19-Nov-2007
Item 2.Management's Discussion and Analysis or Plan of Operation
(A) General
This portion of the Quarterly Report provides management's discussion and analysis of the financial condition and results of operations to enable a reader to assess material changes in financial condition and results of operations as at and for the three and nine month periods ended September 30, 2007, in comparison to the corresponding prior-year periods. This MD&A is intended to supplement and complement the unaudited interim consolidated financial statements and notes thereto, prepared in accordance with US GAAP, for the three and nine month periods ended September 30, 2007 and 2006 (collectively, the "Financial Statements"), which are included in this Quarterly Report. The reader is encouraged to review the Financial Statements in conjunction with your review of this MD&A. This MD&A should be read in conjunction with both the annual audited consolidated financial statements for the year ended December 31, 2006 and the related annual MD&A included in the December 31, 2006 Form 10-KSB on file with the US Securities and Exchange Commission. Certain notes to the Financial Statements are specifically referred to in this MD&A and such notes are incorporated by reference herein. All dollar amounts in this MD&A are in US dollars, unless otherwise specified.
For the purposes of preparing this MD&A, we consider the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of Aurora Gold Corporation's shares; or (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision or if it would significantly alter the total mix of information available to investors. Materiality is evaluated by reference to all relevant circumstances, including potential market sensitivity.
This document contains numerous forward-looking statements relating to our business. The United States Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. Operating, exploration and financial data, and other statements in this document are based on information we believe reasonable, but involve significant uncertainties as to future gold and silver prices, costs, ore grades, estimation of gold and silver reserves, mining and processing conditions, changes that could result from our future acquisition of new mining properties or businesses, the risks and hazards inherent in the mining business (including
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Item 2. Management's Discussion and Analysis or Plan of Operation
(A) General (continued)
environmental hazards, industrial accidents, weather or geologically related conditions), regulatory and permitting matters, and risks inherent in the ownership and operation of, or investment in, mining properties or businesses in foreign countries. Actual results and timetables could vary significantly from the estimates presented. Readers are cautioned not to put undue reliance on forward-looking statements. We disclaim any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.
(B) Significant developments during the nine months ended September 30, 2007 and Subsequent Events
We are a mineral exploration company engaged in the exploration of base, precious metals and industrial minerals worldwide. We were incorporated under the laws of the State of Delaware on October 10, 1995, under the name "Chefs Acquisition Corp."
We have no revenues, have sustained losses since inception, have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations. We will not generate revenues even if any of our exploration programs indicate that a mineral deposit may exist on our properties. Accordingly, we will be dependent on future financings in order to maintain our operations and continue our exploration activities. Funds raised in fiscal 2007 and 2006 were used for exploration of our properties and general administration.
During 2007 we have been evaluating our property holdings in order to determine whether to implement exploration programs on our existing properties or to acquire interests in new properties.
During 2007 through September 30, 2007 the Company received proceeds of $750,000 for loans from various Companies. The loans payable bear interest at 6% per annum, are due on December 31, 2007 and are unsecured.
In March 2007 the Company completed a private placement to a non-affiliated offshore investor of 500,000 common shares of the common stock of the Company for net proceeds of $250,000 pursuant to the exemption from registration requirements of the Securities Act of 1933 as amended afforded by Regulation S as promulgated by the Act.
In July 2007, 5,000,000 common shares were issued at $0.25 per share. Of the 5,000,000 common shares, 2,000,000 shares were issued to settle loans of $500,000 and the remaining 3,000,000 shares were issued for cash proceeds of $750,000. The shares were issued to individuals and companies who reside outside the United States of America (in accordance with the exemption from registration requirements afforded by Regulation S as promulgated thereunder).
In August 2007, the Company entered into an agreement to issue 250,000 common shares at $0.20 per share in settlement of amounts owed to an individual for services performed valued at $50,000. The shares were not issued until subsequent to September 30, 2007, but given the agreement was entered into prior to September 30, 2007 the $50,000 is classified as common stock issuable. The shares were issued to an individual who resides outside the United States of America (in accordance with the exemption from registration requirements afforded by Regulation S as promulgated thereunder).
In September 2007 the Company completed a private placement to non-affiliated offshore investors of 4,000,000 common shares at $0.20 per share for net cash proceeds of $800,000. The shares were issued to individuals and companies who reside outside the United States of America (in accordance with the exemption from registration requirements afforded by Regulation S as promulgated thereunder). The shares were not issued until subsequent to September 30, 2007 since the proceeds for these shares were received prior to September 30, 2007 the total proceeds of $800,000 are classified as common stock issuable in stockholders' equity on the condensed consolidated balance sheet as of September 30, 2007.
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Item 2. Management's Discussion and Analysis or Plan of Operation
(C) Exploration and Development
We conduct exploration activities from our principal and technical office in Coolum Beach, Queensland, Australia. These offices are provided to us on a rent free, month to month basis by Lars Pearl, one of our directors. We believe that these offices are adequate for our purposes and operations.
Our strategy is to concentrate our efforts on: (i) existing operations where an infrastructure already exists; (ii) properties presently being developed and/or in advanced stages of exploration which have potential for additional discoveries; and (iii) grass-roots exploration opportunities.
We are currently concentrating our property exploration activities in Brazil and Canada. We are also examining data relating to the potential acquisition of other exploration properties in Latin America, South America.
Our properties are in the exploration stage only and are without a known body of mineral reserves. Development of the properties will follow only if satisfactory exploration results are obtained. Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that our mineral exploration and development activities will result in any discoveries of commercially viable bodies of mineralization. The long-term profitability of our operations will be, in part, directly related to the cost and success of our exploration programs, which may be affected by a number of factors.
For the three and nine month periods ended September 30, 2007 we recorded exploration expenses of $324,142 and $1,613,974 (2006 - $1,387,701 and $2,963,262) respectively. The following is a breakdown of the exploration expenses by property: Brazil $324,142 and $1,611,799 (2006 - $1,387,701 and $2,961,017) and Canada, Kumealon property $0 and $2,175 (2006 - $0 and $2,245) respectively.
We currently have an interest in five (5) projects located in Tapajos gold province in Para State, Brazil and one property located in British Columbia, Canada. We have conducted only preliminary exploration activities to date and may discontinue such activities and dispose of the properties if further exploration work is not warranted.
We initially had 10 properties under Memorandum of Understanding ("MOU") or under option of which we currently have retained five (5) properties, São Domingos, São João, Piranhas, Comandante Araras, and Bigode in the Tapajos Gold Province, State of Pará, Brazil. With a total of approximately 54,613 hectares, we are the largest property holder in the region.
Between December 21, 2005 and May 26, 2006 we signed four MOUs covering the Piranhas, Branca de Neve, Bigode and Santa Lúcia properties in the Municipality of Itaituba, Tapajos gold province, State of Para, Brazil. The MOUs provide us with a review period, ranging from two months to six months, to access the mineral potential of the properties.
Between January 1 and March 31, 2006 we signed five option agreements covering the Novo Porto (since cancelled due to governmental land use management changes), Ouro Mil (option since relinquished), Santa Isabel (option since relinquished), São Domingos and São João mineral exploration licences located in the Municipality of Itaituba, in the Tapajos gold province of the State of Para, Brazil.
Access to all of the property areas in which we have an interest is by airstrips, rivers in season and the Trans Garimpeiro Highway. Regional infrastructure to the property areas is serviced from our offices in the city of Itaituba and the field office located at the Sao Domingos property.
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Item 2. Management's Discussion and Analysis or Plan of Operation
(C) Exploration and Development (cont'd)
São Domingos
The São Domingos property covers an area of 6.100 hectares and is located approximately 250km south of the regional center of Itaituba and approximately 40 km north of our previous Santa Isabel property.
São João
The São João property area is located approximately 20km west of our São Domingos property and covers an area of approximately 5.160 hectares.
Santa Isabel - option since relinquished
The Santa Isabel Property lies in the southwestern region of the Tapajos Gold Province, Para State, Brazil and comprises an area of 3.650 hectares.
In March 2007 we decided not to follow up our preliminary exploration program on the Santa Isabel property and have decided not to exercise our option to acquire the property.
Novo Porto - option since relinquished
The Novo Porto property lies approximately 180km south of Itaituba and covered an area of approximately 6.600 hectares. Due to changes in the Government land management the area that encompassed the Nova Porto project and our property interest was deemed to be in a non active commercial mining zone.
In March 2006 we decided not to follow-up our preliminary exploration program on the Novo Porto property and have decided not to exercise our option to acquire the property.
Ouro Mil - option since relinquished
The Ouro Mil property is located approximately 20 km south of Santa Isabel property area and approx 300km South of Itaituba, and covers an area of 9.794 hectares.
In October 2006 we decided not to follow up our preliminary exploration program on the Ouro Mil property and have decided not to exercise our option to acquire the property.
Branca de Neve - option since relinquished
The Branca de Neve property adjoins our Piranhas property and is located approximately 50 km NE of our São Domingos property, and covers an area of approximately 2.210 hectares
The Company has decided not to follow up our preliminary exploration program on the Branca de Neve property and have decided not to exercise our option to acquire the property.
Piranhas
The Piranhas property adjoins the South western boundary of our Branca de Neve property and covers an area of approximately 9.341 hectares.
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Item 2. Management's Discussion and Analysis or Plan of Operation
(C) Exploration and Development (cont'd)
Bigode
The 4.150 hectare Bigode property adjoins the southeast portion of our São Domingos property, and is approximately 30 km north of our Santa Isabel property.
Santa Lúcia - option since relinquished
The 1.600 hectare Santa Lúcia property is located 1,270 km SSW of the main regional centre of Itaituba. The property is located 10 km south west of the Company's Santa Isabel property.
The Company has decided not to follow up our preliminary exploration program on the Santa Lucia property and have decided not to exercise our option to acquire the property.
Comandante Araras
The 2.750 hectare Comandante Arara property is located 10 km west of the Company's São João property.
British Columbia, Canada
The 741 acre Kumealon limestone project is located on the north shore of Kumealon Inlet, 54 kilometres south-southeast of Prince Rupert, British Columbia, Canada.
(D)Results of Operations
Nine Months Ended September 30, 2007 versus Nine Months Ended September 30, 2006
For the nine months ended September 30, 2007 we recorded a net loss of $ 2,666,143 (2006 net loss - $3,434,796) or $0.06 per share (2006 - $0.08). Included in the net loss for the nine months ended September 30, 2007 was stock option compensation expense of $454,295 (2006 - $0).
General and Administrative Expenses - For the nine months ended September 30, 2007 we recorded expenses of $1,052,169 (2006 - $471,534). This amount includes, professional fees - accounting $40,628 (2006 - $30,518) and legal $105,511 (2006
- $148,357).
Exploration expenditures - For the nine months ended September 30, 2007 we recorded exploration expenses of $1,613,974 (2006 - $2,963,262). The following is a breakdown of the exploration expenses by property: Brazil $1,611,799 (2006
- $2,961,017) and Canada, Kumealon property $2,175 (2006 - $2,245) respectively.
Depreciation expense - For the nine months ended September 30, 2007 we recorded depreciation expense of $8,775 (2006 - $679).
(E) Capital Resources and Liquidity
September 30, 2007 versus December 31, 2006
At September 30, 2007, we had cash of $371,495 (December 31, 2006 - $278,091) and a working capital deficiency of $790,917 (December 31, 2006 working capital deficiency - $835,003). Total liabilities as of September 30, 2007 were $1,214,452 as compared to $1,155,673 at December 31, 2006, an increase of $58,779.
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Item 2. Management's Discussion and Analysis or Plan of Operation
(E) Capital Resources and Liquidity (continued)
In March 2007 we completed a private placement to a non-affiliated offshore investor of 500,000 common shares of the common stock of the Company for net proceeds of $250,000 pursuant to the exemption from registration requirements of the Securities Act of 1933 as amended afforded by Regulation S as promulgated by the Act.
In July 2007, 5,000,000 common shares were issued at $0.25 per share. Of the 5,000,000 common shares, 2,000,000 shares were issued to settle loans of $500,000 and the remaining 3,000,000 shares were issued for cash proceeds of $750,000. The shares were issued to individuals and companies who reside outside the United States of America (in accordance with the exemption from registration requirements afforded by Regulation S as promulgated thereunder).
In August 2007, the Company entered into an agreement to issue 250,000 common shares at $0.20 per share in settlement of amounts owed to an individual for services performed valued at $50,000. The shares were not issued until subsequent to September 30, 2007 but given the agreement was entered into prior to September 30, 2007 the $50,000 is classified as common stock issuable. The shares were issued to an individual who resides outside the United States of America (in accordance with the exemption from registration requirements afforded by Regulation S as promulgated thereunder).
In September 2007 the Company completed a private placement to non-affiliated offshore investors of 4,000,000 common shares at $0.20 per share for net cash proceeds of $800,000. The shares were issued to individuals and companies who reside outside the United States of America (in accordance with the exemption from registration requirements afforded by Regulation S as promulgated thereunder). The shares were not issued until subsequent to September 30, 2007 since the proceeds for these shares were received prior to September 30, 2007 the total proceeds of $800,000 are classified as common stock issuable in stockholders' equity on the condensed consolidated balance sheet as of September 30, 2007.
(F) Plans for Year 2007
Our general business strategy is to acquire mineral properties either directly or through the acquisition of operating entities. Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and applicable to a going concern which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As discussed in note 1 to our unaudited September 30, 2007 consolidated financial statements, the Company has incurred recurring operating losses since inception, has not generated any operating revenues to date and used cash of $2,353,755 from operating activities through September 30, 2007. The Company requires additional funds to meet its obligations and maintain its operations. We do not have sufficient working capital to (i) pay our administrative and general operating expenses through December 31, 2007 and (ii) to conduct our preliminary exploration programs. Without cash flow from operations, we may need to obtain additional funds (presumably through equity offerings and/or debt borrowing) in order, if warranted, to implement additional exploration programs on our properties. While we may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of its properties, there is no assurance that any such activity will generate funds that will be available for operations. Failure to obtain such additional financing may result in a reduction of our interest in certain properties or an actual foreclosure of its interest. We have no agreements or understandings with any person as to such additional financing.
Our exploration properties have not commenced commercial production and we have no history of earnings or cash flow from its operations. While we may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of its property, there is no assurance that any such activity will generate funds that will be available for operations.
We intend to raise additional funds through equity offerings and/or debt borrowing to meet our administrative/general operating expenses and to conduct work on our exploration property. There is, of course, no assurance that it will be able to do so.
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Item 2. Management's Discussion and Analysis or Plan of Operation (cont'd)
(F) Plans for Year 2007 (continued)
We will concentrate our exploration activities on the Brazilian Tapajos properties and examine data relating to the potential acquisition or joint venturing of additional mineral properties in either the exploration or development stage
in Brazil, Canada and other South American countries. Additional employees will be hired on a consulting basis as required by the exploration properties.
Our exploration work program in 2007 and 2008 on the Brazilian Tapajos properties will entail surface mapping of geology, sampling of soils on a grid basis to delineate geochemical anomalies, stream sediment sampling, geophysical surveying and drilling.
We have set up a field operations center at the São Domingos property and intend to continue to focus our exploration activities on anomalies associated with the São Domingos Property. We selected the São Domingos property based on its proximity to our other properties, and the logistics currently in place. Access to São Domingos property is by light aircraft to a well-maintained strip, by road along the government maintained Trans Garimpeiro highway, and by boat along the multitude of waterways in the Amazon Basin.
We will continue to conduct exploration programs on our properties adjacent to the Sao Domingos property using the road and river access to the properties from the Sao Domingos field operations centre. Exploration on the São Domingos property will involve further mapping of the outcrop geology and soils from shafts of previous workers in order to confirm lithologies and structural trends noted from drilling and on government maps. Currently, four anomalous areas on the Sao Domingos property have been identified from soil and rock chip sampling, at Atacadao, Esmeril, Fofoca and Cachoeira, and are currently scheduled for further investigation.
In late May 2006 we continued the exploration of the Sao Domingos property with the initiation of a projected 5,000 metre diamond-drilling program. Drilling targeted various soil anomalies and lithogical trends outlined by mapping and sampling of out cropping rocks. Drilling tested areas around the Atacadau gold occurrence, the Esmeril occurrence and Fofoaca area. These areas have been the focus of both alluvial and relatively shallow underground hard rock (oxidized) mining. The lithology is porphyritic Pararui granite containing stockwork quartz veins. Limited historical underground production was carried out via shafts sunk in the oxidized material peripheral to the dominant quartz veins. No dewatering was utilized and generally mining ceased, as water became a problem.
Drilling completed during 2006 resulted in a volume of mineralized material which was calculated on the first 17 drill holes targeting high grade gold in quartz veins and altered host rocks. Drill hole line spacing of 40m was used in the initial appraisal. The initial calculation resulted in a volume of mineralized material containing approximately 60,000 ounces of gold at 2.4 g/t.
After reviewing the geology and grade continuity from previous drilling on the Mineralized material at the Sao Domingos-Molly project, the Company initiated drilling during July 2007 to test target extensions of the current mineralized material as well as to infill current drilling to increase the confidence levels.
Currently the mineralized material still remains open along strike in both directions and at depth. Aurora will continue to evaluate the potential, and is confident that Molly could evolve along strike and link up with other noted targets further along strike. A geophysical survey is planned for later in the year to test the strike continuity of the Molly mineralized structure.
Exploration on the Sao Joao, and the adjoining Comm Ararras properties during early 2007 included trenching and mapping. Sample results of a trench on the main vein resulted in 80m at 30.94 g/t gold. Recent sampling and mapping has shown this vein system to be extensive and a series of other veins have been located and sampled. Drilling is scheduled to follow up the main vein during the 4th Quarter of 2007.
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Item 2. Management's Discussion and Analysis or Plan of Operation (cont'd)
(F) Plans for Year 2007 (continued)
The Bigode project has returned significant gold assay results and is also scheduled for drilling on completion of drill testing at Sao Joao. We will also continue to evaluate the, Piranhas, Branca de Neve, and Santa Lucia properties through ongoing geochem programs and by mapping and sampling.
Exploration at Bigode is scheduled to continue and will involve mapping and drill target generation for testing in the future.
We are not planning to do any exploration work on the British Columbia Kumealon limestone property in 2007 and 2008.
(G) Application of Critical Accounting Policies
The accounting policies and methods we utilize in the preparation of our consolidated financial statements determine how we report our financial condition and results of operations and may require our management to make estimates or rely on assumptions about matters that are inherently uncertain. Our accounting policies are described in note 2 to our December 31, 2006 consolidated financial statements. Our accounting policies relating to mineral property and exploration costs and depreciation and amortization of property, plant and equipment are critical accounting policies that are subject to estimates and assumptions regarding future activities.
(H) Off-balance Sheet Arrangements and Contractual Obligations
We do not have any off-balance sheet arrangements or contractual obligations that are likely to have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that have not been disclosed in our financial statements.
(I) Qualitative and Quantitative Disclosures About Market Risk
Our exposure to market risk is confined to our cash equivalents and short-term investments. We invest in high-quality financial instruments; primarily money market funds, federal agency notes, and US Treasury obligations, with the effective duration of the portfolio within one year which we believe are subject to limited credit risk. We currently do not hedge interest rate exposure. Due to the short-term nature of our investments, we do not believe that we have any material exposure to interest rate risk arising from our investments.