
Total current assets |
$ |
40,331 |
|
$ |
38,894 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Bank indebtedness |
$ |
- |
|
$ |
8,623 |
|
- |
Accounts payable and accrued liabilities |
|
7,872 |
|
|
6,997 |
|
13% |
Loans and borrowings |
|
|
|
|
|
|
|
Demand loans |
|
- |
|
|
2,950 |
|
- |
Finance lease liabilities |
|
- |
|
|
291 |
|
- |
Current portion of term loan * |
|
3,600 |
|
|
23,628 |
|
(85%) |
Revolving loan |
|
- |
|
|
5,000 |
|
- |
Other current liabilities |
|
1,105 |
|
|
1,001 |
|
10% |
Liabilities related to assets held for sale |
|
- |
|
|
2,316 |
|
- |
Total current liabilities |
$ |
12,577 |
|
$ |
50,806 |
|
|
|
|
|
|
|
|
|
|
Working capital (deficiency) |
$ |
27,754 |
|
$ |
(11,912) |
|
|
Current ratio |
|
3.21 |
|
|
0.77 |
|
317% |
* Amortized cost; principal outstanding
on Term Loan is $23.5 million. A reconciliation between the principal balance owing and the amortized cost (carrying amount) presented
on the Company’s Statement of Financial Position is included in the “Other Financial Measures and Reconciliations”
section of this MD&A.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 12 |
Investing
Activities
Cash provided by investing activities
amounted to $9.7 million for the nine months ended September 30, 2014 (YTD 2013 - ($26.7) million). Investing activities included
the proceeds from the sale of an NSR Royalty Agreement (Q1 2014), the sale of the Madsen Property (Q1 2014), the decrease in reclamation
deposits (Q2 2014), the sale of a portion of the Company’s shares in publicly traded companies and the redemption of certain
short-term investments (collectively providing $25.8 million). These were offset by Mineral property expenditures of $16.1 million
during the first nine months of 2014, a $9.1 million decrease over the comparable period of 2013. Year to date, expenditures were
comprised of development of $12.5 million, exploration costs (focusing primarily on the Seabee and Santoy Regional areas) of $0.3
million and property, plant and equipment additions of $3.3 million. Property, plant and equipment additions include mining equipment,
camp infrastructure and tailings management facility expansion. The Company utilized its cash flow provided by investing activities
(which included proceeds from the NSR Agreement and the sale of Madsen) to fund these additions.
Financing
Activities
Financing activities during the
first nine months of 2014 included proceeds of $0.7 million received from the issuance of common shares pursuant to the
Company’s Employee Share Purchase Program (“ESPP”). This was offset by the repayment of the $5.0 million
revolving loan, $1.5 million of Term loan principal repayments and $3.3 million of demand loans and capital leases
repayments, resulting in a net financing cash outflow of $9.0 million. This compares to a net financing cash inflow of $17.4
million during the first nine months of 2013, which consisted of $0.7 million in funding received from the Company’s
ESPP and demand loan proceeds of $5.0 million and net Term loan proceeds of $24.4 million; these proceeds were offset by
debenture, demand loan and capital lease repayments totaling $12.7 million.
During the first nine months of 2014,
a total of 7,799,148 common shares (2013 - 2,065,812) were issued pursuant to the Company’s ESPP. No common shares were issued
pursuant to the Company’s Stock Option Plan during the first nine months of 2014 or 2013.
During 2014, in addition to interest
payments, monthly principal payments of $0.3 million began in May 2014. Monthly principal payments will continue until the Term
Loan matures in 2018. Year to date, a total of $1.5 million of Term Loan principal payments have been made (YTD 2013 - nil).
Table 9: Terms of Term Loan Agreement |
Period |
Monthly Amount |
Annual Amount |
Months 1 - 12 |
NIL |
NIL |
Months 13 - 59 |
$300,000 |
$3,600,000 |
Due at Maturity (April 2018) |
|
$10,900,000 |
The 5,750,000 common share purchase warrants
pursuant to the original Term Loan Agreement were cancelled during the first quarter of 2014 for consideration of $1.0 million;
consideration was paid with 4,545,454 common shares of Claude.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 13 |
Financial and Other Instruments
In the normal course of its operations, the
Company is exposed to gold price, foreign exchange, interest rate, liquidity, equity price and counterparty risks. The overall
financial risk management program focuses on preservation of capital and protecting current and future Company assets and cash
flows by reducing exposure to risks posed by the uncertainties and volatilities of financial markets.
The Company may use derivative financial instruments
to hedge some of its exposure to fluctuations in gold prices and foreign exchange rates. The Company does not acquire, hold or
issue derivatives for trading purposes. The Company’s management of financial risks is aimed at ensuring that net cash flows
are sufficient to meet all its financial commitments as and when they fall due and to maintain the capacity to fund its forecast
project development and exploration strategies.
The value of the Company’s mineral resources
is related to the price of gold and the outlook for this mineral. Gold and precious metal prices historically have fluctuated widely
and are affected by numerous factors outside of the Company’s control, including, but not limited to, industrial and retail
demand, central bank lending, forward sales by producers and speculators, levels of worldwide production, short-term changes in
supply and demand because of speculative hedging activities and certain other factors related specifically to gold. The profitability
of the Company’s operations is highly correlated to the market price of gold. If the gold price declines below the cost of
production at the Company’s operations, for a prolonged period of time, it may not be economically feasible to continue production.
The Company’s revenues from the production
and sale of gold are denominated in U.S. dollars. However, the Company’s operating expenses are primarily incurred in Canadian
dollars and its liabilities are primarily denominated in Canadian dollars. The results of the Company’s operations are subject
to currency risks. The operating results and financial position of the Company are reported in Canadian dollars in the Company’s
consolidated financial statements.
To mitigate the effects of price fluctuations
in revenue, the Company may enter into derivative instrument transactions, from time to time, in respect of the price of gold and
foreign exchange rates. Such transactions can expose the Company to credit, liquidity and interest rate risk. At September 30,
2014, the Company had derivative instruments outstanding in the form of forward sales contracts relating to 2014 production totaling
12,500 ounces (Q3 2013 - 10,000 ounces). The market value gain inherent in these contracts at September 30, 2014 was $0.9 million
(Q3 2013 - $0.5 million gain). The Company’s main exposure to interest rate risk arises from interest earning cash deposits.
The Company’s liquidity position is managed
to ensure sufficient liquid funds are available to meet its financial obligations in a timely manner. The Company manages liquidity
risk by continuously monitoring forecast and actual cash flows and ensuring that the Company has the ability to access required
funding.
The Company is exposed to equity securities
market price risk, arising from investments classified on the balance sheet as available-for-sale. Investments in equity securities
are approved by the Board on a case-by-case basis. All of the Company’s available-for-sale equity investments are in junior
resource companies listed on the TSX Venture Exchange.
The Company is exposed to counterparty risk
which is the risk that a counterparty will not complete its obligations under a financial instrument resulting in a financial loss
for the Company. The Company does not generally obtain collateral or other security to support financial instruments subject to
credit risk; however, the Company only deals with credit worthy counterparties. Accounts receivable comprise institutions purchasing
gold under normal settlement terms of two working days. Counterparty risk under derivative financial instruments is to reputable
institutions. All significant cash balances are on deposit with high-rated banking institutions. The carrying amount of financial
assets recorded in the financial statements represents the Company’s maximum exposure to credit risk without taking account
of the value of any collateral or other security obtained.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 14 |
Contractual Obligations
At September 30, 2014, other than the Company’s
repayment of its demand loans outstanding during the third quarter, there were no significant changes to the Company’s contractual
obligations from those reported in the Management’s Discussion and Analysis for the year ended December 31, 2013.
Statements
of Financial Position
Highlights
Table 10: Select Statements of Financial Position Data |
| |
Sept 30 | |
Dec 31 | |
Percent |
| |
2014 | |
2013 | |
Change |
| |
| |
| |
|
Total assets | |
$ | 168,964 | | |
$ | 181,675 | | |
| (7 | )% |
Non-current liabilities * | |
$ | 26,369 | | |
$ | 8,273 | | |
| 219 | % |
* At December 31, 2013, the Company’s
Term loan was classified as a current liability due to non-compliance with a financial covenant. Non-current liabilities at September
30, 2014 reflect the reclassification of the Company’s Term Loan from current to long-term due to execution of a waiver agreement
pursuant to the Term Loan during the first quarter of 2014.
Assets
The
Company’s total assets were $169.0 million at September 30, 2014, compared to
$181.7 million at December 31, 2013; Claude’s asset base primarily consists of non-current assets comprising mineral properties,
reflecting the capital intensive nature of the exploration and mining business and the impact of the significant capital expenditures
relating to its operations and exploration projects. The $12.7 million net decrease
resulted from increases of: $10.6 million in cash and cash equivalents, largely relating to higher gold sales (attributable to
improved production and grade at the Seabee Gold Operation); and $6.5 million in inventories, attributable to an increase in gold
bullion and in-circuit inventory (relating to the timing of gold sales) and materials and supplies inventory. These increases were
offset by decreases of: $1.8 million in Accounts receivable, largely attributable to
the timing of gold sales; $13.4 million in Assets held for sale (relating to the classification
of the Madsen Property as held for sale at December 31, 2013); $13.7 million in Mineral
properties, largely attributable to the NSR royalty completed by the Company on the Seabee Gold Operation; and $0.4 million in
Deposits for reclamation costs, representing the net amount between deposits returned pursuant to the Madsen sale and additional
funds put on deposit relating to the Seabee Gold Operation.
Liabilities
Total Current and Non-current liabilities
were $38.9 million at September 30, 2014, down $20.1 million from December 31, 2013. This result was attributable to decreases
of: $8.6 million in Bank indebtedness,
$9.5 million (net) of Loans and borrowings, attributable
to repayment of the Company’s $5.0 million revolving loan, principal repayments of $1.5 million on the Company’s Term
loan, $3.0 million of repayments on demand loans outstanding and $0.3 million of repayments
on obligations under finance lease, attributable to improved production results and gold sales which enabled the Company to repay
this facility; $2.3 million in Liabilities related to assets held for sale, attributable
to the Madsen Property being classified as held for sale at December 31, 2013 and the sale itself being completed in the first
quarter of 2014; and a net decrease of $0.8 million in the Company's current and long-term
Net royalty obligation. These decreases were offset by a $0.9 million increase in Accounts payable and accrued liabilities,
attributable to the timing and payment of expenditures relating to consumables at the Seabee Gold Operation; and
a $0.2 million increase in the Company’s Decommissioning and reclamation provision.
Shareholders’ Equity
Shareholders’
equity increased by $7.4 million to $130.0
million at September 30, 2014, from $122.6 million at December 31, 2013. This variance is attributable to an increase in Share
capital of $3.2 million due to the issuance of common shares pursuant to the Company’s ESPP and pursuant to a private placement
completed during the first quarter of 2014; a decrease of $1.3 million to Contributed
surplus; a $5.1 million decrease to Accumulated deficit, a result of the net profit
for the first nine months of 2014; and a $0.4 million increase to Accumulated other
comprehensive income.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 15 |
Comprehensive
income consists of net profit (loss), together with certain other economic gains and losses that are collectively referred to as
“other comprehensive income (loss)” or “OCI” and are excluded from the Income Statement.
Key Sensitivities
Earnings from Claude’s gold operation
are sensitive to fluctuations in both commodity and currency prices. The key factors and their approximate effect on earnings,
earnings per share and cash flow, based on assumptions comparable to year to date 2014 actuals, are as follows:
Gold
For a U.S. $10 movement in gold price per ounce,
earnings and cash flow will have a corresponding movement of CDN $0.7 million, or $0.00 per share. For a $0.01 movement in the
U.S.$/CDN$ exchange rate, earnings and cash flow will have a corresponding movement of CDN $0.9 million, or $0.00 per share.
Grade
For a 0.25 gram per tonne movement in grade,
earnings and cash flow will have a corresponding movement of CDN $3.1 million, or $0.02 per share.
Selected
Quarterly Production and Financial Data
|
Sept 30 |
Jun 30 |
Mar 31 |
Dec 31 |
Sept 30 |
Jun 30 |
Mar 31 |
Dec 31 |
|
2014 |
2014 |
2014 |
2013 |
2013 |
2013 |
2013 |
2012 |
|
|
|
|
|
|
|
|
|
Tonnes milled |
74,930 |
79,746 |
64,370 |
74,458 |
64,642 |
79,077 |
61,877 |
69,698 |
Grade processed (grams per tonne) |
8.88 |
7.70 |
5.76 |
5.61 |
5.30 |
5.13 |
4.31 |
5.94 |
Gold Ounces |
|
|
|
|
|
|
|
|
Produced |
20,600 |
18,700 |
11,300 |
12,800 |
10,500 |
12,400 |
8,100 |
12,700 |
Poured |
20,900 |
17,700 |
10,800 |
13,300 |
10,800 |
11,600 |
9,300 |
12,700 |
Sold |
17,600 |
17,700 |
10,900 |
13,200 |
10,800 |
11,500 |
9,300 |
12,700 |
Gold sales ($ millions) |
24.3 |
24.7 |
15.6 |
17.5 |
15.0 |
16.1 |
15.3 |
21.2 |
Production costs ($ millions) |
12.0 |
12.6 |
10.6 |
12.2 |
9.9 |
10.1 |
11.6 |
10.5 |
Capital expenditures ($ millions) |
4.4 |
3.8 |
7.9 |
6.7 |
5.8 |
7.3 |
13.4 |
10.3 |
Net profit (loss) ($ millions) (a) |
6.9 |
3.3 |
(5.1) |
(27.1) |
(33.9) |
(9.9) |
(2.5) |
2.4 |
Net profit (loss) per share (a) |
0.04 |
0.02 |
(0.03) |
(0.15) |
(0.19) |
(0.06) |
(0.01) |
0.01 |
Average realized gold price (CDN$ per ounce) |
1,384 |
1,397 |
1,438 |
1,323 |
1,389 |
1,393 |
1,643 |
1,668 |
Average realized gold price (U.S.$ per ounce) |
1,270 |
1,282 |
1,303 |
1,260 |
1,338 |
1,361 |
1,629 |
1,683 |
All-in sustaining (b) (CDN$ per ounce) |
1,063 |
1,065 |
1,919 |
1,609 |
1,574 |
1,590 |
2,857 |
1,722 |
All-in sustaining (b) (U.S.$ per ounce) |
976 |
977 |
1,738 |
1,533 |
1,516 |
1,554 |
2,833 |
1,737 |
Cash cost per ounce (b) (CDN$ per ounce) |
735 |
753 |
978 |
944 |
919 |
875 |
1,245 |
822 |
Cash cost per ounce (b) (U.S.$ per ounce) |
675 |
691 |
886 |
899 |
885 |
855 |
1,235 |
829 |
Cash flow from operations before net changes in non-cash operating working capital ($ millions) (c) |
10.4 |
9.9 |
1.8 |
4.5 |
4.3 |
3.7 |
1.4 |
9.4 |
Cash flow from operations before net changes in non-cash operating working capital (c) per share |
0.06 |
0.05 |
0.01 |
0.03 |
0.02 |
0.02 |
0.01 |
0.05 |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (basic) |
188,156 |
188,156 |
182,029 |
175,811 |
175,811 |
175,811 |
174,801 |
173,746 |
|
|
|
|
|
|
|
|
|
CDN$/U.S.$ Exchange |
1.0892 |
1.0902 |
1.1038 |
1.0498 |
1.0383 |
1.0235 |
1.0086 |
0.9914 |
(a) |
|
Basic
and diluted, calculated based on the number of shares issued and outstanding during the quarter. Q4 2013 reflects the impact
of a $3.5 million impairment charge on the Seabee Gold Operation and a $4.3 million impairment charge on the Madsen Property.
Q3 2013 reflects the impact of a $7.9 million impairment charge on the Seabee Gold Operation and a $37.3 million impairment
charge on the Madsen Property. Q2 2013 results reflect the impact of a $10.8 million impairment charge on the Seabee Gold
Operation. |
(b) |
|
Denotes a non-IFRS measure. For an explanation and reconciliation of non-IFRS measures, refer to the “Non-IFRS Financial Measures” section of this MD&A. |
(c) |
|
For an explanation of this performance measure,
refer to the “Other Performance Measures” section of this MD&A. |
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 16 |
Trends
| • | Consistent tonnage throughput ranging from 61,877 to 79,746 tonnes. |
| • | More than 107,000 ounces of gold production over the last eight quarters (including over 63,000
ounces of gold production over the last four quarters). |
| • | Decreasing capital expenditures. |
| • | Canadian average gold price realized has ranged from $1,323 to $1,668 per ounce over the last eight
quarters with gold prices generally declining over the same period. |
| • | The weakening of the Canadian dollar versus the United States dollar. |
Accounting Estimates
Certain of the Company’s accounting policies
require that Management make decisions with respect to the formulation of estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses. For a discussion of those estimates, please refer to the Company’s most recent
annual Management’s Discussion and Analysis for the year ended December 31, 2013, available at www.sedar.com.
Future
Accounting Pronouncements
These are the changes that the Company reasonably
expects will have an impact on its disclosures, financial position or performance when applied at a future date. The Company intends
to adopt this standard, if applicable, when it becomes effective.
Financial Instruments
IFRS 9, Financial Instruments (“IFRS
9”), was issued by the IASB on November 12, 2009 and will replace IAS 39, Financial Instruments: Recognition and Measurement
(“IAS 39”). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost
or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments
in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also
requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual
periods beginning on or after January 1, 2018 (tentative). The Company is currently evaluating the impact of IFRS 9 on its financial
statements, if any.
Exploration Results
During 2014, exploration at the Seabee Gold
Operation will focus on low cost per ounce targets, proximal to infrastructure with the potential to materially impact near-term
production, drive resource growth and to positively impact the Company’s Mineral Reserves and Mineral Resources.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 17 |
All exploration activities were carried out
under the direction of Qualified Person, Brian Skanderbeg, P. Geo., Senior Vice President and Chief Operating Officer.
Seabee Gold Operation
The Seabee Gold Operation is located northeast
of La Ronge, Saskatchewan and consists of two producing mines, the Seabee Mine (which includes the L62 deposit) and the Santoy
Mine Complex (which includes the Santoy 8 and Santoy Gap deposits). In addition, the Seabee Gold Operation is host to various regional
exploration targets.
Figure 1: Seabee Property regional map showing
significant gold deposits and occurrences.
Santoy Region
The Santoy Region includes the Santoy 8 and
Santoy Gap deposits, which are part of the Santoy Mine Complex.
Gold mineralization at the Santoy Region is
hosted in siliceous, shear structures with sulfide-chlorite-quartz veins and in silicified granitoid sills. The mineralized lenses
dip moderately to steeply eastward and are amenable to bulk mining techniques. Gold mineralization of the Santoy 8 ore lens occurs
over a strike length of 600 metres, a depth of 500 metres and remains open along strike and down plunge to the north. The Santoy
8E ore lens has been intercepted over a strike length of 200 metres, depth of 250 metres and remains open along strike and down
plunge to the north. The true thickness of the Santoy 8 deposits varies from 1.5 metres to 15 metres.
The Santoy Gap deposit is located 400 to 900
metres north of underground infrastructure, immediately on strike and adjacent to the Santoy 8 deposit within the Santoy Mine Complex.
Historical drilling completed in and around the Santoy Gap and along the Santoy regional shear zone has extended the mineralized
system, discovered a sub-parallel lens to the Santoy Gap approximately 150 metres to the east and affirmed the high prospectivity
of the Santoy Regional Shear Zone, hosting multiple deposits over a three kilometre strike length. The Santoy Gap system remains
open down plunge to the north, along strike to the south and at depth. These recent intercepts at depth may link with the existing
Santoy 8 resource 300 metres to the south.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 18 |
Drilling at Santoy Gap has extended the mineralized
system down-plunge to 650 metres depth and at Santoy 8 has extended the system 400 metres below the base of the existing inferred
resource. These step-out drill intercepts significantly expand the footprint of the Santoy Mine Complex and are of a materially
higher grade than the current reserve and resource base. Results from the underground drill program during 2014 have shown high
grade and excellent widths that are hosted within three distinct vein systems (Santoy Gap 9A, 9B and 9C). Select highlight holes
that have intercepted multiple vein systems are presented in the table below.
Table 11: Highlights of Drill Holes Intercepting Multiple Vein Systems Within the Santoy Gap Deposit |
|
Hole ID |
VEIN SYSTEM |
|
9A |
9B |
9C |
|
GRADE g/t (cut) |
TRUE WIDTH (m) |
GRADE g/t (cut) |
TRUE WIDTH (m) |
GRADE g/t (cut) |
TRUE WIDTH (m) |
|
|
SUG-14-027 |
33.56 |
4.57 |
7.71 |
2.52 |
4.28 |
10.21 |
|
SUG-14-028 |
15.35 |
7.51 |
4.84 |
3.42 |
6.71 |
7.13 |
|
SUG-14-029 |
50.00 |
1.88 |
10.91 |
10.47 |
15.17 |
4.80 |
|
SUG-14-034 |
13.29 |
2.58 |
22.54 |
9.62 |
4.93 |
1.72 |
|
SUG-14-038 |
9.87 |
8.22 |
20.20 |
0.87 |
28.36 |
2.02 |
|
SUG-14-044 |
8.03 |
3.39 |
- |
- |
11.33 |
7.63 |
|
SUG-14-048 |
6.06 |
6.34 |
6.23 |
4.69 |
26.77 |
8.70 |
|
Note: Composites were calculated using a 3.5 g/t Au cut-off grade and a 50.0 g/t top-cut and may include internal dilution. |
|
These results are significant because all three
structures hosted within the Santoy Gap continue to demonstrate economic grades and widths. The Santoy Gap deposit contains more
gold ounces per vertical metre than other ore bodies within the Seabee Gold Operation; as such, the Company has the opportunity
to improve productivity and margins.
Results during 2013 were highlighted by drill
hole JOY-13-690 that returned 330.35 grams of gold per tonne over 1.55 metres, inclusive of a bonanza grade interval of 602.00
grams of gold per tonne over 0.84 metres. This is the highest grade interval drilled to date at the Santoy Gap deposit. Drill hole
JOY-13-692 returned 18.80 grams of gold per tonne over 13.86 metres in the final hole of the program. The intercept is located
400 metres down plunge from existing Santoy 8 inferred resources and 200 metres along strike from the Santoy Gap inferred resources. Drill
hole JOY-13-692 is of particular significance as it confirms continuity at depth between the Santoy Gap and Santoy 8 deposits.
Table 12: Highlights from 2013 Santoy Mine Complex Drilling |
Hole ID |
Easting |
Northing |
From (m) |
To (m) |
Grade (g/t) |
Width (m) |
Zone |
JOY-13-690 |
599175 |
6171150 |
684.27 |
685.82 |
330.35 |
1.55 |
GAP |
|
|
Incl |
684.98 |
685.82 |
602.00 |
0.84 |
GAP |
JOY-13-692 |
599721 |
6170539 |
632.85 |
646.71 |
18.80 |
13.86 |
Santoy 8 |
|
|
Incl |
632.85 |
635.85 |
73.49 |
3.00 |
Santoy 8 |
Note: Composites were calculated using a 3.0 g/t Au cut-off grade and may include internal dilution. True widths are interpreted to be 75 to 95 percent of drilled width. Assay results are uncut. |
The 2013 surface drill program was able to
demonstrate significant resource and grade upside at the Santoy Mine Complex, the prospectivity of the regional Santoy system and
highlighted the potential for near term resource growth. With the completion of the Company’s exploration ramp from Santoy
8 to Santoy Gap, Claude’s exploration group initiated underground infill drilling to aid in the development of a detailed
mine design for the Santoy Gap as its production profile is further advanced.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 19 |
Figure 2: Santoy Region Composite Longitudinal
Section.
Seabee Region
Exploration of the Seabee Region is focused
on a near mine environment and is prioritizing drill targets to be tested during 2015.
Figure 3: Seabee Mine Composite Longitudinal
Section (L62 Zone Discovery)
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 20 |
Amisk Gold Project
No exploration expenditures are planned for
the Amisk Gold Project during 2014. The Amisk Gold Project is located in the Flin Flon-Snow Lake Greenstone Belt and is host to
the Amisk Gold Deposit as well as a large number of gold occurrences and prospects.
At the Amisk
Gold Project, regional potential remains high and exploration maturity low. Field work and extensive compilation have resulted
in the emergence of an extensive list of exploration targets that are currently being prioritized for future assessment. The Company
has also completed target development (with the goal of identifying targets with similarities to Amisk’s historical geology),
ranking and ground-base reconnaissance in areas which host potential for Amisk-style gold-silver (“Au-Ag”) mineralization
as well as conventional base-metal deposits typical of the Flin Flon belt.
Figure 4: Amisk Gold Project
Drilling from the Company’s historical
drill programs successfully confirmed continuity of gold mineralization within the northern and eastern portion of the deposit
as well as demonstrated the potential for expansion to the east and southeast. Gold and silver mineralization at the Amisk Gold
Project is associated with a sequence of quartz porphyritic, rhyolitic lapilli tuffs and flows hosting disseminations and stringers
of pyrite, sphalerite, galena, tetrahedrite and chalcopyrite. Drilling has intercepted the mineralized system over a strike length
of 1,200 metres, width of 400 metres and depths of in excess of 600 metres. The system remains open to the southwest, southeast,
northwest and at depth.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 21 |
Figure 5: Cross Section A-A’ of the
Amisk Gold Property
Quality Assurance and Quality Control
Procedures
Rigorous quality assurance and quality control
procedures have been implemented including the use of blanks, standards and duplicates. Geochemical analyses were submitted to
ALS Chemex in Vancouver, British Columbia, TSL Laboratories in Saskatoon, Saskatchewan and or the Seabee mine site lab. ALS Chemex
and TSL Laboratories are ISO approved. Core samples were analyzed by a 30 gram gold fire assay with an atomic absorption and gravimetric
and or screen fire finish.
Mineral Reserves and Mineral
Resources
The Company’s Mineral Resources were
estimated by Claude personnel. Estimates of Mineral Resources as at November 15, 2013 were conducted under the direction of Qualified
Person Brian Skanderbeg, P.Geo., Senior Vice President and Chief Operating Officer. SRK Consulting (Canada) Inc. prepared the estimates
of the Company’s Mineral Reserves as at November 15, 2013 under the direction of Qualified Person Stephen Taylor, P.Eng.
(SRK Consulting (Canada) Inc.). An updated Mineral Reserve and Mineral Resource statement for the Seabee Gold Operation is anticipated
to be released during the first quarter of 2015.
Seabee Gold Operation
At November 15, 2013, Proven and Probable Reserves
in the Seabee Gold Operation were 2,308,800 tonnes, grading 5.70 grams per tonne or 422,900 ounces of gold. The Company’s
Mineral Resources at its Seabee Gold Operation included Measured and Indicated Mineral Resources of 175,200 ounces and Inferred
Mineral Resources totalling 582,900 ounces.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 22 |
Table 13: Seabee Gold Operation Mineral Reserves and Mineral Resources |
Proven and Probable Reserves |
Projects |
November 15, 2013 |
December 31, 2012 |
Tonnes |
Grade (g/t) |
Ozs |
Tonnes |
Grade (g/t) |
Ozs |
Seabee |
490,000 |
6.67 |
105,000 |
947,100 |
7.26 |
221,100 |
Santoy 8 |
362,100 |
4.45 |
51,800 |
628,100 |
4.45 |
89,900 |
Santoy Gap |
1,456,700 |
5.68 |
266,100 |
1,210,000 |
6.24 |
243,000 |
Totals |
2,308,800 |
5.70 |
422,900 |
2,785,200 |
6.19 |
554,100 |
Measured and Indicated Mineral Resources |
Projects |
Tonnes |
Grade (g/t) |
Ozs |
Tonnes |
Grade (g/t) |
Ozs |
Seabee |
151,000 |
6.42 |
31,200 |
45,400 |
4.86 |
7,100 |
Santoy 8 |
68,000 |
4.55 |
9,900 |
59,300 |
3.28 |
6,200 |
Santoy Gap |
309,400 |
8.44 |
83,900 |
94,000 |
4.65 |
14,000 |
Porky Main |
160,000 |
7.50 |
38,600 |
160,000 |
7.50 |
38,600 |
Porky West |
100,700 |
3.57 |
11,600 |
111,000 |
3.10 |
11,000 |
Totals |
789,100 |
6.91 |
175,200 |
469,600 |
5.10 |
77,000 |
Inferred Mineral Resources |
Projects |
Tonnes |
Grade (g/t) |
Ozs |
Tonnes |
Grade (g/t) |
Ozs |
Seabee |
421,600 |
9.78 |
132,600 |
355,600 |
8.55 |
97,700 |
Santoy 8 |
640,100 |
6.09 |
125,300 |
518,700 |
5.91 |
98,600 |
Santoy Gap |
1,210,000 |
6.96 |
270,800 |
1,875,000 |
5.92 |
356,900 |
Porky Main |
70,000 |
10.43 |
23,500 |
70,000 |
10.43 |
23,500 |
Porky West |
174,800 |
5.48 |
30,800 |
138,300 |
6.03 |
26,800 |
Totals |
2,516,500 |
7.21 |
582,900 |
2,957,600 |
6.35 |
603,400 |
Footnotes to the Mineral Resource Statement:
| 1. | At November 15, 2013, Mineral Resources were estimated by Claude personnel. SRK Consulting (Canada)
Inc. prepared the Company’s Mineral Reserves as at November 15, 2013. The Mineral Resource evaluation work was completed
by a team of geologists and engineers under the supervision of Brian Skanderbeg, P.Geo., Senior Vice President and Chief Operating
Officer, a full time employee of Claude. Mr. Skanderbeg has sufficient experience, which is relevant to the style of mineralization
and type of deposit under consideration and to the activities undertaken to qualify as a Qualified Person as defined by NI 43-101.
Mineral Reserves were conducted under the direction of Qualified Person Stephen Taylor, P.Eng (SRK Consulting (Canada) Inc.). |
| 2. | In 2012, Mineral Reserves and Mineral Resources estimates were conducted under the direction of
Qualified Persons Brian Skanderbeg, P.Geo., Senior Vice President and Chief Operating Officer and Peter Longo, P.Eng., former Vice
President, Operations. |
| 3. | The Mineral Resources and reserves reported herein have been estimated in conformity with generally
accepted CIM “Estimation of Mineral Resource and Mineral Reserves Best Practices” guidelines and are reported in accordance
with Canadian Securities Administrators’ National Instrument 43-101. |
| 4. | Mineral Reserves and Mineral Resources for the Seabee deposit are reported at a cut-off of 4.6
grams of gold per tonne. Santoy 8 and Santoy Gap Mineral Reserves and Mineral Resources are reported at a cut-off of 3.5 grams
of gold per tonne. Porky Main and Porky West Mineral Resources are reported at a cut-off grade of 3.0 grams of gold per tonne.
Assumptions include a price of CDN $1,350 per ounce of gold using metallurgical and process recovery of 95.2 percent and overall
ore mining and processing costs derived from 2013 realized costs. |
| 5. | All figures are rounded to reflect the relative accuracy of the estimates. Summation of individual
columns may not add-up due to rounding. |
| 6. | Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
There is no certainty that all or any part of the Mineral Resource will be converted into Mineral Reserves. |
At the Seabee Gold Operation, year over year,
there was a 24 percent decrease in Mineral Reserves (131,200 ounces) and a 128 percent increase in Measured and Indicated Mineral
Resources (98,200 ounces). Year over year, changes in the Seabee Gold Operations Mineral Reserves and Mineral Resources were driven
by:
| • | a decrease in gold price which increased cut-off grade; |
| • | reduced drilling meterage focused on grade definition; |
| • | higher dilution assumptions. |
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 23 |
The Mineral Reserves and Mineral Resources
of the Santoy Gap deposit are growing in importance and represent an opportunity for the Company due to their proximity to permitted
mine infrastructure, low development cost and near-term production potential. Furthermore, based on its high-grade nature and size,
the Santoy Gap deposit demonstrates the potential that exists to grow production at the Seabee Gold Operation.
Amisk Gold Project
At the Amisk Gold Project, Claude’s independent
NI 43-101 compliant resource calculation outlines an Indicated Resource of 921,000 ounces of 0.95 grams of Au Eq per tonne and
an Inferred Resource of 645,000 ounces at 0.70 grams of Au Eq per tonne.
Table 14: Amisk Gold Project Consolidated Mineral Resource Statement* |
Resource Class |
Quantity |
Grade (g/tonne) |
Contained Ounces (000’s) |
(000’s tonnes) |
Au |
Ag |
Au Eq |
Au |
Ag |
Au Eq |
|
|
|
|
|
|
|
|
Indicated |
30,150 |
0.85 |
6.17 |
0.95 |
827 |
5,978 |
921 |
Inferred |
28,653 |
0.64 |
4.01 |
0.70 |
589 |
3,692 |
645 |
* Reported at a cut-off of 0.40 grams of
gold equivalent (Au Eq) per tonne using a price of U.S. $1,100 per ounce of gold and U.S. $16 per ounce of silver inside a conceptual
pit shell optimized using metallurgical and process recovery of 87 percent, overall ore mining and processing costs of U.S. $15
per tonne and overall pit slope of 50 degrees. All figures are rounded to reflect the relative accuracy of the estimates.
Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
The mineral resources for the Amisk Gold Project
are sensitive to the selection of cut-off grade. The table below presents the quantity and grade estimates at a range of cut-off
grades inside the conceptual pit shell considered for reporting the Mineral Resource Statement. A cut-off value of 0.4 grams of
gold equivalent per tonne was selected based on optimization results and benchmarking against similar deposits.
Table 15: Global Block Model Quantity and Grade Estimates, Amisk Lake Gold Project at Various Cut-off Grades. |
Grade |
Indicated |
Inferred |
Au Eq
(gpt) |
Quantity
(tonnes) |
Au Eq
(gpt) |
Ounces
Au Eq |
Quantity
(tonnes) |
Au Eq
(gpt) |
Ounces
Au Eq |
0.40 |
30,150,090 |
0.95 |
920,881 |
28,653,135 |
0.70 |
644,854 |
0.50 |
23,533,117 |
1.09 |
824,702 |
19,446,358 |
0.82 |
512,676 |
0.60 |
18,322,858 |
1.25 |
736,367 |
13,665,490 |
0.94 |
412,994 |
0.70 |
14,359,129 |
1.41 |
650,936 |
9,491,034 |
1.07 |
326,504 |
0.80 |
11,418,785 |
1.58 |
580,054 |
6,659,786 |
1.20 |
256,941 |
0.90 |
9,206,976 |
1.76 |
520,980 |
4,825,758 |
1.34 |
207,903 |
1.00 |
7,606,617 |
1.93 |
471,998 |
3,589,543 |
1.48 |
170,802 |
1.50 |
3,472,946 |
2.80 |
312,642 |
1,078,945 |
2.16 |
74,928 |
Note: The reader is cautioned that the figures in this table should not be misconstrued with a Mineral Resource Statement. The figures are only presented to show the sensitivity of the block model estimates to the selection of cut-off grade. |
Business Risks
Risks and uncertainties related to economic
and industry factors are described in detail in the Company’s Annual Information Form, available at www.sedar.com,
and remain substantially unchanged.
Common
Share Data
The authorized share capital of the
Company consists of an unlimited number of common shares and two classes of unlimited preferred shares issuable in series. At September
30, 2014, there were 188,155,978 common shares outstanding. This compares to 175,811,376 common shares outstanding at December
31, 2013.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 24 |
The Company did not issue any common
shares during the third quarter of 2014. During the first quarter of 2014, the Company issued 7,799,148 common shares pursuant
to the Company’s ESPP (Q1 2013 - 2,065,812 common shares). Also, during the first quarter of 2014, Claude completed a private
placement (the "Private Placement") of common shares in the capital of the Company ("Common Shares"). The Private
Placement consisted of the issuance of 4,545,454 Common Shares at a price of CDN $0.22 per Common Share to Crown Capital Partners
Inc. (“CCP”). The Common Shares were issued to CCP as payment for a waiver being granted by CCP in connection with
a Credit Agreement dated as of April 5, 2013 as a result of a covenant breach at December 31, 2013.
At October 30, 2014, there were 188,155,978
common shares of the Company issued and outstanding.
Stock
Options, Warrants, Deferred Share Units and Restricted Share Units Outstanding
Stock Options
At September 30, 2014, there were 8.0
million director, officer and key employee stock options outstanding with exercise prices ranging from $0.17 to $2.38 per share.
This compares to 7.9 million director, officer and key employee stock options outstanding at December 31, 2013 ranging from $0.14
to $2.38 per share.
Table 16: Schedule of Stock Options Outstanding and Weighted Average Exercise Price |
|
|
September 30, 2014 |
|
December 31, 2013 |
|
|
Number |
|
Weighted Average Exercise Price |
|
Number |
|
Weighted Average Exercise Price |
|
|
|
|
|
|
|
|
|
|
Beginning of period |
7,936,361 |
|
$1.19 |
|
6,948,527 |
|
$1.43 |
|
Options granted |
811,576 |
|
0.17 |
|
1,937,268 |
|
0.43 |
|
Options exercised |
- |
|
- |
|
- |
|
- |
|
Options forfeited |
(675,778) |
|
1.00 |
|
(934,434) |
|
1.35 |
|
Options expired |
(60,000) |
|
1.57 |
|
(15,000) |
|
1.79 |
|
End of period |
8,012,159 |
|
$1.10 |
|
7,936,361 |
|
$1.19 |
For options outstanding at September 30, 2014, the range of exercise
prices, the number vested, the weighted average exercise price and the weighted average remaining contractual life are as follows:
Table
17: Schedule of Stock Options Outstanding by Price Range |
|
Options
Outstanding |
Options
Exercisable (Vested) |
Option Price
Per Share |
Quantity
|
Weighted
Average Remaining Life |
Weighted
Average Exercise Price |
Quantity
|
Weighted
Average Remaining Life |
Weighted
Average Exercise Price |
$0.17 - $0.50 |
2,447,563 |
5.90 |
$0.35 |
556,255 |
5.44 |
$0.47 |
$0.51 - $1.00 |
973,178 |
4.42 |
0.75 |
923,178 |
4.38 |
0.75 |
$1.01 - $1.50 |
2,339,673 |
4.08 |
1.20 |
2,339,673 |
4.08 |
1.20 |
$1.51 - $2.00 |
1,775,000 |
5.32 |
1.87 |
1,538,000 |
5.11 |
1.86 |
$2.01
- $2.38 |
476,745 |
6.44 |
2.32 |
405,396 |
6.43 |
2.31 |
|
8,012,159 |
5.09 |
$1.10 |
5,762,502 |
4.70 |
$1.31 |
The foregoing options have expiry dates ranging
from January 5, 2015 to November 9, 2021.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 25 |
Warrants
At September 30, 2014, there were no common
share purchase warrants outstanding. This compares to 5.8 million common share purchase warrants outstanding at December 31, 2013.
During the first quarter of 2014, the Company entered into an Amending Agreement pursuant to its long-term debt arrangement with
CCP whereby the 5,750,000 warrants held by CCP were cancelled in conjunction with the waiver of covenant breach for consideration
of $1.0 million, which was paid in 4,545,454 common shares of Claude.
Deferred Share Units
The Company offers a Deferred Share Unit (“DSU”)
plan to non-employee Directors. A DSU is a notional unit that reflects the market value of a single common share of Claude. A portion
of each Director’s annual retainer is paid in DSUs. Each DSU fully vests upon award and are redeemable for cash upon a director
leaving the Company’s Board of Directors. The redemption amount will be based upon the weighted average of the closing prices
of the common shares of Claude on the TSX for the last 20 trading days prior to the redemption date multiplied by the number of
DSUs held by the Director.
During the second quarter of 2014, the Company
granted 3,043,481 DSUs to participating Directors. During the third quarter of 2014, a total of 1,320,582 DSUs were settled for
proceeds of $0.3 million in conjunction with the retirement of two Company Directors. At September 30, 2014 and October 30, 2014,
total DSUs held by participating Directors was 3,302,985 (December 31, 2013 - 1,580,086).
Restricted Share Units
In the first quarter of 2014, the Company established
a Restricted Share Unit (“RSU”) plan whereby it may provide each plan participant an annual grant of RSUs in an amount
determined by the Company’s Board of Directors. An RSU is a notional unit that reflects the market value of a single common
share of Claude that entitles the participant to a cash payment for all fully vested units. RSUs vest annually over a three-year
period. The final value of the redemption amount will be based upon the weighted average of the closing prices of the common shares
of Claude on the TSX for the last 20 trading days prior to the redemption date multiplied by the number of RSUs held by participants.
For RSUs, the Company records compensation
expense with an offsetting credit to accounts payable to reflect the estimated fair value of RSUs granted to participants. During
the second quarter of 2014, a total of 1,058,696 RSUs were granted to participants in the Company’s RSU plan (YTD 2013 -
nil). At September 30, 2014 and October 30, 2014 (the date of this Management’s Discussion and Analysis), total RSUs held
by participants was 778,261 (December 31, 2013 - nil).
Footnotes
| (1) | See description and reconciliation of non-IFRS measures in the “Non-IFRS Financial Measures and Reconciliations”
section of this MD&A. |
| (2) | See description and reconciliation of this performance measure in the “Other Performance Measures and Reconciliations”
section of this MD&A. |
Non-IFRS
Financial Measures and Reconciliations
The Company utilizes non-IFRS financial measures
as supplemental indicators of operating performance and financial position. These non-IFRS financial measures are used internally
by the Company for comparing actual results from one period to another. The Company believes that, in addition to conventional
measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance and
ability to generate cash flow. Accordingly, such information is intended to provide additional information and should not be considered
in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 26 |
Adjusted Net Profit (Loss)
Adjusted net profit (loss) is a measure that
does not have a standardized meaning or a consistent basis of calculation under IFRS (non-IFRS measure). The Company uses this
measure (which represents the Company’s net profit (loss) calculated under IFRS adjusted for deferred income tax (recovery)
expense and non-recurring items such as impairment charges and gain (loss) on sale of assets and investments), in addition to conventional
measures prepared in accordance with IFRS, as a more meaningful way to compare the Company’s financial performance from period
to period. Furthermore, Management believes that certain investors and other stakeholders use this information to evaluate the
Company’s performance.
Adjusted net profit (loss) is non-standard
supplemental information and should not be considered in isolation or as a substitute for financial information prepared according
to accounting standards. Other companies may calculate this measure differently, so you may not be able to make a direct comparison
to similar measures presented by other companies. Investors are cautioned that the above measures may not be comparable to similarly
titled measures of other companies.
The table below reconciles adjusted net profit
(loss) with the Company’s net profit (loss), as determined under IFRS.
Table 18: Adjusted Net Profit (loss) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
Sept 30 |
|
Sept 30 |
|
Sept 30 |
|
Sept 30 |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
|
|
|
|
|
|
Net profit (loss) |
$ |
6,852 |
$ |
(33,871) |
$ |
5,068 |
$ |
(46,323) |
Adjustments: |
|
|
|
|
|
|
|
|
Deferred income tax (recovery) |
|
- |
|
(12,531) |
|
- |
|
(16,773) |
Impairment charge |
|
- |
|
45,187 |
|
- |
|
56,034 |
Loss on sale of assets |
|
- |
|
- |
|
642 |
|
- |
Loss (gain) on investments |
|
(1,047) |
|
- |
|
(1,317) |
|
262 |
Adjusted Net profit (loss) |
$ |
5,805 |
$ |
(1,215) |
$ |
4,393 |
$ |
(6,800) |
Weighted Average shares outstanding (basic) |
|
188,156 |
|
175,811 |
|
186,136 |
|
175,478 |
Weighted Average shares outstanding (diluted) |
|
188,459 |
|
175,811 |
|
186,313 |
|
175,478 |
Per share
adjusted net profit (loss)
(basic
and diluted) |
$ |
0.03 |
$ |
(0.01) |
$ |
0.02 |
$ |
(0.04) |
All-In Sustaining Cost Per Ounce
All-in sustaining costs and all-in sustaining
cost per ounce are Non-GAAP measures. These measures are intended to assist readers in evaluating the total costs of producing
gold from current operations. While there is no standardized meaning across the industry for this measure, the Company’s
definition conforms to the definition of all-in sustaining costs as set out by the World Gold Council, which became effective January
1, 2014. The Company defines all-in sustaining costs as the sum of production costs, sustaining capital (capital required to maintain
current operations at existing levels), corporate general and administrative expenses, in-mine exploration expenses and reclamation
cost accretion related to current operations. All-in sustaining costs exclude growth capital, reclamation cost accretion not related
to current operations, interest expense, debt repayment and taxes. The costs included in the calculation of all-in sustaining costs
are divided by commercial gold ounces sold; U.S.$ all-in sustaining costs per ounce sold are translated using the average Bank
of Canada CDN$/U.S.$ exchange rate.
All-in sustaining costs and all-in sustaining
cost per ounce are reconciled to the amounts included in the Consolidated Statements of Comprehensive Income (Loss) as follows:
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 27 |
Table 19: All-In Sustaining Cost per Ounce |
|
|
|
|
Three months ended |
|
|
|
|
|
|
Sept 30 |
|
Sept 30 |
|
|
|
|
|
|
2014 |
|
2013 |
|
Change |
|
|
|
|
|
|
|
|
|
Production cost (CDN$) |
|
|
$ |
12,021 |
$ |
9,909 |
|
21% |
Production royalty |
|
|
|
902 |
|
- |
|
- |
Smelting, refining, freight |
|
|
|
64 |
|
45 |
|
42% |
By-product credits |
|
|
|
(14) |
|
(28) |
|
(50%) |
General and administrative |
|
|
|
1,258 |
|
1,249 |
|
1% |
Accretion |
|
|
|
35 |
|
51 |
|
(31%) |
Development |
|
|
|
2,727 |
|
4,402 |
|
(38%) |
Property, plant and equipment |
|
|
|
1,626 |
|
1,088 |
|
49% |
Exploration |
|
|
|
65 |
|
249 |
|
(74%) |
All-In Sustaining Costs |
|
|
$ |
18,684 |
$ |
16,965 |
|
10% |
Divided by ounces sold |
|
|
|
17,578 |
|
10,781 |
|
63% |
All-in sustaining cost per ounce (CDN$) |
|
|
$ |
1,063 |
$ |
1,574 |
|
(32%) |
|
|
|
|
|
|
|
|
|
CDN$ Exchange Rate |
|
|
|
1.0892 |
|
1.0383 |
|
|
All-in sustaining cost per ounce (U.S.$) |
|
|
$ |
976 |
|
1,516 |
|
(36%) |
Table 20: All-In Sustaining Cost per Ounce |
|
|
|
|
Nine months ended |
|
|
|
|
|
|
Sept 30 |
|
Sept 30 |
|
|
|
|
|
|
2014 |
|
2013 |
|
Change |
|
|
|
|
|
|
|
|
|
Production cost (CDN$) |
|
|
$ |
35,243 |
$ |
31,581 |
|
12% |
Production royalty |
|
|
|
1,694 |
|
- |
|
- |
Smelting, refining, freight |
|
|
|
172 |
|
112 |
|
54% |
By-product credits |
|
|
|
(63) |
|
(12) |
|
425% |
General and administrative |
|
|
|
5,201 |
|
5,076 |
|
2% |
Accretion |
|
|
|
114 |
|
129 |
|
(12%) |
Development |
|
|
|
12,453 |
|
17,510 |
|
(29%) |
Property, plant and equipment |
|
|
|
3,351 |
|
6,498 |
|
(48%) |
Exploration |
|
|
|
201 |
|
989 |
|
(80%) |
All-In Sustaining Costs |
|
|
$ |
58,366 |
$ |
61,883 |
|
(6%) |
Divided by ounces sold |
|
|
|
46,133 |
|
31,614 |
|
46% |
All-in sustaining cost per ounce (CDN$) |
|
|
$ |
1,265 |
$ |
1,957 |
|
(35)% |
|
|
|
|
|
|
|
|
|
CDN$ Exchange Rate |
|
|
|
1.0943 |
|
1.0236 |
|
|
All-in sustaining cost per ounce (U.S.$) |
|
|
$ |
1,156 |
|
1,912 |
|
(40%) |
Cash Cost Per Ounce
The Company reports its cash costs on
a per-ounce basis, based on uniform standards developed by the Gold Institute, an independent researcher and evaluator of the gold
market and gold industry. Management uses this measure to analyze the profitability, compared to average realized gold prices,
of the Seabee Gold Operation. Investors are cautioned that the above measures may not be comparable to similarly titled measures
of other companies, should these companies not follow World Gold Council.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 28 |
Table 21: Total Cash Cost per Gold Ounce Sold |
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
Sept 30 |
|
Sept 30 |
|
|
|
|
|
|
2014 |
|
2013 |
|
Change |
|
|
|
|
|
|
|
|
|
Production costs (CDN$) |
|
|
$ |
12,021 |
$ |
9,909 |
|
21% |
Divided by ounces sold |
|
|
|
17,578 |
|
10,781 |
|
63% |
Production cost per ounce (CDN$) |
|
|
$ |
684 |
$ |
919 |
|
(26)% |
|
|
|
|
|
|
|
|
|
NSR royalty |
|
|
$ |
902 |
$ |
- |
|
- |
Divided by ounces sold |
|
|
|
17,578 |
|
10,781 |
|
63% |
NSR royalty cost per ounce (CDN$) |
|
|
$ |
51 |
$ |
- |
|
- |
|
|
|
|
|
|
|
|
|
Total cash cost per ounce (CDN$) |
|
|
$ |
735 |
$ |
919 |
$ |
(20)% |
|
|
|
|
|
|
|
|
|
CDN$ Exchange Rate |
|
|
|
1.0892 |
|
1.0383 |
|
|
Total cash cost per ounce (U.S.$) |
|
|
$ |
675 |
$ |
885 |
|
(24)% |
Table 22: Total Cash Cost per Gold Ounce Sold |
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
Sept 30 |
|
Sept 30 |
|
|
|
|
|
|
2014 |
|
2013 |
|
Change |
|
|
|
|
|
|
|
|
|
Production costs (CDN$) |
|
|
$ |
35,243 |
$ |
31,581 |
|
12% |
Divided by ounces sold |
|
|
|
46,133 |
|
31,614 |
|
46% |
Production cost per ounce (CDN$) |
|
|
$ |
764 |
$ |
999 |
|
(24)% |
|
|
|
|
|
|
|
|
|
NSR royalty |
|
|
$ |
1,694 |
$ |
- |
|
- |
Divided by ounces sold |
|
|
|
46,133 |
|
31,614 |
|
46% |
NSR royalty cost per ounce (CDN$) |
|
|
$ |
37 |
$ |
- |
|
- |
|
|
|
|
|
|
|
|
|
Total cash cost per ounce (CDN$) |
|
|
$ |
801 |
$ |
999 |
$ |
(20)% |
|
|
|
|
|
|
|
|
|
CDN$ Exchange Rate |
|
|
|
1.0943 |
|
1.0236 |
|
|
Total cash cost per ounce (U.S.$) |
|
|
$ |
732 |
$ |
976 |
|
(25)% |
Other
Financial Measures and Reconciliations
Cash Flow from Operations before Net Changes in Non-Cash Operating
Working Capital
The Company uses Cash Flow from Operations
before Net Changes in Non-Cash Operating Working Capital as a supplemental measure of its financial performance. The Company uses
this measure to analyze the cash generated by its operations. These measures are not necessarily indicative of operating profit
or cash flow from operations as determined under IFRS. Investors are cautioned that the above measures may not be comparable to
similarly titled measures of other companies.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 29 |
Table 23: Calculation of Cash Flow from Operations before Net
Changes in Non-Cash
Operating Working Capital |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Sept 30 |
|
|
Sept 30 |
|
|
Sept 30 |
|
|
Sept 30 |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit (loss) |
$ |
6,852 |
|
$ |
(33,871) |
|
$ |
5,068 |
|
$ |
(46,323) |
|
Adjustments for non-cash items: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion |
|
4,604 |
|
|
5,360 |
|
|
16,841 |
|
|
15,703 |
|
Finance expense |
|
126 |
|
|
136 |
|
|
1,176 |
|
|
381 |
|
Finance and other income |
|
(320) |
|
|
(316) |
|
|
(833) |
|
|
(913) |
|
Impairment charges |
|
- |
|
|
45,187 |
|
|
- |
|
|
56,034 |
|
Loss on sale of assets |
|
- |
|
|
- |
|
|
642 |
|
|
- |
|
Loss (gain) on investments |
|
(1,047) |
|
|
- |
|
|
(1,317) |
|
|
262 |
|
Stock-based compensation |
|
153 |
|
|
307 |
|
|
438 |
|
|
937 |
|
Deferred income tax recovery |
|
- |
|
|
(12,531) |
|
|
- |
|
|
(16,773) |
|
$ |
10,368 |
|
$ |
4,272 |
|
$ |
22,015 |
|
$ |
9,308 |
Weighted Average shares outstanding (basic) |
|
188,156 |
|
|
175,811 |
|
|
186,136 |
|
|
175,478 |
Weighted Average shares outstanding (diluted) |
|
188,459 |
|
|
175,811 |
|
|
186,313 |
|
|
175,478 |
Per share cash flows from operating activities (basic and diluted) |
$ |
0.06 |
|
$ |
0.02 |
|
$ |
0.12 |
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation Principal Balance Owing on Debt
Pursuant to Company policy, closing costs associated
with the Company’s long-term debt are netted against the face value of the debt, thereby reducing the carrying value of the
Term Loan on the Statement of Financial Position. These costs are amortized using the effective interest rate method over the life
of the debt facility. A reconciliation of the amortized cost of the Company’s Term loan versus the principal balance owing
is outlined below.
Table 24: Principal Balance of Debt |
|
|
|
|
|
|
Sept 30 |
|
Dec 31 |
|
|
|
|
|
|
2014 |
|
2013 |
|
|
|
|
|
|
|
|
|
Term loan (amortized cost) |
|
|
|
|
$ |
22,399 |
$ |
23,628 |
Add: |
|
|
|
|
|
|
|
|
Remaining closing costs to be amortized |
|
|
|
|
|
1,101 |
|
1,372 |
Debt (principal balance owing) |
|
$ |
23,500 |
$ |
25,000 |
Disclosure
Controls and Internal Controls over Financial Reporting
Disclosure Controls and Procedures
As at September 30, 2014, we evaluated our
disclosure controls and procedures as defined in the rules of the U.S. Securities and Exchange Commission (“SEC”) and
the Canadian Securities Administrators. This evaluation was carried out under the supervision and with the participation of Management,
including the Interim President and Chief Executive Officer and the Chief Financial Officer. Based on that evaluation, the Interim
President and Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls
and procedures were effective.
Internal Control Over Financial Reporting
Management is responsible for establishing
and maintaining adequate ICFR. ICFR, no matter how well designed, has inherent limitations and can only provide reasonable assurance
with respect to the preparation and fair presentation of published financial statements. Under the supervision and with the participation
of the Interim President and Chief Executive Officer and the Chief Financial Officer, management conducted an evaluation of the
effectiveness of its internal control over financial reporting based on the criteria set forth in the Internal Control-Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on
this evaluation, the Interim President and Chief Executive Officer and the Chief Financial Officer concluded that internal control
over financial reporting is effective as at September 30, 2014.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 30 |
Changes in Internal Control Over Financial Reporting
There have been no significant changes made
in our internal controls over financial reporting during the period ended September 30, 2014 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
Limitations of Controls and Procedures
The Company’s Management, including the
Interim President and Chief Executive Officer and Vice President and Chief Financial Officer, believes that any disclosure controls
and procedures or internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments
in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can
be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the
control. The design of any control system also is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur
and not be detected.
Cautionary
Note to U.S. Investors Concerning Resource Estimates
Resource Estimates
The resource estimates in this Management’s
Discussion and Analysis were prepared in accordance with National Instrument 43-101, adopted by the Canadian Securities Administrators.
The requirements of National Instrument 43-101 differ significantly from the requirements of the SEC. In this Management’s
Discussion and Analysis, the Company uses certain terms such as “measured”, “indicated” and “inferred”
resources. Although these terms are recognized and required in Canada, the SEC does not recognize them. The SEC permits U.S. mining
companies, in their filings with the SEC, to disclose only those mineral deposits that constitute “reserves”. Under
U.S. standards, mineralization may not be classified as a reserve unless the determination has been made that the mineralization
could be economically and legally extracted at the time the determination is made. U.S. investors should not assume that all or
any portion of a measured or indicated resource will ever be converted into “reserves”. Further, “inferred resources”
have a great amount of uncertainty as to their existence and whether they can be mined economically or legally, and U.S. investors
should not assume that “inferred resources” exist or can be legally or economically mined, or that they will ever be
upgraded to a more certain category.
Compliance with Canadian Securities Regulations
This annual report is intended to comply with
the requirements of the Toronto Stock Exchange and applicable Canadian securities legislation, which differ in certain respects
from the rules and regulations promulgated under the United States Securities Exchange Act of 1934, as amended (“Exchange
Act”), as promulgated by the SEC.
U.S. investors are urged to consider the disclosure
in our Annual Report on Form 20-F, File No. 001-31956, filed with the SEC under the Exchange Act, which may be obtained from the
Company (without cost) or from the SEC’s Web site: http://sec.gov/edgar.shtml.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 31 |
Caution
Regarding Forward-Looking Information
All statements, other than statements of historical
fact, contained or incorporated by reference in this MD&A constitute “forward-looking information” within the meaning
of applicable Canadian securities laws and “forward-looking statements” within the meaning of the United States Private
Securities Litigation Reform Act of 1995 (referred to herein as “forward-looking statements”). Forward-looking statements
include, but are not limited to, statements with respect to the future price of gold, the estimation of mineral reserves and resources,
the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital
expenditures, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, currency
exchange rate fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks,
unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. Generally, these forward-looking
statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does
not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”,
“intends”, “anticipates” or “does not anticipate” or “believes”, or the negative
connotation thereof or variations of such words and phrases or state that certain actions, events or results, “may”,
“could”, “would”, “might” or “will be taken”, “occur” or “be
achieved” or the negative connotation thereof.
All forward-looking statements are based on
various assumptions, including, without limitation, the expectations and beliefs of management, the assumed long-term price of
gold, that the Company will receive required permits and access to surface rights, that the Company can access financing, appropriate
equipment and sufficient labour, and that the political environment within Canada will continue to support the development of mining
projects in Canada.
Forward-looking statements are subject to known
and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements
of Claude to be materially different from those expressed or implied by such forward-looking statements, including but not limited
to: actual results of current exploration activities; environmental risks; future prices of gold; possible variations in ore reserves,
grade or recovery rates; mine development and operating risks; accidents, labour issues and other risks of the mining industry;
delays in obtaining government approvals or financing or in the completion of development or construction activities; and other
risks and uncertainties, including but not limited to those discussed in the section entitled “Business Risk” in this
MD&A. These risks and uncertainties are not, and should not be construed as being, exhaustive.
Although Claude has attempted to identify important
factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other
factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will
prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements.
Forward-looking statements in this MD&A
are made as of the date of this MD&A, being October 30, 2014 and, accordingly, are subject to change after such date. Except
as otherwise indicated by Claude, these statements do not reflect the potential impact of any non-recurring or other special items
that may occur after the date hereof. Forward-looking statements are provided for the purpose of providing information about management’s
current expectations and plans and allowing investors and others to get a better understanding of our operating environment.
Claude does not undertake to update any forward-looking
statements that are incorporated by reference herein, except in accordance with applicable securities laws.
The forward-looking statements contained
in this Management’s Discussion and Analysis are expressly qualified by these cautionary statements.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 32 |
Additional
Information
Additional information related to the
Company, including its Annual Information Form (Form 20-F in the U.S.), is available on Canadian (www.sedar.com) and U.S. (www.sec.gov)
securities regulatory authorities’ websites. Certain documents are also available on the Company’s website at www.clauderesources.com.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 33 |
Conversion Multiples
For ease of reference, the following factors
for converting metric measurements into imperial equivalents are provided:
To Convert from Metric |
To Imperial |
Multiply Metric Units by |
Metres |
Feet (ft.) |
3.281 |
Kilometres (km) |
Miles |
0.621 |
Tonnes |
Tons (2,000 pounds) |
1.102 |
Grams |
Troy Ounces |
0.032 |
Hectares |
Acres |
2.471 |
Glossary
of Financial Terms
Current
ratio = (current asset / current liabilities)
Debt
to capital = (total debt - cash and cash equivalents) / (total debt - cash and cash equivalents + total shareholders’
equity)
Working capital = (current
asset - current liabilities)
Glossary
of Technical Terms
Alteration - any change in the mineral
composition of a rock brought about by physical or chemical means.
Assaying - laboratory examination that
determines the content or proportion of a specific metal (i.e.: silver) contained within a sample. Technique usually involves firing/smelting.
Au Eq (“gold equivalent”) -
a measure of contained metal expressed in equivalent gold grade.
Biotite - a widely distributed and important
rock-forming mineral of the mica group.
Brecciated - broken into sharp-angled
fragments surrounded by finer-grained material.
Bulk Sample - a collection of representative
mineralized material whose location, geologic character and metal assay content can be determined and then used for metallurgical
or geotechnical testing purposes.
Chalcopyrite - a sulphide mineral of
copper and iron.
Chlorite - a group of platy, monoclinic,
usually greenish minerals.
Chloritic alteration - the replacement
by, conversion into, or introduction of chlorite into a rock.
Core Samples - the cylindrical form
of rock called “core” that is extracted from a diamond drill hole. Mineralized sections are separated and these samples
are sent to a laboratory for analysis.
Cross-cut - a horizontal opening driven
from a shaft or haulage drift at an oblique or right angle to the strike of a vein or other orebody.
Cut-off Grade - the lowest grade of
mineralized material that qualifies as a reserve in a deposit (i.e.: contributing material of the lowest assay that is included
in a reserve estimate).
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 34 |
Diamond Drilling - a type of rotary
drilling in which diamond bits are used as the rock-cutting tool to produce a recoverable drill core sample of rock for observation
and analysis.
Dip - the angle that a structural surface,
a bedding or fault plane makes with the horizontal, measured perpendicular to the strike of the structure.
Drift - a horizontal underground opening
that follows along the length of a vein or rock formation.
Duty to Consult - governments in Canada
may have a duty to consult with and potentially accommodate Aboriginal groups prior to making decisions which may impact lands
and resources subject to established or potential treaty or Aboriginal rights, title or other claims. These governments, in turn,
may delegate procedural aspects of this duty to industry.
Exploration - work involved in searching
for ore, from prospecting to diamond drilling or driving a drift.
Fault - a fracture or break in rock
along which there has been movement.
Feasibility Study - a comprehensive
technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments
of realistically assumed mining, processing, metallurgical, economic, marketing, legal, environmental, social and governmental
considerations together with any other relevant operational factors and detailed financial analysis, that are necessary to demonstrate
at the time of reporting that extraction is reasonably justified (economically mineable). The results of the study may reasonably
serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of
the project. The confidence level of the study will be higher than that of a Prefeasibility Study.
Fire Assay - the assaying of metallic
minerals by use of a miniature smelting procedure with various agents.
Footwall - the rock on the underside
of a vein or ore structure.
Fracture - a break or crack in rock.
Geophysical Survey - a scientific method
of prospecting that measures the physical properties of rock formations. Common properties investigated include magnetism, specific
gravity, electrical conductivity and radioactivity.
Grade - the metal content of rock with
precious metals, grade can be expressed as troy ounces or grams per tonne of rock.
Granitoid - a light-coloured, plutonic
rock with quartz between 20 and 60 percent.
Head
Grade - the average grade of ore fed into a mill.
Hydrothermal
- the products or the actions of heated waters in a rock mass such as a mineral deposit precipitating from a hot solution.
Igneous - a primary type of rock formed
by the cooling of molten material.
Indicated
Mineral Resource - is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics,
can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters,
to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable
exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings
and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 35 |
Inferred
Mineral Resource - is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis
of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate
is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches,
pits, workings and drill holes.
Lens - a body of ore that is thick in
the middle and tapers towards the ends.
Lithostructural
- an assemblage of rocks that is unified on the basis of structural and lithological features.
Mafic
- igneous rocks composed mostly of dark, iron and magnesium-rich minerals.
Measured
Mineral Resource - is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical
characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application
of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The
estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques
from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological
and grade continuity.
Metallurgy - the study of the extractive
processes which produce minerals from their host rocks.
Mill - a processing facility where ore
is finely ground and thereafter undergoes physical or chemical treatment to extract the valuable metals.
Mineral - a naturally formed chemical
element or compound having a definitive chemical composition and usually a characteristic crystal form.
Mineralization - a natural concentration
in rocks or soil of one or more minerals.
Mineral Reserve - the economically mineable
part of a Measured or Indicated Mineral Resource demonstrated by at least a Prefeasibility Study. This study must include adequate
information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting,
that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur
when material is mined.
Mineral Resource - a concentration or
occurrence of natural, solid, inorganic, or fossilized organic material in or on the Earth’s crust in such form and quantity
and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological
characteristics, and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and
knowledge.
National Instrument 43-101 or NI 43-101
- National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators.
Ounces - troy ounces of a fineness of
999.9 parts per 1,000 parts.
Ore - rock, generally containing metallic
or non-metallic minerals, which can be mined and processed at a profit.
Ore Body - a sufficiently large amount
of ore that can be mined economically.
Plunge - the vertical angle a linear
geological feature makes with the horizontal plane.
Porphyry - any igneous rock in which
relatively large crystals are set in a fine-grained groundmass.
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 36 |
Prefeasibility Study - a comprehensive
study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining,
or the pit configuration, in the case of an open pit, has been established, and where an effective method of mineral processing
has been determined. This study must include a financial analysis based on reasonable assumptions of technical engineering, operating,
and economic factors, which are sufficient for a Qualified Person acting reasonably, to determine if all or part of the Mineral
Resource may be classified as a Mineral Reserve.
Probable Mineral Reserve - the economically
mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource, demonstrated by at least a Prefeasibility
Study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be justified.
Proven Mineral Reserve - the economically
mineable part of a Measured Mineral Resource demonstrated by at least a Prefeasibility Study. This study must include adequate
information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting,
that economic extraction is justified.
Pulp - a mixture of ground ore and water.
Pyrite - an iron sulphide mineral (FeS2),
the most common naturally occurring sulphide mineral.
Pyrrhotite - a bronze-colored, often
magnetic iron sulphide mineral.
Qualified Person - an individual who
is an engineer or geoscientist with at least five (5) years of experience in mineral exploration, mine development, mine operation,
project assessment or any combination of these; has experience relevant to the subject matter of the mineral project and technical
report; and is a member in good standing of a professional association.
Quartz - crystalline silica; often forming
veins in fractures and faults within older rocks.
Raise - a vertical or inclined underground
working that has been excavated from the bottom upward.
Ramp - an inclined underground opening.
Sericite - a fine-grained potassium
mica found in various metamorphic rocks.
Shear
Zone - a zone in which shearing has occurred on a large scale so that the rock is crushed and brecciated.
Showing
- surface occurrence of mineral.
Sill - an intrusive sheet of igneous
rock of roughly uniform thickness that has been forced between the bedding planes of existing rock; the initial horizontal drift
along the strike of the ore vein.
Specific Gravity - the ratio between
the weight of a unit volume of a substance and that of a unit volume of water.
Stope
- an underground excavation from which ore has been extracted, either above or below a level. Access to stopes is usually by way
of adjacent raises.
Stratigraphy
- the sequence of bedded rocks in a particular area.
Tailings
- Tailings consist of ground rock and process effluents that are generated in a mine processing plant or mill. Mechanical and chemical
processes are used to extract gold from mine ore and produce a waste stream known as tailings. This process of product extraction
is never 100 percent efficient, nor is it possible to reclaim all reusable and expended processing reagents and chemicals. The
unrecoverable and uneconomic metals, minerals, chemicals, organics and process water are discharged, normally as slurry, to a final
storage area commonly known as a Tailings Management Facility (TMF) or Tailings Storage Facility (TSF).
Q3 2014 Management’s Discussion and Analysis (in thousands of CDN dollars, except as otherwise noted) | Page 37 |
Till
- is unsorted glacial sediment. Its content may vary from clays to mixtures of clay, sand, gravel and boulders. This material is
typically derived from the subglacial erosion and incorporated by the moving ice of the glaciers of previously available unconsolidated
sediments.
Tonne - a metric ton or 2,204 pounds.
Trenching - the process of exploration
by which till is removed from a trench cut from the earth’s surface.
Vein - a thin, sheet-like, cross-cutting
body of hydrothermal mineralization, principally quartz.
Waste - barren rock in a mine, or mineralized
material that is too low in grade to be mined and milled at a profit.
Working
interest or WI - means the interest held by Claude in property. This interest normally bears its proportionate
share of capital and operating costs as well as royalties or other production burdens. The working interest percentage is expressed
before royalty interests.