Results of Operations
The Company’s loss from operations for the Current Year was $27.5 million (a loss of $0.14 per share) as compared to a loss of $19.1 million (a loss of $0.15 per share) for the Comparative Year. The Company’s loss for the Current Year is mainly due to a large write-off of capitalized resource property costs (Current Year - $26.3 million; Comparative Year - $16.5 million) and a loss of $5.5 million (before taxes) from the sale of a mineral property interest (Comparative Year -$nil). Administrative expenses (Current Year - $4.2 million; Comparative Year - $5.9 million) decreased during the first complete year of operations following the acquisition of control of Ashton and Contact in September 2006.
The Company capitalizes all acquisition and exploration costs until the property to which those costs related is placed into production, sold or abandoned. The decision to abandon a property is largely determined from exploration results and the amount and timing of the Company’s write-offs of capitalized resource property costs will vary in a fiscal period from one year to the next and typically cannot be predicted in advance.
Resource property write-offs had the largest impact on the Company’s Current Year loss of $27.5 million (Comparative Year - $19.1 million), increasing to $26.3 million in the Current Year from $16.5 million during the Comparative Year. Resource property write-offs accounted for about 73% (Comparative Year – 76%) of the Company’s loss before income taxes (Current Year - $35.9 million; Comparative Year - $21.7 million). Also contributing to the Current Year loss was a $3.8 million loss (after taxes) on the sale of a property interest (Comparative Year - $nil). During the Current Year, the Company received $15 million cash and common shares with a fair value of $1,870,000 for the sale of its interest in the Buffalo Hills property, Alberta. A future income tax recovery of $8.3 million (Comparative Year - $2.1 million) reduced the Company’s net loss for the year.
During the Current Year, the Company wrote-off capitalized resource property costs of $26.3 million as it reduced its land packages or identified properties where exploration results indicated no further work should be pursued. The most significant write-offs during the Current Year were associated with properties in the Northwest Territories ($5.3 million), the Company’s generative exploration programs ($4.5 million), and exploration activities in Botswana ($1.7 million). In addition, the Company wrote-off $12.7 million of resource property costs capitalized as part of the Ashton acquisition; $1.4 million on its properties in the Western Arctic; $99,000 in Eastern Canada and $562,000 in other areas of Canada. The $16.5 million write-off in the Comparative Year included write-offs of $5.1 million for the Eastern Arctic properties; $5.8 million for the Western Arctic properties; $2.0 million on the Company’s other Canadian exploration properties; $2.0 million for generative exploration and $891,000 related to the Company’s exploration activities in Botswana.
Administrative expenses for the Current Year totaled $4.2 million, a significant decrease from the Comparative Year ($5.9 million) due to a reduction in public company expenses post-merger. A significant decrease in professional fees (Current Year - $393,000; Comparative Year - $2.0 million) had the most direct impact on the Company’s administrative expense during the Current Year. Salaries and benefits (Current Year - $1.1 million; Comparative Year - $1.4 million) also decreased however, the Company’s office and sundry expense increased in the Current Year to $678,000 from $201,000 due mostly to costs associated with the additional premises acquired through the Company’s acquisition of Ashton in the Comparative Year. Administrative fees increased from $126,000 in the Comparative Period to $192,000 in the Current Period. Stock-based compensation expense, a non-cash item, (Current Year - $1.1 million; Comparative Year - $1.4 million) accounted for approximately 27% (Comparative Year – 25%) of the Company’s total administrative expenses.