INTERIM MANAGEMENT S DISCUSSION AND ANALYSIS REPORT QUARTER ENDED MARCH 31, 2017

Transcription

1 INTERIM MANAGEMENT S DISCUSSION AND ANALYSIS REPORT QUARTER ENDED MARCH 31, 2017 The goal of this analysis is to bring to the attention of the readers important changes in the financial position and results of operations of Metanor Resources Inc. (the Company) for the nine-month period ended March 31, This present MD&A report was submitted to the audit committee that recommended its adoption to the Board of directors, which was approved on May 9, This interim analysis has been prepared with information available as at May 11, 2017 and must be read in conjunction with the audited financial statements for the year ended June 30, 2016, including accompanying notes. The unaudited condensed interim financial statements for the period ended March 31, 2017 were prepared based on International Financial Reporting Standards (IFRS), in accordance with IAS 34 standard, Interim Financial Reporting. The condensed interim financial statements are presented in Canadian currency, which is also the functional currency of the Company. These condensed interim financial statements for the nine month period ended March 31, 2017 have not been reviewed by the auditors of the Company. Further information regarding the Company and its operations are filed electronically on the System for Electronic Document Analysis and Retrieval (SEDAR) in Canada and can be obtained from PROSPECTIVE STATEMENTS Some statements included in this interim analysis constitute prospective information concerning anticipated developments or conditions likely to occur or to occur at a later date. The Company s actual results including other developments or conditions could thus significantly differ from those presented in the prospective statements because of a certain number of risks, uncertainties, and other factors, including, but without being limited to, risks related to legislative modifications in the mining industry, the Company s ability to benefit from the technologies, and additional financial needs, as well as the Company s capacity to obtain those financings. It is as such recommended not to rely unduly on those prospective statements since plans, intentions or expectations on which they are based may not materialize. SHARE CONSOLIDATION On April 13, 2017, the Company completed a consolidation of its issued and outstanding common shares on a 10-to-1 basis ("Share Consolidation"). The Share Consolidation affected all shareholders, option holders and warrant holders uniformly and thus did not materially affect any security holder s percentage of ownership interest. All references in these financial statements to common shares, options and share purchase warrants have been retroactively adjusted to reflect the Share Consolidation. CORPORATE INFORMATION, NATURE OF ACTIVITIES AND GOING CONCERN Metanor Resources Inc. was incorporated on January 10, 2003 under the Canada Business Corporations Act. Its head office is located at 2872 Chemin Sullivan, Suite 2, Val-d'Or, Quebec, J9P 0B9, phone: , info@metanor.ca. The Company is listed in the Tier 1 at the TSX Venture Exchange under the MTO.V symbol. 1

2 CORPORATE INFORMATION, NATURE OF ACTIVITIES AND GOING CONCERN (Continued) The Company is engaged in the production and sale of gold, as well as the exploration and development of mining properties. The recoverability of the amounts shown for mining properties is dependent upon the existence of economically recoverable ore reserves, the ability of the Company to obtain necessary financing to complete the exploration and development of its properties and the proceeds from the disposal of properties. These financial statements were prepared on a going concern basis, using the historical cost, except for the financial assets accounted for at fair value through profit and loss. During the quarter ended March 31, 2017, the Company generated a net income of $2,104,939 and has a deficit of $69,737,426 as at that date. In addition to its current working capital requirements, the Company must obtain additional financing to meet its commitments and obligations in respect to its exploration and evaluation programs, its funds reserved for exploration following the issuance of flow-through shares and its long-term debt contractual commitments. The Company's ability to continue as a going concern depends on its ability to realize its assets and to obtain additional financing. Even if the Company has been successful in the past in doing so, there is no assurance that it will manage to obtain additional financing in the future and no guarantees that the financing sources or initiatives will be accessible to the Company or that they will be available under such conditions acceptable for the Company. As a result, these conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company s ability to continue as a going concern. These financial statements do not reflect the adjustments to the carrying values of assets and liabilities, the reported amounts of revenues and expenses and the classification of statement of financial position items if the going concern assumption was deemed inappropriate, and these adjustments could be material. Management did not take these adjustments into account as it believes in the validity of the going concern assumption. The Board of Directors is composed of: Greg Gibson (Chairman and Interim Chief Executive Officer), Pascal Hamelin (President and Chief Operating Officer), Akiba Leisman, Ron Perry, Michel Fontaine *, Tristram Robert Coffin*, and Robert C. Bryce* (*member of the Audit Committee). FINANCIALS AND OPERATIONALS HIGHLIGHTS FROM THE QUARTER ENDING MARCH 31, 2017 Bachelor Property Note Gold production of 9,442 ounces during the quarter. Gold sales of 10,881 ounces during the quarter. Total of $16,304,364 in revenues from gold sales in the quarter at an average realised price of $1,498 per ounces sold (US$1,133/oz using an exchange rate of US$0.76/CND$1.00). Cash cost 1 of CND$1,008 per ounce sold (US$762/oz using an exchange rate of US$0.76/CND$1.00) during the quarter. Sustaining cost 2 of CND$1,182 per ounce sold (US$894/oz using an exchange rate of US$0.76/CND$1.00) during the quarter. All-In cost 3 of CND$1,282 per ounce sold (US$969/oz using an exchange rate of US$0.76/CND$1.00) during the quarter. 1. The cash cost is composed of all costs related to the mineral extraction and processing including royalties associated to the property and by-product credit. 2. The sustaining cost is composed of the cash cost, and all costs related to sustain the existing operation such as capital and exploration expenses at the existing mines, and the corporate administration cost. 3. The all-in cost is composed of the sustaining cost and all costs related to corporate exploration and evaluation. 2

3 FINANCIALS AND OPERATIONALS HIGHLIGHTS FROM THE QUARTER ENDING MARCH 31, 2017 (Continued) Barry Property A total of 7,239 m of drilling confirmed the presence of high grade sub-vertical shear below the pit, and confirmed the extension of the Barry pit to the west. Administration The Company had a net income of $322,287 for the quarter ended March 31 st 2017 after depreciation and depletion of $3,387,429. The Company had a treasury of $16,747,276 and restricted cash of $747,975 on March 31 st The shareholders approved a consolidation of shares on a 10-to-1 basis which was completed on April 13 th The closing of a private placement of $10,752,031 for which the net proceeds will be used for mining development and exploration at the Barry project and for general working capital purposes. The closing of a flow-through private placement of $747,975 for which the net proceeds will be used to incur resource exploration expenses. SENIOR MANAGEMENT CHANGES On March 24, 2017, the Company announced the appointment of Mr. Greg Gibson and Mr. Akiba Leisman to its Board of Directors. Mr. Gibson, along with Mr. Roy, will co-chair the board. On April 12, 2017, the Company announced the retirement of the Company s founders Mr. Serge Roy, Executive Chairman and Mr. Ghislain Morin, President, CEO and director. Management appreciates and is grateful to the Company founders Serge and Ghislain for their perseverance over the years in building the foundation of a Company that is now ready to move into its next phase. They leave the Company in a strong financial position and with an upcoming new strategic investor/partner Kirkland Lake Gold. We wish them happiness in their retirement and continued success in any future endeavors they decide to pursue. Mr. Greg Gibson, Chairman of the Board, has been appointed to the position of Interim Chief Executive Officer and Mr. Pascal Hamelin, Vice-president of Operations with the Company for the past 4 years, will take on the role of President and Chief Operating Officer. OPERATION SUMMARY BACHELOR MINE The Bachelor Mine is located 4 km south of highway 113 and 90 km north-east of the city of Lebel-sur- Quévillon, Québec, Canada. The project began in November The Company published an independent NI Technical Report in 2011 presenting a prefeasibility study of the Bachelor Project. In June 2012, the Company completed its bulk sampling campaign at the Bachelor Project. In July 2012, the Company announced that it would begin the construction and development of the mine to bring the project toward commercial production state, and in December of 2013, the Bachelor Mine reached the commercial production status. Since that time, the mine has been extracting and selling gold, while it continues to conduct exploration and definition drillings around the Bachelor Mine on order to discover additional ounces of gold. The mine is connected to the provincial electrical grid, is linked to the world with high-speed internet and has mobile phone service on site. Also, the mine has a sleep camp to lodge and cater to all the workers. The employees are working on a 7in/7out schedule, and are split into 4 teams operating 7 days per week and 24 hours per day. The mill and tailing facility are fully functional with all the social and environmental licenses. 3

4 OPERATION SUMMARY (Continued) Operation summary Three months ended Nine months ended Operation results March 31 st 2017 March 31 ST 2016 March 31 st 2017 March 31 ST 2016 Tonnes milled (Tonnes) 61,101 60, , ,601 Feed grade (g/t) Mill recovery rate (%) 96.4% 96.3% 96.3% 96.5% Ounces produced 9,442 9,113 27,605 24,948 Ounces sold 10,881 8,730 29,204 24,003 Underground development (meters) 1,230 1,571 3,346 4,933 Diamond drilling (meters) 15,214 6,795 52,673 42,191 Underground Operation The ramp development reached level 15 in the Main ore zone and will continue to be developed. The diamond drilling confirmed that the Main vein continues below level 15 down to level 16. In the Hewfran sector, drifting on level 12 reached the ore zone. In the current quarter, an exploration drift on level 8 will be developed to access exploration targets further west from Hewfran. Also, two exploration drifts will be developed to drill targets in the Main vein at depth and to the west. These two exploration drifts are driven to the south on levels 11 and 14. For the quarter, a total of 61,101 tonnes of ore at a grade of 5.0 grams per tonne were processed at the mill at a recovery rate of 96.4% which resulted in a production of 9,442 ounces of gold. During the quarter, gold sales of 10,881 ounces were much higher than the ounces produced due to the recovery of ounces in the mill and sales of gold inventory at the Mint. Between the beginning of the operations in 2010 and March 31 st 2017, 180,042 ounces were extracted from the Bachelor mine. The proven and probable reserves of the technical report published in April 2011 were 200,177 ounces of gold. According to this report dated April 2011, there would be 20,135 ounces of gold left to extract. Since there are more ounces left to extract, the Company is assessing the mineral inventory with an independent consulting firm MRB & Associates from Val-d Or. In the coming months, the production coming from the Hewfran sector will be maintained and more ounces will come from the Main vein in the ramp area. For 2017, the Company reviewed and increased its production objective which should reach between 30,000 and 36,000 ounces of gold. 4

5 OPERATION SUMMARY (Continued) Bachelor Mine Exploration In the last quarter, the definition drilling program was targeting the Hewfran sector between levels 5 and 12 and between levels 14 and 16 in the Main vein area. The exploration drilling continued in the Hewfran sector to verify the extension of the Hewfran stopes below level 14 and further west on level 8 toward the old Coniagas mine. The old Coniagas mine extracted zinc and silver in the early 1960 s and is located 1 km west of the area where the actual work is being done on Hewfran. Finally, an additional drill will be mobilized in May to further explore below level 16 in the Main vein. SELECTED FINANCIAL INFORMATION (UNAUDITED) FOR THE THREE AND NINE MONTH PERIOD: 3 months months months months 2016 $ $ $ $ Revenue 16,304,364 11,901,847 44,842,327 32,821,828 Gross income (loss) 1,953,861 (1,240,471) 6,479,701 (4,591,658) Net income (loss) and comprehensive income (loss) 322,287 (1,979,975) 2,104,939 (7,761,428) Cash flows from (used by) operating activities 3,247, ,399 9,188,215 (976,508) Net change in cash 13,654,021 (441,747) 14,858,338 (1,305,874) Investments in property, plant and equipment 761, ,006 2,119,794 1,136,141 Basic and diluted income (loss) per share 0.01 (0.05) 0.05 (0.20) 3 months months months months 2016 $ $ $ $ Cash 16,747,276 1,737,854 16,747,276 1,737,854 Exploration and evaluation assets 35,638,750 19,858,114 35,638,750 19,858,114 Property, plant and equipment 39,358,155 54,463,995 39,358,155 54,463,995 Total assets 102,099,793 87,811, ,099,793 87,811,474 Current liabilities 17,578,881 10,208,361 17,578,881 10,208,361 Deferred mining taxes 4,632,672 4,312,395 4,632,672 4,312,395 Total non-current financial liabilities (excluding unearned revenue) 9,712,694 17,955,269 9,712,694 17,955,269 Equity 68,893,108 50,151,594 68,893,108 50,151,594 5

6 OPERATING INCOME (LOSS) During the quarter ended March 31, 2017, the operating income totaled $593,695 compared to a loss of $1,173,658 as at March 31, This increase of $1,767,353 is mainly explained by the increase in revenues of $4,402,517 offset by the increase of cost of sales of $1,208,185 and the decrease of the reversal of the provision for compensation of $1,150,000 and the reversal of the PartXII.6 income taxes of $275,803. During the nine month period ended March 31, 2017, the operating income totaled $2,548,842 compared to a loss of $6,965,776 as at March 31, This increase of $9,514,618 is mainly explained by the increase in revenues of $12,020,499 offset by the increase of cost of sales of $949,140 and the decrease of the reversal of the provision for compensation of $1,150,000 and the reversal of the PartXII.6 income taxes of $275,803. The mining properties, development costs and underground infrastructures are amortized using the unit-ofproduction method on the useful life of the mine. The depletion rate is calculated in accordance with the number of ounces of gold sold using proven and probable reserves. For the nine month period ended March 31, 2017, the depreciation and depletion was calculated with 29,204 ounces produced on a total of 105,219 ounces. The calculated amount of depreciation and depletion could be reduced if, following the underground exploration program, the proven and probable ounces were increased. NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) For the quarter ended March 31, 2017, the Company realized a net income and comprehensive income of $322,287 or $0.01 per basic and diluted share compared to a net loss and comprehensive loss of $1,979,975 or ($0.05) per basic and diluted share for the corresponding quarter of This increase of $2,302,262 is mainly explained by the increase in revenues of $4,402,517 offset by the increase in cost of sales of 1,208,185 and the decrease of the reversal of the provision for compensation of $1,150,000, the unrealized loss on derivative financial instrument of $518,245 and the reversal of the PartXII.6 income taxes of $275,803. For the nine month period ended March 31, 2017, the Company realized a net income and comprehensive income of $2,104,939 or $0.05 per basic and diluted share compared to a net loss and comprehensive loss of $7,761,428 or ($0.20) for the corresponding period of This increase of $9,866,367 is mainly explained by the increase in revenues of $12,020,499 offset by the increase in cost of sales of $949,140 and the decrease of the reversal of the provision for compensation of $1,150,000. The weighted average number of common shares outstanding for the period ending March 31, 2017 was 44,482,456 compared to 39,066,488 on March 31, The mining properties, development costs and underground infrastructures are amortized using the unit-ofproduction method on the useful life of the mine. The depletion rate is calculated in accordance with the number of ounces of gold sold using proven and probable reserves. For the nine month period ended March 31, 2017, the depreciation and depletion was calculated with 29,204 ounces produced on a total of 105,219 ounces. The calculated amount of depreciation and depletion could be reduced if, following the underground exploration program, the proven and probable ounces were increased. 6

7 SUMMARY OF QUARTERLY RESULTS Q4 Q1 Q2 Q $ $ $ $ Revenue 15,492,036 12,663,044 15,874,919 16,304,364 Operating costs 11,651,428 8,523,128 8,908,145 10,657,303 Royalties 280, , , ,771 Depreciation and depletion 3,705,157 2,700,275 3,289,086 3,387,429 Cost of sales (15,636,711) (11,447,095) (12,565,028) (14,350,503) Gross income (loss) (144,675) 1,215,949 3,309,891 1,953,861 Administration (798,298) (937,351) (867,830) (880,970) Impairment (reversal) of exploration and evaluation assets 10,586,490 (110) - (4,198) Impairment of property, plant and equipment (3,050,000) Exploration and project evaluation (424,152) (382,472) (382,930) (474,998) Loss on disposal of non-financial assets (6,597) OPERATING INCOME (LOSS) 6,162,768 (103,984) 2,059, ,695 Financial expenses (386,238) (395,685) (398,286) (403,267) Financial revenues 258, , , ,859 INCOME (LOSS) BEFORE INCOME TAXES 6,035,219 (360,164) 1,858, ,287 Income taxes (798,802) 157, ,271 - NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) 5,236,417 (202,389) 1,985, ,287 Basic and diluted income (loss) per share 0.12 (0.005) (0.05) 0.01 Weighted average number of common shares outstanding 42,978,823 43,483,567 43,808,168 46,192,816 Cash flows from operating activities 1,476,760 1,926,756 4,013,799 3,247,660 Investments in property, plant and equipment 1,165, , , ,897 Investments in exploration and evaluation assets 1,578,974 1,321,101 1,413,150 1,116,704 Total assets 92,711,449 92,125,222 92,255, ,099,793 Total non-current liabilities (excluding unearned revenue) 18,341,654 9,727,716 9,719,986 9,712,694 The net income and comprehensive income for Q4 increased due to the reversal of exploration and evaluation assets of $10,346,015 and the impairment of property, plant and equipment of $3,050,000. The net income and comprehensive income for Q1 decreased due to the decrease of the reversal of exploration and evaluation assets of $10,346,015, the impairment of property, plant and equipment of $3,050,000, the deferred income taxes of $641,027 and to the increase of the revenues of $1,921,692. The net income and comprehensive income for Q2 increased due to the increase in the gross income of $2,093,942. The net income and comprehensive income for Q3 decreased due to the increase of operating costs of 1,749,158. 7

8 SUMMARY OF QUARTERLY RESULTS (Continued) Q4 Q1 Q2 Q $ $ $ $ Revenue 13,989,447 10,741,352 10,178,629 11,901,847 Operating costs 10,664,086 8,669,523 9,847,890 9,901,561 Royalties 291, , , ,987 Depreciation and depletion 3,469,306 2,693,239 2,628,589 2,965,770 Cost of sales (14,424,851) 11,578,695 (12,692,473) (13,142,318) Gross income (loss) (435,404) (837,343) (2,513,844) (1,240,471) Administration (819,977) (769,027) (826,027) (574,022) Reversal of provision ,150,000 Impairment (reversal) of exploration and evaluation assets (156,341) (42,842) (62,374) (135,259) Exploration and project evaluation (91,295) (254,474) (425,859) (366,989) Loss on disposal of non-financial assets - (58,078) (2,250) (6,917) OPERATING LOSS (1,503,017) (1,961,764) (3,830,354) (1,173,658) Financial expenses (605,932) (243,963) (372,949) (383,486) Financial revenues 4,212 13, ,747 (512,831) LOSS BEFORE INCOME TAXES (2,104,737) (2,192,234) (4,000,556) (2,069,975) Deferred income taxes 526, , ,269 90,000 NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (1,578,196) (2,016,166) (3,765,287) (1,979,975) Basic and diluted income (loss) per share (0.04) (0.06) (0.1) (0.05) Weighted average number of common shares outstanding 35,655,773 35,686,208 39,395,405 42,151,382 Cash flows from (used by) operating activities (177,988) (339,830) (1,416,077) 779,399 Investments in property, plant and equipment 955, , , ,006 Investments in exploration and evaluation assets, net of gold sales 303, ,855 1,324, ,945 Total assets 91,902,745 89,638,724 90,403,013 87,811,474 Total non-current liabilities 17,320,412 17,397,278 17,317,373 17, 955, 269 The net loss and comprehensive loss for Q4 decreased due to the decrease of revenue of $2,534,278. The net loss and comprehensive loss for Q1 decreased due to the negative gross profit of $837,343, the financial expenses of $243,963 and the deferred income taxes of $176,068. The net loss and comprehensive loss for Q2 decreased due to a gross loss of $2,513,844. The net loss and comprehensive loss for Q3 decreased due to the reversal of provision of $1,150,000. 8

9 MINING PROPERTIES AND EXPLORATION WORK Moroy Property During this quarter, the work on this project was focused on the modeling of the ore zone. The 3-D interpretation showed that the upper portion and the lower portion of the auriferous lens are not on the same vertical axis. The deepest part of the lens is shifted approximately 100 meters to the south. This displacement is associated with a fault deeping southwardly. In the coming months, an exploration drift will be developed. This gallery will allow the drilling of the lower portion of the mineralized lens which is open in all directions. Barry United Property - PITS area During this period, 7,239 meters of drill holes (41 holes) were drilled around the pits. These holes discovered a new gold-bearing zone located southwest of the western limits of the existing pits. This new mineralized zone is located in the hangingwall of a large felsic intrusion. The ore zone extends laterally about 250 meters and vertically from the surface to a depth of 125 meters. This new zone should increase mineral resources extractable by open pit. These holes also intersected gold mineralization in narrow fault zones. The grades of these ore zones are generally higher than those found close to the intrusive contact. This type of mineralization had been neglected in previous drilling programs. These zones, although presently ill-defined, are of interest because of their vertical extension which seems very good. It could be possible to extract gold by underground mining without harming the pit extraction. The results of the holes drilled around the pits during the quarter are detailed in the Company s press releases. Over the next few months, our compilation work will focus on identifying and targeting shear zones bearing gold mineralization with a potential to increase the gold resource. A second drill will be mobilized in May on the Barry Property to accelerate the drilling program. Barry United Property - MOSS area A compilation of drilling data undertaken at the end of the previous quarter continued. It shows that gold zones were found in 3 separate sectors in the Moss area. Two of these sectors are located near the eastern boundary of the property and the third is in the central portion of the area. Holes drilled by the Company in the previous quarter were concentrated in the central sector. Several drill holes of this program intersected gold values at variable grades in a shear zone. To the east, narrow shear zone (20 to 50 cm) contains high gold grades (17.5 to 102 g / t Au). This area extends over 75 meters and remains open towards the southwest and at depth. The second gold zone in the area is located 200 meters to the west. It is associated with a plurimetric shear zone with grades ranging from 0.5 to 6.0 g / t Au. A follow-up drilling program will begin in May in this area. Wahnapitei Sudbury area The renewal of the two mining leases on the property was accepted by the Ontario MNDN. Acceptance is subject to the Company s commitment to carry out work on the property in the following year. 9

10 EXPLORATION AND EVALUATION ASSETS The carrying amount can be analyzed as follows: Ontario Quebec Wahnapitei Property (1) Balance as at Credit on Balance as at June 30, duties and March 31, 2016 Additions tax credits Impairment 2017 $ $ $ $ $ Mining rights - 4,308 - (4,308) - Exploration and evaluation Hewfran-2 Property - 4,308 - (4,308) - Mining rights 358, ,426 Exploration and evaluation 552, , , ,098 MJL- Hansen Property Mining rights 202, ,952 Exploration and evaluation 158,099 - (5,607) - 152, ,051 - (5,607) - 355,444 Barry Property Mining rights 2,072, ,072,550 Exploration and evaluation 13,471,035 1,667, ,138,301 15,543,360 1,667, ,210,851 Barry United Property Mining rights 18, ,990 Exploration and evaluation 3,021, ,105 8,206-3,687,819 3,040, ,105 8,206-3,706,809 Barry Extension Property 175, ,878 Mining rights 399, , ,715 Exploration and evaluation 574, , ,593 MJL-2 Property Mining rights 462, ,204 Exploration and evaluation 99, , , ,310 10

11 EXPLORATION AND EVALUATION ASSETS (Continued) Nelligan Property Balance as Credit on Balance as at at June 30, duties and March Additions tax credits Impairment 2017 $ $ $ $ $ Mining rights 119,533 12, ,781 Exploration and evaluation 417,426 9, , ,959 21, ,453 Barry- Souart Property Mining rights 102, ,122 Exploration and evaluation 281, , , ,382 Geonova Property Mining rights 3,389, ,389,637 Exploration and evaluation 2,531,923 22,926 (7,930) - 2,546,919 5,921,560 22,926 (7,930) - 5,936,556 Moroy Property Mining rights 829,417 1, ,655 Exploration and evaluation 3,049,178 1,293, ,342,915 3,878,595 1,294, ,173,570 Coniagas Property Mining rights 84, ,684 Exploration and evaluation , ,684 Summary Mining rights 7,815,906 18,281 - (4,308) 7,829,879 Exploration and evaluation 23,981,528 3,832,674 (5,331) - 27,808,871 31,797,434 3,850,955 (5,331) (4,308) 35,638,750 (1) Impairment was recognized on the property because substantive expenditures on further exploration for an evaluation of mineral resources in a specific area is neither budgeted nor planned. All impairment charges (or reversals, if any) are included in Impairment of exploration and evaluation assets in profit or loss. 11

12 EXPLORATION AND EVALUATION ASSETS (Continued) The following table shows the capitalized exploration and evaluation expenses for the period ended March 31, 2017, for the main categories of activities, by property. Drilling Expenses Barry Barry Nelligan United Barry Extension Geonova Moroy Total $ $ $ $ $ $ $ , , , ,029 1,839,460 Salaries and fringe benefits Lodging Assays Maps and reports Stripping and line cutting Fuel and energy Material Depreciation Professional fees Maintenance Consulting fees Road maintenance Equipment rental Equipment maintenance Telecommunications Geophysics - Prospection Taxes and permits Environment Office expenses Core library TOTAL - 112, ,246 5,000 22, , , ,690 92,594 15,626-96, ,052-2, ,931 1,785-44, , , , ,219 3,596 39,783 34, ,305 92,953-5,603 80, ,188-7,541 67,421 1,525-4,836 81, , , , ,066-15,212 26, ,088 50,640 4,454 24,713 10,120 6, , , ,033-1,495 8, ,375 33,260-10,800 14, ,163-4,027 20, , , , , , , , , , , ,212 9, ,105 1,667, ,394 22,926 1,293,737 3,832,674 12

13 EXPLORATION AND EVALUATION ASSETS (Continued) See below for the detailed analysis of exploration and evaluation assets during the period ended March 31: Balance as at June 30 Additions for the period $ $ 23,981,528 9,600,175 Drilling 1,839,460 1,710,217 Salaries and fringe benefits 765, ,205 Lodging 254,052 32,304 Assays 199,040 83,997 Maps and reports 138,219 61,635 Stripping and line cutting 92, Fuel and Energy 86,188 61,408 Material 81,323 2,793 Depreciation 77,037 75,965 Professional fees 59, Maintenance 50,640 44,899 Consulting 45, Road maintenance 37,033 73,192 Equipment rental 33,260 39,375 Equipment maintenance 25,163 2,490 Telecommunications 24,309 3,872 Geophysics - Prospection 9,340 79,428 Taxes and permits 6,161 5,229 Environment 5,700 - Office supplies 1, Core library 1,212-3,832,674 2,712,083 Impairment of deferred exploration expenses - (236,104) Credit on duties and tax credits (5,331) - 3,827,343 2,475,979 Balance as at March 31 27,808,871 12,076,154 13

14 CASH FLOWS During the quarter ended March 31, 2017, the cash flows from operating activities totaled $3,247,660 compared to $779,399 for the corresponding quarter of This difference is mainly due to the income before income taxes and the changes in working capital items. During the quarter ended March 31, 2017, the cash flows used by the investing activities totaled $211,469 compared to $1,380,191 in This difference is mainly due to the additions to exploration and evaluation assets and the additions to property, plant and equipment offset by the tax credits received. During the quarter ended March 31, 2017, the cash flows from financing activities totaled $10,617,830 compared to $159,045 for the corresponding quarter in This difference is mainly due to the issuance of units and shares during the period ended March 31, The cash as at March 31, 2017 was of $16,747,276 compared to an amount of $1,737,854 in BALANCE SHEET As at March 31, 2017, the total assets of the Company amounted to $102,099,793 compared to $92,711,449 as at June 30, This difference of $9,388,344 is mainly due to the increase in cash of $14,858,338 and restricted cash of $747,975, the decrease in materials, supplies and gold inventory of $2,071,210 and property plant and equipment of $9,349,052, and the increase in exploration and evaluation assets of $3,841,316 and security deposits of $623,493. Gold inventory The gold inventory in the circuit as at March 31, 2017 totaled 1,953 ounces and the doré bars totaled 464 ounces. According to the accounting policy of the Company, the gold inventory is valued at the lower of cost and net realizable value. The cost of the gold inventory was $2,599,132 while the net realizable value was $3,556,896 as at March 31, As at March 31, 2017, the liabilities of the Company totaled $33,206,685 compared to $36,945,452 as at June 30, This difference of $3,738,767 is mainly due to the decrease in unearned revenue of $2,150,541 and trade and other payables of $1,416,123. Net Working Capital On March 31, 2017, the Company had a working capital of $6,557,705 compared to a working capital deficiency of $768,473 on June 30, This difference is mainly due to the increase in cash offset by the increase in the convertible debentures. More advanced exploration and development work and the production of gold on the Bachelor property could require additional funding. The Company could raise funds by way of public and/or private financing, loans or gold sales. 14

15 BALANCE SHEET (Continued) Equity The equity as at March 31, 2017 was comprised of the share capital of $127,349,485, to which is added the warrants of $835,744, contributed surplus of $10,445,305 offset by the deficit of $69,737,426 resulting in equity of $68,893,108. As at June 30, 2016, the equity amounted to $55,765,997. Assets retirement obligations The asset retirement obligations are based on the costs to abandon and reclaim mineral properties and facilities as well as an estimate of future timing of the costs. Estimated liabilities of $4,522,286 and $426,726 were respectively provided for the Bachelor mine and the Barry deposit site, for total obligations of $4,949,012. Capital Structure The share capital of the Company is composed of an unlimited number of Common shares and of Preferred shares, which can be issued in series. On May 10, 2017, the capital structure of the Company was: Common Shares 75,994,092 Stock Options 1,513,500 Warrants 21,210,679 Brokers warrants 690,354 SIGNIFICANT ACCOUNTING POLICIES The accounting policies are presented in the audited financial statements for the year ended June 30, 2016 and have not been modified since that time. RISK AND UNCERTAINTIES Risk factors are discussed in detail in the Company s Financial Statements and MD&A contained in the annual report for the year ended June 30, SUMMARY OF FINANCIAL INFORMATION Information for the financial years (12 month period) ended on: June 30, 2016 $ June 30, 2015 $ Interest income 38,152 60,253 Net loss and comprehensive loss (2,525,011) (6,264,748) Basic and diluted net loss per share (0.10) (0.20) 15

16 LIQUIDITY At the end of the quarter, the cash of the Company totaled $16,747,276 compared to $1,888,938 on June 30, The net working capital was $6,557,705 on March 31, 2017 whereas it was a working capital deficiency $768,473 on June 30, The increase in liquidity and the net working capital results from the completion of private placements. SHARE CAPITAL On April 13, 2017, the Company completed a consolidation of its issued and outstanding common shares on a 10-to-1 basis ("Share Consolidation"). The Share Consolidation affected all shareholders, option holders and warrant holders uniformly and thus did not materially affect any security holder s percentage of ownership interest. All references in these financial statements to common shares, options and share purchase warrants have been retroactively adjusted to reflect the Share Consolidation. On March 21, 2017, the Company completed a private placement of 17,920,052 units priced at $0.60 each for gross proceeds of $10,752,031. Each unit consisted of one common share and one-half of one common share purchase warrant. Each full warrant entitles the holder to purchase one share of the Company at a price of $0.90 each until March 21, In addition, 997,300 flow-through shares were issued at a price of $0.75 each, for gross proceeds of $747,975. A cash commission of 6.5% of the gross amount raised was paid to the brokers and 567,521 warrants were allocated. These warrants may be exercised at a price of $0.65 for a period of 24 months and have a fair value of $170,256. WARRANTS Outstanding warrants entitle their holders to subscribe to an equivalent number of common shares, as follows: Investors March 31, 2017 June 30, 2016 Weighted average Weighted average Number of warrants exercise price Number of warrants exercise price $ $ Balance at beginning 7,168, ,937, Granted 8,960, ,945, Exercised (704,050) 0.55 (314,000) 0.56 Expired - - (1,400,000) 3.00 Balance at end 15,424, ,168, Brokers March 31, 2017 June 30, 2016 Weighted average Weighted average Number of warrants exercise price Number of warrants exercise price $ $ Balance at beginning 149, , Granted 567, , Exercised (26,600) 0.55 (775,960) 0.55 Balance at end 690, ,

17 WARRANTS (Continued) Outstanding warrants are as follows : Investors March 31, 2017 June 30, 2016 Expiry date Exercise price Number Number $ March 27, ,552,975 2,257,025 November 6, ,934,500 3,934,500 November 19, , ,106 March 21, ,960,026-15,424,607 7,168,631 Brokers March 31, 2017 June 30, 2016 Expiry date Exercise price Number Number $ March 27, ,600 November 6, ,600 33,600 November 19, ,233 89,233 March 21, , , ,433 SHARE-BASED PAYMENTS On March 21, 2017, the Company granted to two officers 45,000 stock options exercisable at $0.70 per share valid for 5 years. These options were granted at an exercise price equal to the closing market value of the shares the day prior to the grant. The fair value of these share options amount to $23,409 for an estimated weighted-average fair value of $0.52 per option. The fair value of the options granted was estimated using the Black-Scholes option pricing model with no expected dividend yield, 1.16% weighted-average risk-free interest rate, 99.82% weighted-average expected volatility and 5 years weighted-average expected life. Stock options are exercisable at date of grant. An amount of $24,537 ($14,729 in 2016) of the share-based payments of the directors and officers was recorded respectively in earnings and credited to contributed surplus. Number of options March 31, 2017 June 30, 2016 Weightedaverage exercise price Number of options Weightedaverage exercise price $ $ Outstanding, beginning 1,613, ,831, Granted 45, , Cancelled - - (262,500) 3.20 Expired (145,000) 3.80 (5,000) 7.00 Outstanding, end 1,513, ,613, Exercisable, end 1,513, ,601,

18 SHARE-BASED PAYMENTS (CONTINUED) The table below summarizes the information related to share stock options as at March 31, Expiry Date Remaining Number of shares life outstanding exercisable (years) Exercise Price $ May 28, ,000 10, September 14, ,500 34, January 23, ,800 2, February 3, , , December 17, ,000 10, February 16, ,400 4, March 12, ,000 10, September 2, ,000 10, September 15, , , December 4, ,000 20, January 17, ,000 10, February 18, ,400 4, March 31, , , July 18, ,500 7, September 22, ,000 10, November 25, ,000 50, February 25, ,400 27, March 23, ,000 45, September 14, , , March 11, ,000 10, ,513,500 1,513,500 18

19 RELATED PARTY TRANSACTIONS The Company s related parties include joint key management and companies under common control as described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled in cash. Key management includes members of the Board of Directors and executive officers of the Company consisting of the Vice-President of operations, General Director and Chief Financial Officer. The remuneration of key management include the following expenses: March 31, 2017 March 31, 2016 $ $ Wages, directors fees and benefits 721, ,552 Consulting fees 240, ,595 Defined contribution pension plan 39,253 39,273 Share-based payments 24,537 14,729 1,025, ,149 CONTINGENCIES AND COMMITMENTS The Company is partially financed through the issuance of flow-through shares and, according to tax rules regarding this type of financing, the Company is committed to realizing mining exploration work. These tax rules also set deadlines for carrying out the exploration work, which must be performed no later than the earlier of the following dates: Two years following the flow-through placements; and One year after the Company has renounced the tax deductions relating to the exploration work. However, there is no guarantee that the Company's exploration expenses will qualify as Canadian exploration expenses, even if the Company is committed to taking all the necessary measures in this regard. Refusal of certain expenses by the tax authorities would have a negative tax impact for investors. The Company will renounce qualifying expenses for an amount of $747,975 as at December 31, Management is required to fulfil its commitments within the stipulated deadline of one year from these dates. As at March 31, 2017, exploration work of $747,975 must be spent before December 31, On September 9, 2013, the Ministry of Natural Resources of Quebec approved the update of the restoration plan of Bachelor Lake. The financial guarantee covering the restoration costs amount to $4,000,103 of which $2,261,294 has already been paid for a net balance owing of $1,738,809 as at March 31, The Company is involved in a legal action; a criminal claim in relation to a workplace accident. In the opinion of management, the possibility of any outflow in settlement is remote or will not have a material adverse effect on the Company s financial position or liquidity. 19

20 POST-REPORTING DATE EVENTS On April 13, 2017, the Company completed a consolidation of its issued and outstanding common shares on a 10-to-1 basis ("Share Consolidation"). The Share Consolidation affected all shareholders, optionholders and warrantholders uniformly and thus did not materially affect any securityholder s percentage of ownership interest. All references in these financial statements to common shares, options and share purchase warrants have been retroactively adjusted to reflect the Share Consolidation. On April 21, 2017, the Company completed a private placement of 12,642,143 units priced at $0.70 each for gross proceeds of $8,849,500. Each unit consisted of one common share and one-half of one common share purchase warrant. Each full warrant entitles the holder to purchase one common share of the Company at a price of $0.90 until April 21, A cash commission of 6.5% of the gross amount raised for a total of 103,966 was paid to the brokers. TECHNICAL INFORMATION The technical information published in this document was reviewed by Mr. Pascal Hamelin, P.Eng., Vice-president of Operations, an employee of the Company and a qualified person under NI Please refer to the SEDAR website ( for all technical reports and other corporate documentations. MANAGEMENT S RESPONSABILITY TOWARDS THE FINANCIAL INFORMATION The interim condensed financial statements and other financial information contained in this MD&A are the responsibility of the Company s management and have been approved by the Board of Directors on May 10, (s) Greg Gibson Greg Gibson, President and CEO (s) Claudine Lévesque Claudine Lévesque, CFO 20